Unpredictable Patents Fuel Rise in Trade Secrets Protection and Enforcement

Over the last few years, we have been seeing a substantial increase in trade secrets litigation, including by life sciences companies. This rise has largely been driven by the fact that patent protection in the U.S. has become somewhat unpredictable over the past decade. This is due, in part, to U.S. Supreme Court decisions that have made many patents easier to invalidate and a number of federal circuit decisions that have limited plaintiffs’ ability to secure large damages awards. In addition, the uncertainty around whether patents can adequately protect technologies involving artificial intelligence (AI) has motivated life sciences companies to take a closer look at the option of trade secrets protection. Increasingly, life sciences companies are less certain that they will be able to adequately protect their technologies and products through patents or to get their investment back through the enforcement of their patents.

For these reasons, life sciences companies are increasingly looking toward trade secrets protection as a complement to their patent portfolio. Trade secrets protection means that instead of disclosing details of their inventions to the public in a patent, life sciences companies can instead protect some of their IP from competitors by keeping them as trade secrets. Trade secrets protection in the U.S. extends broadly to all types of scientific, engineering, technical, business, and financial information, so long as reasonable measures have been taken to keep that information secret and the information derives independent economic value from not being generally known in the industry. In addition, litigation over trade secrets has the potential for resulting in very large damages awards, including enhanced damages for willful and malicious misappropriation. 

In 2023, as an increasing number of trade secrets cases are litigated, we are likely to see more boundaries created in the law on trade secrets. Right now, compared to traditional patent litigation, trade secret litigation appears to be more open season for plaintiffs, as there are relatively fewer examples of case law limiting the scope of theories or damages that can be claimed. However, we are expecting this situation to change over the next few years. 

Finally, in recent years, we have seen more trade secrets litigation involving Asian companies in the U.S., including Asian companies filing trade secrets claims against U.S. companies and overseas, including in South Korea. We expect to continue to see a global rise in trade secrets litigation by life sciences companies in 2023.

Tips

FOR PROTECTING AND ENFORCING TRADE SECRETS:

• Prominently label trade secret information as “trade secret” or “confidential.”
• Enter into confidentiality/nondisclosure agreements with employees and third parties who will have access to trade secrets.
• Limit access to trade secrets information on a need-to-know basis.
• Monitor for potential misappropriation, and take appropriate steps to enforce rights.
  

DEFENDING AGAINST TRADE SECRET CLAIMS:

• Have incoming employees sign an acknowledgement that they do not have and will not use the trade secrets or confidential information of prior employers.
• Implement good documentation practices to be able to demonstrate independent development of the product/information.
• Demonstrate that the alleged trade secret is known in the industry.
• Demonstrate reasonable measures were not taken to protect the alleged trade secret.