Keeping Confidence: Putting in Place a Trade Secret Protection Program in an R&D Lab and in a Manufacturing Busines

1. Keeping Confidence: Putting in Place a Trade Secret Protection Program in an R&D Lab and in a Manufacturing Business By Dr Shantanu De Ranbaxy Disclaimer: The views & comments expressed in this presentation are solely of the speaker and in no way reflects or represents the opinion of Ranbaxy on the said subject.

2. Index • What is Trade secret ? • What constitutes Trade secret? • Importance of Trade secret • Trade secret vs patent • Trade secret protection program • TRIPS provision, Paris convention, Indian scenario • Protection program • In general • In R&D • In Manufacturing • Test data • Relevance of Trade secrets in Biotech industry and protection. • References & Acknowledgements

3. Trade secret (TS) • It is “information which, if disclosed to a competitor, would be liable to cause real or significant harm to the owner of the secret. It must be information used in trade or business, and …..the owner must limit the dissemination of it or at least not encourage or permit widespread publication” - Lansing Linde Ltd v Kerr (1991) 1 All ER 418 • According to Chambers 21st Century Dictionary,(Reprint on 2000,page1491) the term TS means –an ingredient, technique, etc. that a particular company or individual will not divulge because they see it as giving them an advantage over their rivals. • Again, according to Oxford advanced learners Dictionary the term TS means a piece of information, for example, about how a particular product is made, that is known only to the company that makes it.

4. Trade secret Uniform trade secrets Act (UTSA) - TS is a formula, process, device, or other business information that is kept confidential to maintain an advantage over competitors. It is an information-including a formula, pattern, compilation, program, device, method, technique, or process that- 1) derives independent economic value, actual or potential, from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use, and 2) is the subject of reasonable efforts, under the circumstances, to maintain its secrecy.

5. What constitutes trade secret? • Both the “content” as well as “expression” remains secret. • TS per se is broader in scope than patents, trademarks or copyrights • It is a vital part of intangible asset, others being goodwill, branding, patents, trademarks & copyrights. • TS`s are different from others as their protection requires an establishment and maintenance. • Necessity of good faith, honesty and fair play are thus critical. • It is a form of IP whose associated rights and duties have not been documented much by means of any legislation. • TS does not require any conformity to the definition of patentable matter, nor does it need to be novel or non obvious

6. What constitutes trade secret? • US courts have held that “the extent of a property right in a trade secret is determined by the extent to which the owner of the secret protects his secret from disclosure” • Ruckhelhaus v Monsanto 476 US 986 (1984) • TS is a Confidential Information that is clear & specific/certain and thus not speculative. • Boundaries of TS has to be laid down, it includes Confidential information (CI) that is not trivial in nature, immoral, vague & in public domain • It allows for a number of people to know about a secret without the information being considered to be a part of the public domain.

7. What constitutes trade secret? What can form part of TS : (I) Technical and Scientific information (ii) Commercial information(iii) Financial information and (iv) Negative information • Technical and scientific information may include a formula, pattern, program, device, technical composition of a product (e.g. paint, chemicals etc.), manufacturing methods (process), know-how to produce a product, designs, drawing, Laboratory confidential data, computer codes ,architectural plans, blueprints and maps; Algorithms and processes that are implemented in computer programs, and the programs themselves; Instructional methods, repair processes, techniques and knowhow; Document tracking processes; Data compilations, including certain databases; Personnel records; Schedules; Manuals; Ingredients; Information about research and development activities.

8. What constitutes trade secret? Commercial information may include any business strategy or plan, lists of suppliers and name of clients, customer’s requirements and preferences etc. Data compilations (the more information a list contains, the more likely it is to qualify for trade secret protection) Financial information includes- internal cost structure, employee’s agreements, salary and compensation plans etc. Business strategies/ plans, marketing plans, blueprints, and stock-picking formulae, pricing information, non-public financial data and even information such as overhead rates and profit margins that help define a price may be found to be a trade secret even if the price itself is known. Again, negative information includes- causes of failure and subsequent effort to rectify and solve any problem at the time of manufacturing of certain product, unsuccessful efforts to attract customers in purchasing A TS may be made up of a combination of characteristics and components, each of which by itself is in the public domain, but where the unified process, design and operation of such characteristics or components, in combination, provides a competitive advantage.

9. Importance of Trade secret • Even after the grant of a patent, the associated knowledge may be protected as a TS. • TS can virtually be any kind of business information. These are important to industry and the economy because they protect and encourage innovation. It has the advantage of patent, a copyright, or the law on industrial designs. Getting protecting information that possibly could not be protected by a patent for a product requires that it be innovative, copyright only applies to an original work. But, an innovation in case of patent and originality in case of copyright is not required in case of TS protection. Like other Intellectual Property Instruments, no fixed time limit of validity is necessary for TS. An inventor need not disclose a TS for its registration like patent. So long as the TS remains undisclosed, protection is available for an indefinite period of time.

10. Importance of Trade secret There is no compulsion of disclosure of TS. All R&D data, including those relating to better modes, developed after patent filing, whether or not invention, can also be protected by trade secret. TS protection operates very quickly without delay, virtually all inventions are protected by TS. Trade secrets are generally protected by a mix of state statutory and judicial provisions TS can be enforced as valuable property rights by the courts. TS is an internal instrument with minimum procedural complications

11. Keeping Trade secret or patent it? • That will depend on the specific facts and circumstances of the invention. For example, how long does one expect it will be commercially viable? If it you think the secret can remain secret for a long time and are confident that no one will be able to figure it out on their own, you may prefer to keep it as a trade secret. The formula for Coca-Cola was developed over 100 years ago, and it is still a trade secret. As patents have a limited duration, and are made public when they are issued if the inventor of Coca Cola had patented it, the patent protection would have run out long ago. Today anyone would be able to use the formula. Very often lawyers assist inventors in making choices between seeking to protect an invention with a patent or by relying on trade secret law.

12. Keeping Trade secret or patent it? • Patents are mainly appropriate in the field of technology and are not suitable to protect business secrets. • Patents are for a definite period whereas TS are as long as it can be kept as a secret. • Patents require full and complete disclosure of protected subject matter whereas there is no such requirement in case of TS. • Dilemma: If the competitor acquires the secret by lawful and proper means or by the process of reverse engineering the holder would have no right, while in case of patents even though the protection offered is for a limited period of 20 years no person can duplicate the patented product (in case of a product patent) or use the same method (in case of a process patent) till the protection period expires

13. Pros & cons of having a Trade Secret

14. Protection program

15. Protection program Legal protection of trade secrets can be derived from many diverse sources of law such as contract law, tort law, unfair competition law, criminal law, and the laws governing employee/employer relations and fiduciary obligations

16. Protection under TRIPS Article 39 1. In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3. 2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

17. Protection under TRIPS 3. Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.

18. Paris Convention Article 10bis of the Paris convention:(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.(3) The following in particular shall be prohibited:(i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;(ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;(iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. In Article 10 bis(3) the protection of industrial and business-secrets is implied by the general obligation under Article 10 bis(1) and (2)

19. Trade Secrets Protection in India • Trade secrets are protected in India either through contract law or through the equitable doctrine of breach of confidentiality. It is common to insert clauses of confidential nature in a technology transfer or other license agreement to maintain the confidential nature of the subject matter, not only during the employment period of the employees and contractors but also after its termination, though for a fixed period of time. The skill, knowledge and experience of a particular profession can also be protected in certain circumstances from misuse through contractual obligations. • In India protection of trade secrets is Common Law based. However, section 27 of the Indian Contract Act provides some sort of limited remedy, it bars any person from disclosing any information which he acquires as a result of a contract. • Draft National Innovation Bill 2008 by DST; subject to debate at present Section on “Confidentiality and CI and remedies and offences”

20. Trade Secrets Protection in India • No criminal action can be brought about for revealing CI; only civil remedy. • Here restrictive covenants and Non disclosure agreements are means of protecting TS. • Most cases of TS & CI are considered along with Copyright Act.

21. Trade Secrets Protection To determine whether particular information is a trade secret or not courts generally look into the following points - 1. The extent to which the information is known to the outside world,2. The extent to which the information is known to the employees,3. What measures are taken by the company to protect the secret,4. The value of the information to the business and to the competitors,5. The amount of time and money spent in developing the information, and6. The ease or difficulty with which the information can be acquired and duplicated by others.The above list however is not exhaustive and it would in the end depend on the facts of the case

22. Protection program – In general One should be clear about their trade secrets (identifying & categorizing) and their importance & relevance to business. • Having laid down proper guidelines in the form of SOP clearly defining what is IP and its various forms. • Putting Information security policy in place/ having written policy. • Specific directives to the functional departments, each in regard to their area of practice, to educate them on the proper use of IP. This is to prevent improper handling of IP in the course of operation or business in general. (awareness/ familiarization) • Risk assessment/ analysis • Restrict public access to sensitive areas where trade-secreted information is kept or handled/ Intrusion detection mechanism/ CCTV (Physical controls & safeguards) • Lock gates and cabinets, and use passwords to restrict access to sensitive information in databases

23. Protection program – In general • Security devices/ Encryption technology (Technical controls) • Label trade secret documents, discs, and digital information as such by the use of a "confidential information" stamp or digital notice. • Enter into confidentiality agreements with any third party that may come across the trade secrets of the organization. • Screen speeches, publications, and presentations by employees to check for any inadvertent disclosure of trade secrets • Ensure that procedures are taken to install firewalls for cyber security purposes.

24. Protection program – In general • Monitor the Web, or install programs for cyber surveillance, to collect information on the use of the organization's IP. This should include spotting the use of the trade­mark, or confusingly similar marks, as domain names and cyber squatting incidents. • Install programs for digital management to indicate infringement of the organization's IP, and collect evidence of such infringements. • Monitor the Web site records to spot any attempts to deep link or divert Internet traffic from the organization's Web site, which may constitute anticompetitive practices

25. Research and development • Having clear IP & TS policy in place. Making awareness about them by having regular communication/ training to all. • Flow of information on “Need to know” basis. • While dealing with 3rd parties ensure that flow of information is carried out only between authorized persons. • Wherever applicable & necessary following the path of sharing confidential Information with 3rd parties through Attorneys & Counsel. • Having effective and enforceable Confidential and Non Disclosure agreements in place especially having sections/ clause on IP and on Information/ strategy sharing.

26. Research and Development • In case of TS keeping written communication to the minimum. • Wherever appropriate and necessary qualify such information as “privilege” by keeping Attorney in loop. • Laid down Document retention policies • Minimum printing & Secure printing • Requirement of multiple layer check & authorization while dealing with disposal of certain records • Simply marking laboratory notebooks and research plans such as grant proposals "CONFIDENTIAL".

27. Research and development • Restrictions on accessing privilege documents. • Fingerprinting confidential documents; deliberate “markings” • Password protection of all confidential documents • Installing validated e-security systems. • Restricted sharing of Confidential information even within a core group. • Keeping positive & even negative information such as research options that have been explored and found worthless under protection. • Tactical filing and withdrawal of patent applications.

28. Research and development • Have employees sign confidentiality agreements as part of their employment agreements. • Conduct entry interviews with incoming employees to guard against the inadvertent use of trade secrets of competition's former employees, if any. • Provide incoming employees with a copy, as well as other details, of the trade secret policy. • Conduct exit interviews with departing employees to ensure that they have not taken any trade secrets with them, and prepare statements to be signed by them to that effect. • Dispatch a letter to the new prospective employer with notice that the departing employee possesses trade secrets. This is of particular importance when key former employees are joining the competition.

29. Research and development • Having contractual obligation including penalty related clauses in employment contract, in licensing agreement, in commissioning agreement, in contract of works, in joint venture, in partnership, in joint collaborative research between parties • Maintain clear and corroborated lab notes to establish the dates of conception and reduction to practice of each invention. • Maintain "clean" procedures for copyrights by denying access by the development team to competing software programs, to defend against copyright infringement.

30. Manufacturing • Restrict entry to only authorized plant personnel. • Keeping MPR`s & BPR`s under limited authorized access. • Control access to products under production to protect ideas and concepts that are not the subject of patent application or protection. Such ideas and concepts are protectable as trade secrets, and hence should be identified and marketed accordingly, as well as protected by reasonable security measures. • Identify production processes along the same lines and inform the human resources department of key personnel that are in possession of such trade-secreted processes.

31. Protection program – some concepts practiced across the globe • “Garden leave” – to keep the employee in the rooster till the CI he has is of relevance to any competitor. • Restrictive covenants – which specifies that the employee will not work in the same industry for a specified period after termination. Remedies • Injunctive relief as primary remedy. (US follows doctrine of Inevitable disclosure which must be backed up by sufficient evidence of a probable loss or injury) • Damages (assessed in terms of “market value” of the CI) • “Springboard doctrine” – developed by English court. It aims to ensure that a person who breaches a duty of confidence is not able to benefit from the breach.

32. Test data • TRIPS agreement also requires protection for test data (related to the quality, safety and efficacy as well as information on the composition and physical and chemical characteristics of the product) that may be submitted by pharma companies to regulatory authorities. • Later applicants can rely on bioequivalence tests to apply for grant of marketing authorization. • Art 39 only requires protection of such data from unfair competition.

33. Biotechnology TS protection in biotechnology is similar to that ascribable to any commercial enterprise – current & future business plans, research plans, expansion or building plans, financial records. Trade secret protection seems most appropriate for subject matter that is unlikely to be discovered by anyone else because it is so specific to a particular process or product that it is unlikely that a duplicate set of experiments will be conducted. For example, if, in the production of a particular recombinant protein, it is found that a particular fusion partner permits very high expression in a particular host organism (and the fusion partner is cleaved before the product is marketed), it may very well be that the probability of discovery by competitors is quite low. If so, trade secret protection will be fine.

34. Biotechnology • Yet, if it is found that a particular type of cell is extremely effective in providing large product yields for recombinant products in general, it is probably a mistake to attempt to keep it as a secret. Chances for independent discovery are great and, should independent discoverers decide to obtain a patent themselves, the trade secret holder might have to stop using its "secret" to avoid infringing their patent. • There is lot of collaborative research in this field. This type of trade secret may not be available to nontrade institutions such as universities and research foundations. But with the increased tendency of such institutions to participate in commercial development through out licensing programs, and even equity investments in commercial enterprises, they are quickly falling in the ambit of TS.

35. Biotechnology Some examples of what all can be Trade secrets: • Cell lines for monoclonal antibody production; ideas; formula and production details; experimental procedures; production strains; details of medium design and formulation; hybridization conditions; ways of conducting assays • Protection for such things will work, of course, only if they cannot be reverse engineered (the composition discovered from analysis of products acquired in the marketplace).

36. Biotechnology Additional precautions (besides the points discussed before): • Reserving clear title in any transfer of biological materials. • Use of transfer agreements, even for transfers between universities or other non-profit institutions. • In case of government sponsored research activities it may have "march-in" rights. • Establishing policies governing premature disclosure, licensing, ownership "of inventions, discoveries, trade secrets and software," royalties, and equity and management participation in businesses created to develop intellectual property. • Separating laboratory facilities from teaching and office facilities

37. Biotechnology • Physical security may be facilitated by carrying out the containment practices and guidelines for biosafety • The most important element of containment is a strict adherence to standard microbiological practices and techniques. • Identification of potentially proprietary biological materials is possible through genetic engineering. For instance, combinations of genetic markers in unusual patterns tend to prove that a given strain was derived from the proprietary strain. Of course, the more unusual the combinations, the better and well documented records are of paramount importance. Non-critical alternations in DNA, RNA and protein sequences may also be utilized to identify such strains. If working with genomic eukaryotic DNA sequences or if concerned with non-coding sequences in prokaryotes, such alterations may be made in the non-coding sequences. Use of strains weakened to protect against inadvertent release into the environment are useful in protecting against misappropriation..

38. Biotechnology • In many ways, these practices mimic standard practices used in the publishing industry to detect copying of published works by disbursing randomized, recorded typographical errors throughout such works • Keeping a "paper trail“ thereby establishing for all materials exiting the laboratory by requiring multiple clearances/ review including administrative review. • Transfer of organisms via a contract of bailment which maintains title with the inventor to both the organism and any progeny derived from the organism.

39. References & acknowledgements • Biotechnology by John E. Smith; fourth Edition; Cambridge University Press; 2004. • http://w.w.w.wipo.int • WIPO Magazine, April 2002, p-12-14 • Article by AG Roy in Journal of Intellectual property, Vol. 11, May 2006, p-192-200. • Intellectual property and International trade the TRIPS Agreement. Editor Carlos M. Correa & AbdulQawi A. Yusuf, Published by Kluwer Law International, 2nd Edition 2008. • http://www.legalserviceindia.com/article/l436-Trade-Secret.html • BIOTECHNOLOGY TRADE SECRETS, UNIVERSITY RESEARCH AND INTERNATIONAL PERSPECTIVES by C. Steven McDaniel (www.conleyrose.com)

40. Acknowledgement The author/ presenter acknowledges Ranbaxy Laboratories Ltd. for giving permission to make this presentation. The author/ presenter acknowledges & thanks WIPO for providing this opportunity.