COVID-19 Update: How Life Sciences Companies Can Protect Valuable Trade Secrets While Employees Work From Home

In an effort to combat the rapid spread of COVID-19, governments are taking swift action. As of March 30, 2020, twenty-seven state governors have issued stay-at-home orders, essentially halting the daily routines of their states' residents. Similar orders are in place around the world, including in much of Europe and Asia. However, business continues, and companies both large and small are shifting to a work-from-home environment for their employees. Not only is this temporary work environment unfamiliar to most of us, it also may pose substantial confidentiality risks to companies.

Intellectual property protection is a key component of the success of many companies, and increasingly companies are turning to trade secrets to safeguard their valuable assets. Unlike patents, copyrights, and trademarks, which require disclosure to the public of the information sought to be protected, trade secrets must actively be kept secret. For information to be considered a trade secret it must not be generally known or readily ascertainable by the public, must derive economic value from its confidential nature, and must be the subject of reasonable efforts to maintain secrecy. Generally, a trade secret may include information of all types and forms, such as algorithms, computer programs, techniques, processes, product specifications, pricing strategies, customer lists, business and marketing plans, and industry forecasts.

For the life sciences industry, the protection of proprietary information, including trade secrets, is paramount. With the increase in collaborations, joint ventures, licensing, and the mobility of employees, valuable proprietary information is at increased risk of dissemination. In particular, the development of drugs, testing, and devices involves valuable trade secrets such as chemical formulas, biological sequence information, manufacturing processes, know-how, supplier lists, research and development information, and clinical data.

Recently, we have seen an increased focus on trade secrets protection and litigation, in part due to the passage in 2016 of the Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq. (“DTSA”) which created a federal cause of action for trade secret misappropriation. However, the rise in cases is also attributable to our new work environments—employees have easy access to company information electronically, technology allows employees to work remotely from the office, and confidential digital information is often stored offsite, such as in the “cloud.”

In light of these circumstances, it is vital for life sciences companies to consider whether they have policies and procedures in place to maintain the protection of their valuable trade secrets during this work-from-home period. It is likely that existing company policies for maintaining and protecting confidential business information were drafted and implemented with the traditional workplace in mind. Are these policies still effective when an apartment with inquisitive family or neighbors replaces an office space? What about when an at-home WiFi network replaces a complex, thoroughly protected internal network? These are just a few examples of the many challenges presented by the current work-from-home environment, and companies should be proactive in implementing strategies that protect against trade secrets losing their secret status, as well as from potential misappropriation of valuable trade secrets by third parties.

Employers must strike a balance between facilitating the seamless operation of business remotely and protection of trade secret information. Below are some practical suggestions that life sciences companies can implement to reduce trade secret vulnerabilities while employees work from home:

• Employers should immediately institute confidentiality policies or revisit their current policies—especially if they want to have enforcement options. Under the DTSA, employers must place employees on notice of their obligation to maintain the secrecy of trade secrets and must clearly and specifically notify employees regarding the confidentiality of information. A formal written policy is important, as well as a reminder notification.
• All employees should receive training regarding the protection of trade secrets. Also, employees with access to confidential information and trade secrets should be required to sign non-disclosure agreements, intellectual property assignment agreements, and/or non-compete agreements at the start of their employment.
• It is also advisable to have employees acknowledge receipt of the company policy before being provided access to any confidential or trade secrets information. Of course, all such information must be clearly designated as a trade secret.
• Employers should prohibit employees from transmitting or maintaining company confidential information or trade secrets except through authorized company systems. The use of personal email accounts, cloud services, home assistant devices (e.g., Alexa), and social media creates the additional risk of inadvertent transmission or hacking by third-parties.
• Employers should require that all confidential business information and trade secrets only be shared using a secure document exchange system. This is especially true for the sharing of research and development information originating from laboratory settings, or from the use of artificial intelligence applications.
• Additional safeguards should be taken when research and development data is shared with other parties, such as through a collaborative research agreement. Employers should also remind their employees of the importance of safeguarding third-party confidential information.
• Thought must be given to third-party contract manufacturers or vendors that employees work with. For instance, the details of manufacturing processes, formulations, and the use of reagents, biomarkers, oligonucleotides, and probes by third parties must be safeguarded, and therefore companies should monitor the policies and procedures used by third parties, especially when information is being transmitted between entities.
• Consider placing restrictions on which employees can access confidential business information and trade secrets, such as using passwords to protect certain types of information. For example, consider whether marketing and business personnel require access to potential trade secrets such as chemical formulas and preclinical data while working remotely. By limiting the number of employees granted access to such vital information, the risk of inadvertent disclosure is reduced.
• It is advisable for companies to utilize software that identifies the remote downloading of highly confidential or trade-secret information, and to consider requiring employees to keep a log of when they access certain confidential information or trade secrets.

To address the needs of our clients in this unfolding crisis, we have produced a guide to help employers manage HR legal and practical issues arising from COVID-19.