Protecting Trade Secrets in Life Sciences

Trade secret fundamentals

Trade secrets are generally protected under state law through the Uniform Trade Secrets Act (UTSA) and under federal law through the Defend Trade Secrets Act of 2016 (DTSA). Not all states, however, follow the USTA. Information that is not generally known that provides economic value and that is subject to reasonable measures for protection can qualify as a trade secret. Trade secrets are particularly useful for information that does not qualify for patent protection.

In the European Union, the Trade Secrets Directive 2016/943/EU established a harmonized, minimum standard for EU member states. The Directive addresses only civil remedies. Individual member states may maintain their own criminal statutes covering trade secret misappropriation.

Trade secrets and patents offer very different forms of protection, and life sciences companies must weigh the trade-offs between the two. Trade secrets carry no patentability requirements and can protect information that would not otherwise qualify for a patent, whereas patents must satisfy the formal requirements of patentability. A trade secret can last indefinitely so long as secrecy is maintained, while a patent has a limited term of protection of 20 years from filing. Patents must be federally registered through the U.S. Patent and Trademark Office (USPTO), and the specifics fully disclosed to the public, while trade secrets require no public disclosure at all. A patent gives its owner the right to exclude others from making, using or selling the invention, while a trade secret gives its owner the right to prevent misappropriation and unauthorized use. Trade secrets generally can be reverse-engineered without violating the law, whereas patented inventions cannot be reverse-engineered for competing use. While maintaining a trade secret requires ongoing investment in secrecy measures, maintaining a patent requires ongoing registration costs.

Legal framework for trade secret protection

Uniform Trade Secrets Act (UTSA)

Before the UTSA was enacted in 1979, trade secret law was disorganized with different rules varying from state to state. As noted above, not all states have adopted the USTA. The UTSA itself is not part of the United States Code. Rather, it was designed as a model “template” law intended to bring consistency to how states protect a business’s valuable confidential information. The UTSA defines what a trade secret is, what it means to steal a trade secret (“misappropriation”), and what legal remedies are available to businesses when misappropriation occurs. In 1985, the National Conference of Commissioners on Uniform State Laws adopted amendments to the UTSA to further standardize trade secret law among the states.

Section 1 of the UTSA sets out the Act’s core definitions. A trade secret is information — including a formula, pattern, compilation, program, device, method, technique, or process — that derives independent economic value from not being generally known and that is the subject of reasonable efforts to maintain its secrecy. Misappropriation is the unauthorized acquisition, use, or disclosure of a trade secret by a person who knows or should know it is a trade secret.

Section 2 addresses injunctive relief, allowing a court to grant an injunction to prevent misappropriation, or to prevent the further use or disclosure of a trade secret where it finds that misappropriation has occurred or is likely to occur.

Section 3 governs damages, which may include actual damages and profits, whereas Section 4 allows the prevailing party to recover reasonable attorney’s fee.

Section 5 requires the preservation of secrecy, providing that a party who has acquired or possesses a trade secret may not disclose it to anyone not authorized to receive it. Section 6 imposes a four-year statute of limitations, running from the date of misappropriation. Section 8 directs that the Act be construed and applied in a manner that promotes uniformity of application across states, Section 9 provides the Act’s short title as the Uniform Trade Secrets Act, and Section 10 contains a severability clause, providing that if any provision of the Act is held invalid, the remainder of the Act remains in full force and effect.

Defend Trade Secrets Act (DTSA)

Although most — but not all — states had adopted a version of the UTSA by the 21st century, specific interpretations and remedies varied significantly from state to state. Enacted in 2016, the DTSA provides federal jurisdiction for trade secret theft and aligns closely with the UTSA offering uniform protection across state lines. The core of the DTSA is found at 18 U.S.C. § 1836. It defines a trade secret using a crucial three-part test and outlines who can sue, what must be proven in court, and what remedies are available to victims of misappropriation. The trade secret owner must show that the information is confidential; reasonable efforts to maintain confidentiality; the economic value of the trade secret; and establish misappropriation. Reasonable efforts are irrelevant if the information was not confidential in the first place.

The DTSA covers all forms of information as a trade secret where the owner has taken reasonable measures to keep the information secret, and the information derives independent economic value from not being generally known. Misappropriation under the DTSA includes the acquisition of a trade secret by a person who knows or has reason to know it was acquired by improper means. It also includes the disclosure or use of a trade secret without consent by a person who used improper means to acquire it or knew it was improperly acquired. Most often, however, the disclosure is by someone who acquired the information properly but did not have the right to disclose it to a third party.  

A person cannot be held criminally or civilly liable under federal or state trade secret law for disclosing a trade secret if the disclosure is made in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or if made in a complaint or other document filed under seal in a lawsuit. The DTSA also imposes an Employer Notice Requirement: Employers must provide notice of this immunity in any contract or agreement with an employee governing the use of trade secrets or confidential information. If an employer fails to provide this notice, it cannot recover exemplary damages or attorney’s fees in a DTSA lawsuit against that employee.

The DTSA provides several avenues of civil relief. Courts can issue injunctions to prevent further disclosure or use of trade secrets, and victims may recover compensatory damages for actual losses and unjust enrichment resulting from misappropriation, potentially including a reasonable royalty for unauthorized use. In cases of willful and malicious misappropriation, courts may award exemplary damages of up to double the compensatory damages, and the prevailing party may recover attorney’s fees if the misappropriation, or the claim itself, was pursued in bad faith. In extraordinary circumstances, courts can also order the ex parte seizure of property necessary to prevent the dissemination of trade secrets. Orders of seizure are very rare. 

To obtain a seizure order, a plaintiff must convince a judge that a standard injunction or restraining order would be inadequate, that they will suffer immediate and irreparable harm if seizure is not ordered, that they are highly likely to win their case, that the defendant is in actual possession of the trade secret and the property to be seized, and that the defendant would destroy or otherwise make the trade secret inaccessible if given notice. If a judge agrees, federal law enforcement can be ordered to seize property to prevent the secret from being lost forever.

In addition to civil remedies, the Economic Espionage Act, which the DTSA amends, provides criminal penalties for trade secret theft. Individuals convicted of trade secret theft can face up to 10 years in federal prison and fines up to $5 million or three times the value of the stolen trade secret, whichever is greater. Organizations found guilty of trade secret theft can be fined up to $10 million or three times the value of the trade secret. Where the theft is intended to benefit a foreign government, the stakes rise further.

Trade secrets in the life sciences industry

Life sciences companies rely on trade secret protection for a wide range of confidential information. This includes: manufacturing and process information, such as methods of producing pharmaceuticals; research and development data, such as experimental protocols, assay designs, confidential algorithms, and cell lines; strategic business information, such as marketing strategies, pipeline plans, acquisition targets, and vendor or supplier information; technical know-how, such as the specialized knowledge of key scientists and engineers in fields like personalized medicine; and negative know-how, meaning information about what does not work.

Over the past decade, trade secret litigation has grown substantially. The enactment of the DTSA in 2016 created a federal private right of action for trade secret misappropriation, making it easier for plaintiffs to bring actions in federal court. Heightened competition between life science companies has intensified disputes over confidential information, and increased mergers and acquisitions activity has created more opportunities for trade secret disputes.

Companies are also increasingly recognizing the value of their trade secrets, and collaboration agreements between companies jointly developing products together add another source of potential disputes.

Trade secret disputes in the life sciences industry tend to arise from five recurring scenarios: employee mobility and poaching, breach of confidentiality agreements, internal theft, external theft, and corporate restructuring or M&A activity. Each is illustrated below with representative decisions.

Common origins of trade secrets disputes 

Employee mobility and poaching

In Guardant Health, Inc. v. Natera, Inc., No. 3:25-cv-01837 (N.D. Cal. Feb. 20, 2025), Guardant alleged that Natera recruited Guardant employees and used confidential information to accelerate development of competing cancer-detection products. Guardant voluntarily dismissed the case without prejudice.

Breach of confidentiality agreements

In Certain Selective Thyroid Hormone Receptor-Beta Agonists, Processes for Manufacturing or Relating to Same, and Products Containing Same, Inv. No. 337-TA-1352 (U.S.I.T.C. 2023), Viking Therapeutics alleged that Ascletis and its partners misappropriated confidential information concerning thyroid hormone receptor-beta agonists that had been disclosed during a prior licensing and collaboration relationship. The International Trade Commission (ITC) issued a seven-year limited exclusion order prohibiting unlicensed entry into the United States, along with a cease-and-desist order against each corporate respondent.

In Aptar Group Inc. v. ARS Pharmaceuticals, Inc., No. 1:25-cv-02545 (S.D.N.Y. Mar. 27, 2025), Aptar alleged that ARS misappropriated trade secrets relating to Aptar’s intranasal drug-delivery technology after the parties collaborated on the development of nasal spray products under confidentiality agreements. The motion to dismiss was denied, and the case remains open, with trial scheduled for May 2027.

Internal theft

In Certain Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same, Inv. No. 337-TA-1145 (U.S.I.T.C. 2019), Medytox alleged that a former employee stole confidential botulinum toxin manufacturing information and transferred it to Daewoong, which then used the information to develop competing products.

The ITC issued a limited exclusion order and a cease-and-desist order against the respondents for a duration of 21 months, along with a bond of $441 per 100U vial of accused product during the period of Presidential review. The 21-month remedy might be considered a win for the respondents. 

In United Therapeutics Corp. v. Liquidia Technologies, Inc., No. 21-cv-004094 (N.C. Bus. Ct. 2025), United Therapeutics alleged that a former executive improperly retained and used confidential financial models, regulatory strategies, marketing plans, and clinical trial data to assist in developing a competing pulmonary arterial hypertension therapy. The defendant’s motion for summary judgement was denied, allowing the claims to proceed toward trial.

External theft

In Certain Botulinum Toxin Products, Processes for Manufacturing or Relating to Same and Certain Products Containing Same, Inv. No. 337-TA-1313 (U.S.I.T.C. 2022), Medytox alleged that an unauthorized third-party visitor obtained a proprietary C. botulinum stain from its research facility and that the strain was later used by Hugel in commercial botulinum toxin products. The ITC denied the complainant’s request for oral argument and terminated the investigation.

In Insulet Corp. v. EOFlow Co., Ltd., No. 1:23-cv-11780 (D. Mass. 2025), Insulet alleged that EOFlow unlawfully acquired and used trade secrets relating to its OmniPod insulin pump technology to develop a competing product. A jury found that EOFlow had misappropriated four of Insulet’s trade secrets and awarded $452 million in damages; the district court subsequently reduced the award to $25.8 million in compensatory damages and $33.6 million in exemplary damages. On appeal, the Federal Circuit reversed Insulet’s trade secret victory, holding that the company had filed suit too late.

Corporate restructuring and M&A risks

In CardiaQ Valve Technologies, Inc. v. Neovasc, Inc., No. 14-cv-12405 (D. Mass. 2017), CardiaQ alleged that confidential transcatheter mitral valve designs, technical know-how, and other proprietary information were used in the development of the Tiara valve system, which was later acquired and commercialized by Neovasc. A jury awarded CardiaQ $70 million in damages, finding that Neovasc had breached both its non-disclosure agreement and its duty of honest performance. The district court awarded an additional $21 million in enhanced damages and awarded co-inventorship of the Neovasc transcatheter mitral valve patent to CardiaQ’s co-founders. On appeal, the Federal Circuit affirmed, with the panel finding that the district court had acted properly in denying Neovasc’s request for a new trial.