By Matt Bauer
The changing landscape of the life sciences industry relies more and more on a form of intellectual property protection called trade secrets to safeguard mechanisms of manufacturing and process knowledge not always included within life science patents.
To the public, this means the methods of production for life saving therapeutics may be kept indefinitely in the hands a single company, never to enter the public domain.
What are the main differences between trade secrets and patents?
Patents are exclusive negative rights for an invention. In other words, the patent holder is granted the right to exclude others from replicating their invention. Generally this invention must meet the bar of being “useful,” “novel,” and “non-obvious.”
Patents are disclosed upon filing and generally last 20 years from the filing date of the application. However, in filing a patent, one needs only to provide sufficient disclosure for another to make the product. This means the patent holder must only disclose the minimum steps for the end product to be produced. This may be significantly different than what the company uses as the “best mode” to produce its commercially viable product.
Trade secrets, on the other hand, are, by definition, much more ambiguous. The term refers to industry information that is kept secret. One of the most famous trade secrets is the formula to Coca-Cola, which has been kept secret for more than a century.
Trade secrets offer a number of benefits for life sciences companies compared to patents, such as theoretical indefinite intellectual property protection. Patents, on the other hand, have a limited shelf life of 20 years at best before entering into the public domain. Trade secrets, however, offer no formal intellectual property protection. Other entities can unravel the secrets through their own independent work or by reverse engineering the end product.
For most biological innovations, patents and trade secrets are used together to protect intellectual property. One of the key reasons why both are used together is because patents only require a limited disclosure of information. It is common for life sciences companies to keep the “best mode” for production of a product a trade secret, but file a patent for the end product with only the “sufficient” disclosure to meet the bar of patentability.
Consumers should be worried about the use of trade secrets for biologics
At face value this may not seem to be a big problem. A company files a patent, and after the patent expires, the patented information will become part of the public domain, which will allow anyone interested to use the information to produce the innovation.
In practice, however, it can be extremely difficult to do so. For products that are significantly complicated to make, if the patent doesn’t fully disclose all the information needed to produce it (i.e., if the company protects their intellectual property through trade secrets), competitors will not be able to reproduce the end product, even with access to the patent.
This leads to a form of de-facto extension of the monopoly many life science companies have on their innovations even after the patents have expired. This is particularly true for biologics, or complex pharmaceuticals derived from living (biological) sources.
Unlike small molecule drugs, which are more easily reverse-engineered from a patent, biologics require a high degree of specialized knowledge to produce. Much of this knowledge is held by companies in the form of trade secrets that are never disclosed to the public even when the patent is expired. The entry of biosimilars, or generics for biologics, into the market is significantly hampered because of this practice.
For example, as of 2019, only a handful of biosimilars (17) in total have been approved by the U.S. Food and Drug Administration (FDA). Even fewer have reached the commercial market. In contrast, for small molecule drugs, in 2019 alone the FDA approved nearly 1,000 generic drug applications. This is largely because of the difficulty that competitors have in producing biosimilars without investing a large amount of research and development into figuring out the “best mode” disclosures that are held as trade secrets by the original producer.
Companies interested in producing biosimilars must spend large amounts of research and development money to recreate platforms for manufacturing biologics. This cost is passed on to consumers through increased prices. Thus, biosimilars do not offer the traditional cost savings associated with generic small molecule drugs.
Consumers should be aware of these issues, as biologics are a promising and rapidly growing new area of drug development. Because of the inherent secrecy used in much of the manufacturing process, consumers will face high prices and fewer options, unless the field as a whole moves toward increased transparency and disclosure.