Part VI: Trade secrets in collaborative innovation

Topics covered in this Part:

• Particularities of trade secret management in collaborative innovation

• Management of trade secrets through different phases of collaboration

• Protection and use of trade secrets by universities

• Handling trade secrets in university–industry collaboration

Many recent books and articles have stressed the importance of collaborative innovation models not only for companies’ competitiveness but also for accelerating creation of innovative products for the benefit of the public at large. Collaboration between public research institutions and private companies has been encouraged in many countries with a view to facilitating practical application and commercialization of public research outputs.

In practice, collaborative research brings in researchers from two or more organizations, having the required expertise, knowledge, know-how and skills, to one project. They collectively contribute to a common goal.

Trade secrets as background IP. Oftentimes, not to share trade secret information with other collaborating researchers at all is not an option, since cross-fertilization of shared knowledge and know-how is key for success in collaboration. Thus, if trade secret information is considered relevant to the collaboration, trade secret holders may ask themselves how and under what conditions their trade secrets should be shared with other collaborators so that both the value of the trade secrets for the company and successful outputs from the collaborative process will be maximized. The trade secrets held by each collaborator and shared with another collaborator for his/her use during (and possibly after) the collaboration under the agreed terms and conditions are part of the “background IP.”

Trade secrets as foreground IP. Trade secrets may also be created as the results of collaboration. In these cases, they are part of the “foreground IP.” When the collaboration leads to a new idea (i.e., new information in a broad sense), how to handle that valuable information can become an important question for the collaborating parties. Who has ownership over that new information? Should it be simply published instead of seeking patent protection? Should one seek patent protection, thus also committing to disclosing the information? Or is it better to rely on trade secret protection, which requires a consciously crafted confidentiality regime and conditions of disclosure? Should trade secret information be shared only within the collaborative research group or beyond? If the institutional goals and economic or business interest of the collaborating partners align, it is not so difficult to find a common answer to these questions. However, if their business principles and goals are not pointing in a similar direction, it may be more challenging to find an agreement.

As can be easily imagined, how to best handle trade secrets in collaborative research depends on the agreed objective and nature of the collaborative project. Nevertheless, what can be said with certainty is that trade secrets are an integral part of collaborative innovation, and there are several points that organizations should take into account in this setting. See Part VII (Trade secrets and digital objects), in particular, Section 3, for trade secret protection of digital data, metadata, algorithms and code in collaboration.

1. Particularities of trade secret management in collaborative innovation

The general measures of trade secret management also apply to collaborative innovation (see Part IV Trade secret management). Since the sharing of trade secret information with a party (or parties) outside the organization increases the outbound risk of trade secret misappropriation by a party outside the organization as well as the inbound risk of the organization being contaminated with third parties’ trade secrets, Part IV, Sections 3.2 and 5.2 of this Guide highlight some measures to mitigate such risks.

In a collaborative research setting, innovation managers are expected to manage secrecy (trade secret information) and flow of that information throughout the collaborative innovation process. External factors that mitigate the risk of trade secret misappropriation, such as a robust national legal framework for protection of trade secrets, may also support raising the level of confidence and trust between collaborators to the point that they can comfortably share their valuable intangible assets. Below, some general guidance on how to approach the particularities of trade secret management in collaborative innovation are outlined.

1.1 Trust and loyalty in collaboration – legal and cultural differences

Confidence and trust are the keywords for successful trade secret management. Creating trust and loyalty among collaborators will usually reduce the risk of misappropriation. This can be easily said but is difficult to achieve.

Multi-jurisdictional collaboration – legal frameworks

Sharing similar, if not identical, national legal frameworks or legislation among all collaborators would facilitate development of mutual confidence and trust. For example, one of the driving forces for the adoption of the European Union (EU) Directive on the protection of trade secrets is that without effective and comparable legal means for protecting trade secrets across the EU, incentives to engage in cross-border innovative activity within the region are undermined, and thus trade secrets are unable to fulfill their potential as drivers of economic growth and job creation. ⁽¹⁾Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the Protection of Undisclosed Know-How and Business Information (Trade Secrets) Against Their Unlawful Acquisition, Use and Disclosure, Preamble paragraphs (3) and (4). In reality, however, organizations and individuals involved in international collaboration projects may come from different regions having different legal traditions relating to trade secret protection and enforcement.

While convergence of national legal frameworks on trade secrets has been observed to a certain extent (particularly with respect to the eligibility criteria), laws and practices beyond the trade secret law in the narrow sense, which are relevant to exploitation and enforcement of trade secrets, continue to vary: they include laws regarding employment, privacy and data protection, property and joint ownership, contracts, civil and criminal procedures and technology export controls and taxes. To avoid any misunderstanding and unwarranted expectations, collaborators need to be mindful of the differences in national laws and fill in the gaps with contractual arrangements or a sound choice of law. ⁽²⁾Issues relating to cross-border litigation is addressed in Part V: Trade secrets in litigation, Section 7.

Multi-jurisdictional collaboration – cultural differences

Obviously, the underlying legal frameworks represent just one factor that could have an impact on trade secrets in multi-jurisdictional collaboration. Cultural differences among the members of a collaboration team may also affect the behaviors of, and communication among, team members. In the end, a collaboration agreement needs to be executed and trade secret information is shared among individual members. In the international context, training and educational programs on trade secrets can be adapted to a multi-cultural team, also sensitizing the participants about the different approaches to confidence building and information sharing.

Differences in organizational culture and business strategy

Even if collaborators come from the same country, their organizational culture and structure as well as business strategies may lead to different understandings about, and expectations for, trade secret protection. Typically, in collaborative research between public research centers (including universities) and private companies, protection of trade secrets has different impacts on their respective missions and goals (see Section 3, below). To lower the trade secret management gap, efforts of all parties to align the ultimate objective of the collaborative project is one aspect that should be borne in mind, with due regard to their respective justified interests.

In general, it is more difficult to build a team of individuals coming from multiple organizations. In addition to the organizational culture, confidentiality rules and guidelines applicable to the collaborative research team may be not the same as what is applied to the organization of each team member. Therefore, clarifying practical rules and expected behaviors of team members, i.e., to-do and not-to-do, may help team members interact and work together. They do not necessarily need to be formal internal rules and can be provision of guidance to those who are involved in the collaborative project. What may be important is that all collaborating parties, both researchers and managers, are involved in setting guidance, which should be clear, consistently applied and in line with the goal of the collaboration. Accordingly, team building, education and training for team members play an even more important role in successful collaboration.

1.2 The fuzzy nature of trade secrets in collaborative innovation processes

Terminology

In all collaborations, collaborators should clarify the definition of ambiguous terms such as “open,” “secret” and “confidential,” which could represent different notions when they are used within their respective organizations. For example, one party may use “confidential” as a broader term, which encompasses concepts such as privacy and security and not only trade secrets.

In addition, the languages of the collaborators may create associations that form their different understanding of the terms. For instance, in Scandinavian languages, the legal term “business secret” is used in the place of the term “trade secrets.” Thus, there is a risk that some people may construe the former term more narrowly than the latter, which is more commonly used in other regions. Therefore, the collaborators may need to agree on what is meant by a seemingly common term “trade secret” (or “business secret”) in the first place.

Uncertainties in the collaborative innovation process

Product development is a long journey starting from generation of an idea, conceptualization, R&D, product design and manufacturing to marketing and business analysis. The early stage of this innovation process is often referred to as a “fuzzy front end,” since the outcome of the process and the appropriation of the innovation are unclear and uncertain. However, already at this early stage, managing access to information may be important for keeping the innovation process in a controlled environment.

As a trade secret is a flexible body of knowledge, it can be more difficult for the collaborators to anticipate which trade secret information will need to be shared in future collaborative activities. Therefore, the parties in collaborative activities need to find a balance between clarity of the term and flexibility. Some tips for achieving such balance are provided in Section 2.2.

Moreover, information management at the early stage of collaboration is necessary not only for maintaining the possibility of protecting new ideas (i.e., information) via trade secret protection, but also for keeping options to seek other forms of IP, such as patents and industrial designs that depend on secrecy before filing. In this “fuzzy front-end” phase, such confidential and potentially valuable information may or may not satisfy the legal requirements for trade secret protection. At some point, however, confidential information may become trade secrets that meet legal requirements or may be published or otherwise become common knowledge among researchers in the field. As another possibility, it may continue to be treated as not more than confidential information throughout the innovation process, i.e., while having been kept confidential, its value due to secrecy cannot yet be affirmed.

If this sounds very complicated, the bottom line is that both parties acknowledge the fuzzy and dynamic nature of trade secrets in collaborative innovation and find a practical arrangement not only through their legal teams but also involving business and technology managers.

1.3 Maintaining oversight of trade secret management

Due to the potential flexible understanding of trade secrets among employees and the fuzzy front end of the innovation, maintaining oversight of trade secret management throughout the innovation process of one organization is already complicated. In a collaboration setting, it usually becomes more challenging, as more organizations, and hence more IP managers, are involved.

A practical question for collaborators is whether it makes sense to designate an IP management function for the specific collaboration (such as a steering group or an advisory board) or whether it is sufficient that the IP managers of the different parties find agreement. The greater the differences in terms of the industry sector, nationality or a management approach between the two parties, the more tensions can arise during discussions among the various IP managers. Creating one IP management function in the collaboration team may make sense, particularly where multiple parties having different management cultures and bringing in a complex set of background IP will embark on long-term projects aiming at ambitious research outputs.

2. Management of trade secrets in different phases of the collaboration

Although most of the general principles and guidance on trade secret management ⁽⁴⁾See Part IV Trade secret management. In particular, Part IV, subsections 3.2 and 5.2 discuss some measures to mitigate high risks of misappropriation and contamination in collaborative activities. Part IV, subsection 2.3 specifically addresses contractual measures to protect confidentiality, including contracts with third parties. apply throughout the different phases of the collaborative innovation process, particular steps in that process may require more attention.

2.1 Negotiating collaboration

Usually, when two or more parties have expressed their general interest in engaging in collaborative activities, they will assess various positive or negative impacts of such collaboration for their own organization and negotiate an agreement.

During this phase, sensitive business or technological information often needs to be shared among the parties. Therefore, a non-disclosure agreement (NDA) is usually signed between the parties. The main features of the NDA are explained in Part IV, Section 2.3. However, there are a few important points to be considered in signing NDAs at this stage of the collaboration.

• Purpose limitation: the NDA is strictly for assessing the feasibility and desirability of the collaboration. It focuses on confidentiality and exchange of confidential information. There is no component of licensing clauses and no intent to share anything that goes beyond what is strictly necessary for the negotiation. 

• Identification of the confidential information: properly identifying what constitutes confidential information is crucial, since sharing of the confidential information takes place in a tentative, uncertain relationship between the parties.

• Termination protocol: NDAs should explicitly state that documents and other data carriers as well as materials and prototypes containing the confidentiality information should be handed back or destroyed, if the parties decide not to pursue further negotiation. The types of data carriers and destruction methods may be specified, and parties may also require a certification of destruction. In addition, the parties usually guarantee that no further use of the shared confidential information will be made. In some jurisdictions, parties may need to hold shared information for a minimum period of time because of, for example, auditing or legal requirements. Parties may also consider these aspects in negotiating termination protocols.

2.2 Bringing trade secrets into the collaboration

When the negotiation is successful, a formal collaboration agreement usually includes a set of clauses over trade secrets (and/or know-how), including sharing of the background IP and management of the foreground IP. The NDA concluded during the negotiation phase should be expressly superseded by the collaboration agreement.

While a collaboration agreement usually defines and lists the background IP of each party, a clear identification of subject matter is more challenging for trade secrets than for other IP. This is because any leakage of trade secret information could result in loss of protection.

One possible practical technique could be to define a trade secret with a reference to a title or other identifying designation (or an ID-number) and the field of the trade secret concerned in the list of background IP (e.g., Trade Secret 14, on quality of component manufacturers). If a collaborator needs to access or use the secret information, a more specific agreement may be concluded. In general, an internal database documenting the trade secrets can be helpful, as it may keep track of access to them by the authorized individuals in the collaborating entities.

From the perspective of the owners of the background IP, it is also important to specify in the agreement that they will hold the ownership of any modification of the trade secrets that form part of the background IP.

To find a balance between clarity of the collaboration agreement and flexibility of future collaborative activities, parties may consider:

• Clear but flexible NDAs: NDAs may clearly define confidential information involved in the collaborative activity, and also include a clause that allows for a periodic review and adjustment of the scope of confidential information in accordance with project development.

• Tiered access to information: researchers and teams involved in the collaboration may have different level and scope of access to shared information. For example, in a partnership between a university and a pharmaceutical company, early-stage research data may be widely accessible within the university, while access might be restricted to a smaller group when it comes to more commercially viable findings.

• Defined yet adaptable milestones: parties may agree on clear milestones for project development. At each milestone, they may review what information has been generated and decide how to treat it.

• IP strategy meeting: parties may hold regular IP strategy meetings to maintain ongoing dialogue on managing IP flexibly while maintaining a clear process for decision making.

Sharing background trade secrets held by other collaborating partners means there is more exposure to trade secret information of the other party, increasing the risk of contamination with the trade secrets held by the other party. ⁽⁵⁾See Part IV, Section 5.2. In accordance with the collaborative agreement, each party should take measures to prevent unlawful use or disclosure of trade secrets held by others.

Even if an impeccably drafted non-disclosure requirement is in place, the risk of unlawful use of background trade secrets by another party cannot be zero. Therefore, from the perspective of trade secret holders, the scope of trade secrets that are included in background IP should be limited to specific use of specific information for the specific purpose of the foreseen collaborative activities.

Similarly, from the perspective of another party who is the recipient of the trade secret information, it may not wish to receive any unnecessary disclosure from the trade secret holder, since it will merely extend the obligation of confidentiality to unnecessary information received, and increase the burden of managing it properly to minimize the risk of liability.

2.3 Identifying joint trade secrets in the collaboration

In general, a collaboration agreement also states how foreground IP should be identified, reported and managed. Thus, it stipulates how jointly developed IP should be owned, who owns the rights to seek legal protection of the joint IP, who has the rights to use the joint IP, who has commercial exploitation rights, what are the rights after termination of the collaboration and the rights to derivative IP etc. (see also Sections 2.4 and 2.5, below).

To identify jointly owned IP, usually one or more managers, such as a project manager, will be responsible for reporting technical advancement made during the collaboration to an IP manager (or a common IP management group) of the collaborative project. At this stage, the project manager instructs researchers to keep potentially valuable information, ideas etc. confidential. New findings that can be more suitable for patent protection than trade secret protection must be kept confidential at least until filing a patent application. To be potentially protected by trade secrets, the information needs to be handled with a sufficient level of caution to comply with the criteria for trade secret protection.

Based on the report from the program manager(s), the IP manager or management group considers which type of IP protection mechanisms may best suit each new technical finding. Usually, appropriateness of trade secret protection is reviewed in comparison with other IP, such as patents. Some of the questions asked are: Is maintaining secrecy of the information crucial for long-term commercial success? Will external technological development make the secret information naturally known to other researchers by their self-discovery or become obsolete in a short period?

The answers to these questions have an impact on the expected duration of trade secret protection as well as the required cost and resources for trade secret management. Therefore, decisions will be taken not only from the legal and technical perspectives but also from the business and commercial perspective. Naturally, if the secrecy of certain information is crucial for long-term success, the collaborators need to take stronger measures to protect it than if the secret information will be revealed anyhow. For the latter cases, collaborators may also consider a revealing strategy to avoid unintended consequences from the natural termination of trade secret protection.

2.4 Handling shared trade secrets during the collaboration

The fact that trade secret information was developed in the collaborative research space does not necessarily mean that it ought to be held jointly. Joint ownership of all developed technology may usually seem to be a simple solution. However, since the developed technology often includes pre-existing IP, the owner of such pre-existing IP may inadvertently and indirectly give away its control over the pre-existing IP.

Therefore, depending on the practical needs of collaborating partners in the short, middle and long term, they may agree on an arrangement of a sole trade secret holder with the possibility of lawful use of the information by other collaboration members. Such an arrangement may also take into account the business strategy of each party, such as the main geographical fields of business, the fields of commercial use etc.

In general, such arrangements are negotiated and stipulated in contracts agreed by the collaborators. Since some information shared with collaborators can be critically important for the trade secret holder’s business, the contracts may contain multiple provisions to reinforce the protection. They include, for example, confidentiality of information, limited use of the information, non-transferability or non-assignability of the information, termination rights after a change in control of a collaborator, and dispute resolution provisions.

Even with these contractual provisions, there is an inherent risk that the persons involved in the collaboration may share the secret beyond what is agreed upon. The collaboration agreement may not be known in detail by all researchers involved. Even if it is known, they may apply the rules flexibly: for example, a researcher may find that the objective of a smoother collaboration justifies not following the rules or even not being in line with the rules.

Therefore, collaborating partners may also agree on additional measures to reassure that the parties comply with the confidentiality obligation. For example, the importance of regular and continuous educational programs for all people involved in the collaboration is already highlighted. In addition, parties may agree on periodic audits to review compliance with the agreed terms.

2.5 Trade secrets after the collaboration

The management of jointly owned trade secrets and liability clauses are important not only during the collaboration but also after the end of the collaboration, amicable or otherwise. These clauses related to post-collaboration questions also need to be agreed between the parties and included in the collaboration agreement.

The issues that may be considered are:

• who will own which trade secrets once the collaboration ends;

• the duration of the confidentiality clauses or NDAs;

• liability in case of trade secret misappropriation or breach;

• reach through clauses, including a party’s subsidiaries or eventual licensing, sublicensing or assignment.

A particular concern for the ownership of trade secrets is that if a trade secret becomes public, it loses its entire value. Therefore, collaborators depend on the others’ ability to keep a secret even after the collaboration ends. Finding a mutually agreeable solution that protects the confidentiality of trade secrets should be a common interest among all collaborating parties.

The management of trade secret post-collaboration could also require certain care by each party. Thus, when the collaborators discuss how the jointly created information should be protected by different types of IP, they may also consider the potential implication of trade secret protection post-collaboration.

3. Specifics of collaborations including academic partners

Collaborative research involving both public research institutions and industry players has been growing. Around one-quarter of OECD countries each spent over €100 million directly to support the development of collaborations between public research organizations and industry in 2017. ⁽⁶⁾University-Industry Collaboration, OECD, 2019. The number of PCT international patent applications jointly filed by business and the public sector ⁽⁷⁾Due to the reasons explained in section 2.4 above, collaborating parties may agree that one of them will be an owner of foreground IP. Therefore, the number of patent applications jointly filed by business and public sector does not necessarily show the total number of applications generated by such collaboration. However, since collaborative agreements are confidential, it is very difficult to ascertain the total number. grew significantly from 2008 to 2022 in many countries: the number increased approximately eight times in China, four times in France and the Republic of Korea and two times in the United States of America. 

Traditionally, universities and public research institutions (PRIs) have been operating under the principle of openness and information sharing. Many universities claim that openness in knowledge sharing and the absolute freedom to publish are part of their academic mission of education and basic research. ⁽⁸⁾In the United States of America, academic institutions may enjoy the benefits of the fundamental research exclusion (FRE) under export control rules. In essence, the FRE applies if the results of basic or applied research in science and engineering are published and shared broadly within the scientific community, as distinguished from proprietary research and from industrial activities. Publication of research results was of greatest importance for academic researchers’ career development. Therefore, there was not much need for PRIs to consider trade secret protection of their innovation output (apart from national security restrictions).

This position, however, may contrast with the needs of private sector players with whom a collaborative research agreement is sought. For industry, trade secrets offer unique protection that cannot be replaced with other protection mechanisms and are part of the valuable intangible assets that strengthen a company’s competitive advantage. Regardless of whether the trade secrets are part of foreground IP or background IP, the risk of losing trade secret protection is an important factor for deciding on entering into collaboration with PRIs. Such a fundamental gap of interest and objectives between PRIs and private entities has been narrowed gradually, and parties from both sectors seek synergies and practical solutions in advancing their research.

3.1 Use of trade secrets by universities and PRIs

The increasing research interaction between academia and industry, coupled with a growing emphasis on the commercialization of academic research, has caused a shift in the traditional thinking of universities and PRIs on access to information generated by them, at least to a certain extent. Having said that, the IP policies of universities address protection of trade secrets much less than patent protection. Moreover, the extent to which trade secret protection of their research results is allowed varies significantly among the universities (see section 3.3 for examples of the trade secret policies of some universities ⁽⁹⁾See also WIPO Database of Intellectual Property Policies from Universities and Research Institutions, which contains intellectual property policies, manuals and model agreements from universities and research institutions worldwide. https://www.wipo.int/en/web/technology-transfer/database-ip-policies-universities-research-institutions. ).

As outlined in the previous Parts, the decision to protect certain information as a trade secret can be influenced by many factors. ⁽¹⁰⁾See Part III: Basics of Trade Secret Protection of this Guide on factors to be considered when deciding whether an innovative output should be protected by patents or trade secrets. Many of the general tips and pitfalls for managing trade secrets, such as identifying trade secrets, evaluating their value and associated risks, maintaining confidentiality, and avoiding unintended use of others’ trade secrets, are also applicable to the university settings. ⁽¹¹⁾See Part IV: Trade Secret Management of this Guide. However, since university-private sector collaboration often aims to bring together the research expertise of universities and commercialization capacity of the private sector, universities may particularly take into account the expectation of potential industry partners in evaluating the value of the information they possess. It goes without saying that the university's legal and ethical standards and policies provide the framework for identifying and managing trade secrets.

There can be various situations where a university may consider protecting certain research findings as trade secrets. The following paragraphs provide some examples.

Research with commercial potential

More and more countries allow universities and PRIs to file and become owners of patents for inventions created in their institutions. To seek patent protection, the newly created knowledge (i.e., information) must be kept in secrecy before filing a patent application. Usually, universities set their own internal mechanisms that require researchers to report any new findings and to keep the information confidential at least during a certain period so that the universities can evaluate its potential IP value and the best way to protect it.

In addition, if certain know-how and newly created knowledge that has not been patented are kept in secrecy, once a potential collaboration opportunity with industry arises, they might become the most relevant information for the collaboration that has been sought. Such non-patented confidential information as part of the “background IP” can be a valuable bargaining chip for negotiation with a potential industry partner.

Industry collaboration

There can be different kinds of collaborative relationships between the academic and industry partners. They include, for example, sponsored research where a university’s research activity is funded by an industry partner, co-financing research collaboration projects where a university and an industry partner both participate in the research, and commissioned or contract research where a company “purchases” specific research tasks conducted by a university. In general, the stronger the company’s control over the research subject, design and planning, the more robust proprietary protection of the research results the company may require. This, however, is not an absolute rule, since each collaboration takes place in a specific environment on a specific research subject.

In sponsored research projects, the sponsor will generally require the university and the creators to preserve secrecy of the information. In these cases, universities may have to agree to terms regarding confidentiality. This might mean that certain research conducted in collaboration with a company is kept secret for a set period or until patents are filed. However, due to the freedom to publish principle, some universities will not allow, at least as a general rule, any information generated by its staff members, even under a sponsored research contract, to be kept secret.

Under co-financing research collaboration agreements, each party’s rights to the joint research outcome, including the handling of jointly created trade secrets, must be agreed between the parties. In one university, ⁽¹²⁾Research & Innovation, Collaborating with the University of Copenhagen, The University’s Overall Principle (2012). University of Copenhagen. https://healthsciences.ku.dk/research-files/KU_s_guide_vedr__samarbejdsaftaler_GB.pdf. its policy states that the joint results must be published in case where the collaboration does not lead to the results that one or both parties had expected. It will ensure that the university researchers involved can still perform research within the area in question after an agreement has been signed with the industry party, and that the researchers have the freedom to collaborate with other companies and organizations. It is possible for the industry party to obtain a license or purchase the project results, depending on who has contributed to what in the creation of the results in question.

In practical terms, each party can have different expectation to the outcome of the joint research. Therefore, in collaborative agreements, success or failure of the collaboration should be determined by objective factors, such as measurable milestones or deliverables, to avoid potential disputes.

In commissioned or contract research, the rights to research results usually belong to the industry party who commissioned the research. In general, the industry party prefers to bind university researchers with non-disclosure obligation. However, contract research agreements may be scrutinized by the university to avoid any conflict with the researcher’s obligation to the university. The university may also have a policy regarding a restriction to scientific publication of research results under such agreements. However, the general principles or terms of an institutional policy are more often operationalized in the contractual arrangements, such as research agreements, consortium agreements etc.

While collaborative research with industry partners creates an opportunity for university researchers to access a new source of knowledge, it also exposes university researchers to trade secret information held by the industry partner, which university researchers must keep confidential and can use only under the agreed terms and conditions and for a limited purpose. This increases the burden of university researchers to manage the obligation of confidentiality and avoid unlawful use or disclosure of such information. In case of trade secret misappropriation, not only the university researcher but also the university itself may be held liable, depending on applicable national law, university policy and circumstances of the case.

Spinoffs

Universities often support the creation of spinoff companies to commercialize research findings. In addition to patents, trade secrets could also be their valuable asset to raise funds and establish their position in the market. Universities may be indirectly involved in protection of these trade secrets as a stakeholder, such as a member of the Board.

As illustrated in the case studies in Subsection 3.4, the interests of the parties involved in spinoffs are not necessarily aligned. Often, a spinoff company itself, a commercial entity that participates in the spinoff with its technology, a financial investor, a university and an individual academic researcher have different interests that form their behaviors and expectations.

Therefore, it is even more important to conclude a clear and solid contract that can be relied on by those involved. The key issues relating to trade secrets are similar to any collaborative activities. They include: the scope of the trade secret information assigned or licensed to the spinoff; the scope of the rights of the spinoff to acquire, use or disclose the trade secrets received; and the ownership and right to use trade secrets created in the spinoff’s activities.

Competitive research grants

In some highly competitive research areas, preliminary results or methods may be kept confidential to gain a competitive advantage for obtaining funding from external sources. Which level of confidentiality over the sponsored research is imposed may depend on, for example, the nature of the sponsors (e.g., government, non-profit foundations, industry etc.). In general, industry sponsors may prefer restricted disclosure of research results. When public sponsors fund public–private collaborative research, they usually design a framework that accommodates the need for industry participation on the one hand and the general preference of universities for non-exclusivity and disclosure models on the other.

Material transfer and associated trade secrets

In the field of biotechnology research, researchers may need access to physical proprietary biological materials, such as cell lines, animal models, hybridomas and vectors, to advance their research. A university can be a proprietor of such biological material, which may be, for example, necessary for an industry partner to carry out the collaborative research. In that case, typically, the university and the industry partner who receives a sample of the material conclude a Material Transfer Agreement (MTA), in which the terms and conditions for use of the sample, restrictions on modifications, handling of the material upon expiration of the contract etc. are stipulated.

In some instances, the university also holds know-how that is associated with the permitted use and storage of the sample (for example, specific storage conditions to keep the material viable). Such know-how can be the university’s trade secret, which needs to be shared with the industry partner to use and store the sample for purposes of the collaborative research. Accordingly, conclusion of a confidentiality agreement in relation to the trade secret between the two parties will be necessary.

3.2 Selected trade secret protection measures in a university setting

If a university decides to protect information as a trade secret, in general, the Technology Transfer Office (TTO) of the university will handle the legal and commercial aspects, such as drafting confidentiality agreements, managing sensitive information and conducting licensing negotiations. When handling and managing trade secret information, TTOs follow the university’s relevant policy that may outline procedures for disclosing inventions, protecting sensitive information and the sharing of research findings.

General best practices regarding trade secret management can also be adapted to universities. ⁽¹³⁾See Part IV of this Guide. For example, university employees, including researchers and professors, may be required to sign confidentiality agreements, especially when they are involved in research that has commercial potential or when they are working with industry partners. In some universities, the university, and not individual researchers, is bound by the collaboration agreement in a university–industry collaboration setting. Thus, the university has the obligation to comply with confidentiality clauses, and will bear the liability. Some universities require researchers and students who participate in collaborative research with industry partners to sign a confidentiality declaration to fulfill its contractual obligation. Considering the complexity of intellectual property matters in university–-industry collaboration agreements, involvement of TTOs in discussions with protentional research partners from an early stage in the process is advisable.

The particular status of universities requires a few issues that can be highlighted as follows.

Safeguarding publication and future research

From the premise of an academic mission of education and basic research, universities pay particular attention to maintaining the possibility of publishing research results (even if the publication may be delayed) and safeguarding the possibility of and space for future research and commercialization activities on the same research subject.

Some universities include trade secret clauses in their standard collaboration agreements (for example, agreed delay of publication as well as confidentiality terms for background trade secrets and research results). However, their IP policy may allow individual collaboration agreements to deviate from such standard agreements.

Organizational management structure

With respect to trade secret management at the institutional level, the organizational and hierarchical management structure of universities is somewhat different from a private business entity. Although the importance of an internal trade secret management structure across the organization applies to both, such differences may be taken into account in designing an organization-wide trade secret management team.

Trade secrets accessed by students and affiliated researchers

A more peculiar issue, however, may be the handling of trade secrets created or accessed by non-employee students and affiliated researchers.

In general, legislative provisions regarding IP ownership in employer–employee relationships and internal guidelines applicable to employees do not apply to undergraduate, postgraduate or PhD students, nor visiting researchers from other universities or other organizations, who are not employees of the university.

However, they may also generate valuable trade secret information through their study or research activities at the university, may be in a position to access trade secret information held by the university, and may be exposed to trade secrets held by external parties by, for example, participating in university–industry collaborations. Consequently, providing clear guidance on the rights and obligations of non-employee researchers and setting an appropriate and workable internal management system are important for universities to protect their trade secret assets and to avoid misappropriation of others’ trade secrets brought into the university.

Especially for students who are not employees of the university, it is necessary to find a balance among educational openness to publish research results, educational merits from participation in university–industry collaboration, and the need to protect sensitive information. In practice, in cases where they will have access to trade secret information, they may be required to sign confidentiality agreements or unilateral declarations. Similarly, a practical arrangement may be found for public defense of theses by students or the availability of theses in the university library. Provided that the university’s IP policy allows it, the defense may be done in a closed meeting, or the theses may be embargoed for a specific period.

As university practices vary, clear internal trade secret-related rules applicable to students would be helpful for preventing potential disputes. Students should be well informed about these rules and the possible consequences for them, through educational and training programs.

As to affiliate researchers, at least for those whose primary research takes place in the university concerned, applying the same policy and rules as employee researchers may simplify the management of trade secrets. However, in the case of visiting researchers, this may require explicit acceptance of the university’s IP policy by the visiting researcher, which may also necessitate an agreement of the sending institution or an inter-institutional agreement in this regard.

3.3 Examples of trade secret policies and guidelines of universities

The more universities collaborate with diverse external partners, the more such partners seek clarity of universities’ policies regarding trade secrets. As there is no one policy that fits all, universities are applying different kinds of trade secret policies and guidelines.

While the breadth and depth of the policies and guidelines relating to trade secrets vary significantly, they may touch upon: (i) the university’s general principles regarding protection of research results via trade secrets; and (ii) circumstances under which trade secret protection may be acceptable in collaborative research with industries. Specifically, they may cover various issues, such as:

• who may sign confidentiality agreements

• under which conditions trade secret protection may be allowed or preferred

• any restrictions on technology areas that may seek trade secret protection

• whether and under what conditions any additional delay in publication of research outcomes can be permitted

• how students and affiliated staff may be involved in academic–industry collaborative research

• mechanisms for monitoring compliance with the university’s trade secret policy and guidelines as well as addressing trade secret breach.

Some examples of the policies and guidelines are illustrated below.

Stanford University ⁽¹⁴⁾Researcher’s Guide to Working with Industry, https://ico.stanford.edu/sites/g/files/sbiybj16441/files/media/file/researchersguidetoworkingwithindustry_0.pdf; Research Policy Handbook, 1.4 (Openness in Research), https://doresearch.stanford.edu/policies/research-policy-handbook/conduct-research/openness-research.  

The Industrial Contracts Office (ICO) negotiates research agreements with industry on behalf of Stanford for our faculty researchers. Its goal is to bring funding and materials into university labs to support university/industry research relationships.

In principle, Stanford University maintains a core policy of no secrecy in research. However, the Research Policy sets limited circumstances where a research program shall be regarded as requiring secrecy, which include industry sponsored research, national security controls and protection of privacy.

In the case of research under industry Sponsored Research Agreements (SRAs), while respecting the needs of industry partners, the university prefers that companies do not disclose trade secret information to Stanford employees and other persons associated with it. This also comes from the fact that the university cannot fully monitor who has access to specific information.

However, if the sharing of trade secrets is necessary for conducting a particular project with the industry, the individual researchers may personally enter a non-disclosure agreement. Generally, Stanford is not a party to these agreements. In other words, a Stanford researcher may personally sign a confidentiality agreement on his or her own behalf under certain conditions. Specifically, a researcher must follow the university policy and comply with laws, and the confidentiality terms must be consistent with researcher interests. For example, confidentiality agreements should not create obligations that restrict or redirect research. In addition, a researcher may not sign an agreement that could affect the IP rights of Stanford or its other researchers. Stanford may also be able to accept certain confidentiality terms as part of an SRA, provided they are consistent with researcher interests and in compliance with the university policy.

In a program of sponsored research, a contractual agreement between Stanford and the sponsor may include provision for a delay in the publication of research results. The types of delays accepted are, in general:

• for a short delay for patenting purposes or for sponsor review of and comment on manuscripts (not to exceed 90 days)

• for a longer delay in the case of multi-site clinical research (not to exceed 24 months from the completion of research at all sites).

When it is in the best interests of the research, the University may approve contractual arrangements that could lead to longer publication delays.

With respect to students and trainees, a faculty member must not engage a student or trainee in a project governed by an extended publication delay agreement or contractual arrangement that could present a barrier to the timely submission of the student's thesis or dissertation or to the publication of a trainee's work.

The ICO may review the confidentiality agreements vis-à-vis the university policy.

University of Copenhagen ⁽¹⁵⁾Research & Innovation: Collaborating with the University of Copenhagen, The University’s Overall Principle, https://healthsciences.ku.dk/research-files/KU_s_guide_vedr__samarbejdsaftaler_GB.pdf.  

The University’s Tech Transfer Office at Research & Innovation is responsible for negotiating various collaboration agreements between the university and external parties. In all such agreements, it is a prerequisite that researchers of the university are able to publish their research results and use them for research purposes.

Publication of research results, produced in collaboration with the University of Copenhagen, can usually be delayed by a maximum of three months (one month where the external party can comment on the material that is to be published, and two months where the company can patent its own results). This period may be divided differently.

However, recognizing the position of private companies that tend to protect confidential information to maintain a competitive position, non-disclosure of an external party’s confidential knowledge can be agreed up to a period of three years from the end of a collaborative project. This period may be extended, if specific circumstances justify.

Non-disclosure agreements or confidentiality agreements are used when the external party and the university’s researcher(s) exchange confidential knowledge related to a specific research project. Together with the external party, the Tech Transfer Office will assist in defining a narrow agreement that suits both the university researcher and the external party.

Northeastern University ⁽¹⁶⁾Policy on Openness in Research, Policy Number 503, https://policies.northeastern.edu/policy503/; Policy on Trade Secrets, Policy Number 208, Section III, https://policies.northeastern.edu/policy208/.  

In principle, according to its Policy on Openness in Research, Northeastern University does not undertake research with restrictions on openness or academic freedom on its campus. Examples of unacceptable restrictions include required external approval of research results before publication or exclusion of members of the university community, including students, from participation in educational and research activities.

While most research can be conducted in accordance with the ideals of freedom of inquiry and open exchange of knowledge, the policy recognizes that, in a few compelling instances, the best interests of society will weigh against broad participation in research and open exchange of information. In these cases, exceptions to such principle may be granted. Exceptions will be rare and will require that the research is critically important to the university’s mission and serves a demonstrable greater good.

As regards computer software, firmware and databases owned or controlled by the university (“Computerware”), the university’s Policy on Trade Secrets states that since copyright or patent protection alone may be inadequate for their protection, they shall be maintained as trade secrets until released by the university. The university may identify other materials to be treated as trade secrets. In principle, faculty, staff and students who create trade secret information shall assign their title and interest in such information to the university.

The Policy on Trade Secrets also clarifies that computerware and other trade secret information may be provided to the university from outside sources under conditions restricting their use or disclosure. In these cases, individuals authorized to access such materials shall treat them as required by the terms agreed between the outside source and the university.

Kyushu University ⁽¹⁷⁾Kyushu University Trade Secret Management Guidelines (Kyushu Daigaku Eigyouhimitsu Kanri Shishinn).  

Kyushu University considers that universities are expected to respond to the needs of society by also pursuing collaborative innovation with industry. Therefore, proper management of confidential information that is shared with, or generated with, industry partners is important for the university to develop trusted relationships with them. In that light, the university issued its Trade Secret Management Guidelines in 2012.

In essence, the guidelines cover trade secret information independently created by university researchers or jointly created with industry partners as well as trade secret information of companies that is brought into the university through, for example, collaborative research projects or internship activities of university students.

The guidelines state that, bearing in mind that research results of the university must be made public, the trade secret information may be kept confidential only during the period specified in the non-disclosure agreement or joint research agreement, or as long as required by the university.

When concluding a non-disclosure agreement or joint research agreement, the agreement should include detailed clauses regarding handling of trade secrets and appointment of a responsible trade secret manager. The highest level of care should be given to students who participate in joint research so that they will not be disadvantaged by the confidentiality obligations, such as being restricted from presentations at academic conferences.

If joint research is conducted with multiple companies, efforts should be made to avoid contamination of information transferred from/to each company by, for example, separating the locations of joint research activities. In addition, with respect to exchange of undisclosed research information with overseas institutions, the security or export control should be conducted, as appropriate, in accordance with the procedures stipulated by the university.

In the event where the university has the right to a patent, the relevant information shall be kept confidential so as not to lose the novelty of the invention. In addition, trade secrets received from companies that are legitimate holders of trade secrets should be properly managed in accordance with the confidentiality clauses in the non-disclosure agreement or joint research agreement, and in compliance with the agreed management procedures and purpose of use.

3.4 Illustrative cases of university–industry collaboration

To highlight how trade secrets could become relevant in university–industry collaborative research in a complex manner, two hypothetical illustrative cases are presented in this Section.