The European Union is about to make major changes in its privacy law that will have a significant impact on U.S. companies that do even modest amounts of business in Europe. On January 25, 2011, the European Commission (the EU’s executive branch) released a long-awaited Draft Regulation on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data (pdf).
While it will likely be a year or more before a final regulation takes effect, and there will almost certainly be amendments along the way, American companies – including those involved in the field of personalized medicine, where personal data is paramount by definition – should start paying attention now, since they may have to change the way that they do business in Europe.
The competitive landscape can be a dangerous place for an early-stage entrepreneur, and even the best business plan can fall prey to imitators unless the entrepreneur is able to protect her business with some type of exclusive rights. Patents can provide powerful protection, and provisional patents are often a good choice for creating early-stage exclusivity. However, no business should overlook the potential value of trade secret protection.
There are two key issues to consider when evaluating trade secret protection: what type of information can an entrepreneur protect and what does she have to do to protect it? In general, any information can be a trade secret if (1) it is non-public information that has value because it is not publicly known and (2) the holder of the information is taking adequate steps to hold it in confidence. Trade secrets can include things as diverse as business plans, business contacts, financial analysis, inventions, formulas, designs and methods.
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Any entrepreneur is likely to be euphoric when her company discovers a novel and potentially valuable genomic invention that may be protectable by a patent. But when the celebrations start to fade, difficult decisions will remain about how to protect and exploit the intellectual property rights associated with the invention. A company may protect its rights by carefully avoiding disclosure until it has reduced its invention to practice (that is, made it work) and filed a patent application. But our entrepreneur may not have that option. Reducing the invention to practice requires money, which may be in short supply.
For the purpose of this post, we assume that the entrepreneur has already taken the required steps to be sure the company owns all necessary rights in the invention. (See our earlier Bench to Market articles: “What Happens When Professors Have Valuable Inventions?” and “Don’t Overlook Agreements with the Inventors.”) How can she now have the discussions with outside parties (such as venture capital firms) that may be necessary to commercialize the invention, without risking the loss of important intellectual property rights?
Corporate formalities are rarely a high priority for early stage development companies. There may be a formal legal entity (such as a corporation or limited liability company) or the participants may operate informally as a partnership. Some participants may be paid employees of the development company while others may still be full time professors or even have other jobs and work for the development company in their spare time. Inventions may be entirely new concepts or may only be improvements (albeit significant ones) to earlier inventions. It may not be at all clear exactly who owns what rights in anything that might be invented.
The participants often do not worry much about this until the day when something potentially valuable is discovered. Then the world changes. Suddenly the participants are focused on allocating rights (including the now important economic rights) to the invention. As they move to the likely next stage of seeking venture capital, they will be asked to prove that the development company owns the invention that it is trying to commercialize. Any misunderstanding about the rights to the invention can become a major problem if they are not addressed before this point.
The growth of prominent genomics research and direct-to-consumer (DTC) commercial services that combine genomic data with phenotypic data, environmental data and personal health surveys continues to spur debate over the appropriate privacy safeguards and expectations for individuals who participate in such research or enroll in such services. From large-scale genomic research projects such as the Coriell Personalized Medicine Collaborative (pdf) and the UK BioBank to popular DTC genomics services such as those offered by Navigenics, many influential players in the public genomics space continue to strongly emphasize their commitment to absolute data privacy. Prominent skeptics, including geneticist George Church and lawyer and ethicist Hank Greely, argue that any such privacy promise is impossible to keep because of the inherent nature of such genomic data, particularly when paired with phenotypic data or other potentially personally identifying information.
Two recent developments may add further fuel to this debate. First, California recently issued a report on the first five months of results from a new state law (effective January 1, 2009) requiring health care organizations in California to report breaches in the security of personally identifiable health information. In publishing the report the California Department of Public Health was surprised at the high volume of reports and confirmed 116 privacy breaches during the five-month period, most of which were inadvertent. Given the early results, the agency expects the number of reported breaches to increase dramatically as organizations become more familiar with their reporting obligations.
Under established state public health programs, hospitals nationwide collect blood samples from the majority of the more than 4 million U.S. newborns each year to screen for genetic and metabolic disorders. This is widely viewed as a valuable program that can lead to early diagnosis and treatment of potentially serious conditions and is normally controversial only when the parents object to testing.
At present, although there is some national coordination of newborn screening programs, there is no uniform policy governing the disposition of newborn blood samples after screening is complete. Some states store the samples for a limited period of time and then discard them. Others, including Minnesota and Michigan, permit researchers to use the samples, including to conduct pilot studies designed to develop additional newborn screening tests. Michigan is even facilitating (although not funding) the development of a “Neonatal BioTrust” in the hopes of drawing biomedical companies to the state.
And additional guidance from the federal government is likely forthcoming. Late last year the National Institute of Child Health and Human Development, a division of the National Institutes of Health (NIH), awarded the American College of Medical Genetics (ACMG) a $13.5 million, 5-year contract for the development of a National Newborn Screening Translational Research Network. One of the network’s many aims is to facilitate the creation of a “reliable repository of residual dried bloodspots that is either virtual or physical and comprised of those stored by state newborn screening programs and other resources.”