Trade secrets and IP protection in biotech collaborations and licensing deals

Charlotte Tillett
Stevens & Bolton, Guildford
charlotte.tillett@stevens-bolton.com

Jessica Gregson
Stevens & Bolton, Guildford
jessica.gregson@stevens-bolton.com

Grace King
Stevens & Bolton, Guildford
grace.king@stevens-bolton.com

Introduction

Strategic collaborations and licensing agreements are essential to the biotechnology sector, helping companies navigate the high costs, complexity and risks associated with research and development and bringing products to market. As of 2024, approximately half (48 per cent) of the UK’s biotech companies were engaged in R&D services,^[1] underscoring the sector’s strong focus on innovation.

Collaborations and licensing deals both foster innovation and drive growth across the sector. Licensing-only deals are beneficial for smaller biotech companies, allowing them to monetise innovations through non-dilutive revenue streams while maintaining focus on core research activities. For larger companies, licensing is a valuable tool to enrich their product pipelines and access new technologies. Broader collaborative arrangements such as joint ventures, strategic alliances and co-development partnerships, which typically also include some form of licensing arrangement between entities, can facilitate access to specialised technologies, accelerate clinical and regulatory timelines and support geographic expansion.

To attract collaborators, secure investors and successfully license their technology, biotech companies must ensure they have robust IP rights and properly safeguard their trade secrets. While patents and other formal IP rights protect publicly disclosed innovations, trade secrets offer a critical layer of protection for confidential know-how, processes and data that are not publicly disclosed but are essential to maintaining a competitive edge.

Robust protection of IP rights and trade secrets not only protects a company’s commercial interests but also fosters innovation in the sector by encouraging the development and sharing of new technologies under controlled conditions. Given the strategic and financial importance of these assets, it is essential that biotech companies effectively manage and protect them, including throughout the lifecycle of collaborations and licensing agreements.

What is licensed in collaborations and licensing deals?

Patents

Patents are often central to IP licensing in the biotech industry, serving as foundational assets in commercialisation strategies and collaborative research agreements. Patents can provide inventors with exclusive rights to their innovations for up to 20 years from the filing date (provided they are not invalidated, renewal fees are paid, and with the limited right to extend the term by up to five years in certain circumstances). In the biotech industry, this exclusivity is usually fundamental to attract strategic partnerships, secure licensing agreements and investment, and unlock commercialisation opportunities. Since patent protection requires public disclosure of an invention’s technical details, it is particularly well-suited to innovations such as novel drugs and diagnostic methods that are already subject to disclosure for regulatory approvals.

Know-how

In practice, patents are frequently licensed with associated know-how, proprietary data and technical information (elements that are particularly critical in biotechnology), where tacit knowledge and experimental nuance play a pivotal role in replicating and scaling innovations. This is especially true in areas such as biologics, cell and gene therapies, and synthetic biology, where the reproducibility of patented inventions often depends on access to detailed protocols, cell lines and manufacturing techniques that are not disclosed in the patent itself. In the UK, as in many jurisdictions, such ancillary information may be protected as trade secrets or confidential information, and its inclusion in licensing deals requires careful drafting to ensure enforceability and alignment with both domestic and international IP frameworks. For international lawyers and biotech professionals navigating cross-border collaborations, understanding the interplay between formal IP rights and informal technical know-how is essential to structuring robust and commercially viable agreements.

Trade secrets

As mentioned above, trade secrets protect confidential information, such as know-how, that derives commercial value from being kept secret. Trade secret protection is rooted in confidentiality rather than registration, giving companies a competitive edge by keeping key knowledge out of competitors’ hands.

In the biotech industry, trade secrets are particularly effective for protecting sensitive and commercially valuable information that may not be patentable or is best kept undisclosed. This can include cell lines, manufacturing processes and formulations, customer lists, plating protocols and growth conditions, verification tests, training data, variable weightings, and trained models.

Trade secrets vs patents: which protection is best?

When both trade secret protection and obtaining patent protection are viable options, the decision has become increasingly strategic and tailored to individual business goals. While patents have long been the cornerstone of IP protection in the life sciences sector, recent years have seen a growing trend toward safeguarding innovations as trade secrets. This shift reflects evolving priorities around speed to market, cost efficiency, and the desire to maintain competitive advantage without public disclosure.

Advantages of trade secrets

Given their inherent nature of keeping valuable information confidential, trade secrets are particularly useful for protecting behind-the-scenes processes, proprietary methods or technical know-how that would be difficult for competitors to reverse-engineer.

Trade secrets also avoid the significant costs associated with patenting, including filing fees, legal expenses and ongoing renewal charges. Moreover, while patents offer protection for a fixed term of 20 years, trade secrets can provide indefinite protection, as long as the information remains confidential.

Risks and considerations

While trade secrets can offer indefinite protection, their effectiveness hinges entirely on maintaining confidentiality, which makes them inherently vulnerable. Breaches can occur through employee misconduct, corporate espionage or accidental disclosure: once the secret is out, legal remedies cannot restore it.

Unlike patents, trade secrets do not protect against independent discovery or reverse engineering. If a competitor lawfully uncovers the same information, the original holder has no legal recourse.

Establishing trade secret protection can also be challenging in practice. To qualify, the information must have been subject to reasonable steps to preserve secrecy, such as internal protocols, access controls and confidentiality agreements. Enforcing violations is equally complex, often involving costly and time-consuming legal proceedings to trace the breach.

From a commercial perspective, trade secrets are also intangible and difficult to assess, which can make them less attractive to investors. Patents, on the other hand, are registered rights that offer clearer evidence of innovation and are easier to value, often serving as a more compelling signal of a company’s strength and market potential.

Practical tips for collaborating and licensing

Managing your IP portfolio

A strong IP portfolio is essential for attracting investors and securing strategic partnerships.

When building your portfolio, consider adopting a hybrid strategy to mitigate the limitations of relying solely on patents or trade secrets. For instance, you might keep early-stage innovations as trade secrets, while pursuing patents for elements that are more susceptible to reverse engineering, such as a drug’s active ingredient. When filing patents, think about whether you can preserve any background processes, formulations, and know-how as trade secrets.

Take particular care when managing your trade secrets by:

• ensuring that employees are aware of their confidentiality obligations;
• including robust post-termination restrictions in employment contracts to prevent disclosure to competitors; and
• limiting disclosures to collaborators to what is strictly necessary to fulfil any agreements.

Collaboration and licensing agreements – key provisions

When entering into collaboration or licensing agreements, ensure your IP is adequately protected by including the following key provisions:

• Clear definitions of the existing IP that will remain owned by the licensor and any new IP that will be developed as part of the agreement, with ownership and usage rights clearly allocated. This will be particularly important when developing products in joint ventures.
• A detailed scope of the IP that is being licensed, including any know-how, databases, copyright, software, along with any restrictions on use.
• Thorough confidentiality clauses to protect your trade secrets from unauthorised disclosure by the other party and their employees.

Conclusion

Ultimately, there is no one-size-fits-all approach to trade secrets and IP protection in biotech collaborations and licensing deals. Each entity must tailor its strategy to align with its unique technological assets, business goals, speed of development and change, and risk tolerance.

Whether prioritising confidentiality through robust trade secret management or leveraging the formal protections of patents and licensing frameworks, the key lies in thoughtful, case-by-case evaluation. By carefully balancing innovation incentives with strategic control, biotech companies can foster successful partnerships while safeguarding their competitive edge.