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Scientific Trade Secrets, Medical Research Focus of Latest IP Theft Case

by Chris Brook on Friday September 20, 2019

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Researchers at this children's hospital purportedly stole trade secrets, then used them to start and market their own Chinese biotechnology firm.

It's not always information on solid state drives and self-driving car technology.

In experimental and clinical settings like hospitals, highly sensitive information on how to handle acids, proteins, and other human building blocks can be valuable and serve as a ripe target for malicious insiders.

We saw evidence of this again this week in the latest of a string of trade secret theft cases.

In this one, a couple from Dublin, a Columbus, Ohio suburb, Yu Zhou and Li Chen, were charged on Monday after allegedly stealing medical research trade secrets from a nearby children's hospital they worked at for 10 years.

According to an indictment, the two conspired, attempted, and did ultimately steal scientific trade secrets on exosomes and exosome isolation from a research institute at Nationwide Children's, one of the biggest and best ranked children's hospitals in the country. The facility, which has nearly 12,000 employees, also acts as the pediatric teaching hospital for The Ohio State University College of Medicine.

Exosomes are tiny structures that drive intercellular communication. Technically exosomes are vesicles, structures composed of lipid molecules, used to transport proteins, nucleic acids, and membranes. The ability to isolate exosomes figures into cancer research, clinical care, diagnostics, and treatment monitoring at medical facilities like Nationwide Children’s.

Exosomes, which have been called a "rising star in drug delivery," have recently been used to help build nanomedicine for cancer chemotherapy. Studies suggest they could also prove beneficial when it comes to cardiology, regenerative medicine, and neurogenerative diseases.

According to the indictment, Zhou and Chen worked in two separate research labs at the hospital over the course of 10 years and while there, unbeknownst to Nationwide Children's, founded a Chinese company in which they marketed products and services on exosome isolation. To compound the issue further, the two helped co-found another company in 2017, a biotech firm on American soil, which offered products and services related to exosome isolation as well.

While the two were arrested in July, news of the alleged crimes weren’t known until the grand jury indictment was unsealed on Monday.

With privileged access to the hospital's resources and equipment, the two had no trouble carrying out research on exosomes for their work, the DoJ claims. One kit offered by the American company was developed from a trade secret created at Nationwide Children's, the department adds.

The two ultimately made thousands from their crimes, according to the FBI and National Security officials. Zhou and Chen received more than $876,000 and stock stemming from an asset purchase agreement involving the American company it started. After this, Zhou entered into a stock purchase agreement with the same company that would have paid him an additional $450,000.

According to the indictment, the two took five trade secrets in all. One allowed for the isolation of exosomes from between 10 and 20 microliters of serum; the rest mostly contained exosome-related information, data, images, and analysis.

While Nationwide Children's protected its trade secrets - it restricted physical access to labs to those with key-cards, required visitors to sign in, and third parties to sign nondisclosure agreements - its efforts didn't stop Zhou and Chen from sending e-mails with attachments containing hospital trade secrets and IP to personal emails, some which were tied to servers in China.

Multiple times, the two sent emails with files, JPGs, .PDFs, Powerpoint documents, Word, and Excel documents, containing the hospital's "proprietary and non-public" exosome-related data. The fact the employees were able to move the data in the first place, let alone send it back and forth, between one another, through China-based emails, is concerning and appears to highlight the lack of basic policies and procedures for IP protection.

The presence of tools to encrypt and protect that IP, technology that can not only classify and locate sensitive documents, but keep track of how they're used, and by whom, could have helped prevent the exfiltration of these scientific trade secrets in the first place.

Vial, syringe image via Dawn Huczek's Flickr photostream, Creative Commons

Tags:  Healthcare Industry Insights

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