COVID-19 Innovation Patent Trade Secret

Special 301 Report 2021: Trade Secrets, Patents and Technology Transfer


[This post has been co-authored with .]

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Recently, the Annual Special 301 Report on IP Protection (the ‘Report’) was released by the Office of the United States Trade Representative. In our earlier posts, we have discussed the US’s relaxed stance on compulsory licensing (here) and the India-specific copyright and enforcement related issues (here) as discussed in the Report. In continuation of the same, in this post, we shall analyse the discussion of three other key aspects in the Report: India-specific trade secrets and patents issues, and the general stance on technology transfers.

Trade Secrets

A seemingly new complaint that has emerged in this year’s Special 301 Report is insufficient protection of trade secrets. While previous reports have mentioned the issue in passing, this year the USTR has specifically expressed apprehension regarding the contractual nature of remedies and the lack of civil or criminal laws addressing trade secret protection. They seek the enactment of legislation to eliminate gaps in the regime. As we know, remedies for trade secret violation in India are available under the Indian Contract Act 1872, breach of confidence law, or the common law principle of equity. While establishing a statutory regime is an option worth consideration (read Prashant’s article on the issue), it is necessary to remember that TRIPS does not impose any such mandate under its Article 39. In context of regulatory data, Prof. Basheer has argued that Article 39.3 envisages a “compensatory liability model” rather than one of “data exclusivity.”

A more interesting question is the timing of raising the trade secrets concern. Considering the Reports for the past few years have not focused on this IP, it cannot be a coincidence that trade secrets have suddenly come under the scanner the same year that IP protection over medical products has assumed center stage in discourses relating to technology transfer and local manufacturing of Covid-19 drugs/vaccines. Praharsh has explained how the strength of CLs in increasing generic manufacture of drugs/vaccines can be severely undermined if it is not coumbined with the sharing of those bits of information that are not covered under the patent, but protected as trade secrets.

Additionally, it is especially strange because the US has recently come out in support of an IP waiver over vaccines, which presumably includes waiving of trade secrets. The nature of trade secrets makes it difficult to extract direct and certain benefits through a waiver unless they are voluntarily shared. However, the idea is to compel companies to share the necessary information with local manufacturers, either by threatening legislation that mandates sharing of such information or actually passing such legislation. While threatening involuntary use of IP to compel favourable terms has happened before in case of CLs such as US’s Anthrax scare, it is rather unprecedented when it comes to trade secrets in pharmaceuticals, and risks aggressive retaliation. Notably, earlier this month, Brazil’s senate has passed a bill that contemplates something similar to this.

If the TRIPS waiver – which the US so far supports only to the extent of vaccines – does not cover trade secrets, it would become exceedingly difficult to get tangible benefits through the existing TRIPS flexibilities while respecting US’s wishes regarding strong trade secret protection (Notably, the Report criticizes China’s trade secret regime for gaps in its scope of protection as well).  The contradiction of this approach that extends a softened stance on compulsory licenses and supports the waiver is rather difficult to reconcile with the hardened position on trade secrets. In balance, the latter undermines the strength of the other measures and makes one question the extent of US’s commitment to sharing IP in order to address issues regarding local manufacture of Covid-19 drugs/vaccines.

Patents

As far as patent issues are concerned, the Report had most of their same old consistent objections to the Indian regime that have been highlighted in earlier reports. These include issues such as narrow patentability criteria under the Patents Act, threat of patent revocations, costly and time consuming procedural formalities, and an objection to Section 3(d) of the Act that seeks to prevent evergreening of patents (discussed here, here, and here on the blog). There are, however, four interesting developments to note in this year’s report on patents as discussed below.

First, the Report notes “Stakeholders continue to express concerns over vagueness in the interpretation of the India Patents Act”. This statement, however, is made in abstract without indicating in any manner what these uncertainties in interpretation are. This is similar to the broad brush objection made with respect to copyrights wherein the Report just broadly blames court cases and government memoranda to raise concerns regarding copyright protection in India without going into any specificities as discussed in the earlier post here. Notably, this objection regarding vagueness of interpretation was not present in last year’s Special 301 Report despite noting it to be a continuous objection by stakeholders. In doing so, the credibility of such an exercise also becomes questionable as it is using broad brush strokes to criticize intellectual property regimes of a country without exactly highlighting what it disagrees with.

Second, the Report praises the amendment which dilutes patent working disclosure norms through Form 27. Pankhuri has discussed in great detail why these changes are detrimental to the patent regime. What is worth noting is that they want the information submitted through Form 27 to be kept confidential. The purpose of disclosing local working details of patents is not to keep only the government abreast of the patentee’s operations. It is to make information regarding the patent’s working available, especially for generic companies who can potentially manufacture the products either through a voluntary license  or by applying for a CL. This month, Delhi High Court’s directions to Roche revealed how little of the drug was available to Covid-19 patients due to absence of local manufacture and sole reliance on imports, underscoring the importance of working information in meeting public health needs. Making all of Form 27 information confidential would defeat the very purpose that disclosure norms are meant to achieve.

Third, the Report raises concerns regarding the “lack of presumption of patent validity,” referring to the judicially reinforced statutory provision that the grant of a patent does not create any presumption of validity in favour of the patent, despite the fact that it has passed the IPO’s examination. This concern presumably arises from a recent refusal of interim injunction to AstraZeneca for the infringement of its patented anti-diabetic drug Dapagliflozin, where the claim of presumption of validity on the basis of the age (17 years), commercial success and lack of Opposition proceedings against the patent was outrightly rejected by the court. Unlike India, US law presumes the validity of an existing patent. While this is not surprising from the jurisdiction that considers “anything under the sun made by man” to be patentable, in recent years this policy has been criticized for creating a patentee-favouring environment, especially after research has revealed that patent examiners at the USPTO effectively rely on a miniscule section of the prior art available to them to determine an application’s patentability. Moreover, a bill had also been introduced in the US Congress in 2019 that seeks to weaken the presumption of patentability in case of pharma patents. The Report thus shows a lack of self-awareness, recommending a policy that has come under question in US itself. As regards the Indian patent regime, considering the number of errors that the Patent Office data reveals every year (see here and here), there seems to be no need for a presumption of patent validity.

Fourth, while discussing issues surrounding effective adjudication of intellectual property disputes, the Report notes that “the United States is closely monitoring” the shutdown of the IPAB. It, however, does not specify any particular opinion on the development. As the readers might be aware, the IPAB has been a hot topic of discussion on the blog with its inefficacy constantly highlighted and its abolition considered to be a positive step. A compilation of the various posts published on the blog over the past decade discussing issues surrounding IPAB is available here.

Technology Transfer

Meme from here.

In an earlier post, we had analysed the surprisingly positive U-turn by the Report as far as its stance on compulsory licensing was concerned. This has come about in the wake of the Covid-19 pandemic and its large scale impact on health infrastructure across the globe. At the same time, however, the same understanding is not reflected in the discussion on technology transfer in the Report. It specifically criticizes government measures and policies “that require or pressure technology transfer from U.S. companies.” Such technology transfers are termed as a denial of opportunities to access foreign markets for US companies and leading to “non-market distortions into licensing and other private business arrangements”. This is stated to be a factor to disincentivise investment and to hurt the interests of jurisdictions mandating these mechanisms in the first place.

This portrayal, however, is a capitalistic framing of the problem without due regard to the socio-economic circumstances of a given jurisdiction. It essentially argues that a developing or an under-developed jurisdiction should never be allowed to develop technologically self-sustaining using some protectionist policies and must instead be subjected to exploitation by the US multinationals in the “open” market. The rationale on market distortion is unfounded given that the market in less developed jurisdictions is distorted to begin with which allows the US companies to unduly appropriate economic rent which is sought to be externally countered using technology transfer mandates. If, for instance, the objection is further extended to technology transfer for materials required to counter the ongoing pandemic, this would subject less developed jurisdictions to the mercy of patent holders without gaining ability to adequately prepare for self-sustenance further. In contrast, jurisdictions such as the US insisting on stringent intellectual property protections started demanding so only after benefitting significantly with development friendly policies themselves for long enough to protect and develop their domestic industries (see here, here, here, here, here, and here). At the same time, it must be noted that genuine considerations such as mandatory over-sharing of technology without any due cause and in a sufficiently developed jurisdiction should not be overlooked.

Conclusion

The majority of the Report’s complaints are repeated year after year. The little that this year’s version has to offer in terms of constructive criticism of IP practices is heavily offset by the overwhelming amount of unsolicited advice whose primary purpose is to advance US corporate interests. While the USTR’s almost unprecedented support for a liberalized compulsory licensing policy does come as a surprise, the failure to extend the same courtesy to tech transfers and the hardened stance on India’s trade secret regime do not live up to the promise. Although the Biden administration has been supporting the developing world’s public health needs through vaccine diplomacy during the pandemic, the furthering of IP-maximalist corporate interests cannot be balanced through philanthropic gestures alone if they do not respect development interests of sovereign countries.

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