Sheena Linehan and Craig Bowers outline what makes trade secrets different from other types of IP protection

Often misunderstood, trade secrets represent a unique and hugely important intellectual property consideration for pharmaceutical innovators – particularly in the context of the pandemic, with a hotly debated WTO proposal currently on the table calling for a temporary, broad-brush, worldwide suspension of IP rights relating to COVID-19 innovations.

Understanding the basics

The World Trade Organization (WTO) agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS) obligates WTO members to protect the intellectual property rights of their innovations.

Trade secrets are part of the family of IP rights relating to confidential information, which are often used where there is a strategic advantage to not disclosing the ‘secret’ publicly. Unlike patents or copyright, which expire after a given term, a trade secret can in principle continue indefinitely.

Practically speaking, any confidential business information which provides a pharmaceutical company with an actual or potential competitive advantage over its competitors and is unknown outside the company may be protected as a trade secret.

Trade secrets encompass technical information, such as detail relating to manufacturing processes, pharmaceutical test data, designs and drawings and computer programs; and commercial information, such as distribution methods, lists of suppliers and clients and marketing strategies.

A trade secret may be also made up of a combination of elements, each of which by itself may be publicly available, but wherein the combination is kept secret, and provides the potential or actual competitive advantage.

Any information that can be easily ascertained by straightforward inspection of a product placed on the market cannot qualify as a trade secret.

To qualify, the information must be commercially valuable, known only to a limited group of persons and be subject to reasonable steps taken by the owner to keep it secret. This includes actions such as the use of confidentiality agreements for business partners and employees.

The protection of trade secrets forms part of the general concept of protection against unfair competition or is based on the protection of confidential information.

What’s more, they generally pertain to information held by a company rather than by an individual and a trade secret owner cannot stop another party from using the same information, if the other party acquired or developed such information independently by themselves.

Having taken reasonable steps to protect their trade secrets, owners can pursue legal claims in the event of trade secret misappropriation.

The COVID context

As the pandemic continues, governments and global organisations are looking for ways to promote the distribution and rollout of vaccines and treatments across the world.

To facilitate this, there is currently a proposal under consideration, tabled at a meeting of the TRIPS Council in October 2020, for the suspension of IP rights, including trade secrets relating to COVID-19 innovations. The waiver proposed by South Africa and India and supported by more than 100 other WTO member countries (notably including the United States), would specifically suspend provisions of the 1995 Trade-Related Aspects of Intellectual Property Rights, or TRIPS, agreement requiring WTO members to enact laws protecting IP.

As things stand, the waiver is not explicitly worded. The broad proposal is that under it, any party would have the ability to make and sell its own vaccines without the threat of IP (including trade secrets) infringement lawsuits. There is no precise timing in the proposal as to when the waiver may be effective but merely, inclusion of the wording ‘during the pandemic’.

Opinion divided

Unsurprisingly, the proposed waiver is not supported by all. Vaccine developers argue that the strong and predictable system of intellectual property protection established by the TRIPS Agreement has promoted the production of vaccines and weakening those rights would make it more difficult for the type of collaboration that brought forth the COVID-19 vaccines.

That said, clearly, the proposal has its merits. The underlying principle is noble in that every citizen regardless of their country of residence should have access to COVID-19 vaccines. Of course, here it has to be appreciated that most of the IP rights relating to COVID-19 vaccines are likely to be owned by ‘first-world’ organisations.

The exact mechanism by which the waiver would work has also not been described. However, it could be imagined that a temporary restriction on enforcement of IP rights could occur, during the pandemic.

For most forms of IP rights, a temporary lifting of enforcement (with a possible tagged on extension for any lost period of enforcement) would be relatively straightforward. However, this is not the case when it comes to trade secrets.

A trade secret derives its value from not being publicly known. Once disclosed, it simply ceases to exist as there is no longer anything secret to protect. Even after the waiver period ended, the disclosed trade secret would remain unprotectable. In other words, there is no way for once publicly available information to be ‘forgotten’ and somehow revert to being secret. Any form of forced or encouraged disclosure would simply destroy any trade secret protection.

This would be problematic for trade secret protection in regard to vaccines. Usually during any regulatory vaccine approval and review process, there is a controlled disclosure to regulatory authorities of confidential information, which comprises trade secrets.

What’s more, any loss of trade secret protection could prove to be a huge disincentive for pharma companies to support the development of new and innovative technologies.

Additionally, trade secrets relied on to safely develop and manufacture COVID-19 vaccines would be expected to extend beyond COVID-19 vaccines themselves, potentially impacting numerous pharmaceutical products. It would prove extremely difficult, if not impossible, to limit the disclosure of a more general trade secret solely to COVID-19 vaccines.

A question of timing

As such, whilst the IP waiver proposal presents an interesting solution, many observers believe it to be fundamentally short- sighted, with the long-term risks outweighing the perceived short- term benefits, particularly in respect of trade secrets.

Certainly, negotiations at the WTO are always difficult and lengthy and this scenario is no different despite the manifest need for clarity to be swiftly reached.

The original proposal and its amended form extend the waiver beyond patents and vaccines to include nearly all forms of IP (including trade secrets). It is of course possible that the waiver will be limited to patents, but either way, its duration will be a particularly complex negotiating issue. If approved, it is likely to be time-limited (with possible scope for extension). There will also have to be safeguards against abuse baked in.

There is also a question as to whether the waiver will actually permit a WTO member country to suspend its own national IP protection regulations or merely lift its internal obligations under TRIPS.

Overall, timescales around the issue are difficult to predict with any certainty. At best, the negotiations could be completed by the time of the next WTO Ministerial Conference, scheduled to begin this November but there is equally the prospect that they will continue well into 2022.

All eyes on the WTO

By a number of measures, it would seem that the existing WTO proposal has so far failed to adequately consider provisions needed to successfully address the unique nature of trade secrets.

Whilst these rights are, by their nature, ‘hidden’ behind company firewalls and not publicly available, they represent a significant component of a company’s intellectual property assets (with significant associated commercial value), not only for existing products but in the development of future innovations.

Logic therefore dictates that by their very nature there can be no temporary waiver of rights in trade secrets. It now remains to be seen whether this logic will prevail in future TRIPS waiver negotiations...

Sheena Linehan and Craig Bowers are patent attorneys at European IP law firm Potter Clarkson