In recent months, various academics, non-governmental organizations (NGOs), and governments began arguing that intellectual property (IP) protection obstructs access to COVID-19 vaccines and related therapeutic products, especially in developing countries. Such arguments are like those raised during earlier global public health crises. With respect to COVID-19, these arguments were directed, among other forms of IP, at trade secrets. While countries differ on how they protect trade secrets, trade secrets are generally understood to encompass valuable information and technology that is “secret” (i.e., not known to the public), where the right holder has taken reasonable care to maintain that secrecy.
Contrary to these arguments, it is strong IP protection, including patents and trade secrets, that incentivized the development of the technologies (including mRNA technology) used in combating the ongoing pandemic. Maintaining strong IP protection throughout the world will be required to incentivize the development of new vaccines, as the COVID-19 variants evolve, and prepare for the next pandemic.
Pursuant to the terms of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the 164 members of the World Trade Organization (WTO) agreed on the fundamental understanding that the “protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology[.]” Events during the ongoing pandemic vindicate this understanding. Hundreds of partnerships and collaborations, among manufacturers around the world, are expected to result in the delivery of eleven billion doses of COVID-19 vaccines by the end of 2021.
In the years leading up to the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration) and the amendment to the TRIPS Agreement (i.e., Article 31bis)—when global health concerns were primarily focused on HIV/AIDS, tuberculosis, and malaria (as highlighted by the Doha Declaration itself)—the IP rights subject to greatest debate and discussion were patent rights. During discussions over COVID-19-related IP rights, however, trade secret protection gained prominence for those who advocated for eliminating, or reducing, IP protection in an attempt to increase the production and distribution of vaccines and therapeutics. Yet as detailed herein, although there may be some overlap in the type of subject matter that patents and trade secrets protect, the nature of these two distinct forms of IP protection is very different, such that the protection accorded, and permissible limitations on, such protection are likewise necessarily quite different.
The negotiators of the TRIPS Agreement, including of the amendment thereto, have built into the treaty certain “flexibilities” that provide WTO members, under certain limited circumstances, with the discretion to limit aspects of the IP protection, which must ordinarily be provided. Among those flexibilities are the provisions in Articles 31 and 31bis allowing for compulsory licensing of patents. As explained by Solovy and Krishnamurthy, “Article 31 contains no less than twelve distinct paragraphs . . . constitut[ing], by far, the longest list of specific considerations for any single limitation or exception to substantive IP rights in the TRIPS Agreement.” These flexibilities and associated conditions, as expanded through Article 31bis, are the subject of a pending proposal by the European Union (EU) that the WTO General Council adopt a “Declaration on the TRIPS Agreement and Public Health in the Circumstances of a Pandemic,” clarifying certain aspects of permissible compulsory licensing of patents.
Despite these built-in flexibilities and efforts to further clarify the scope of the TRIPS Agreement, several WTO members have proposed a so-called “TRIPS Waiver,” which would, as initially proposed, provide discretion for WTO members to opt not to protect multiple types of IP rights covering COVID-19-related products and technologies. Among the types of protection, specifically listed in the proposed TRIPS Waiver is trade secret protection, as identified through reference to Part II, Section 7 of the TRIPS Agreement. If the TRIPS Waiver currently being debated at the WTO is approved, it would have harmful implications for generations to come, limiting the ability of the biopharmaceutical industry to respond to future pandemics with vaccines and therapeutics as quickly as was possible in response to the COVID-19 pandemic.
Several commentators, including academics, argue that trade secrets—including those related to technologies and processes relevant to COVID-19 vaccines, treatments, and diagnostics—are currently subject to certain flexibilities, including the possibility of requiring the right holder to license, or otherwise share, a trade secret against their will. This latter concept is known as a compulsory license when more commonly used in reference to patents. These arguments were advanced when it became increasingly unlikely that a TRIPS Waiver, at least a waiver with the scope and breadth of that initially proposed, would be adopted by WTO members. For example, Gurgula, Hull, and Levine argue that the TRIPS Agreement—even in the absence of any amendment or waiver—currently permits compulsory licensing of trade secrets; in other words, they imply that WTO member governments currently have the discretion to compel sharing of information related to COVID-19 vaccines and therapeutics without risking a violation of their WTO obligations. They also argue that the domestic laws of the United States (U.S.), the European Union (EU), and United Kingdom (UK) are amenable to broad compulsory licensing of trade secrets for reasons of public health, even though these are countries well known for supporting and implementing robust IP protection.
In this article, we respond to these multiple erroneous contentions. After first providing background on the protection of trade secrets as a form of IP right (Section II), we then explain that, unlike for patents, there is no reasonable way to interpret the TRIPS Agreement according to the rules of treaty interpretation (or otherwise) in a manner that would permit the compulsory licensing of trade secrets (Section III). We then turn to the question of trade secret protection in the U.S., EU, and UK, explaining that any exceptions to trade secret protection are narrowly defined in each of these jurisdictions (Section IV). Finally, we conclude by examining the costs and risks that would arise from failing to respect trade secret protection, including through an action as aggressive as compulsory licensing (Section V).
Trade secret protection is a critically important form of IP right that serves to protect subject matter that may not be patentable. Unlike patents, which are available only for new, non-obvious, and useful inventions, trade secret protection is available regardless of the nature of the information, as its commercial value derives from the fact that it is secret. Importantly, trade secret protection is not available for the subject matter that is disclosed in a patent. Indeed, as a requirement of acquiring a patent pursuant to the TRIPS Agreement and, generally, in line with domestic laws, “an applicant for a patent shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art.” In stark contrast, trade secrets by their very nature consist of information that is “secret”—i.e., not disclosed to the public or to persons that are not under an obligation to maintain the secrecy of the information.
Scholars have found that some forms of trade secret protection were available since the days of the Roman Empire and, possibly, beforehand. During the period of the Renaissance, “most European nation-states had laws that protected businesses . . . from those who used their secret processes and ideas without permission.” During the nineteenth century, common law courts in England and the U.S., for example, gradually recognized the existence of, and enforced, trade secret protection, and such common law was eventually codified in these jurisdictions.
Like other forms of IP included in the TRIPS Agreement, trade secrets have the objective of “promotion of technological innovation and . . . the transfer and dissemination of technology.” Unlike patents, which must be protected by WTO members for at least twenty years from filing, trade secrets are not subject to protection for a prescribed duration; they are protected, by definition, only for so long as they remain secret.
Traditionally, trade secret protection was understood to be based in principles of property rights. For example, in Ruckelshaus v. Monsanto Co., the U.S. Supreme Court held that trade secrets were a form of property, reasoning that they “have many of the characteristics of more tangible forms of property” because they are “assignable[,]” “can form the res of a trust[,]” and pass “to a trustee in bankruptcy.”
Trade secrets have also been conceptualized in terms of tort and contract law, focusing on the “breach of confidence,” including breaches tied to explicit provisions of contracts like employment contracts or technology licenses. As explained by Menell et al., “[t]rade secret law has long been grounded in what has been termed ‘commercial morality.’” The U.S. Supreme Court, for example, clearly recognized this connection in Kewanee Oil Co. v. Bicron Corp., when stating, “[t]he maintenance of standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law.” This understanding of the relationship between trade secret protection on the one hand and commercial morality and ethics on the other is reflected in the TRIPS Agreement. Article 39.1 explicitly links protection of “undisclosed information” with the protection against unfair competition within the meaning of the Paris Convention (1967). Article 10bis of the Paris Convention for the Protection of Industrial Property (Stockholm Act of the Convention of July 14, 1967) (Paris Convention) stated that “[a]ny act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.” Article 39.2 of the TRIPS Agreement, which is the key provision mandating that WTO members provide a certain minimum level of trade secret protection, then repeats the reference to “contrary to honest practices.” Thus, in line with the jurisprudence in domestic legal systems, such as the U.S., there is a clear link in the TRIPS Agreement between trade secret protection and the fair and ethical treatment of people who developed information kept secret through reasonable precautions.
During the TRIPS negotiations in 1989, the advocates of trade secret protection explained their rationale for protection of trade secrets. This rationale is summarized in the negotiating history as follows:
The representative of the United States, referring to his delegation’s proposal, said that according to information from business in the United States a large proportion of intellectual property was protected in the form of trade secrets, rather than through patents or other [intellectual property rights]. Trade secrets and business know-how were important for competitiveness in a wide range of industries and should be an essential element of any system of intellectual property protection. The absence of adequate protection exerted a major chilling effect on the transfer of technology. Another participant said that it favoured the inclusion of a generally worded provision in a [General Agreement on Tariffs and Trade (GATT)] to protect trade and business secrets, according to which the proprietor should have the right to prevent such secrets from becoming publicly available or being used by others in a manner contrary to honest commercial practices.
Several months later, during the negotiations, the U.S. again highlighted the important role trade secret protection plays in facilitating the flow of information between developed and developing countries. The U.S. position is summarized as follows:
Presenting the background to his delegation’s proposal, the representative of the United States said that the protection of trade secrets was an issue of growing importance to his delegation. He also believed it important for developing countries since there was no better way of encouraging the transfer of technology to developing countries than to provide protection to trade secrets and proprietary information which constituted the very essence of the transfer of technology.
Thus, the U.S. government argued that trade secret protection was important not only because of the way it advanced the “competitiveness” of innovative industries but also because its absence “exerted a major chilling effect on the transfer of technology.” This need to disseminate technology, and the role of trade secrets in such dissemination, is at the center of the ongoing debate on the role of trade secrets in the development and supply of COVID-19 related vaccines, therapeutics, and diagnostics.
The U.S. government’s explanation, which is an important part of the negotiating history of the TRIPS Agreement, is in direct conflict with the position taken by those who are advocating today for compulsory licensing, or even a full waiver, of trade secrets. According to the U.S. government’s position in the TRIPS negotiations and the logic underlying the TRIPS Agreement, compulsory licensing of trade secrets would be entirely counterproductive to the stated aims of those who argue for reduced trade secret protection. It would decrease technology transfer, including transfers from developed and developing countries.
With this important perspective on the historical origin and moral basis for trade secret protection, and the decision of WTO members to include trade secrets within the scope of the TRIPS Agreement, it is logical that any limitations on such protection must be narrowly drawn and construed. Indeed, as detailed in Section III below, unlike several other types of IP protection set out in the TRIPS Agreement and the Paris Convention, there are no generally applicable exceptions to trade secret protection or provisions allowing for compulsory licensing.
Part II of the TRIPS Agreement encompasses seven sections dealing with individual types of IP rights. Section 7, titled “Protection of Undisclosed Information,” contains only Article 39, with its three subparagraphs.
As Professor Gervais notes, the reference to “undisclosed” information is not a fully accurate description of what is covered by the provision because information, which is never disclosed to anyone, would likely not require protection. Rather, as clarified by the language of each paragraph of Article 39, what is protected is “information disclosed selectively and under precise conditions.” The aim of each paragraph of Article 39 is to ensure such information is used only subject to the conditions pursuant to which it was disclosed. Thus, in line with Article 39.2 of the TRIPS Agreement, while a company may choose to share a trade secret among its employees who agree to keep it confidential, that company must have the right to prevent those employees from then selling or otherwise releasing the trade secret without the consent of the company.
Article 39.1 includes a general obligation that is further elaborated with reference to specific circumstances in the other parts of Article 39. The article provides that “[m]embers shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3.” Thus, it introduces two types of information—(i) undisclosed information and (ii) data submitted to governments or governmental agencies—and indicates that they must each be protected by WTO members.
Article 39.2 creates a substantive right that applies to undisclosed information and lists the three conditions required for accessing that right. According to the chapeau to Article 39.2, “[n]atural and legal persons shall have the possibility of preventing information . . . . from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices . . . . ” To avail this right, the information: (i) must be “lawfully within the[] control” of the “natural” or “legal” person exercising the right; (ii) shall be “secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question”; (iii) “has commercial value because it is secret”; and (iv) “has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”
Next, Article 39.3 requires WTO members to provide protection for data submitted to governments and government agencies “as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities” and sets forth the standard of protection. Protection is available to “undisclosed test or other data” submitted in this context if the origination of the data “involves a considerable effort.” If the data qualifies for such protection, members “shall protect such data against unfair commercial use.” In addition, according to the last sentence of Article 39.3, members must “protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.”
Importantly, Part II, Section 7 does not contain any general exceptions to the obligations in Article 39, unlike other types of IP rights covered by the TRIPS Agreement. The only exceptions to the obligation to protect undisclosed information are: (i) the security exception in Article 73 of the TRIPS Agreement, which applies uniformly across the agreement in the same way as the security exceptions in the GATT 1994 (Article XXI) and the General Agreement on Trade in Services (Article XIVbis); and (ii) the possibility accorded in the last sentence of Article 39.3 to not protect certain data submitted to governments or governmental agencies against disclosure, where “necessary to protect the public” or when steps are taken to “ensure” the data is “protected against unfair commercial use.” This contrasts sharply with the sections of the TRIPS Agreement concerning other forms of IP. For example, Article 30 in Part II, Section 5 creates general exceptions to the rights conferred by a patent. Further, Article 31, which is also in Part II, Section 5, deals specifically with the compulsory licensing of patents. With respect to copyrights, Part II, Section 1 sets out a general exception for copyright protection under Article 13. Further, Article 9.1 of the TRIPS Agreement incorporates, by reference, Article 11bis(2) of the Berne Convention (1971), which includes a specific provision for compulsory licensing of copyrights. There are no similar provisions in Part II, Section 7. Thus, there are no exceptions or derogations available to the obligation to protect undisclosed information beyond those listed above.
WTO agreements are subject to the customary international law rules on treaty interpretation, codified in Articles 31 and 32 of the Vienna Convention on the Law of Treaties. Applying those rules, WTO adjudicators have repeatedly cautioned that exceptions must be read and interpreted narrowly. That is, even where a specific exception to a WTO obligation exists, adjudicators must interpret that exception in a strict fashion to not defeat the negotiated balance between the rule and the exception. Where a WTO obligation is unaccompanied by an exception, it would simply be impermissible for an adjudicator to create one. This is precisely what those advocating for compulsory licensing of trade secrets are attempting to do.
There may be several reasons for the difference in treatment in the TRIPS Agreement, in terms of availability of exceptions, between patents and trade secrets. First, a key condition for the grant of a patent is disclosure, while the key condition for protection of trade secrets is non-disclosure. For the grant of a patent, and pursuant to Article 29.1 of the TRIPS Agreement, the inventor must disclose detailed information about the claimed invention “in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art” and may require disclosure of the “best mode for carrying out the invention known to the inventor.” Thus, with a few limited exceptions, there is generally nothing “secret” about a patent once granted. To require compulsory licensing of any trade secret or undisclosed data that has been submitted to a government for regulatory approval, a government would need to force a party to share that information with another party and then authorize the use of that information.
First, this is a far more invasive form of government interference in private dealings when compared to the compulsory licensing of a patent. Second, the scope of a compulsory license on a patent can, and generally must, be strictly circumscribed in terms of time, purpose, and geographic reach. The situation is entirely different for a trade secret. Once publicly disclosed, a trade secret loses its secret nature forever, throughout the world, such that the effects of the disclosure cannot be circumscribed geographically or temporally. Even if a compulsory license required sharing trade secrets with one entity subject to confidentiality requirements, that one entity would then know the secret information and would permanently be in lawful possession of that information. There is no “obliviate” spell that would remove the information from the recipient’s memory after a defined licensing period. This must be seen against the context that, by definition, a trade secret has commercial value, and is protected, because of its secret nature.
Whatever the reasons may be for the lack of a comparable trade secret provision like the provision for patents in Article 31 in Part II, Section 5 of the TRIPS Agreement, it remains the negotiated outcome among WTO members. It is not for WTO adjudicators—and much less for academic commenters—to rewrite the treaty and wish into existence a compulsory license provision for trade secrets.
To take an example, Gurgula and Hull argue that the TRIPS Agreement already allows for compulsory licensing of trade secrets. They start by interpreting the reference in Article 39.1 of the TRIPS Agreement to Article 10bis of the Paris Convention to mean that trade secrets are protected only against acquisition “through theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or through espionage, including electronic espionage.” There is no such limitation in Article 39, which clearly describes the substantive obligations it creates. Article 39.2 provides those who hold rights over undisclosed information with the ability “of preventing information . . . from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices.” Here, the phrase “without . . . consent” is core to the right.
Moreover, the “contrary to honest commercial practices” language is a broad enough concept to encompass, inter alia, a situation where a government takes a trade secret from a right holder, or from someone with a duty of confidentiality, through force or coercion and releases that secret to competitors of the right holder. The TRIPS Agreement provides examples of “a manner contrary to honest commercial practices,” but these examples, preceded by the phrase “shall mean at least[,]” do not constitute a definition, and they are not exhaustive. They do provide relevant context for understanding that, if a WTO member’s government were to force disclosure of a trade secret—particularly if such disclosure was in breach of a contract (e.g., an employment agreement, license agreement, etc.), breach of confidence, or inducement to breach—a violation of Article 39.2 would result. Moreover, whereas Article 39.3 obligates members to protect certain data submitted to governments or governmental agencies “against disclosure,” the disclosure need not occur through the particular means identified by Gurgula and Hull to result in a violation of the TRIPS Agreement.
If WTO obligations require a member to prohibit specific conduct by private parties (e.g., the disclosure of trade secrets without permission of the right holder), the member cannot evade those obligations by taking action in domestic law to compel private parties to engage in that conduct. Rather, by compelling conduct that the member is required to prohibit, the member would violate its WTO obligations.
In a further attempt to find support for compulsory licensing of trade secrets under the TRIPS Agreement, Gurgula and Hull reference Articles 7 and 8 of the TRIPS Agreement and the Doha Declaration. Levine advances a similar argument. However, while Articles 7 and 8 and the Doha Declaration can be relied upon for relevant context and shed light on the object and purpose of the TRIPS Agreement, for the purposes of interpretation, they do not provide exceptions to the substantive obligations.
Article 7 of the TRIPS Agreement, entitled “Objectives,” states:
The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.
Thus, Article 7 clarifies that the TRIPS Agreement should be interpreted in a manner that would “balance” the desire to incentivize the creation and promotion of new technology, with the need to disseminate technology and new ideas once they are created. That “balance” is already reflected throughout the TRIPS Agreement.
Article 8.1 of the TRIPS Agreement, entitled “Principles,” states: “Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement. Importantly, Article 8.1 concludes that any measures “to protect public health” must be “consistent with the provision of [the TRIPS] Agreement.”
Thus, while the TRIPS Agreement aims to create a balance between innovation and access to the fruits of innovation, measures taken to protect public health must be “consistent with the provisions of this Agreement.” As with Article 7, Article 8.1 offers relevant context and information about the object and purpose of the agreement, which is useful for interpreting other TRIPS provisions. Article 8.1, however, is not an exception to the TRIPS Agreement, including the obligation to protect undisclosed information.
Levine also argues that the security exception in Article 73 of the TRIPS Agreement, by permitting members to take “any action which it considers necessary for the protection of its essential security interests,” may offer an avenue for compulsory licensing of undisclosed information. But Levine ignores that WTO adjudicators recently confirmed that the exception is not a blank check for departures from WTO obligations. The right to take “any action which it considers necessary for the protection of its essential security interests” is conditioned by one of three exhaustively listed circumstances in paragraphs (i)–(iii) of Article 73(b): (1) measures “relating to fissionable material[,]” (2) supply of “a military establishment[,]” and (3) “war or other emergency in international relations[.]” While it is undeniable that members may depart from any TRIPS obligation, including those in Article 39, where the conditions for an invocation of Article 73 are met, the meeting of such conditions cannot be readily assumed. Further, there are important systemic implications arising from overreliance on the national security exceptions of the TRIPS Agreement or any of the WTO agreements.
Finally, Gurgula and Hull claim that because “the TRIPS Agreement remains silent” on compulsory licensing of undisclosed information, they can therefore deduce from that “silence” that the “matter” may be left for “national legislation.” According to Gurgula and Hull, this silence implies that governments are permitted “to issue compulsory licensing of trade secrets when required, including for the protection of public health.” If silences in the TRIPS Agreement were interpreted as providing exceptions, one could invent any number of exceptions and bring down the entire TRIPS Agreement with those exceptions. For example, are the general exceptions in Article XX of the GATT 1947 applicable to the TRIPS Agreement, despite the exception describing its scope as “this agreement” and the TRIPS Agreement not having an analogue? Is there an exception permitting the denial of patents when applications are filed on a rainy day? Is there an exception to protection of undisclosed information where the lawful owner of that information is a person with blond hair? If one fills the silences with exceptions, one could simply keep going and rewrite the entirety of the TRIPS Agreement to ridiculous effect.
Rewriting the TRIPS Agreement to create a compulsory licensing exception to Article 39 leaves significant questions unanswered: (i) Does a compulsory license have to be considered on individual merits, as is the case for patents under Article 31(a)? (ii) Is a prior failed attempt at obtaining a voluntary license generally a condition for the grant of a compulsory license, as is the case under Article 31(b) for patents (subject to certain exceptions)? (iii) Is there an obligation to limit the scope and duration of the compulsory license, as is the case for patents under Article 31(c)? (iv) Is there an obligation for compulsory licenses to be non-exclusive, as is the case for patents under Article 31(d)? (v) Is there an obligation for compulsory licenses to be non-assignable, as is the case for patents under Article 31(e)? (vi) Is there a requirement that the compulsory license be predominantly for the supply of a product in the domestic market, as is the case for patents, under Article 31(f)? (vii) Is there an obligation to terminate the compulsory license once the circumstances giving rise to its grant cease to exist, as is the case for patents under Article 31(g)? (viii) Is there an obligation to pay remuneration to the right holder, as is the case for patents under Article 31(h), and how is that remuneration, if any, calculated? (ix) Is there an obligation to provide for judicial review of the legal validity of a compulsory license, as is the case for patents, under Article 31(i)? (x) Is there an obligation to provide for judicial review of the decision on remuneration, as is the case for patents, under Article 31(j)? (xi) Are there exceptions, where any of these questions are answered in the affirmative?
Of course, the proponents of compulsory licensing of undisclosed information may be able to answer each of the above questions in the affirmative or the negative, as there is no treaty text to guide them. But such answers would reflect their subjective views on what the law should be and would not constitute an accurate commentary of what the law is. As for whether there is a disparity between what the law is and what it should be and how any such disparity may be resolved, those are questions reserved for WTO members in negotiations. Simply assuming into existence an exception, where the TRIPS Agreement does not offer answers to any of the questions above, would create potentially limitless uncertainty for right holders, as well as WTO members. Because the WTO is a legal system that emphasizes the importance of predictability and security in the multilateral trading system, such treatment would be highly destructive. And in the context of a treaty that aims to provide certainty that innovators will be rewarded with strong IP rights, such an interpretation would effectively remove the incentives for innovation. If that happens, the world would be in a much more difficult place when the next global pandemic begins to emerge than it was when COVID-19 rapidly spread in 2020.
We now turn to the question of trade secret protection in the U.S., UK, and the EU. In each of these WTO member countries, and generally in line with the obligations of the TRIPS Agreement, any exceptions to trade secret protection are narrowly drawn. In particular, there are no exceptions in these jurisdictions that would be broad enough to permit the compulsory licensing of trade secrets in order to transfer information from IP right holders to competitors to produce the same products (e.g., vaccines and therapeutics) being produced by the right holders or their licensees.
Despite contentions to the contrary in several recent publications, U.S. law cannot accommodate the compulsory licensing of trade secrets involved in the production or development of COVID-19 vaccines or therapeutics. First, as it stands, state and federal law almost certainly cannot accommodate mandatory company-to-company trade secret transfer absent the trade secret owner’s consent. Second, U.S. case law cited by advocates of compulsory licensing of trade secrets fails to support claims that U.S. law invites mandatory trade secret disclosure to advance public health. Finally, U.S. international treaty obligations suggest that U.S. law must prohibit compulsory licensing of trade secrets.
There are no state or federal laws in the United States that would facilitate compulsory licensing of trade secrets for public health reasons. Trade secret protection in the U.S. derives from a combination of both state and federal law. While not identical, trade secret laws across the fifty states are quite similar. Forty-eight states, the U.S. Virgin Islands, Puerto Rico, and the District of Columbia apply the Uniform Trade Secrets Act (UTSA) to regulate the acquisition, use, and disclosure of trade secrets.
The UTSA provides a remedy, through civil (as opposed to criminal) proceedings, for any person or entity whose trade secrets are acquired by another party through “improper means.” “[T]heft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means” are all understood to qualify as “improper means.” Pursuant to the UTSA, one can also bring a civil cause of action for the “misappropriation” of a trade secret, defined as:
(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(ii) disclosure or use of a trade secret of another without express or implied consent by a person who (A) used improper means to acquire knowledge of the trade secret; or (B) at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was (I) derived from or through a person who has utilized improper means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
The UTSA does not prohibit “reverse engineering,”—legally taking “the known product and working backward to find the method by which it was developed”—or the independent discovery of an existing trade secret’s substance. This, of course, is a major distinction between trade secret protection and patent protection, as patents do protect—for a limited term—against the making, using, selling, offering for sale, or importing of patented products and processes even if they are independently discovered after the patent has been issued.
There is nothing in the UTSA that would anticipate the U.S. states providing themselves with the general authority to issue compulsory licenses (or otherwise require public disclosure) of trade secrets, whether in the name of public health or for any other reason. Indeed, there are no “express exceptions to trade secret liability” in the UTSA, in line with Article 39 of the TRIPS Agreement.
Pursuant to the UTSA, state courts enjoy the power to enjoin “actual or threatened [trade secret] misappropriation.” In certain limited instances, state courts have the ability to formulate other remedies for trade secret misappropriation. Specifically, according to the UTSA, “in exceptional circumstances,” a court may deny an injunction to the right holder and instead allow for the future use of a trade secret, subject to the user of that trade secret being obligated to pay “a reasonable [and time-limited] royalty.” Under the UTSA, “[e]xceptional circumstances include, but are not limited to, a material and prejudicial change of position” of the defendant that occurs before they realize that they are making use of a trade secret that has been misappropriated. In addition, Uniform Law Commission (ULC) comments accompanying its UTSA template recognize that an “overriding public interest,” such as pressing matters of national security, may constitute an exceptional circumstance.
To be clear, the ongoing royalty remedy is appropriate only in scenarios where the defendant has already used and experienced a change of position due to the trade secret misappropriation. There is no basis in the UTSA for a court to compel a company to newly supply a trade secret to another company against its will, which would be the aim of a compulsory license for trade secrets.
The Economic Espionage Act of 1996 (EEA) and the Defend Trade Secrets Act of 2016 (DTSA) are the two primary regimes at the federal level for protecting trade secrets in the U.S. As with U.S. state laws, there is nothing in the federal trade secrets regime that would appear to permit or otherwise facilitate the compulsory licensing of trade secrets in the name of improving public health, whether in the U.S. itself or in other countries.
The EEA, inter alia, criminalizes the improper acquisition (including theft) of trade secrets (including in the context of interstate and international commerce), providing for the possibility of significant fines and imprisonment. The DTSA provides the ability to bring federal civil proceedings for certain trade secret misappropriation (including when the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce), similar to the liability provided for by state-level UTSA legislation.
There are no exceptions, in either the EEA or the DTSA, for those who misappropriate trade secrets for reasons of improving public health in the U.S. or in foreign countries. Rather, these statutes provide exceptions only for (1) trade secret disclosures made under seal in court filings (including those in anti-retaliation lawsuits filed by whistleblowers against employers); (2) government activities that are otherwise legally permissible; and (3) individuals who confidentially disclose trade secrets to their attorneys or to public officials “solely for the purpose of reporting or investigating a suspected violation of law.” The existence of these explicit exceptions suggests that the U.S. Congress did not intend federal trade secret law to offer a broad exception for public health or emergencies. In fact, the DTSA’s subsection on exceptions states that “[e]xcept as expressly provided for under this subsection, nothing in this subsection shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.”
Under the EEA and DTSA, courts can force trade secret owners to confidentially disclose their trade secrets to an attorney, court, or the government. But these statutes do not empower a court to compel the public or intercompany disclosure of trade secrets. Rather, the relevant statutory language emphasizes that court-ordered disclosure “shall not constitute a waiver of trade secret protection . . . unless the trade secret owner expressly consents to such waiver.” This caveat makes sense only if court-ordered disclosure is limited to confidential disclosure to an attorney, government, or court, as public or intercompany disclosure would inherently obliterate the trade secret’s protection.
Advocates for compulsory licensing of trade secrets in the U.S. also argue that the U.S. Food and Drug Administration’s (FDA) organic statute and regulatory authorities support their position that the U.S. government can, without the consent of the right holder, share confidential information or trade secrets with foreign medicine regulatory agencies. A complex framework governs the FDA’s approach to sharing trade secrets and confidential commercial information outside of the agency. FDA authorities permit the agency to confidentially acquire certain information that may constitute trade secrets or confidential commercial information from companies seeking approval or authorization of their products. Critically, however, there are significant limitations on the FDA sharing trade secrets or confidential commercial information with a foreign agency absent the consent of the trade secret owner. Instead, the FDA may provide confidential commercial information only in certain circumstances: (1) where the sponsor “has provided written authorization for the disclosure”; (2) where sharing the relevant information with a foreign government “would be in the interest of public health by reason of the foreign government’s possessing information concerning the safety, efficacy, or quality of a product”; or (3) where the information is shared (under highly controlled and specific conditions) with foreign scientists visiting the FDA. In other words, absent the trade secret owner’s approval, the FDA generally cannot disclose trade secret information. Even in circumstances where the FDA does share confidential information with regulators outside of the U.S., consideration must be given to securing an appropriate confidentiality agreement with that regulator, as also acknowledged by Gopakumar et al. As such, that information remains undisclosed and protected. Furthermore, pursuant to the Trade Secrets Act of 1948, employees of the FDA (and other U.S. government agencies) are individually responsible for protecting trade secrets obtained in the course of their employment or official duties and subject to criminal charges (and termination from their employment) if they fail to do so.
In their attempt to demonstrate that compulsory licensing of trade secrets is permissible under U.S. law, advocates of compulsory licensing cite isolated instances in which U.S. courts and agencies have fashioned narrowly tailored remedies on a case-by-case basis. For example, Gurgula and Hull reference a Federal Trade Commission (FTC) order requiring a pharmaceutical producer to share certain manufacturing expertise with another company but concede that the FTC ordered this result only as part of an antitrust settlement. This example fails to demonstrate that U.S. law would accommodate trade secret licensing outside of the narrow context of an antitrust consent order.
Gurgula and Hull also cite a case from the Eastern District of Michigan in which the court required a technology company to continue licensing its software and technical support services to a hospital. The company initially terminated the license after the hospital outsourced operation of the software to a third party. The court preliminarily enjoined the company from terminating this license, agreeing with the hospital that termination would harm patient care. But this decision does not suggest that U.S. law would generally accommodate the compulsory licensing of trade secrets for public health reasons. First, the hospital and the third-party operator had already possessed the software company’s product and know-how for a year, pursuant to a voluntary license. That is, the court in this case did not require that the company newly supply an unshared trade secret. Second, the company had terminated the license only after the hospital refused to sign additional confidentiality agreements and increase payments to the software company. In other words, the company initially signaled its conditional consent to the outsourcing arrangement. This conditional consent influenced the court’s decision. Finally, in this case, the court required that the license continue only until it rendered a decision on the merits (which the court never reached, ostensibly due to withdrawal of the case).
The international treaty obligations of the U.S. further suggest that U.S. law must prohibit compulsory licensing of trade secrets. For example, in 2005, the U.S. signed a trade agreement with Australia (AUSFTA) that includes robust IP rules. Article 17.9(7) of this agreement stipulates circumstances under which Australia or the U.S. may allow for compulsory licensing of patents, clarifying certain aspects of the TRIPS Agreement. In pertinent part, Article 17.9(7)(b) allows a state party to provide for compulsory licensing of patents in “cases of public non-commercial use, or of national emergency, or other circumstances of extreme urgency.” But Article 17.9(7)(b)(iii) explicitly prohibits parties from mandating the licensing or sharing of “undisclosed information or technical know-how” (i.e., trade secrets) related to any such compulsorily licensed patents.
Thus, in addition to violating its obligations under the TRIPS Agreement (for the reasons set out above in Section III), the U.S. would violate its crystal-clear treaty commitments under the AUSFTA if it compelled the licensing of trade secrets in the situation covered by Article 17.9(7)(b). Significantly, Article 17.9(7)(b) of AUSFTA does more than announce a commercial condition that the U.S. must provide only to Australian nationals. Rather, Article 17.9(7)(b)(iii) prohibits U.S. and Australia law from accommodating compulsory licensing of trade secrets as regards IP owners of any nationality. Again, this confirms the obligation that is already evident from the TRIPS Agreement itself, which applies to all WTO members.
The UK offers an interesting case study of established trade secrets protections, which further helps to rebut the inappropriate suggestions that there exists broad governmental authority for compulsory licensing of trade secrets in countries such as the UK that are well known for strong IP protection. Although the UK voted to leave the EU in 2016, through the Trade Secrets Regulations 2018 (SI 2018/597), the UK government has effectively implemented the EU’s Trade Secrets Directive. The new regime of trade secrets protection established by the Regulation supplements and complements the robust protections for trade secrets that already existed in its domestic laws, particularly the English common law duty of confidentiality.
While the protections of trade secrets are robust, they are not absolute. For instance, parties engaged in civil litigation cannot generally cite commercial confidentiality as a defense against disclosing documents in discovery. As Gurgula and Hull correctly note, relying on the decision in Spycatcher, duties of confidentiality in English law can, in limited and exceptional circumstances, be overtaken by certain public interest considerations.
But Gurgula and Hull ignore the concerns expressed by the court in Spycatcher about competing public interests. That case concerned the publication by newspapers of secret information about the UK’s Security Service (MI5). A question before the court was how to balance the public interest in providing free press and the public interest in providing an efficient and secure Security Service (including the ability of the Security Service to preserve a high degree of secrecy). The court declared that “[a] balance must be struck between the two competing public interests.”
In considering this decision, Gurgula and Hull correctly acknowledge that the notion of public interest in English trade secrets law is not strong enough to justify “the enforced disclosure of trade secret technology by way of a compulsory licence.” Nevertheless, Gurgula and Hull indicate that “in the case of compulsory licensing of trade secrets related to COVID-19 vaccines, there is an overarching public interest for disclosure of such trade secrets” that could justify relaxing protection of trade secrets. Yet they fail to mention the competing public interest in the UK of encouraging innovation and investment in new technologies and products by ensuring the availability and predictability of IP protection for biopharmaceutical products; without such incentives, the public health of the UK (and others around the globe) will be put in jeopardy for future pandemics. Particularly in the UK, the vaccine resulting from a collaboration between UK-based Oxford University and AstraZeneca was developed in a jurisdiction known to have a strong regime of IP protection, including patents and trade secrets. Notably, trade secret protection is especially important to encourage the transfer of critically important information from right holders to their licensees. In the case of their COVID-19 vaccine, for example, Oxford University and AstraZeneca have entered into voluntary agreements with the Serum Institute of India to work together to supply one billion doses for low- and middle-income countries.
If English courts are required to balance the public interest behind IP protection (here, trade secret protection) and allegations that compulsory licensing of trade secrets would somehow advance national or global public health interest (which it would not), they would not likely alter the common law duty of confidentiality in a manner that would allow for compulsory licensing of trade secrets in the context of a pandemic (whether by public disclosure or by private disclosure to a third party on strict terms of confidence). Although English courts retain a wide degree of discretion to develop the common law, they refrain from doing so where the UK Parliament is the more appropriate authority to do so. Furthermore, while international treaties—such as the TRIPS Agreement—are not directly enforceable in English law, the courts have held them as an aid to the development of the common law and as a basis for legitimate expectation. In that regard, because of the obligations imposed by the TRIPS Agreement on WTO members (including the UK) to protect trade secrets (as detailed in Sections II and III, above), English courts are less likely to be inclined to permit compulsory licensing of trade secrets through the mechanism of public interest exemptions to the common law duty of confidentiality.
Until 2016, the responsibility for protecting trade secrets was vested in individual EU member states, which resulted in considerable differences among the member states on that matter. Research conducted by the European Commission concluded that the “fragmented and diversified” nature of trade secret protection in the EU was undesirable, “imposing unnecessary costs and risks” and obstructing cross border innovation. As a result, in 2013, the European Commission proposed an EU-wide regime to protect trade secrets from unlawful acquisition, use, and disclosure.
The result of this proposal was Directive 2016/942 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure (the Trade Secrets Directive), which sought to harmonize trade secrets protections across the EU.
The Trade Secrets Directive is aimed at protecting private rights—i.e., those who have rights over trade secrets. The Trade Secrets Directive makes clear that businesses value trade secrets as much as more formal IP rights, such as patents or copyright, and that trade secrets are vital to innovation, creativity, and investment, particularly amongst small and medium-sized enterprises (SMEs), stating: “Trade secrets have an important role in protecting the exchange of knowledge between businesses, including in particular SMEs, and research institutions both within and across the borders of the internal market, in the context of research and development, and innovation.”
The Trade Secrets Directive aims to incentivize and expedite research and development, innovation, and, ultimately, cross-border cooperation and trade by providing strong and predictable trade secret protection throughout the EU member states. The Trade Secrets Directive is predicated on the understanding that, when a trade secret is misappropriated, the result is to discourage creativity and investment throughout the EU.
In view of the object and purpose of the EU Trade Secrets Directive, it is clear that compulsory licensing of trade secrets is contrary to the goal of establishing a legal system in which right holders can be certain of their trade secret rights and their ability to enforce those rights.
Citing Article 3(1) of the Trade Secrets Directive, Gurgula and Hull assert that trade secrets in the EU can be subject to “enforced disclosure or legitimate use by third parties.” Yet Article 3(1) provides an exhaustive (not illustrative) list of exemptions and includes no support for the possibility of compulsory licensing of trade secrets. In particular, Article 3(1) states that acquisition of a trade secret is lawful when obtained by independent means or discovery, reverse engineering, exercise of workers’ rights, or any other honest commercial practice.
Gurgula and Hull also refer to Article 1(2)(b) of the Trade Secrets Directive in support of the same proposition. Again, this analysis is misplaced. It is worth quoting the relevant article: “This Directive shall not affect . . . (b) the application of Union or national rules requiring trade secret holders to disclose, for reasons of public interest, information, including trade secrets, to the public or to administrative or judicial authorities for the performance of the duties of those authorities.”
But the Trade Secrets Directive does not provide any basis or jurisdiction for authorities to require compulsory licensing of trade secrets. It merely refers to the existence of other rules that might require disclosure of trade secrets but does not actually identify any existing rule (whether at the EU or member state level) that would require compulsory licensing of trade secrets.
Further, the Trade Secrets Directive recognizes the necessarily limited nature of disclosures made to third parties. Recital 18, for example, indicates that, if the disclosure of trade secrets might potentially be lawful under a given member state’s rules, it should likewise be considered lawful under Trade Secrets Directive. Again, Gurgula and Hull do not cite to any relevant examples. Recital 18 also includes the following restriction, which is worth highlighting here:
However, such treatment of the acquisition of a trade secret as lawful should be without prejudice to any obligation of confidentiality as regards the trade secret or any limitation as to its use that Union or national law imposes on the recipient or acquirer of the information. In particular, this Directive should not release public authorities from the confidentiality obligations to which they are subject in respect of information passed on by trade secret holders, irrespective of whether those obligations are laid down in Union or national law.
Thus, with particular respect to public officials that have received confidential information, the Trade Secrets Directive mandates that any disclosure must be limited by and subject to other pre-existing obligations of confidentiality.
Indeed, in other contexts where EU law has had to balance the rights to disclosure versus the rights to protection of commercial secrecy, it has withheld documents from public disclosure and rejected public interest arguments. For instance, European citizens and others in Europe have the right to access documents held by European institutions, but that right is expressly circumscribed where disclosure would undermine a person’s commercial interests, subject to public interest considerations. When confronted by a request for disclosure on the basis of public interest, the Court of Justice of the EU upheld the European Commission’s decision not to disclose documents containing a third party’s trade secrets.
As discussed above, one would need to effectively rewrite the TRIPS Agreement for a WTO member to justify, as consistent with its WTO obligations, compulsory licensing of trade secrets or other undisclosed information covered by Article 39; the same is true with respect to the domestic law discussed above. The result of any such actions would be to undermine the incentives that industries have for developing and bringing to market new technologies and products—such as products intended to improve global health—including collaboration (pursuant to voluntary licenses and other cooperative agreements) with partners from countries throughout the globe. This is particularly true for information that would not be subject to patent protection.
As discussed in Part III, the concept of compulsory licensing of a patent, which itself is to be done under very limited circumstances and requires compliance with multiple conditions, is simply incapable of adaptation to suit the context of trade secrets. It is possible to issue compulsory licenses of patents with limitations on temporal, purposive, and geographical scope, as required by Articles 31 and 31bis of the TRIPS Agreement. The same is not true for trade secrets. Once a trade secret is disclosed, there can be no temporal limitation on the disclosure because disclosure is necessarily a permanent act. The information will reside with the recipient permanently. While it may be possible to legally prescribe that the information disclosed pursuant to a compulsory license be used only for a particular purpose, or that it may not be divulged to third parties within or outside the country where the compulsory license is issued, monitoring and enforcing compliance with such geographic and purposive scope limitations would be a very difficult—if not impossible—task.
Moreover, while the compulsory licensing of a patent will interfere solely with patent rights in the country where the compulsory license is issued, the impact of a compulsory license on trade secrets would likely be global. IP rights (and permissible exceptions to those rights) are generally understood to be territorial in nature, but a compulsory license of a trade secret in one territory has the potential to have follow-on effects for protection of that same trade secret throughout the globe. This goes against the fundamental principle of territoriality.
To recall, among the requirements for protection of undisclosed information under Article 39.2 of the TRIPS Agreement are (i) the information is secret and (ii) the information has commercial value because it is secret. The same requirements are reflected in domestic laws. Once information has been disclosed to a third party pursuant to a compulsory license, it is doubtful whether the information would still meet these requirements. Thus, compulsory licensing of undisclosed information has the potential to undermine protection of such information not only in the country issuing a compulsory license (or in countries with weak protection of undisclosed information) but even in countries with strong mechanisms for the protection of such information.
When getting involved in a country where trade secrets are at risk of being compulsory licensed, innovative industries would be expected to limit the ability of persons within that country to possess their valuable undisclosed information. This would potentially mean that these industries would not invest in such countries and would refrain from collaborative undertakings (such as licensing patents to local entities for the production of a good), where such collaboration entails sharing undisclosed information with a local entity. This could result in a significant setback for attempts by developing countries to participate in innovative sectors, such as pharmaceutical manufacturing. In fact, as discussed in Section II above, creating a situation where innovative industries in developed countries are comfortable sharing trade secrets with entities in developing countries was one of the primary justifications set out by the U.S. during the negotiations of Article 39 of the TRIPS Agreement. At that time, the U.S. emphasized that protection of trade secrets is “important for developing countries since there was no better way of encouraging the transfer of technology to developing countries than to provide protection to trade secrets and proprietary information which constituted the very essence of the transfer of technology.” In a recent example, it was announced in June 2021 that mRNA technology transfer hubs would be established in Africa, beginning with the first one in South Africa, led by a consortium comprising Biovac, Afrigen Biologics and Vaccines, a network of universities, and the Africa Centres for Disease Control and Prevention. The aim of these hubs is to allow mRNA technology to be established at industrial scale, to provide training and necessary licenses, and to share “the production know-how” (including trade secrets) with local manufacturers.
In sum, there is no support for the contention that compulsory licensing of trade secrets would be consistent with the TRIPS Agreement, or with the existing domestic legal regimes of WTO members, where many of the valuable IP rights related to COVID-19 vaccines and therapeutics originated—such as the U.S., EU, and UK. Further, any changes to the international or domestic legal regimes that would permit any such compulsory licensing of trade secrets would cause far more harm than good in terms of technology transfer and, ultimately, global public health.
