Covid Vaccine Waiver Deal Threatens Investment for Future Crises

The World Trade Organization last week approved a deal to loosen intellectual property protections that many policy professionals say will shatter investment and innovation incentives for drugmakers to meet the needs of major health crises. The deal was a blow to vaccine makers such as Pfizer Inc. and Moderna Inc., which fought to keep the current framework that enabled them to produce life-saving vaccines in record time.

“Anyone with a stake in preventing or responding to future crises should be concerned about the negative effect of this agreement,” said James Pooley, a former deputy director general at the United Nation’s World Intellectual Property Organization.

The IP waiver comes after nearly two years of debate and at a time when initial catalysts for a plan to spur vaccine access and production capabilities have largely been addressed—leaving many in the IP and drug spaces skeptical of the goals of the agreement beyond political gain.

“It delivers the worst possible result: coming at a time when there is an oversupply of vaccines, it is irrelevant to the current crisis; and by reducing the reliability and predictability of patent protection it makes it much harder to secure private investment in the research required to deal with the next global health crisis,” Pooley said.

The waiver indicates that patent rights include ingredients and processes necessary for the manufacture of the vaccine. Were that interpreted to include trade secrets, it could scare off investment capital, Pooley said.

“It signals that the United States is willing to play footsie with India and South Africa on this essential sort of lie, that pulling back on patent protections globally will somehow solve more problems than it creates, and that’s a delusion. And we’re buying into it,” said James Pooley, a former deputy director general at the World Intellectual Property Organization. “That itself will have a dampening effect on the willingness of companies to invest in technologies.”


According to the tentative plan, WTO members will decide whether to extend the waiver to “cover the production and distribution of COVID-19 diagnostics and therapeutics” within six months of an agreement.

McDole, however, noted that “like the vaccine manufacturers, Gilead and other therapeutic manufacturers are continuously entering into voluntary licenses to increase production and access” for Covid treatments.

The waiver, particularly from the U.S. point of view, is “the worst of both worlds,” Pooley said.

“It doesn’t solve the actual problems of vaccine availability,” and “it reinforces the idea that whenever we have some sort of global issue, let’s look at ways in which the IP system can be seen as a barrier,” he said.

DTAS (Defend Trade Secrets Act) claims now constitute almost three-quarters of those filed in suits. The DTSA, signed into law on May 11, 2016, provides litigants a private right of action in federal court for trade secret misappropriation claims.

“It’s no surprise that many plaintiffs favor the federal option, with nationwide service of process and harmonized rules,” says James Pooley, a leading trademark attorney, author and ex-Deputy Director General of WIPO. “Many still choose state court for essentially local cases, where it is generally easier to get your case to trial.

“As for the high percentage of judgments resulting in injunctions, that statistic should be understood in context of  how few cases actually get to a judgment after trial. Those that do would naturally tend to present strong facts that justify injunctive relief.”

Five years after legislation significantly improved trade secret protection in the US, Jim Pooley
tells IAM in an interview, more policymakers on Capitol Hill are advocating tough policing of
potential IP theft by Chinese entities - for good and not so good reasons

The current US Congress is still in its early days but if the first few months are anything to go by we can expect plenty of discussion and proposed legislation on the subject of IP theft and specifically on protecting their trade secrets.

Last week, Senators Grassley and Whitehouse issued the Stop Theft of Intellectual Property Act 2021. If enacted, this would see foreign nationals who engage in IP theft facing potential deportation from the US.

Another proposed bill comes from Senator Graham. He put out a news release last month about his introduction of “The Combating Chinese Purloining (CCP) of Trade Secrets Act”. Among other things, the bill would include “prohibition on applications for patent protections by US Patent and Trademark office” for foreign persons who misappropriate a trade secret.

“My legislation is designed to deter behavior, much of it from China, that results in the loss of trade secrets, intellectual property, and sensitive government research,” Graham announced.  

Senators Van Hollen and Sasse have also had their say with their “Protecting American Intellectual Property Act”, which passed the Senate late last year and, last month, was reintroduced in the new Congress. That proposes levying economic penalties on companies or individuals who have been found to have engaged in the theft of US IP. 

Whether any of these bills actually become law remains to be seen. It has only been five years since the Defend Trade Secrets Act (DTSA) was passed, handing rights owners a powerful new route to bring cases under federal law. There hasn’t been an indication yet that

this legislation hasn’t given US authorities enough powers to tackle the problem of IP theft - a message that trade secrets expert Jim Pooley reiterated in a recent interview with IAM.

“These [bills] were not generated from a sense of concern that trade secrets in general are not being sufficiently supported or that the DTSA is not working or that prosecutions under the Economic Espionage Act are somehow not hitting the mark,” Pooley remarked.

Perhaps not surprisingly, Pooley stressed that what had changed the dynamic are the geopolitical tensions between the US and the world’s most populous country. “China was a concern five years ago, now it’s an almost rabid concern on the part of a number of politicians for good reasons and not so good, in my view,” Pooley said.

“I think the elevated concern over China is largely justified but that part is more performative - that you want to be seen to be tough on China - and this is what has me worried because of the unintended consequences,” Pooley commented.

The danger, should some of the proposed legislations’ more radical ideas become law, is that it will prompt a tit-for-tat response.

“Whenever you take measures that are designed to punish and discourage behavior by a foreign country or coming from a foreign country, what you risk is that that country or other countries will enact similar legislation of their own,” Pooley stressed.

In recent years legislators on Capitol Hill have been making ever more radical suggestions around how the US could use the IP system to get tough on China’s leading tech players. In 2019 Senator Rubio even floated the idea of preventing Huawei from seeking damages in patent litigation after it emerged that the Chinese tech giant had asked Verizon to pay $1 billion in licensing royalties.

Graham’s proposal that transgressors should be prohibited from filing for US patents might raise alarm about a similarly harsh response affecting the legions of US companies that have significantly increased their Chinese patent portfolios in recent years. That may not be an appealing prospect for a business like Qualcomm which makes a huge chunk of its revenue from device makers in China. 

The risk, Pooley underlined, is that ideas around a balanced playing field and rights owners being given due process in overseas courts, which have traditionally underpinned US policy, might be undermined if the US pursues lopsided measures. 

“We want our companies that are engaged in litigation in China to be treated appropriately but what we’re risking here is that by putting up these kinds of barriers without due process we’re basically sending a contrary message,” he stated. 

Pooley, who was a key voice in the passage of the DTSA, underlined that the legislation was working largely as was hoped when it was enacted in 2016. He pointed to the large number of trade secrets cases now being filed in federal courts and to developments in the case law such as the decision in Motorola v Hytera, which found that the DTSA could apply to IP theft outside of the US.  

“At the moment we don’t need to fix the existing tool in some way to make it more effective,” Pooley insisted. “What I do think we need to do is, a little more broadly speaking around intellectual property, come up with a national strategy for innovation that will increase our competitiveness in a way that hoping additional blocking or punishment mechanisms might not.”

Pooley stressed that he is happy to see a focus on strengthening IP rights, particularly in trade secrets, but added that: “At the same time I worry that the long-term effects of these kinds of proposals may not be what we really want.” 

Patents themselves are publicly accessible, noted James Pooley, intellectual property attorney and former deputy director general of the United Nations' World Intellectual Property Organization. But trade secrets developed by Pfizer/BioNTech, Moderna and others, "cook books" of manufacturing processes such as temperature and growing conditions, have not been made public. That may ultimately be a dual problem for negotiators. Before they protect the knowledge, U.S. officials would have to ensure access to it.

Those companies would need to be persuaded to come to the bargaining table to give up such trade secrets.

“What happens when it turns out that the U.S. can’t actually deliver the information that is critically important to implementing the inventions?” Pooley asked. “This will be seen as another failure by the U.S. and other rich countries to keep their promises.”

James Pooley, member of the Center for Intellectual Property Understanding and former deputy director general of the World Intellectual Property Organization, understands the full seriousness of cyberespionage.

Pooley agrees that COVID has created a riskier environment because employees are away from their usual offices. But the problem is not entirely current, he notes, explaining that a new risk environment emerged in the last 15 to 20 years, as we moved into an information-based economy, where the asset base shifted from tangibles to intangibles.

In addition, “the imperatives for sharing information and trusting other people went up like crazy because of globalisation”, he says. Supply chains have become longer and more complex, as companies shifted to vendors abroad and therefore have to manage their operations at a distance.

During the early-1970s, “all that a company needed to do to protect its information assets was to guard the photocopier and watch who went in and out the front door, because there were no networks, no internet and records were stored on paper”, says Pooley. But, over the last decades, digitalisation coupled with globalisation has changed the playing field. Some of the most valuable assets have become intangible, opening up a whole new world to hackers.

So how does sensitive data end up in the wrong hands? Pooley argues that swathes of valuable information is lost because of employee inadvertence. In rough numbers, he says, “some 80 to 85 per cent of information loss occurs through employees, as opposed to hackers worming their way in from outside”. While organisations can spend effort and money on secure IT infrastructure, they neglect employee behaviour at their peril.

The need to train employees to protect company IP

“I see it over and over again,” says Pooley. “I get hired as an expert to critique the protection systems for companies in litigation over trade secrets, because they have to prove they took reasonable steps to prevent the things from happening.” What he sees is companies neglect to train their employees on how to identify and handle confidential data.

Meanwhile, hackers look for the weakest link in a company’s information chain, for instance when employees use the public wifi of a restaurant near their office for work purposes. He mentions the 2014 hack of Target, when the company’s heating and air conditioning contractor was used as an entry point by hackers, who exploited the vendor’s weaker system to gain access to the Target system.

“It's just astonishing to me that more companies don't pay better attention to these issues, but there we are,” says Pooley. “Maybe I'm a Cassandra, but remember, Cassandra was right.”

How can companies train their employees to be more vigilant? “Preventing bad behaviour is usually about awareness, because people want to do the right thing and they want their jobs to be preserved,” he says.

When Pooley advises companies, he begins with a high-level strategic examination of what the company’s most important information assets are, what risks or vulnerabilities they face and what mechanisms there are to reduce these risks.

“Being really attentive to where the risk points are will alert you to pay special attention to areas that are likely to be used as points of entry,” he says. Companies need to set up policies and procedures to ensure their IP is protected and training employees is a big part of that.

“I worked with one company that built a consumer product primarily manufactured in China, so there were obvious leakage risks connected to that.” As they went through the process of developing a comprehensive system to protect their IP, Pooley asked for all the senior managers of the company to get together in one room to discuss the matter. Even though this was not easy to arrange, he insisted.

Overcoming silos to reduce IP vulnerabilities

Once all senior managers came together, including the supply chain managers who talked about issues they experienced directly, sharing information triggered insights for managers across the board.

“‘Wait a minute, I don't think I've ever really looked at the non-disclosure agreement that we have with company x and when it expires.’ All of a sudden, they're seeing vulnerabilities, where they hadn't really thought about them before,” says Pooley. “No one expected the specialty arm of the organisation that dealt with all these companies in China would have something to say to the other business units, but vulnerabilities can overlap.”

Are silos and inefficient communication partly to blame for companies’ vulnerability when it comes to countering cyberthreats? Pooley argues organisations need to confront the fact that separate units within their business may have set up unnecessary walls. In reality, information flows and risks are usually shared across the business.

Part of the solution could be found through automation, he says, because automation includes behavioural analytics and insight tools that help companies monitor what exactly it is employees do on their platforms. However, using these tools always has to be balanced with individuals’ expectations of privacy.

Pooley concludes: “The message that I often give is cyberespionage is scary and ugly, and we need to do everything we can to prevent it and deal with it. But if we're not managing our employees in a smart way, it's almost like we’ve left a couple of doors open.”

Unlike other forms of intellectual property, trade secrets are rarely clearly defined anywhere before a lawsuit begins, making it critical for counsel for defendants to know what exactly was allegedly stolen. But at such an early stage in the litigation, even overbroad or ambiguous claims of trade secrets require motions seeking clarity, not pre-discovery victory, intellectual property attorney James Pooley of James Pooley PLC said.

“My impression was the real lesson of the case is ‘Don’t try to challenge the sufficiency of a trade secrets identification with an early motion for summary judgment,’” said Pooley, who focuses on trade secrets cases and practices in California, where the case originated.

ETC’s summary judgment motion “put all its marbles on a risky maneuver, when it could have made a lower risk procedural attack,” he said.

Pooley said he could see how one could worry the decision takes the decision on what constituted a viable trade secret claim out of the hands of judges and hands it to a jury. But that reading takes the decision out of its context of a pre-discovery summary judgment motion.

“I think that’s a superficial and strained reading,” Pooley said. “A fair reading is that judges decide whether you’ve rung the bell enough to go forward, juries decide whether you’ve proved the case.”

Intellectual property (IP) protections are one of the few structural issues covered in the phase-one trade agreement between the United States and China. The combination of new commitments under this agreement and growing domestic pressure to strengthen protections for domestic innovators has led some observers to suggest that China may be moving toward more robust IP protections. Others, however, point out that previous commitments have failed to curb large-scale IP theft. Jonathon Marek interviewed James Pooley, former deputy director general of the World Intellectual Property Organization, regarding developments and trends in China.

What are the key changes in Chinese intellectual property (IP) protections since the phase-one trade agreement? How credible are these commitments compared to previous ones in the absence of an independent judiciary to adjudicate claims?

The Judicial Interpretation from the Supreme People’s Court regarding trade secrets gives good reason to expect at least some modest progress. There are quite a few provisions, but two specifically may be key indicators of whether China is making real progress toward providing safe, effective, and robust mechanisms to enforce trade secrets.

The first of these is shifting the burden of proof (Article 8). Bringing a claim for trade-secret misappropriation can be prohibitively difficult if the court expects the plaintiff to marshal and present sufficient evidence at the outset of the case because China does not have a civil discovery procedure. Therefore, the idea is to set a minimal threshold requirement of initial proof to ensure that the case is reasonably grounded, following which the defendant would have the burden of establishing independent development of the trade-secret information. This notion was not new with the phase-one agreement; it had been introduced as an amendment (with immediate effect) in the 2019 revision of the Anti-Unfair Competition Law. Article 8 of the Judicial Interpretation states that the trade-secret holder first must submit “preliminary evidence” to prove the elements of the claim, and then if the accused infringer claims independent development, “it should provide proof.” The challenge here is to understand what is meant by “preliminary” evidence. In practice, will this come to look like the U.S. threshold of “reasonable suspicion” based on a plausible, but circumstantial, set of allegations? Or will preliminary evidence in effect be subject to the same assessment as at trial? We will not know whether the intent of Article 1.5 of the phase-one agreement, which requires changes in this vein to the burden of proof, has been implemented until there are sufficient examples of actual decisions.

The second key indicator in the Judicial Interpretation is found in Articles 14 and 15, which appear to describe indirect misappropriation. This could be significant because China has in practice only punished misappropriation of a form close to slavish copying. Obviously, improperly gained information can be used to influence the development of a competing product that may look nothing like the original. And there is substantial value in so-called negative trade secrets consisting of experiments through which what does not work, or what works less well, is determined. Although Articles 14 and 15 are not clear (at least in the translation that I read), it is possible that they could be interpreted to allow a court to find that a trade secret has been “used” if it has been “modified” or if “business activities” have been “adjusted” according to the plaintiff’s secret. Again, we will not know whether this portion of the Judicial Interpretation will be followed in that way unless and until we have enough examples of published case reports.

What is the likelihood that China ever makes it fully down the path toward protecting foreign IP? Will there always be significant risks to foreign firms as a result of the Chinese political and economic model?

There can be no doubt that China has been moving toward a more robust IP-protection regime for several decades. This has been in part an assumed obligation of membership in the World Trade Organization (WTO) and in part a classical reaction to the need to construct a framework to provide sustained incentives for domestic innovation. But China’s path, unlike that taken by, for example, Japan, Taiwan, and South Korea, has been strictly controlled by its Communist government, which has tilted the economic playing field to favor Chinese companies.

Therefore, in a sense the very significant and rapid progress made by China since the 1980s in constructing a world-class IP system is a bit like wax fruit: it looks good, but can you eat it? China’s current system, which in practice favors domestic players, must evolve to apply fairly to all litigants, in accord with the principle of national treatment. Moreover, China will move fully down the path toward protecting foreign IP only when its judicial system is sufficiently transparent that one can be confident of even-handed application of the rule of law. Although some within the Chinese judicial system are pushing for such reforms, I do not expect this kind of change will happen in the foreseeable future.

What future policy reforms or other developments would indicate that China will increasingly take trade-secret protection seriously? To what extent might these reforms be influenced by international pressure?

I believe that we need to see fulsome implementation by China of leading reforms, such as reversing the burden of proof and finding misappropriation based on indirect use rather than copying. That sort of demonstration naturally requires more transparency, and in particular the regular publication of judicial opinions. In my view, although there is some internal pressure on China to move in that direction (largely from professors who would like to have access to the reported data to inform their research), domestic forces will never be enough to effect meaningful change. This is simply because the government does not see a compelling reason to give up the inherent advantages of opacity.

Therefore, I believe that change will only come from external influence. As a multilateralist, I hope that such influence is exerted by countries operating through institutional frameworks such as the WTO, but of course there is room for unilateral action by the United States or the European Union, each of which can apply pressure relative to the size of its market.

If China does not fully implement the changes it has promised, or the pace of progress slows due to heightened tensions, what unilateral or multilateral policy measures would be most effective in getting things back on track?

The answer to this question depends very much on what one understands as getting things back on track. It is probably unrealistic to expect that China, without a fundamental change in government, will ever change its court system in a way that would allow us to be fully confident about the implementation of the most important reforms. If by being on track we mean being diplomatically engaged in active discussions about these issues, then I would say that direct economic pressure—perhaps not as drastic as some of the tariffs that have been levied by the United States, but of the same nature—is the most effective means for keeping China at the negotiating table and talking productively. Progress may be measured in inches, but if the parties are engaged, then it is a way of being “on track.”

What is the role of the World Intellectual Property Organization (WIPO) in trade-secret protection, especially with respect to China?

Having spent five years at WIPO, much of it engaged in attempting to facilitate negotiations to improve international IP systems, I am of the view that the organization is highly unlikely to play a meaningful role in securing improvements in China’s trade-secret-protection regime. In large part, this is because the concerns we have with China are about enforcement of the laws, not so much about their content. And enforcement in general is a forbidden subject at WIPO because it is largely perceived to invade the sovereignty of the member states’ judicial systems. This issue is both too diplomatically sensitive and arguably outside WIPO’s mandate. Additionally, there is the problem that trade secrecy in general is largely misunderstood in the international diplomatic community. Among many countries, any discussion of trade secrecy often focuses exclusively on Article 39(3) of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Many believe that this article, which requires protection of pharmaceutical test data, was an unfortunate giveaway to the drug industry. More broadly, the notion of secrecy simply seems inconsistent with the general idea of transparency and so has a sinister connotation.

This debate suggests that WIPO’s primary contribution to protecting trade secrets in China could be to provide a forum to facilitate better understanding of the role of robust protection in enabling technology transfer. This issue itself is a subject of broad interest, particularly among developing countries. If there were a more sophisticated view of the role that secrecy plays in accelerating innovation, it might over time provide very helpful context for a continuing examination of the shortcomings of China’s trade-secret regime.

Given the rather decisive defeat of the Chinese-backed candidate for director general earlier this year, how will China work to influence WIPO in the years to come?

One can conclude from China’s promotion of its own candidate for director general at WIPO, following several successful campaigns for the lead spot at other UN agencies, that China has shifted rather dramatically from a lead-from-behind approach of exercising its influence to a much more aggressive posture that looks like a broad grab for power at the United Nations. This is occurring at a time when the United States has retreated somewhat from its traditional multilateral engagement, which has significant implications for the structures and mandates of multilateral institutions. Notwithstanding its failure in the WIPO elections, I have no doubt that China will continue to assert leadership, at least behind the scenes, where it exerts very powerful influence over a number of other developing countries. On this point, it is important to keep in mind that stopping something from happening at WIPO takes very little political power (as is probably true at most other UN agencies). In general, I would expect China to continue to assert itself at WIPO in ways that will help the country maintain control over the speed and substance of domestic IP reforms. If the United States wishes to understand how that will play out in the coming years, not to mention have any influence over the process, it must engage vigorously in the organization.

WIPO and the other agencies may sound like obscure bureaucratic outposts, but they help shape standards and rules for global commerce. WIPO logs 250,000 patent applications every year, including more than 55,000 from the United States, and it’s supposed to keep them secret for 18 months until they’re published. The director general “exercises control over every aspect of WIPO’s operations,” according to James Pooley, a former WIPO deputy director general.

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