Canada is not the first country that comes to mind as a threat to U.S. trade. After all, Canada is our largest goods trading partner, with $632 billion in total goods traded bilaterally during 2013. Canada was one of America’s first free trade agreement partners, and the importance of the North American Free Trade Agreement (NAFTA) is demonstrated by the continuing economic integration between the two countries. Most recently, the U.S. and Canada have undertaken bilateral dialogues on border security issues (Beyond the Border) and regulatory cooperation (the U.S.-Canada Regulatory Cooperation Council).
While the good news of U.S.-Canada trade cooperation is well-recognized, this doesn’t mean the trading relationship is always smooth sailing. A trade dispute over Canada’s subsidies for softwood lumber has been an irritant for over two decades and Canada has voiced strong concerns over U.S. government procurement practices. Over the last decade U.S. pharmaceutical companies have faced trade challenges in the form of a narrow interpretation of patent eligibility in Canada. Canada’s patent utility provisions are a serious threat to U.S. innovative industries, and therefore are legitimately being raised in NAFTA’s dispute settlement system.
The WTO-negotiated Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) was the first international trade agreement to incorporate intellectual property law. Though the Agreement remains controversial, the TRIPS Agreement struck an important balance between the long term benefits intellectual property rights generate through knowledge creation and short term costs resulting from market exclusivity. The TRIPS Agreement introduced more predictability into the international trade environment, and also provides a mechanism for the resolution of disputes in a systematic way. As with many international agreements, however, future viability lies in fair and uniform adherence to the agreed-upon principles.
To date, the most contentious aspect of the TRIPS Agreement is the IP protection surrounding pharmaceutical products. The debates are vitriolic, pitting the long term incentives to innovate against the immediate public health needs of society. In particular, innovators and public health advocates disagree on the use of compulsory licensing to address public health emergencies. The concern over public health emergencies and the periodic need to increase access to existing medications led WTO Member States to adopt the Doha Declaration on the TRIPS agreement and public health. The Doha Declaration emphasizes that the TRIPS Agreement should not be interpreted as preventing countries from taking extraordinary actions relative to intellectual property in the event of a public health emergency. One of the extraordinary measures authorized to give governments more flexibility to address a public health crisis is compulsory licensing.
In 2010, Hewlett-Packard sued its former CEO for threatened misappropriation of trade secrets, after he took a position as President of Oracle. In 2012, Taiwan’s Acer, Inc. sued its former CEO for breach of a non-competition agreement after he quit and took a top position at Lenovo. And last month, criminal charges were filed against five employees of Taiwan’s HTC Corp., for allegedly conspiring to form a competing company using secrets stolen from HTC.
Employers often spend considerable resources recruiting, hiring and training key talent, only to face potential disaster when those trusted employees quit to join a competitor, often taking sensitive files on their way out the door. Even if they don’t act in bad faith, departing employees carry critical, confidential information inside their heads, which can’t be deleted. Fortunately, various remedies may be available for the former employer, from confidentiality and non-competition agreements, to lawsuits for actual or threatened misappropriation of trade secrets and the doctrine of inevitable disclosure.
But there’s a conflict. Employers have a legitimate interest in preventing misappropriation of trade secrets, while employees have a legitimate interest in utilizing knowledge and skills gained through work experience and working for employers of their choosing. Courts and lawmakers have long struggled to establish a balance between those competing interests. Below is a general overview of relevant laws and practices in the U.S. and Asia.
In a recent article in the New England Journal of Medicine, Amy Kapczynski argues that the Supreme Court of India’s strict interpretation of the country’s new patent law provides a model to be followed by other countries. Kapczynski applauds this “Patent Law 2.0” and argues that it will enhance access to medicines and may improve pharmaceutical innovation. Unfortunately she is wrong on both counts.
Section 3(d) of the Indian Patent Act forbids the patenting of new forms of known drugs unless the new form significantly enhances efficacy and yields therapeutic benefits. Accordingly, much of the incremental innovation that is done on existing treatments will no longer be patentable under the so-called Patent Law 2.0. Three points are worth making.
First, this interpretation removes the incentive for improvements to existing therapies. Given that first-in-class treatments are rarely optimal, incremental innovation plays an important role in improving health outcomes, frequently becoming best in class and first line therapies. Incremental innovation may also increase the number of available dosing options, uncover new physiological interactions of known medicines, facilitate reformulations to encourage children’s compliance, and increase the shelf-life or heat-stability of a given medicine to ensure effectiveness in diverse environments. The incremental developments present in these follow on therapies allow physicians to precisely treat the specific needs of diverse patients and provide treatment options when the initial medicine is either ineffective or not tolerated by the patient. Second, incremental innovation is critical to the developing world. Incremental innovations provide for more convenient extended-release dosing and formulations that are do not require refrigeration or are less temperature sensitive, valuable characteristics in developing country settings. A recent study of the World Health Organization’s Essential Drug List finds 63% of the drugs were follow-on drugs, which points to their value and importance to public health and development efforts. Moreover, follow-on drugs are becoming more important over time as this share has increased more than 25% over the previous two decades. Finally, the Indian Patent Office is now bound by the interpretation of “increased efficacy” as therapeutic efficacy. Given this, it is important to ask how the threshold for “therapeutic benefit” will be defined. The ambiguity surrounding how this requirement will be interpreted increases the risk and uncertainty of innovation and will reduce the incentives for future innovation.
India’s booming $26 billion generic drug industry and public health sector rejoiced over the Indian Supreme Court’s recent decision to reject a patent filed by the Swiss pharmaceutical giant, Novartis for their landmark leukemia drug, Gleevec. Novartis received a patent for an earlier variation of Gleevec in 40 countries including Russia, China, and Taiwan. However, India’s troubled IP regime applies an ambiguous standard to patentability, the so-called “enhanced efficacy” for new forms of known substances. India only applies their “efficacy” requirement to the chemical and pharmaceutical drug industry as a protectionist measure. India codified the efficacy requirement in section 3(d) of their patent code and this may contravene with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) as set forth by the World Trade Organization (WTO).
In the Novartis decision, the Indian Supreme court asserted that the legislative history of India’s patent code wanted to prevent evergreening. Evergreening is when patents are granted due to incremental changes to known substances. According to the Indian Supreme Court, evergreening allows, “[a] trifling change [to be] made to an existing product, and claimed as a new invention” (Novartis AG vs. Union of India and Others, Supreme Court of India, Civil Appeal Nos. 2706-2716 of 201, 1 April 2013, pg. 55).
Yesterday the United States Supreme Court issued a truly regrettable decision in the much anticipated copyright case Golan v. Holder. At issue in this case was nothing short of whether the United States Congress has the authority to restore copyrights in works that were in the public domain, or in other words whether Congress has the authority to strip works from the public domain and grant copyright protection. In one of the more intellectual dishonest decisions I have ever read, the U.S. Supreme Court, per Justice Ginsburg, determined that Congress can pretty much do whatever it is that they want with respect to copyrights. Removing works from the public domain and restoring copyright protection is said to be a power granted to the Congress under the Constitution, and there are no legitimate First Amendment concerns.
To all those who can read the Constitution it has to be clear that the Supreme Court’s decision in Golan v. Holder is absurd. It is a ridiculous decision that lacks intellectual honesty and defies common sense. Further, the facts of this case provide ample ground for the suspicions of many who wonder why it is that the United States is so interested in losing its identity and compromising Constitutional principles in order to facilitate some ill conceived plan to join the world community. Simply stated, treaties and international law cannot trump the Constitution. With all due respect to the six Justices who ruled in favor of stripping works from the public domain, the Constitution does not support this decision and any attempts to argue to the contrary are insulting and show a contemptuous understanding of the history and role of intellectual property in America.
Earlier this week the United States Supreme Court granted the petition for a writ of certiorarifiled by lawyers from Stanford Law School’s Fair Use Project (FUP) and Wheeler Trigg O’Donnell LLP and will review the constitutionality of a federal statute that removed thousands of foreign works from the Public Domain and placed them under copyright protection. The case presents a two-pronged constitutional challenge to the 1994 law passed by Congress, which amended the Copyright Act. The case will test whether Congress has the authority to remove works from the Public Domain under the “Intellectual Property Clause” of the United States Constitution and whether the 1994 law violates the First Amendment rights of those who performed, adapted, restored and distributed works which had previously been in the Public Domain.
The Fair Use Project filed the petition in October, 2010 on behalf of orchestra conductors, educators, performers, film archivists and motion picture distributors who relied for years on the free availability of works in the Public Domain, which they performed, adapted, restored and distributed. The 1994 amendment to the Copyright Act, the Uruguay Round Agreements Act (URAA) (see copyright highlights of URAA), removed these works and many others from the Public Domain and placed them under copyright protection in conjunction with the implementation of international intellectual property treaties. That amendment affected the copyright status of thousands of works by foreign authors that had previously fallen into the Public Domain in the United States.
Francis Gurry, WIPO Director General at BIO Convention
Yesterday I had the honor of spending 30 minutes interviewing Francis Gurry, the Director General of the World Intellectual Property Organization (WIPO). The interview was conducted on the record and at the BIO International Convention being held in Chicago, this week. My interview with the Director General took place at 11:00am, prior to his panel session with USPTO Director David Kappos at 2:00pm.
The Director General spoke substantively about issues facing the Patent Offices of the world, as well as some possible solutions. Gurry also discusses harmonization attempts, work-sharing agreements and the crushing worldwide backlog of patent applications that could lead to irrelevance of the system. As you read the interview you will also see that he thinks it is possible that the rest of the world will adopt a US-like grace period, which echos Kappos’ recent push to not only get US patent reform enacted but to harmonize laws, but to push the rest of the world toward a uniform grace period. Gurry also indulged me in a bit of speculation regarding software and the worldwide disagreement on whether software should be considered patentable subject matter.
Gurry was quite engaged and gracious. He is extraordinarily well informed and conversant with the issues and processes on both a macro and micro level, as well as the political realities associated with harmonization and other issues that have for decades dogged the international intellectual property community. We could have easily talked for hours on all sorts of issues, and I hope to have the opportunity to go back on the record with him in the future.
One of the main criticisms of patents by those who are not intimately familiar with patent law, or on the periphery of the industry, is that patents last too long. The reality, if any generalizations could be made at all, is that the overwhelming majority of patents do not last “too long,” but if anything last for only a fleeting moment in the greater scheme of life. So while it is completely true to say that software and certain other high tech innovations should not be locked up for 20 years, the reality is that no patent provides 20 years of protection. As a general rule the patent term can extend all the way to 20 years after the filing of a patent application, but you obtain no exclusive rights until a patent is issued, which is usually a minimum of several years after filing, sometimes much longer, as in the case of the recently issued TiVo patent that was issued more than 10 years after it was filed. On top of that, to keep a patent in force you need to make additional payments over the course of the life of the patent, which is frequently not done.