It has become a trend over the recent years the consideration of compulsory licensing based on inaccessibility grounds i.e. high pricing of patented pharmaceutical products, which are not related to cases of extreme urgency as required from article 31 of the TRIPS Agreement and in the case of Chile, article 51 Nº 2 of the Law 19.039 on Industrial Property. When said consideration is supported by Governments, it opens the door to potentially applying compulsory licensing to any patented product or method, not only for Pharmaceuticals but also for any other field or industry in general. This situation generates fear among right holders i.e. innovation companies, since their patents will become less valuable, non-enforceable and eventually, will suffer a considerable economic lost since their investment in R&D will not be recovered as expected when forced royalties are decided by a third party such as a Judge or the Patent Office. Trade secrets can come into play as a response to this emerging trend, essentially when disclosure is not required by Law or regulations of competent agencies; and in where the holder is able to commercially exploit it while securing its confidentiality by the way of agreements with third parties and internal practices within its organization in order to comply with the “reasonable measures of protection” requirement for trade secrets. Responding with trade secrets to this emerging trend of patent compulsory license will save companies from the uncertainty of politics and changes in Government administration that end up targeting on innovative products or processes for a cheaper access – ignoring the years of efforts in its creation – through a burdensome process for the holder in where, at least in the case of Chile, it is initiated by a public declaration issued by a competent authority on circumstances that would justify the granting of a compulsory license – hence, configuring its grounds – and then, opening the possibility for any third party to request license itself before the Patent Office in a procedure in where the provisions of the license are determined e.g. imposed royalty, duration, grant of rights, among others (in the case of article 51 Nº2 and 51 bis C of the cited Law 19.039)
Now, concerning trade secrets per se, the scope of protection is broader as compared to patents, since it protects any information (yes, even including negative know-how); thereby, not subject to the restrictions commonly found on Patent Law, such as patentable subject matter. The latter provided that the information has an actual or potential value to its holder because it is generally not known or readily ascertainable by others. In this sense, manufacturing processes of pharmaceutical products or any other – when not patented or under regulatory disclosure obligations – can be protected as trade secrets, and therefore, escape from the affectation to holder's exclusive rights as a consequence of a compulsory license granted over the patent. Additionally, products, if permitted by a company's business model, of service provider instead of a retailer, due to the risk of reverse engineering, may also be protected as trade secrets. For example, this could be the case of a software that functions entirely or is a relevant component of a medical device, in where its source code can perfectly be considered as a trade secret.
As mentioned before, for all cases in where trade secret protection is sought, the information itself must be under reasonable confidentiality measures, which is also an evidence burden that any plaintiff has in trade secret litigation. Said measures will extend from the well-known physical to digital measures of protection such as physical copies management and vault storage, document destruction practices, restrictions to the upload of information to cloud services, USB port blocks, network usage and bandwidth monitoring, encrypted intranet platform for digital information storage, among others. These measures will be complemented with the company's trade secret policies, trade secrets identification, chain of ownership and inventory consolidation, employment contracts, continuous training and reminders to employees of their confidentiality obligations when accessing to the information on a “need to know” basis only, and exiting interviews for employees leaving the organization. With third party service providers, clients or contractors, the reasonable measures of protection will have to go towards securing trade secrets by the way of non-disclosure agreements – with the due care of not limiting trade secret confidentiality duration term to fixed number of years in order no to tacitly renounce to such right on a Court's view – ideally with a non-compete clause and a brief list of the trade secrets to be disclosed under confidentiality obligations (because at the end, not “everything” is a trade secret) in encrypted files via cloud service.
All the trade secrets practices mentioned above will certainly help reducing the possibility of a leak of information to the public, and more importantly, an unauthorized use by anyone who, otherwise, would want to access the technology by the way of a compulsory license if patented. Of course, no measure of protection is a 100% free of any faults and will prevent all unauthorized access, but it will provide the evidence needed for supporting a trade secret violation claim and the grounds for a Court to admit and decide in favor of such claim. Although, the TRIPS Agreement in article 39.3 allows country members to disclose trade secrets, it is only when its submission was required in a country for marketing approval of a pharmaceutical or agricultural chemical product to protect the public. Hence, when no such submission is required by Law or regulations of competent agencies, country members cannot access and disclose trade secrets to protect the public. In this sense, besides said exception, the rest of the provisions of article 39 of the TRIPS Agreement and the Chilean legislation on trade secrets (Section 8 of Law 19.039) do not allow an unauthorized access and use of such information by third parties, including the Government, justified by circumstances like the ones found for compulsory licenses; consequently, infringing the holder's rights and incurring into civil and criminal liability. This way is the holder who will decide whether voluntarily grants a license or not to anyone interested in the technology, again, including the Government, securing a negotiating position that will provide enough leverage for the holder to value its technology through royalties that will compensate the R&D investment made by the holder and a margin of well-deserved earnings.
Originally published by Silva, July 2020
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