Whether to patent the vaccine or to protect it as a trade secret?

Mr. Noisy has a start up named M/s Susan Private Ltd. based out of Bangalore and the strart up is involved in medical innovation in the sphere of emerging diseases. After years of research, the organisation developed a new vaccine against the winter flu and named it “Fid-covism”. The vaccine formulation was kept a trade secret by signing a non-disclosure agreement with the researchers, the workers and all the partners with whom the contract of license was conceded. Now, Mr. Noisy wishes to commercialize this vaccine around the globe but he is afraid of loosing the trade secret to his competitors.  

Weeks later Mr. Noisy came across a post on what is safer, trade secrets or patents here on the IP Press blog, and he wanted to approach the industry experts of the IP Press for legal advice.

Dear Readers, 

The IP PRESS brings to you an interesting set of parlance where there would be a colloquy or a small talk with Mr. Gaurav Mishra,

Mr. Nosy: Hello Mr. Mishra, thank you for taking out your valuable time. 

Mr. Mishra: The pleasure is mine Mr. Nosy.

Mr. Nosy: Starting with the basic question, should I seek to patent the vaccine or should I protect it as a trade secret?

Mr. Mishra: This is indeed the million-dollar question. Patents and Trade secrets are both effective forms of IP protection. While patents guarantee you a monopoly for 20 years, they come at a price, i.e., full disclosure. This is to say, that in exchange for obtaining a patent, you must completely and fully furnish the details of your invention to the government, which then also becomes available to the public through patent publication. On the other hand, trade secrets do not guarantee a specified period of protection and this period may span from a few weeks to hundreds of years. In the modern context trade secrets a risky bet, especially since it is far more easier to reverse engineer technology today than it was in the past.

In this case while the vaccine formulation can be protected through both patents or trade secrets, I would vouch for going ahead with a patent.

Mr. Nosy: How to develop an effective trade secret management program? Why and how to conduct a trade secret audit?

Mr. Mishra: Startups often face the threat of trade secret theft and misappropriation. An effective trade secret management programs begins with getting the right set of documents in place. When I say documents, I am referring to having well drafted contracts and agreements in place. Since there is no trade secret law in India, any trade secret theft or misappropriation would be dealt by the courts mostly vis-à-vis the Contract Act, 1872.

A trade secret audit essentially seeks to plug the holes through which proprietary information may leak out. Trade secrets can include scientific processes, formulas, formulations, blueprints, algorithms, data (processed or raw), software, manufacturing techniques, know-how, research studies, reports, client information, costs, etc. It is therefore very important to routinely conduct an audit to find any possible gaps and bridge them as soon as possible.  

Mr. Nosy: What IP mechanism should be used by Susan Private Ltd. to maintain its competitive advantage in the market?

Mr. Mishra: IP protection can deliver immense benefits to an organization. For a startup like Susan Private, securing its IPs can greatly boost its competitive advantage. The very first step to achieve this is to identify the IPs that exist within the organization. This process of identifying potential IPs is referred to as an IP audit. The next step is to see which of these IPs are worth the time and money. This decision is often made at a strategic level. The final step is filing for protection of the IP and maintaining it.

Mr. Nosy: Is it necessary to perform IP due diligence for Susan Private Ltd. If yes, how to conduct IP due diligence?

Mr. Mishra: IP due diligence basically refers to the exercise of assessing the quantity and quality of the IP assets of a company that you intend to buy or invest in. It is basically done to assess the value and risks or liabilities associated with the target company’s IP assets. In this context it is quite rare that startups find the need to conduct an IP due diligence, however assuming that Susan Private does indeed intend to acquire another company’s IP assets or invest in it, it is absolutely necessary for it to perform an IP due diligence before proceeding with the commercial transaction with the target company.

The process of IP due diligence is quite technical and it is always advisable to seek professional help to carry out IP due diligence. For sake of brevity, I would describe the process of IP due diligence in five steps:

• Step 1: Identify all the IP assets;
• Step 2: Verify the existence and ownership of IP;
• Step 3: Find out if there are any restrictions to the use of the IP asset;
• Step 4: Check for IP validity and strength;
• Step 5: Evaluate potential IP encumbrances, obligations, infringements, etc.

Mr. Nosy: If we file for a patent, can compulsory licenses hamper our profits?

Mr. Mishra: Compulsory licenses are often seen as ‘the enemy’ of the pharma industry. Compulsory licenses are issued, if and when a person makes an application to the Controller on any of the grounds that –
(i) the reasonable requirements of the public with respect to the patented invention have not been satisfied;
(ii) the patented invention is not available to the public at a reasonably affordable price; or
(iii) the patented invention is not worked in the territory of India; and if the Controller is satisfied that any one or all of the aforementioned ground is true.

A compulsory license is not issued merely because someone applied for it. There are several conditions, which need to be satisfied before the issue of the compulsory license. Till date, only one compulsory license has been issued in India in the case of Natco. v. Bayer. Even during the COVID pandemic, several organizations urged the Controller and the government to issue a CL in respect of Gilead’s drug Remdesivir, but this has not happened so far.

CL’s are special provisions and should not be feared. There are two opposing voices, while one is pro-CL another is anti-CL. The latter usually comprises the pharma industry.

To sum it up, CL’s may or may not hamper ‘your profits’ depending on which side you are standing on.

Mr. Nosy: How are patent rights enforced? How to find a way to minimize the damage or loss when involved in such a legal dispute? Is there any alternative to litigation?

Mr. Mishra: Patent rights as is the case with any other ‘right in rem’ may be enforced through the Courts. Litigations occur when you are either the wrong doer or are the one who is wronged. In case you are the holder of a valid patent who is seeking to enforce his / her rights, you do not suffer any damage or loss but rather gain from the process once the court decides in your favor. On the other hand if you are the infringer, you might want to consider correcting your actions. As you know, prevention is better than cure. In order to escape possible litigation, it is always a good practice to conduct what is known as a freedom-to-operate (FTO) search before you enter the market with a product / process.

There are certainly alternative means of dispute resolution which serve as an alternative to litigation, but these are not necessarily and not nearly as effective as an order from a Court.

Mr Nosy: Thank you Mr. Mishra for addressing all the questions. Now the company is well acquainted with the issue of whether to patent the vaccine or to protect it as a trade secret from the pens of IPHolics.

You are welcome Mr. Nosy. Here’s wishing you all the very best for the new vaccine.

We are thankful to our team member Sushmita Ray for her contribution in creating this proposition.