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The Amsterdam Law & Technology Institute’s team is inviting faculty members to publish guest articles in the ALTI Forum. Here is the latest contribution authored by Rochelle Cooper Dreyfuss (NYU School of Law).
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For many reasons, the last decade witnessed a dramatic rise in trade secrecy protection. Growing employee mobility increased the risk that valuable information would be taken and used competitively. Confounding that problem, many significant knowledge products—algorithms, data, manufacturing know-how—are not covered by standard intellectual property regimes and thus require a new form of protection. In addition, emerging rights to personal privacy make demands for commercial secrecy more congenial; these rights also furnished firms with novel grounds to withhold the release of data.1See, e.g., Regulation 2016/679 of the European Parliament and of the Council of 27 April 2016 on the Protection of Natural Persons with Regard to the Processing of Personal Data and on the Free Advancement of Such Data, and repealing Directive 95/46/EC, [2016] OJ L 119/1 [GDPR]. Perhaps most important, global competitive pressures drew governmental attention to economic espionage and forced technology transfer, thereby sensitizing legislatures to demands for stronger protection.2Rochelle Cooper Dreyfuss and Orly Lobel, ‘Economic Espionage As Reality or Rhetoric: Equating Trade Secrecy with National Security’ (2016) 20 Lewis & Clark L Rev 419; Request for Consultations by the European Union, China-Certain Measures on the Transfer of Technology, WT/DS549/1 (6 June 2018).
As a result, law that was once something of a backwater—protected, if at all, by local measures—suddenly became an international issue. In 2012, the United States began to cite countries that did not protect undisclosed information in its Special 301 reports.3Office Of the United States Trade Representative, ‘2012 Special 301 Report’ 17-18 <https/ustr.gov/sites/default/files/2012%20Special%20301%20Report.pdf>. By 2016, the US had enacted a federal statute and the EU had adopted the Trade Secrecy Directive (TSD).4Defend Trade Secrets Act, Pub L No 114-153, 130 Stat 376 (2016) (codified mainly at 18 U.S.C § 1836(b)); Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, [2016] OJ L 157 [TSD]. In both instruments, information which—in the EU formulation—is secret, has commercial value because is secret and is subject to reasonable steps to keep secret must be protected against “unlawful acquisition.”5Trade Secrets Directive, arts 4 and 2(1). Bilateral and regional trade agreements spread this protection worldwide by embellishing the skeletal provisions on trade secrecy found in the TRIPS Agreement.6Compare Trade-Related Aspects of Intellectual Property Rights, Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M. 81, art 39 with the Trans-Pacific Partnership Agreement, Feb. 4, 2016, art 18.78 <https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text>.
Recently, however, the costs of heightened secrecy protection have become apparent. Administrative decisions in such spheres as detention, public housing, and education are now often made with the help of artificial intelligence (AI) that commonly employs machine-learning algorithms. These decisions can have a consequential impact on peoples’ lives, yet those wishing to challenge them as inaccurate or biased cannot do so without knowing the algorithms or examining the data used for training purposes.7Ashley Deeks, ‘The Judicial Demand for Explainable Artificial Intelligence’ (2019) 119 Colum. L. Rev. 1829 Similarly, effective control over the spread of disinformation and hate speech on social media such as Facebook and regulation of the competitive impact of platforms like Amazon and Google require access to algorithms, data, and distribution practices.8Digital Services Act (Proposal), COM(2020) 825 final (15 December 2020); Digital Markets Act (Proposal), COM(2020) 842 final (15 December 2020); Nathaniel Persily, ‘Social Media Platforms and the Amplification of Domestic Extremism and Other Harmful Content, Testimony Before the US Senate Committee on Homeland Security and Governmental Affairs’ (26 October 2021) <https://www.dropbox.com/s/r2tgzblora0mayl/Persily%20Senate%20HSGAC%20Testimony.pdf?dl=0>; Aurelien Portuese (ed) Algorithmic Antitrust (Springer 2022). See also Case C-401/19, Poland v Parliament and Council [2022] ECLI:EU:C:2022:297 (suggesting that online content-sharing service providers’ use of algorithms to meet the requirements of copyright legislation can interfere with freedom of expression).
Even more worrisome is secrecy in the health sphere. Rights over data can interfere with medical research and bar reanalysis of information submitted to regulatory authorities.9Timo Minssen, Rajam Neethu, Rajam and Marcel Bogers, ‘Clinical Trials Data Transparency & GDPR Compliance: What Are the Effects on Data Sharing and Open Innovation?’ in Katerina Sideri and Graham Dutfield (eds.), Openness, Intellectual Property and Science Policy in the Age of Data Driven Medicine, Special Issue of Science and Public Policy (Academia 2019) The COVID pandemic exposed other costs: privacy protection makes it harder to trace contacts and notify people about exposure to disease. Secrecy prevents countries from learning enough manufacturing information to develop local sources for vaccines. The persistent lack of supplies leaves much of the world at risk of contracting, spreading, and dying from COVID and allows the virus to continuously mutate and threaten us all.
Significantly, traditional exclusivity regimes take account of public interests. For example, patent laws typically allow experimental use and permit the government to intervene to ensure adequate public access.10See, e.g., Hans-Rainer Jaenichen and Johann Pitz, ‘Research Exemption/Experimental Use in the European Union: Patents Do Not Block the Progress of Science’ (2015) Cold Spring Harbor Perspectives in Medicine <http://perspectivesinmedicine.cshlp.org/content/5/2/a020941.full>; 28 U.S.C. 1498; Patents Act 1977 (UK), sec. 56. Copyright and trademark laws include defenses that enable others to build on earlier works.11See, e.g., 17 U.S.C. § 107; Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union Trademark [2017] OJ L 154, Recital 21. International law supports such limitations.12TRIPS Agreement, arts13, 17 and 30. In particular, the WTO and recent bilateral and regional agreements recognize the right of every state to protect public health.13WTO, Declaration on the TRIPS Agreement and Public Health, WT/MIN(01)/DEC/2 (20 November 2001); Rochelle Cooper Dreyfuss, ‘ISDS and Intellectual Property in 2019: The Case of the Dog that Didn’t Bark’ in Lisa Sachs, Lise Johnson, and Jesse Coleman (eds.) Yearbook on International Investment Law & Policy 2019 (OUP 2021). But trade secrecy law is very different. Its limitations derive mainly from the right to reverse engineer and independently invent similar advances.14TSD, art 3. However, those limits are irrelevant in situations where the need is for specific information in the possession of the trade secrecy holder—the exact training data and algorithms used by its AI, the identity of a person with COVID, or the specific manufacturing details needed to make the same vaccine that was approved by regulatory authorities. And even though the TRIPS Agreement allows exceptions for certain regulatory data,15TRIPS Agreement, art 39(3). it does not include a general exception for trade secrets. Indeed, one objection to the proposal for a pandemic-related waiver to TRIPS is that the secrecy of technical information would bar manufacturing even if unauthorized use of patented technologies were allowed.16Reto M. Hilty, Pedro Henrique D. Batista, Suelen Carls, Daria Kim, Matthias Lamping, and Peter R. Slowinski, ‘Covid-19 and the Role of Intellectual Property: Position Statement of the Max Planck Institute for Innovation and Competition of 7 May 2021’ <https://www.ip.mpg.de/fileadmin/ipmpg/content/stellungnahmen/2021_05_25_Position_statement_Covid_IP_waiver.pdf>.
Admittedly, unlike many trade secrecy laws, the TSD explicitly permits the use of protected information in certain circumstances. It envisions tailored remedies to protect fundamental rights and public health.17TSD, Recital 21. It allows workers to rely on secret information to exercise their rights,18ibid art 3. and it makes other exceptions, including to protect “a legitimate interest recognized by the Union or national law.”19ibid art 5. Notably, however, these limitations assume that the needed information is available to the relevant parties; it is not evident how undisclosed information can be acquired in the first instance.
It is thus not surprising that commentators, aware of the costs of trade secrecy protection, are now looking for ways to induce transparency. One idea, promoted by Peter Lee, is to alter patent laws’ disclosure requirements.20Peter Lee, ‘COVID-19 Vaccines, Technical Disclosure, and Public-Private Quid Pro Quos’ (6 April 2022) < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4058717>. Currently, inventors must reveal a method for carrying out the invention.21European Patent Convention, 5 October 1973, 13 ILM 268, art 83; 35 USC § 112. But the law does not require disclosure of information about how to make the invention on a commercial scale or—for pharmaceutical innovations—in the manner that will yield a product identical to the one approved by health authorities. Even the best mode requirement of US law does not extend that far: it applies only to the inventors named in the patent and requires disclosure only on the application’s filing date. A stronger disclosure requirement, one that extends to the information needed to commercialize inventions and applies to everyone in the production process, would better protect the patent bargain: in exchange for a period of exclusivity, the public would then acquire all the knowledge needed to fully evaluate the invention, manufacture it, and utilize it.
Another approach is to demand more of the information in the possession of regulatory authorities. For example, to obtain marketing approval, pharmaceutical firms must submit both clinical and manufacturing information to health authorities. However, these authorities are often statutorily required to consider much of the information confidential. And as Chris Morten has convincingly argued, they often withhold more than is mandated.22Christopher Morten, ‘Publicizing Corporate Secrets for the Public Good’ (13 February 2022) < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4041556>. He has urged regulators to review their practice and called on the legislature to clarify agency obligations and to restrict confidentiality requirements to information in which firms have a legitimate need for secrecy.
Governments could also leverage their spending power. Some of the most controversial uses of secret information, such as to allocate public resources, are made with AI purchased by government authorities. These authorities could condition purchase on disclosure of the underlying algorithms and training data so that the decisions they make can be evaluated effectively. Similarly, governments could condition support for research—grants, advance purchase orders and the like—on guarantees that the inventions can be accessed, either through reasonable pricing or by supplying enough information so that others can produce the precise invention. Indeed, in retrospect, it is astonishing that the public provided so much support for research on COVID-19 vaccines, but received so little knowledge in return.23Richard G. Frank, Leslie Dach, and Nicole Lurie, ‘It Was the Government That Produced COVID-19 Success, Health Affairs Forefront’ (14 May 2021) < https://www.healthaffairs.org/do/10.1377/forefront.20210512.191448/>. More disclosure might have prevented the Global South from becoming dependent on the North for COVID-related materials.
Governments have other powers at their disposal. In some patent situations, governments enjoy co-ownership, crown use, or emergency authority to utilize the protected invention; they could waive these rights in exchange for voluntary disclosure of associated technical information.24See Christopher J. Morten and Charles Duan, ‘Who’s Afraid of Section 1498? A Case for Government Patent Use in Pandemics and Other National Crises’ (2020) 23 Yale J. L. & Tech. 1. Governments could also enact legislation directly aimed at curing the problems secrecy creates. Rolling back protection need not be all-or-nothing. As both existing law and recent initiatives in the EU and US suggest, information can be made available on a restricted basis: only to particular individuals, under specified conditions, for enumerated uses, or after a time-delay that allows the trade secrecy holder to recoup its investment.25See, e.g., Valerie Junod, ‘Drug Marketing Exclusivity Under United States and European Union Law’ (2004) 59 Food & Drug L.J. 479; Jaenichen and Pitz (n. 10); Morten (n. 22); Minssen et al. (n 9); European Commission, ;White Paper on Artificial Intelligence – A European Approach to Excellence and Trust’ (19 February 2020) <https://ec.europa.eu/info/sites/info/files/commission-white-paper-artificial-intelligence-feb2020_en.pdf>; Proposal for a Regulation Laying Down Harmonized Rules on Artificial Intelligence, COM(2021) 206 final < https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52021PC0206&from=EN>; S. 797, 117th Cong. (17 March 2021), A Bill to Require Transparency, Accountability, and Protections for Consumers Online <https://www.congress.gov/117/bills/s797/BILLS-117s797is.pdf>. Cf Helen Nissenbaum, Privacy in Context (Stanford 2009)(making similar proposals for privacy regulation).
Conclusion
Since 2012, trade secrecy protection has increased significantly. Other exclusivity regimes strike a balance between public and private interests. It is time to do the same with respect to enhanced trade secrecy protection and to recognize the impact that unchecked secrecy can have on human rights, justice, political discourse, health, and social welfare.
Rochelle C. Dreyfuss
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Citation: Rochelle C. Dreyfuss,The Rise (and Fall?) of Trade Secrecy Protection, ALTI Forum, June 15, 2022.
Invited by Thibault Schrepel
