With tens of thousands of confirmed cases of coronavirus globally and more than 2,200 deaths in mainland China,“wartime” measures have been implemented. China has locked down several cities in the Hubei province and more than 50 million people are under quarantine. The healthcare system in Wuhan, where the outbreak was first detected, has been flooded with thousands of sick patients. Chinese factories have been forced to close and global supply chains are at risk. Although the current level of economic disruption is manageable, if the coronavirus continues to spread, the global economic damage will proliferate.
Years prior to the 2019 novel coronavirus (COVID-19) outbreak, California based Gilead Sciences Inc. manufactured an antiviral, Remdesivir, for the treatment of coronaviruses structurally similar to COVID-19. Preclinical data on Remdesivir’s treatment of MERS and SARS indicate that Remdesivir may have “potential activity” against COVID-19, the coronavirus involved in the outbreak in Wuhan. Since Gilead does not have robust data on the effectiveness of the antiviral to treat COVID-19, the company and Chinese health authorities are initiating clinical trials.
Suzhou based drug maker, BrightGene Bio-Medical Technology Co., has developed technology to synthesize the“active pharmaceutical ingredients (APIs)” of Remdesivir, but did so without obtaining permission from the requisite patent holder. BrightGene has said that it plans to license the drug from Gilead, but its development of technology to synthesize the antiviral already amounts to patent infringement and presents a potential challenge to Gilead’s intellectual property (IP) ownership rights in China. BrightGene also claims that it has not infringed on Gilead’s patent rights because the product is not yet being sold on the market. This is an interesting argument, but under international and national patent laws, manufacturing a patented product without permission still amounts to infringement. BrightGene claims that if Gilead approves BrightGene’s manufacture of the drug, “it will be supplied to relevant patients mainly through donations during the epidemic.”
On January 21, 2020, Chinese researchers at the Wuhan Institute of Virology filed a patent application in China to patent the experimental Gilead drug that they believe will fight coronavirus, rather than pursue a license from Gilead to manufacture the drug. This move revives legal and ethical concerns regarding China’s respect for IP rights.
In 2016, after Gilead invented Remdesivir, the company applied for a global patent, including in China, for the compound and on methods to treat coronavirus infections. The application in China is still pending. Because Gilead’s patent application was filed more than three years prior to the Wuhan Institute’s application, Gilead’s filing may be deemed prior art and render the Wuhan Institute’s application unpatentable.
Under World Trade Organization (WTO) Trade Related Aspects of Intellectual Property (TRIPS), an international legal agreement between all member nations of the WTO, in an emergency situation, China has the right to compel a company to license a patent for public welfare. A compulsory license allows an eligible drug manufacturer to legally produce and sell “copycat versions” of patented drugs during national emergencies or health crises. Under a compulsory license, China would be required to pay a fair market price for the license. If the Wuhan Institute’s patent were granted to the Chinese researchers, China may be able to avoid paying the licensing fees. The researchers “made their patent application ‘from the perspective of protecting national interests’” and will not exercise its patent rights if foreign pharmaceutical companies work with China to curb the spread of the virus. However, if the Wuhan Institute’s patent application is granted, China may use it to market the drug globally and cut Gilead out of any potential profits.
Previous Incidents of IP Theft
There are good reasons for Gilead to be worried about the protection of its IP in China. In discussions involving protection of international IP rights, China has frequently been at the forefront of controversy.
The number of technology theft cases investigated by the FBI involving China has risen since 2003. The Chinese government has interests in the clean energy, biotechnology, aerospace/deep sea, information technology, and manufacturing sectors. According to FBI Director Christopher Wray, China uses multiple methods and techniques to obtain U.S. technology such as cyber intrusions, intelligence services, joint ventures, certain graduate students and researchers, and front companies.
Joint venture partnerships often open U.S. companies up to risk because the partnership generally requires a transfer of technology and customers’ personal data. This transfer is usually required for the U.S. company to enter the Chinese marketplace. However, U.S. companies may be cut out by their Chinese partners after the partners have received the IP. Chinese companies have been found using the technology even after partnerships with U.S. companies have ended. For example, a Chinese wind turbine company illegally obtained proprietary software from its U.S. partner after they entered a contract for more than $800 million in products and services.
However, Chinese companies also use old-fashioned techniques of stealing technology. Huawei, the Chinese tech giant, incentivized employees to steal trade secrets from other companies, most notably, T-Mobile. T-Mobile has a robot, named Tappy, that tests devices before they go on the market and is a closely kept secret. Huawei employees stole the robotic arm to take photos before claiming to “find” the arm in their bag and returning it. Huawei claimed that the employees were acting independently and fired them. However, the federal government disagreed and indicted them on ten different counts, ranging from conspiracy to steal trade secrets to obstruction of justice.
Recently, a Chinese student was charged with several counts, including acting as an agent of a foreign government and conspiracy. Another Chinese student was charged with one count of smuggling goods from the U.S. when he was found with 21 vials of biological research from a Beth Israel Deaconess Medical Center cancer research lab at Boston’s Logan International Airport.
China does not only steal IP through private companies and traditional means, it also leverages the open academic environment in the U.S. to its advantage. Just recently, the Chair of Harvard’s Chemistry and Chemical Biology Department, Dr. Charles Lieber, was charged with lying about his involvement in China’s Thousand Talents Plan. Dr. Lieber failed to disclose in his federal grant that he had a significant foreign conflict of interest by participating in the Thousand Talents Plan.
Other researchers have been implicated by their involvement in the Thousand Talents Plan. The former CEO, director of research programs, and four other researchers at Moffitt Cancer Center, a Florida federally designated comprehensive cancer center, resigned in December 2019 for failing to disclose their activities as part of the Thousand Talents Plan and for keeping secret bank accounts in China to receive those personal payments. In this case, only one of the six was a Chinese national, while the other researchers were U.S. citizens.
In 2018, a billionaire known as the “Chinese Elon Musk,” Liu Ruopeng, was accused of stealing a professor’s ideas while he was a student at Duke University. At the time, Professor David Smith was working on an invisibility cloak prototype for the U.S. military. Liu and his old colleagues took pictures of Smith’s lab, its contents, and measurements of equipment during periods of time when Smith was not in the lab. Once the colleagues returned back to China, they built an exact copy of Smith’s invisibility cloak prototype.
These examples only showcase some of the IP theft perpetuated by China. There are many more examples of IP theft in other technology sectors, especially through cyber invasions.
Various ethical concerns arise in situations where China seeks to erode U.S. IP rights. China undermining IP rights disincentives foreign drugmakers and pharma to invest in research and development of drugs to combat emerging diseases. Patents symbolize market exclusivity for a period of time, usually 20 years. During this time, drug companies are able to maximize profits because they have market exclusivity and do not have to compete with other drug companies manufacturing a generic version of the drug. Because of this limited amount of time to maximize profits, pharmaceutical companies typically direct their research funds to diseases that affect wealthier people who can afford to pay for expensive medications. Although patents exist to protect IP of innovators, the patent system also inflates drug prices and renders necessary medications inaccessible to some populations. This system already leads to underinvestment in diseases that affect developing countries and poorer populations, but on top of this, when China disregards foreign IP rights, foreign pharmaceutical companies are even more disincentivized to manufacture drugs for developing countries and poorer populations.
Another concern that arises from China’s disrespect of IP rights is a pharmaceutical company’s willingness to help in the event of another national emergency in the future. Gilead has offered samples of Remdesivir to China and is currently working with Chinese health officials to conduct clinical trials on the efficacy and safety of the drug. Gilead may be motivated to assist China because they believe their 2016 patent filing will serve as prior art against the Wuhan Institute’s recent application. Further, if Gilead’s 2016 filing blocks the Wuhan Institute’s application, Gilead could stand to profit immensely from China’s need for the drug, if clinical trials prove successful. However, actions of BrightGene and the Wuhan Institute indicate China would like to take control of manufacturing the drug and cut Gilead out. China’s mistreatment of Gilead’s patent rights may hamper the development of international research efforts and the willingness of U.S. pharmaceutical companies to offer experimental drugs and assist in clinical trials in foreign countries.
There is obvious dissonance between China’s understanding of IP rights and the West’s understanding of these rights. Westerners value individual innovation and can be described as egocentric in nature, but the Chinese value society as a collective and emphasize the pursuit of power as a society. There is no simple solution to the enforcement and protection of patent rights in China, as the disagreement over IP rights is in part motivated by cultural differences.
Kaity Emerson and Christine Xiao