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Pfizer Vaccine Lawsuit Spotlights Trade Secret Protection Tactics

Dec. 3, 2021, 10:01 AM

Pfizer’s lawsuit alleging an employee stole trade secrets about its Covid-19 vaccine highlights the critical nature of trade secrets as pharmaceutical companies try to protect them, and the importance of the controls companies use.

Pfizer said in its complaint that it put in place technology for monitoring employee uploads to cloud-based platforms in October, the same month it flagged activity by defendant Chun Xiao (Sherry) Li.

Failing to protect trade secrets can erase competitive advantages that took investments of billions of dollars over many years to develop, intellectual property policy analyst Jaci McDole of the Information Technology & Innovation Fund said.

They could boost a competitor that acquires them, or potentially even all competitors. Trade secrets lose protection once publicized, because “once a secret is out there, it’s out,” McDole said.

“Without protecting that information, it would be as if you went out and spent $1,000, and got $5 worth of stuff,” McDole said.

The know-how allegedly taken by Li may have broad applications beyond any particular drug, because techniques can apply broadly, Pfizer said in the complaint.

Willing to Cooperate

Pfizer on Thursday said it was in talks to resolve the suit. The company and Li filed a joint motion that said Li “expressed her willingness to cooperate with Pfizer and to resolve this action without further Court intervention.” It asked the court to push back a scheduled hearing to determine if there would be a preliminary injunction on Li from Dec. 9 to a date after Dec. 13.

Li allegedly misappropriated 12,000 files with “scores” of confidential documents while planning to leave Pfizer for competitor Xencor, Pfizer alleged.

Pfizer cited a clinical “playbook” including Pfizer’s analysis of success and breakthroughs in its COVID-19 vaccine studies and recommendations for managing future drug studies. Its complaint also cited documents containing operational goals, goals for various drugs including cancer drugs, clinical development plans and clinical trial techniques.

Li allegedly misled Pfizer and provided a decoy laptop and deleted files in a bid to cover her tracks after violating her signed confidentiality agreement, Pfizer said in the complaint.

It’s critical to be able to quickly diagnose potential misappropriation of proprietary information, and cloud-based platforms like Google Drive, which Li allegedly used, present a particular challenge, intellectual property attorney Ian G. DiBernardo of Brown Rudnick LLP said.

“It’s certainly something we’ve seen in clients across industries: implementing more robust controls to prevent this kind of misappropriation,” DiBernardo said. “Any effective trade secrets program needs to include both policies and procedures, and technical controls.”

Trade secrets can be more valuable than patents at times, attorneys say. In the pharmaceutical industry they are often comprised of technical know-how and experimentation information, without which patents themselves wouldn’t necessarily be useful.

Lawmakers and courts have recognized this, as full profit disgorgement often is awarded for products created using stolen trade secrets, while only portions of a product’s profits attributable to an infringed patent is generally awarded absent willfulness.

Unclear Motives

Education can solve a lot of trade secret misappropriation risk. Often employees don’t even realize they’ve done anything wrong when they download secrets, intellectual property attorney Jason M. Sobel, a colleague of DiBernardo’s at Brown Rudnick, said. Pfizer noted in its suit that it had previously disabled USB access on its laptops to prevent file downloads, but cloud platforms require different protocols.

Clear instructions as new employees arrive and departing employees leave that go beyond checking boxes can help, Sobel said. Researchers, for example, may just want to keep formats and their own research without being cognizant of the materials’ proprietary nature.

“Employees don’t really perceive the issue. They don’t necessarily have bad motives,” Sobel sad.

DiBernardo said accused employees usually cooperate, which is why Li’s actions alleged in the complaint “certainly jumped out.”

Seeking Assurances

Xencor, the competitor Pfizer said Li was believed to be planning to join, wasn’t named in the lawsuit, which attorneys said indicated that, at the least, Pfizer may not have any evidence Xencor knew of Li’s activity.

Xencor didn’t immediately respond to a request for comment.

DiBernardo said he wouldn’t be surprised if Pfizer had already reached out to Xencor. He said he’s reached out on behalf of a trade secrets plaintiff to the company the defendant allegedly joined or planned to join for assurances that nothing was shared.

New employers have legal and reputational incentives not to hire alleged trade secrets thieves or use proprietary information, particularly once on notice of a lawsuit, DiBernardo said. They often sign confirmation that they haven’t or won’t use it, he added.

Those efforts can keep trade secrets broadly secret, as even if secrets get to a competitor, because if the secrets aren’t publicized they can still be protected, Sobel said.

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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