Asia Supply Chain Disruptions: Director of Thunderbird's China Initiative Talked with IP Magazine

Apr 01, 2020

Covid-19 crisis

As a global pandemic is declared, what effect will the virus have on the IP industry and supply chains?

by Ben Wodecki

As the governments of the world scramble to contain and control the worsening Covid-19 crisis, we’re left to sit and speculate as to the extent our industry will suffer, and how we can combat it.

With events from various IP offices and trade associations being cancelled as each day passes, and misinformation about possible vaccines continue to swell, it’s important to keep a level head and address the situation calmly.

What will the impact be on the IP industry? Supply chains, patenting of vaccines, and the activities of IP offices being among the most affected. But to exactly what extent?

Supply chains

The US has admitted its supply chain of testing kits is low to respond to the virus. But what impact is the virus having on other products?

China was the first country to succumb to the virus – with many products being manufactured in China, potentially facing a nightmare scenario as the country ground to a halt.

Both McGurieWoods Consulting’s Stephanie Kennan and partner at the law firm Axinn Chad Landmon say that supply chains will likely be affected. Kennan states that the disruption is “variable” with larger manufacturers likely having more “flexibility” than smaller firms. While Landmon quotes figures from the Association for Accessible Medicines (AAM,)1 which state that only around 13% of the facilities manufacturing active pharmaceutical ingredients for the US market are located in China.

Landmon expresses his concern should the virus hit India, rather than China. He says, “On the generic pharmaceutical side, we have many finished dosage products and active ingredients coming out of India at a much higher rate than those from China.

“So far, it seems like things are better in India. As long as that keeps going the way it’s been going, hopefully that won’t be as big a problem.”

Professor Douglas Guthrie of the Thunderbird School of Global Management highlights that one of the major drivers behind China’s supply chain is its “floating population... This is a migrant labour force of about 200m people that literally ‘floats’ around the country”. He adds, “Such movement gives China’s supply chain a major advantage because it allows technology and pharmaceutical companies, along with any industry that has seasonal production, to cut back their workforces when production stabilises.”

When Guthrie initially spoke with IPM, he expressed his concerns that the Chinese supply chain was “a really, really big problem” as workers weren’t moving around the country as they were supposed to, as the nation implemented a strict lockdown to prevent the virus spreading.

However, at the time of writing, what was once the most badly affected place on Earth in terms of the virus, has reportedly returned to manageable levels. In fact, on 19 March, China reported for the first time since the initial outbreak that no new domestic transmissions of Covid-19 had occurred.2

Italy has been devastated by the virus, as the country grapples with the surging numbers of cases, many patients needing ventilators. Italian volunteers Cristian Fracassi and Alessandro Romaioli took a novel approach to the lack of equipment and started 3D printing valves used in breathing equipment.

Unsurprisingly, this act brought up potential patent infringement issues.3 While the pair used their 3D printer to create unofficial copies of a patented valve, the patent holder, manufacturing company Intersurgical, revealed it will not sue so that the hospital can continue saving lives.4

Michael Best’s Lucas Osborn outlines that the issue of 3D printing liability “is not necessarily straightforward”.

He says, “If a person designs the digital file but takes it to a company and rents or borrows the company’s 3D printer, who is the one who should be deemed to have printed it: the person or the company owning the printer?”

Further, he notes that simply making a digital version of the at-issue valve “is not an act of patent infringement, because the patent covers only the tangible device, not a digital version of it”.

Osborn reminds that sharing such a file online “could potentially save more lives”.

Vaccine development

While a potential vaccine could take a year or two to develop, even despite essential organisations around the world like the Centre for Disease Control (CDC) and the European Centre for Disease Prevention and Control (ECDC), who should own it? How does one go about patenting such important drugs?

Landmon points out that billions of dollars are invested by private firms every year that provide products, many of which are lifesaving.

Further, he says that while we need a vaccine as quickly as possible, we also need to be able to produce it en mass to provide it to everybody who needs it.

He adds that patents “play an important role in incentivising companies to develop products” and that here, it will play a role.

“I do assume that the companies developing these will try to get patents on them – it remains to be seen whether they actually seek to enforce any resulting patents or just license them out. And it could be that a company is able to not only develop the vaccine or treatment, but to also produce enough of it to provide supply for the public. And if that’s it, the patents may not matter as much.”

He concludes by stating that so long as there isn’t any price gouging, “I do think we need to provide an incentive structure for companies so that they do invest the resources to get this done.”

Has anyone attempted to obtain protection for such a vaccine?

Gilead was the first big name to enter the fray, as the Chinese state-backed Institute of Virology in Wuhan had sought patent protection for a Gilead drug Remdesivir to try and treat Covid-19.5

Upon announcement of this, Gilead’s vice president of public affairs, Sonia Choi, told Chinese state media it was aware of the application, and that it too had filed applications for the compound for uses against coronaviruses globally, including in China, as far back as 2016. It’s application in China is currently, still pending.

Elsewhere, CanSino Biologics said it has received Chinese regulatory approval for human trials of its potential Covid-19 vaccine.6

Danish vaccine manufacturer AJ Vaccines told IPM in early February that it too had begun development of a Covid-19 vaccine, with its chief operating officer, Jerome Cabannes outlining its vaccine “is expected to induce the relevant immune responses and therefore protect against disease with a lower risk for side effects.”

However, AJ Vaccines product may not be ready until 2021.

Long-term changes

Events hosted by the International Trademark Association (INTA), the European Patent Office (EPO), and the International AntiCounterfeiting Coalition (IACC) are among those to be cancelled or rescheduled following the outbreak.

Most countries are banning ‘mass gatherings’, and Kennan advises to “follow what public health officials recommend”.

Landmon himself admits he was lined up to go to several events in “places where you have a lot of international travellers”, such as New York and Washington DC.

But it’s not just events – courts and IP offices around the globe are closing their doors to the public, opting to postpone hearings and implement working from home policies where necessary.

The Court of Justice for the European Union, the Supreme Court of the US, and all Spanish courts are just some of the courts that have postponed cases – potentially meaning the latter half of 2020 could be chock-a-block in terms of case scheduling.

However, out of the ashes, comes adaption. Take the European Patent Office (EPO) – despite postponing all oral examination and opposition proceedings, some have been confirmed to take place by video – showing industry resilience in these testing times.7

While reminding that clients, IP offices, and IP organisations will be reacting to the outbreak, Landmon warns that from a business perspective, “we’re going to see more ripples in the economy as the months go on as it has a downstream impact on the economy”.

This has already been seen, with global stock markets hitting lows not seen since the global financial crash of 2008. The European Central Bank described the virus as having “a significant shock to our economies”.8

As the virus spreads and fatalities unfortunately, but inevitably increase, decisions will be driven by those increases, Landmon suggests. Already in terms of an economic standpoint, the US Federal Reserve has slashed interest rates to near zero in what was the second cut in a week,9 with the Bank of England doing the same.10

As the economy attempts to adjust, many companies are opting to work from home, to keep businesses going. But Landmon says that on the pharma and biologics side, such a move “will not be an option for everyone.

“A lot of work is done in a lab and many clinical studies require patients to come in, sometimes repeatedly. Even with study volunteers, you’re going to see it being harder to find those people as many will want to avoid group settings”, he adds.

Changes at ground zero

China was hit the hardest upon the virus’ outbreak. However, Guthrie notes potential revolutions in technologies as people adapt to their situations.

He notes that in China, children are still studying through mobile technology, and that this could have long term impacts on the way education is conducted.

Further, “My research team have found that a lot of small-scale Chinese entrepreneurs have pivoted to mobile technology. Instead of expecting people to sit at their tables, restaurants have become takeout places.”

Despite this push towards mobile technology, he points out that it “doesn’t solve the problems of how important the floating population is for the supply chain”.

Summary

The IP industry is and will no doubt continue. Only time will tell what kind of a state it will be in once things return to normal… whatever normal may look like.

Footnotes

1.  https://accessiblemeds.org/resources/blog/aam-interim-ceo-jeff-francer-covid-19

2.  https://www.theguardian.com/world/2020/mar/19/china-reports-no-domestic-cases-of-coronavirus-for-first-time-since-outbreak-began

3.  https://www.intellectualpropertymagazine.com/patent/3d-printed-valves-emerge-in-italy-for-covid-19-treatment-140190.htm

4.  https://www.theverge.com/2020/ 3/17/21184308/coronavirus-italy-medical-3d-print-valves-treatments

5.  https://www.intellectualpropertymagazine.com/patent/will-gilead-find-an-antidote-139540.htm?origin=internalSearch

6.  https://www.straitstimes.com/asia/east-asia/chinese-vaccine-approved-for-human-testing-at-virus-epicentre

7.  https://www.intellectualpropertymagazine.com/world/cjeu-restricts-cases-following-virus-outbreak-140170.htm

8.  ecb.europa.eu/press/pr/date/2020/html/ecb.pr200312~45417d8643.en.html

9.  https://www.bbc.co.uk/news/business -51901998

10. https://www.theguardian.com/business/2020/mar/11/coronavirus-bank-of-england-makes-emergency-interest-rate-cut

Author

Ben Wodecki is a reporter for IPM.

This content was originally published by IPM. Original publishers retain all rights.

https://www.intellectualpropertymagazine.com/world/covid-19-crisis-140297.htm


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