Patent Law Reform

We discussed the second draft of proposed amendments to the People’s Republic of China (“PRC”) Patent Law in our previous blog post here. Since then, on 17 October 2020 the PRC National People’s Congress (“NPC”) approved most of the amendments, though the law as passed is different from the draft in two respects:

  • A minimal statutory damages is re-introduced. The current Patent Law has a minimum statutory damages of RMB10,000 (approximately USD1,500) which had been removed in the draft second amendment, perhaps on the basis that such amount may be too high for certain design patent infringement. However, the NPC finally decided to include a minimum statutory damages and raise it to RMB30,000 (approximately USD4,500).
  • The provisions on pharmaceutical patent-linkage are simplified. The law as passed only mentions that (i) the court and the patent administrative departments have jurisdiction to resolve disputes between patentees and drug marketing approval applicants, and (ii) the National Medical Products Administration (“NMPA”) may stay an application for marketing approval based on a decision from the court. The amended law then delegates the responsibility to NMPA and the China National Intellectual Property Administration (“CNIPA”) for making detailed regulations (a draft of which has now been published and is discussed in the second part of this article).

The new Patent Law will be effective from 1 June 2021.

Patent Linkage System

An important change brought by the amendment to the Patent Law is the establishment of a patent linkage system, which provides a mechanism for pharmaceutical patent owners to challenge a generic manufacturer’s marketing approval application in relation to a drug that allegedly infringes the patentee’s right.

Background

As early as 2017, the predecessor of NMPA proposed to establish a patent linkage system. The US-China Phase One Trade Agreement signed on 15 January 2020 also required China to provide an effective mechanism for early resolution of disputes between a patent holder and a generic drug manufacturer seeking market entry.

Draft Measures by NMPA and CNIPA

In fact, before the amendments to the Patent Law were passed, NMPA and CNIPA had jointly published the Implementation Measures for the Early Resolution Mechanism for Drug Patent Disputes (Trial) (Draft for Comment) (“Draft Measures”) on 11 September 2020. The Draft Measures provide concrete guidelines on implementing the patent linkage system in contrast to the overarching target stated in the new Patent Law.

Under the Draft Measures, a register will be set up for marketing approval holders to record patents relating to drugs (“Innovator Drugs”) approved in China. In addition to small molecule drugs, patents for biologic drugs and traditional Chinese medicines can also be registered. Registration is a prerequisite for enforcement under the proposed patent linkage regime.

When manufacturers of generic drugs, biosimilars or traditional Chinese medicines with identical name and formulation (collectively “Imitation Drugs”) apply for marketing approval, one of the following types of declaration should be made:

  • Type 1.  No patent has been registered in relation to the Innovator Drug;
  • Type 2.  The patent registered for the Innovator Drug is expired or invalidated;
  • Type 3.  The Imitation Drug will not be launched before expiry of the patent registered for the Innovator Drug; or
  • Type 4.  The patent registered for the Innovator Drug should be declared invalid, or the Imitation Drug is not covered by the claims of the patent.

The Imitation Drug’s marketing approval application together with the declaration will be published, from when the patentee then has 45 days to file a case, either with the court or the patent administrative department. For a generic drug (i.e. imitation of small molecule drug) application in which the manufacturer filed a type 4 declaration, NMPA sets a stay period of 9 months (“Stay Period”) for the decision but will continue to assess the technical aspects of the generic application during the Stay Period. If a decision that the generic drug is covered by the patent claims is handed down in the Stay Period, the administrative approval of the generic drug (assuming the technical assessment has been passed) will be stayed until 20 working days before the expiry of the patent for the Innovator Drug. On the other hand, if the generic drug is found to be not infringing, or a decision is not available during the Stay period, the administrative approval procedure will commence as soon as the technical assessment is passed. The Stay Period is not applicable to applications for biosimilars and traditional Chinese medicines with identical name and formulation.

Last, but not least, marketing exclusivity of 12 months will be given to the first generic drug applicant who succeeds in challenging the innovator drug’s patent and obtains marketing approval.

Supreme Court Judicial Interpretation

The Supreme People’s Court separately issued a judicial interpretation, the “Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Drug Marketing Review and Approval of Patent” (Draft for Solicitation of Comments)” (“Judicial Interpretation”) on 29 October 2020. Certain key provisions, which are not regulated under the Draft Measures, are highlighted below.

  • The Beijing IP Court shall have jurisdiction over patent linkage disputes.
  • Patent linkage court proceedings will not be stayed merely because a parallel action has been accepted by a patent administrative department.
  • A pending invalidation against the relevant patent is not a sufficient ground to stay the corresponding patent linkage court proceedings, but if the patent is declared invalid the court will accordingly reject the patentee’s claim under the patent linkage system.
  • Where a decision that an Imitation Drug is covered by a patent is issued after the Imitation Drug obtained marketing approval, the patentee may raise a separate action against any infringing act of the Imitation Drug applicant. The court will usually support the patentee’s infringement claim unless there is evidence that the drug as launched is technically different from the Imitation Drug for which marketing approval was sought.
  • The Imitation Drug applicant shall submit to the court technical information filed with NMPA that is relevant to assessing whether the Imitation Drug is covered by the patent claims. The patentee shall keep secret any confidential information received from the Imitation Drug applicant in the course of the litigation.

Comments

Both the Draft Measures and the Judicial Interpretation are in draft form and were released for public consultation. Changes to the aforementioned proposed rules and regulations are possible before the new patent law and the patent linkage system become effective on 1 June 2021. Pharmaceutical patent owners should actively monitor the publication of Imitation Drug applications, as the 45-day deadline for commencing cases is relatively short.