With some ten thousand cases a year, Chinese law on patent
litigation is dynamic. Courts, particularly the Supreme
People's Court (the Court), lead the advancement of the law.
This article seeks to convey a sense of these developments
through three key decisions.
The Simcere Case – amendment of patent
The Patent Law Article 33 limits amendments of patent claims
to the original disclosure and scope of protection. The Patent
Examination Guideline (the Guideline) only permits amendments
if they can be directly and unambiguously determined from the
original disclosure. It further limits the types of amendment
to: deletion of claims, combination of claims and deletion of
technical solutions within a claim. The Guideline's restrictive
prescriptions and rigid applications give rise to broad
dissatisfaction. From 2010, the Court has taken up eleven cases
addressing issues involving amendments of claims to remedy the
situation. The Simcere case is an example of their efforts.
Simcere Pharmaceutical held a patent for anti-high blood
pressure formulations of amlodipine and irbesartan. In an
invalidation proceeding, Simcere proposed to amend a claim
establishing its formulation of "a pharmaceutical composition
comprising a weight ratio of 1:10-30 of active ingredients
amlodipine or its physiologically acceptable salt and
irbesartan." The proposed amendment narrowed the ratio to
simply 1:30. The Patent Reexamination Board (PRB) rejected the
amendment because the ratio 1:30 cannot be directly and
unambiguously determined from the original disclosure. The
PRB's decision was maintained by the court of first instance
but overturned by the court of second instance. The PRB
petitioned the Court to review the case.
The Court permitted the amendment. It found the amended
content in the original disclosure without applying the direct
and unambiguous standard. Specifically, the Court opined that
the ratio of 1:30 was disclosed in examples in the patent
specification. The examples included an optimal combination of
amlodipine over irbesartan as l:30 mg/kg, a dosage range of
2-10:50-300 mg and preparations with the two ingredients in
weight relationships of 2.500:75.000 mg and 5:150 mg. The
examples did not give an explicit description of a generally
applicable ratio of 1:30. But examples could only describe
specific weights. These weights are all consistent with the
claimed ratio. To a person skilled in the art, the ratio is
disclosed. The Court also stated that an inquiry into whether
all weights corresponding to the ratio can fulfill the
inventive purpose should be made under Article 26.4 instead of
The Court recognized that the amendment was not a typical
deletion of technical solutions. It however noted that the
justification for limiting the types of amendments is to
protect public reliance on claims and to prevent broadening of
their scope, not to punish imperfect claim drafting. In this
case, the amendment did not broaden the scope of the claim, it
clarified it. The Court also stated that the list of permitted
amendments in the Guideline is not exhaustive.
The Court's efforts have advanced rationales for practice
concerning claim amendments. A newly released Guideline last
month also reflects a more flexible approach. It states that
"the specific types of amendments are generally limited to
deletion of a claim, deletion of a technical solution,
further limitation to a claim [by reciting features in
other claims] and correction of an apparent error".
The Telier case – close-end claims
The Guideline allows two types of claims for compositions:
open-end claims, typically with claim language like
"comprising," and close-end claims, typically with claim
language like "consisting of".
An open-end claim would cover a composition with the claimed
components regardless of whether the composition also has other
components, while a close-end claim would cover a composition
with the claimed components only. The Guideline however does
not bind courts and had not been expounded in the context of an
infringement case. The Telier case for the first time
construed a close-end claim in the context of a pharmaceutical
composition – whether the addition of pharmaceutically
inactive excipients would place a composition outside the scope
of a close-end claim.
The case involved a patent covering a composition of
lyophilized powder for injection consisting of adenosine
disodium triphosphate and magnesium chloride. The defendant's
product had the two claimed ingredients but with an added
inactive excipient of arginine, known to increase composition
stability. It was added together with sodium carbonate in the
formulation process and retained in the final product. Adding
ingredients in the formulation process is common. The issue was
whether such routinely added ingredients in the formulation
process would place the resulting composition outside the scope
of a close-end claim. The courts of the first and second
instances both found infringement because the defendant failed
to prove that the added excipient substantially affected the
pharmaceutical function of the composition.
Before the Court, the patentee argued for infringement
either because the accused product bore the essential features
of the claim – containing the two active ingredients,
or because it was equivalent to the claimed composition as the
addition of arginine is routine in formulation processing.
Because the patentee's claim for the formulation was drafted
as a close-end one, which did not include the added arginine,
the Court took issue with it. It held that the practice of
drafting close-end claims had been around since 1993, with
consistent directives from the Guideline. It held that there
was a public expectation that such a claim would not cover a
composition with additional components. The patentee thus had a
duty to know the terms of the art and should bear losses
resulting from inappropriate claim drafting. Moreover, the
doctrine of equivalence should not apply as it would defeat the
purpose of close-end claims.
The decision in the Telier case holds a strict but
clear construction of close-end claims for compositions. The
case led to a provision in the Court's judicial interpretation
of March 2016, directing courts not to find infringement of a
close-end claim "unless the additional features are unavoidable
impurities" and making the holding generally applicable.
The Lilly case
Low damages for infringement have been a perennial problem.
The Patent Law prescribes four methods for damage
determination: patentee's loss, infringer's gain, multiples of
royalties and discretionary damages capped at Rmb1,000,000.
Most cases use the last option due to lack of evidence and the
underdevelopment of the other methods. Damages are critical to
the pharmaceutical industry for sustaining innovation.
The Court has been leading efforts to increase damages by
encouraging exploratory practices, such as imposing damages
above the statutory cap and demanding production of financial
information held by defendants, coupled with aggressive adverse
inference. Consequently, sporadic large damage awards have
appeared but reasoned guidance is wanting.
In this case, Lilly sued Watson for infringing its patented
manufacturing process for olanzapine, an antipsychotic drug.
The Jiangsu Higher People's Court found Watson infringing and
ordered it to pay damages of Rmb500,000 for the period of
infringement up to 2003. The decision was based on the fact
that olanzapine was a "new product," and that Watson had failed
to prove the difference of its manufacturing process. Although
Watson asserted the use of its own process as filed with the
regulatory authority, the court found that, according to a
technical appraisal, the process did not work.
With infringement confirmed, Lilly then sued for damages
resulting from Watson's use of the process between 2003 and
2011. Lilly gathered evidence from two sources. Based on a
report assessing Watson's potential losses if it stopped
manufacturing, Watson's monthly profit for selling olanzapine
was about Rmb1,660,000 and the total profit for the relevant
period was Rmb151,060,000. An extensive market investigation
indicated that for the relevant period Watson had hospital
sales of Rmb186,914,143, retail sales of Rmb64,975,343.
Subtracting the cost of materials (Rmb86,522,830), the gross
profit was Rmb165,366,656. Picking the lower of the two profit
numbers, Lilly claimed damages of Rmb151,060,000.
The Jiangsu Higher People's Court awarded Lilly damages of
Rmb3,500,000. Both parties appealed to the Court.
Unfortunately, the Court did not address the damage issue.
Instead, it re-opened the issue of infringement. Taking in new
trade secret evidence submitted by Watson, the Court declared
itself satisfied with Watson's assertion of using its own
manufacturing process, different from the claimed process.
We'll have to wait for another case for the Court's guidance on
Courts are expected to play a leading role in IP protection.
Future decisions will give further guidance as they provide
specific context for the application of the statutory laws,
which inevitably fall behind facts. The precedential value of
cases is gaining recognition in China. The Court has required
all decisions be made public promptly and encouraged the use of
cases in judicial decision making. We expect more illuminating
cases from courts, particularly the Court.
||S Sam Li is a senior
partner at Wan Hui Da – Peksung IP Group. He
leads the firm’s patent and technology
litigation practice. Sam received his law degree from the
George Washington University Law School.
||Honghui Hu is a senior
patent counsel at Wan Hui Da – Peksung IP Group.
She is dual qualified both as patent attorney and as
attorney-at-law in China. She has particular expertise in
chemistry, chemical engineering, pharmaceuticals and food