China Future of IP: The Bolar exemption does not apply to offering to sell
The China National Intellectual Property Administration (CNIPA) released Ten Exemplary Patent Administrative Enforcement Cases of 2019 on April 26 2020, World IP Day. One selected case is a patent infringement dispute relating to the anti-tumour drug Sorafenib, which is selected for its significance in respect of the application of the Bolar exemption.
Bayer is a leading multinational pharmaceutical and life sciences company. Bayer markets Nexavar, which is the first targeted drug to treat advanced liver cancer and owns the patent for Sorafenib, the active pharmaceutical ingredient (API) of Nexavar.
Bayer found that a company in Shanghai had been promoting the patented product Sorafenib on its website and on exhibition boards and brochures at CPhI Shanghai. In January 2019, Bayer filed a complaint to the Shanghai Intellectual Property Office (Shanghai IP Office), alleging that the Shanghai company had infringed its patent by offering to sell the above product and requesting cessation of the infringement.
In May 2019, the Shanghai IP office granted Bayer's petition. The decision is now in force.
1. Establishment of offering to sell
In this case, the respondent argued that: 1) its promotional activities aimed to seek potential clients; 2) it clearly indicated that the product was still at the research and development (R&D) and drug master file (DMF) stage, and it was incapable of selling the patented product; and 3) it also included on the exhibition boards and brochures a disclaimer, which reads "products under patent are not offered for sales until patent expiration in the relevant country."
The Shanghai IP Office said: "The respondent, by stating the status of the allegedly infringing product, made it clear that the compound structure of the product as the API has been fixed, and the product, incorporating such a structure as a product, in the context of patent law, is available. The procurer of the API, noticing the aforesaid status, will not presume that the exhibitor is incapable of selling the patented product therefore precluding the respondent’s declaration regarding the intention to sell the accused product. This finding of promotional intent is corroborated by the recorded statement made by a representative of the respondent at its exhibition stand mentioning that the accused product “can be done””. The Shanghai IP Office also found that "the disclaimer is not sufficient to overlook the purpose for promoting the product. “Sell” and “offer to sell” are two different acts in the Patent Law, and this disclaimer has no bearing on the establishment of offering to sell, thus cannot be used as a defence to disprove its offering to sell."
The finding is in line with the legislative intent of offering to sell and aligns with recent judicial precedent.
Article 11 of the Patent Law provides that "the patent right is granted for an invention or a utility model, unless otherwise provided for in this Law. No unit or individual may exploit the patent without permission of the patentee, i.e. it or he may not, for production or business purposes, manufacture, use, offer to sell, sell, or import the patented products, use the patented method, or use, offer to sell, sell or import the products that are developed directly through the use of the patented method." Offering to sell together with manufacture, use, selling, and importing are the five kinds of acts which exploit patent rights as stipulated in the Patent Law. The establishment of offering to sell does not rest on the simultaneous finding of manufacturing or selling patented products. A declaration of an intention to sell can be established without the presence of the alleged infringing product.
Article 24 of the Several Provisions of the Supreme People's Court on Issues concerning the Application of Law in the Trial of Cases on Patent Disputes provides that "the phrase “offer to sell”, as mentioned in Article 11… of the Patent Law, refers to a declaration of an intention to sell a product by means of advertising it, displaying it in shop windows or at an exhibition fair." The respondent’s promotion of the infringing product on its website and at an exhibition fair falls under the scope of offering to sell as defined by the judicial interpretation. The indication of the product status and the disclaimer has no bearing on the ascertaining of offering to sell, and the indication of the product status to the contrary insinuates that the respondent has acquired the relevant product and is capable to sell such.
The Patent Law, by listing offering to sell as patent infringement, enables the patentee to stop the unauthorised selling of the patented product proactively. If offering to sell were not deemed to be patent infringement unless it was committed in conjunction with manufacturing or selling the patented products, the patentee would be deprived of the chance of cost-efficiently stopping the infringement at an early stage.
In practice, it is not unusual that generic drug manufacturers knowingly promote and sell the generic versions of the patented drugs before the expiry of the patent through the internet and major industry exhibitions. In order to circumvent the risk of infringement, a disclaimer and an indication of products being at the R&D stage is often used to disguise the intention of selling and/or offering to sell. Therefore, it cannot be used as a valid defence.
2. Application of the Bolar exemption
Article 69.5 of the Patent Law provides that “where for the purpose of providing information needed for regulatory examination and approval, any person manufactures, uses, or imports a patented medicine or a patented medical apparatus, or manufactures, imports the patented medicine or the patented medical apparatus specifically for such person”, this shall not be deemed as patent infringement (Bolar exemption).
In this case, the respondent argued that the Bolar exemption sets out two scenarios: 1) where the generic drug manufacturer attempts to obtain the information required for administrative approval; and 2) a third party supports the generic drug manufacturer to obtain information required for administrative approval. Under the circumstance where a generic drug manufacturer seeking to obtain the information required for administrative approval is incapable of manufacturing or importing patented medicines, a competent third party vendor, being exempted from patent infringement, may specifically manufacture and import patented medicines for such manufacturer and may also provide reasonable and appropriate promotion for this specific purpose.
The Shanghai IP Office found that "manufactures or imports the patented medicine specifically for such person" should be limited to manufactures or imports for the researchers and experimenters rather than offering to sell to any other organisations or individuals apart from the former. The respondent targeted an unspecified crowd during its promotion campaign, which does not fall under the category of “manufacture, use, import” as prescribed in the Bolar exemption.
The respondent’s reasoning was obviously a misreading of the law. The Chinese legislator introduced the Bolar exemption into the Patent Law to facilitate early clinical trials and data approval of generic drug manufacturers prior to the expiration of the patent, so that the generic version of the patented drugs could be marketed right after the expiration of such patent. The Bolar exemption only provides infringement exemption for acts that are necessitated for fulfilling the purpose of regulatory approval of drugs, which does not include offering to sell.
In practice, the Bolar exemption is rigorously applied so as not to harm the legitimate interests of patentees. The Shanghai IP Office clarified that the Bolar exemption does not apply to offering to sell a patented drug, which is expected to deter some opportunistic generic drug manufacturers seeking to monetise the patented drug before its expiration.