China-based in-house counsel from the pharmaceutical industry believe that changes to China’s patent system will encourage drug innovation, but they want to see a notification system for generic drug applications under the patent linkage programme.
In October, China introduced amendments to its Patent Law, which will come into effect on June 1 2021, and has released a number of consultations concerning the pharmaceutical sector.
These include CNIPA and the National Medical Products Administration’s (NMPA) draft measures for implementing early resolution mechanisms for drug patent disputes, as well as the Supreme People’s Court’s (SPC) draft legal provisions for cases involving drug marketing review and patent approval. The drafts contain details about the patent linkage programme set out in the new Patent Law.
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One positive change is the extension of patent terms, according to sources. Article 42 of the Patent Law introduces a five-year supplementary protection period for new drugs. CNIPA can grant the extension if the total patent term won’t exceed 14 years after the drug has been approved for marketing.
“This is a good step because invention patent terms are no longer fixed at 20 years,” says the IP director at a Chinese innovator drug company.
Patent term extensions are an important driver of drug innovation because they can help compensate for innovator companies’ upfront investments in drug research, according to the IP director. This is beneficial not only to foreign companies bringing new drugs to China, but it incentivises domestic Chinese drug companies and will help China gradually move from a country of generic drug manufacturing to drug innovation, she adds.
She says that although it is unclear what the term “new drug” means, she expects CNIPA to publish implementing guidelines to outline more detailed criteria on how it will decide whether or not to grant supplementary protection periods.
Linking together
Another change that will affect the pharmaceutical industry is Article 76 of the Patent Law, which outlines the plan for patent linkage. It says that if there is a patent dispute between a drug applicant and a relevant party, the relevant party may file court proceedings during the drug marketing review and approval process. The NMPA will decide whether to approve the marketing authorisation based on the court judgment.
Article 76 also indicates that the parties involved may request an administrative ruling on the patent dispute from CNIPA. However, the article has delegated the implementation details to NMPA and CNIPA.
Under CNIPA and NMPA’s proposed measures, which provide a framework for innovators to defend their patent exclusivity, competitor drug applicants are not required to provide their drug applications during the pre-litigation period. There is a 45-day deadline for a patent owner to start an infringement proceeding after CNIPA publishes competitor drug filings.
Furthermore, innovator drug companies need to be obtain a favourable infringement ruling within a nine-month stay period or else NMPA can grant marketing authorisation to the generic company.
The IP director at the Chinese drug company says that the patent linkage system will drastically change drug patent litigation.
“It will encourage generics to challenge patents to try to take advantage of the one-year market exclusivity period they can get if they are the first to succeed in challenging the molecule drug,” she says.
“However, innovator drug makers will also try to block generics with the longer exclusivity they can get through patent term extensions.”
No notifications
Despite the drastic changes, there are no details on any system in which a patent owner would be notified about an infringing drug, as can be found in the US.
Nick Bennett, managing director at law firm CMS in Hong Kong SAR, says it is uncertain if there will be a notification to patent owners or a monitoring system to see if patents are properly admissible.
“There should be clearer guidance on the patent types that can be recorded in the platform, what constitutes an irrelevant patent and whether these records will be punishable,” he says.
This guidance should include information on eligible patents, such as active pharmaceutical ingredients, compositions containing active pharmaceutical ingredients, and methods of use, he argues.
The Asia head of IP at a global pharmaceutical company adds that the proposed measures do not mention regulatory data protection.
“This is necessary as the first generic company to successfully challenge patent validity will get market approval for one year, but there is no protection for innovator drug companies that have invested in creating the data in drug development,” he says.
Infringement issues
On litigation, the Asia IP head adds that the nine-month stay period is much too short and is inadequate to get through infringement proceedings. A 24-month stay period would be more suitable, he says.
Bennett says that while the 45-day deadline to start an infringement proceeding is short, it is aligned with the US’s system and is longer than the 20 and 30-day periods that the SPC proposed in previous consultations.
He explains that the draft provisions state that a patent owner needs to submit only three things to start an infringement action: a recorded patent in the registration platform; the generic drug applicant’s declaration for drug marketing authorisation; and preliminary evidence showing that the generic drug falls into the protection scope of the patent.
Andrew Cobden, counsel at Hogan Lovells in Hong Kong SAR, says that patent owners will need to monitor the drug registration platform frequently for any competitor application filings so they can be ready to start infringement proceedings within the 45-day period.
“Foreign companies usually find it time consuming to prepare the formal documents needed to file infringement proceedings, as certain documents must be translated, notarised and legalised at Chinese embassies,” he says.
Therefore, he says, patentees should have a plan in place for preparing the documents needed to start infringement proceedings, to avoid unnecessary delays. He adds that as the official publication of competitor drug application filings and patent certifications constitutes notice, patent owners should have a system in place to monitor the official publication of competitor drug application filings and patent challenges daily.
“An issue will be the Beijing IP Court and CNIPA’s attitudes to allowing a patentee to file documents late and to supplementing arguments and evidence on infringement after the proceedings have started,” he says.
Patentees should also monitor their competitors’ activities in China and consider pre-action analyses of their key Chinese patents, he adds.
Cases in the capital
When patent linkage cases do arise, companies can expect the Beijing IP Court to take them on at first instance.
The in-house counsel at a European pharmaceutical company is concerned that there will not be enough resources to handle cases at the Beijing IP Court. She also wants to see more clarity in how CNIPA and the Beijing IP Court will be handling patent invalidity.
“CNIPA has often invalidated pharma patent claims and we’ve seen at least 50% of patents being invalidated,” she says.
However, Bennett adds that while CNIPA does have high invalidation rates, this is gradually changing as patent examiners are better trained and China is shifting towards a focus on patent quality rather than quantity.
“Patents granted now are less vulnerable to prior art challenges,” he says, adding that under the SPC’s draft provisions, courts may have the power to declare non-infringement when the patent is obviously invalid, but that it is unclear how this will be defined.
One thing that IP practitioners can agree on is the experience of the Beijing IP Court in handling patent cases.
Bennett says that the court has lots of experience in patent disputes and has been quite considerate to foreign patent owners, such as by granting extra time to gather translated and notarised documents and allowing foreign expert witnesses to testify in court.
Cobden agrees: “The Beijing IP Court has more experience in dealing with patent infringement cases and patentees have been achieving a good success rate there.”
He adds that as starting infringement proceedings triggers a stay of just nine months for approval, patentees will want a decision on infringement within that period.
“Both CNIPA and the Beijing IP Court could give decisions on infringement and validity within nine months, but there are more procedural possibilities for delay in court proceedings,” he says.
However, he says that the Beijing IP Court may decide to prioritise patent linkage cases and take positive steps to keep to the nine-month period. Patentees will need to watch developments on how the Beijing court and CNIPA deal with cases and then decide which procedure is likely to be best for them, he adds.
Another issue, Cobden points out, is whether NMPA is willing to delay granting marketing approvals beyond the nine-month period if a decision on infringement is expected fairly soon.
As the linkage issues and other provisions show, China is making ambitious steps towards creating a stronger patent system to encourage drug innovation. However, it is not there just yet.
