Under China’s patent regime, patents for chemical compounds are most desirable for pharmaceutical companies, as they offer broad coverage and strong protection over the patented technology. A hydrate refers to a chemical compound with crystalline water in its structure. In practice, opinions vary as to whether the hydrates of a patented chemical compound fall within the latter’s protection scope.
The initial ruling in Yangtze River v HIPI
On May 25 2023, the Intellectual Property Court of the Supreme People’s Court (SPC) elucidated this matter in its decision re Yangtze River Pharmaceutical (Group) Co., Ltd. et al. v HIPI Corporation Ltd. et al.
This case originates from the dispute over abuse of dominant market position which was brought by Yangtze River Pharmaceutical (Group) Co., Ltd. and its subsidiary (collectively referred to as Yangtze River) against HIPI Corporation Ltd. (HIPI) et al. before the Nanjing Intermediate Court in 2019. Yangtze River requested, among others:
The cessation of monopolistic practices;
The indemnification of RMB 90 million (approximately $12.5 million) for the losses arising from the monopolistic conducts; and
The reimbursement of reasonable costs of RMB 500,000.
On March 18 2020, the Nanjing Intermediate Court ruled in favour of the plaintiffs and awarded damages of over RMB 68 million. HIPI and its subsidiary appealed before the SPC.
At the core of the suit is a compound invention patent, ‘ZL02128998.0’ (‘Patent 998’), covering specific kinds of desloratadine polyacid-base metal or alkaline-earth metal complex salt, such as desloratadine citrate disodium, which is an antihistamine registered eponymously with the National Medical Products Administration as a new drug. The invention patent is owned by HIPI’s subsidiary.
In 2006, Yangtze River signed a technology transfer contract with HIPI in exchange for the latter’s production approval and production technology of desloratadine citrate disodium tablets, which Yangtze River marketed as BEIXUE.
According to the contractual terms, HIPI was obligated to provide Yangtze River with the active pharmaceutical ingredient (API). Nevertheless, the technology transfer contract neither covered HIPI’s production technology of the API nor the hard capsules of desloratadine citrate disodium, which were later marketed as RUIPUKANG by HIPI’s subsidiary. The collaboration started to fall apart as bitter legal wrangling broke out due to the steep rise of the API price and the rivalry between the BEIXUE tablets and RUIPUKANG capsules.
Of the allegations made by Yangtze River, one pivotal issue concerned whether the API at issue fell within the protection scope of ‘Patent 998’. If the API at issue were found to be covered by ‘Patent 998’, the monopolistic allegation was unlikely to stand because unless licensed by the patentee, other entities are not allowed to implement the patent and the alleged monopolistic practice would be nothing but legitimate execution of a valid invention patent.
Yangtze River contended that the patented compound is desloratadine citrate disodium salt (Chemical Abstracts Service No. 1602766-05-1), while the API at issue is desloratadine citrate disodium salt dihydrate (Chemical Abstracts Service No. 1450805-34-1). Thus, qualitatively speaking, they are different compounds.
SPC decision
The SPC found that the disputes revolved around the definition of the relevant market, whether HIPI has a, and abuses its, dominant market position, and the legal liability thereof, which are highly relevant to whether the API of desloratadine citrate disodium tablets falls within the protection scope of ‘Patent 998’. The court held the following:
‘Patent 998’ is a compound invention patent, the protection scope of which covers the complex salt of desloratadine citrate disodium.
It is widely known to a person skilled in the art that desloratadine citrate disodium dihydrate is one of the crystal forms of desloratadine citrate disodium complex salt. It, of course, falls within the protection scope of ‘Patent 998’.
The instructions of BEIXUE tablets read: "The main ingredient of this product is desloratadine citrate disodium. Its chemical name is 8-chloro-6,11-dihydro-11 – (4-piperidinylidene)-5H-benzo[5,6]cyclohepta[1,2-b]pyridine citrate disodium salt dihydrate... Molecular formula: C25H25ClN2O7Na2·2H2O.” The statement should not be construed as a redefinition of desloratadine citrate disodium. The instructions of BEIXUE recognise desloratadine citrate disodium as its main component, and express the chemical name as complex salt dihydrate, which neatly illustrates that desloratadine citrate disodium existing in BEIXUE is in the crystal form of hydrate. Therefore, the instructions cannot be used as evidence to prove that desloratadine citrate disodium dihydrate does not fall within the protection scope of ‘Patent 998’.
The difference of desloratadine citrate disodium from its dihydrate in terms of physical and chemical properties does not negate the fact that desloratadine citrate disodium dihydrate falls within the protection scope of ‘Patent 998’. It is perfectly normal for the physical and chemical properties of anhydrous and hydrate of the same compound to be different, which has no bearing on whether desloratadine citrate disodium dihydrate falls within the protection scope of ‘Patent 998’.
The SPC thus concluded that the API at issue (desloratadine citrate disodium dihydrate) falls within the protection scope of ‘Patent 998’ and HIPI’s exercise of its valid patent did not constitute exclusion or restriction of competition in the sense of the Anti-Monopoly Law.
The parameters to be considered
The SPC’s decision illustrates that the following parameters come into play in assessing whether the hydrates of a patented compound fall within the latter’s protection scope.
Common knowledge in the art
‘Patent 998’ claims the complex salts, which shall cover all forms of the compounds, such as anhydrous, solvate, hydrate, amorphous, and polycrystalline.
Description of patent specification
‘Patent 998’ solves two problems vis-à-vis the prior art:
The poor solubility of desloratadine; and
The compatible stability of desloratadine with lactose.
The first problem could be solved by salting. As to the second problem, the brown products formed by lactose and desloratadine could cause degradation and lead to the stability problems of desloratadine.
Based on the description of the specification, the only reason the aforesaid problem could be effectively solved is that the formed complex salt significantly reduces the reaction activity of desloratadine with lactose. That is, ‘Patent 998’ manages to solve both problems of the prior art by forming complex salt. The therapeutic active ingredient desloratadine also originates from the release of the dissolved complex salt. And hydrates are not different from the complex salt in these respects.
Corroboration from other literature
In March 2015, Yangtze River's subsidiary patented an invention patent, ‘ZL201310052197.9’, titled ‘Pseudopolycrystalline of desloratadine citrate disodium and the preparation method thereof’. The background technology of the patent states: "Under the influence of various environmental factors, during the process of crystallisation... substances could form different crystalline structures... There are also drugs that regularly introduce, during crystallisation, a second foreign molecule, especially a solvent molecule, into the crystalline structure of the compound, a phenomenon sometimes referred to as pseudopolycrystalline... When the second foreign molecule is a solvent molecule, the pseudopolycrystalline may also be called a solvate.” The statement corroborates the fact that solvates, including hydrates, are merely a form of a substance that is covered by compound claims.
Final thoughts
The case is of empirical significance because the SPC uses it to expatiate on the distinction between a monopoly and the exercise of valid intellectual property rights. In the event that the two are closely intertwined, the judiciary shall weigh in on the legal consequences stemming from the legitimate exercise of valid intellectual property rights, in assessing whether the alleged monopolistic behaviour gives rise to exclusion or restriction of competition.
Where the alleged effect of excluding or limiting competition is the inevitable result of the legitimate execution of intellectual property rights and such execution does not extend beyond the purview of the intellectual property rights, the Anti-Monopoly Law shall not apply.
