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China Patents: Patent linkage system is becoming real in China

In early October, the top policy making body in China issued a special opinion proposing to explore the patent linkage system, to extend patent terms for pharmaceuticals and to improve regulatory data protection, all of which are intended to encourage innovation in pharmaceutical and medical device fields. While the exact details of such new policy initiatives are not yet known, it has excited the industry.

In the past, despite some early useful efforts in attempting to associate the drug approval process with patent protection, CFDA took the view that its task was to verify the safety, effectiveness and quality of a medical product, and it had no power or responsibility to consider the patent related issues. Under the current practice, only a simple non-infringement statement is required for the granting of drug approval. The applicant can hardly be held liable for the authenticity and accuracy of the statement.

Meanwhile, while the current China patent law absorbed a Bolar exemption type rule, manufacturing, using and importing patented drugs for the purpose of providing information necessary for going through the drug approval process is not deemed an infringement, nor is any patent term extension is available.

In recent years, rapid investment in new drug development within China has drawn more attention to the lack of strong IP protection of pharmaceutical products. It is very encouraging that China has shifted focus to this area and now apparently is going to adopt a US style patent linkage system.

The patent linkage system, as proposed in an earlier CFDA document (Circular No. 55) issued in May 2017, appears to mirror the US system in some ways. According to the circular, a drug applicant should disclose relevant patent information when filing an application for drug registration, and shall notify the patentee within 20 days if the applicant is willing to challenge the originator's patent rights. If the patentee believes that its patent is infringed, it shall file a patent infringement lawsuit within 20 days from receiving the notice, the CFDA may set a stay period up to 24 months to stay the drug approval. Once a settlement is reached or an effective decision is made by a court/IPO within the stay period, CFDA may approve or disapprove the drug registration. Otherwise, CFDA may approve the drug registration once the stay period expires.

The exact details of the China patent linkage system are still work in progress. The October policy document endorses immediate a pilot programme of a patent linkage system, but did not substantiate what was disclosed in the CFDA circular. This shows some possible variations, such as the 24-month stay period and what incentives to give to successful generic challengers.

Previously, CFDA protected regulatory data for drugs containing a new chemical composition for six years. The October policy document makes clear that protection of regulatory data applies to innovative drugs, orphan drugs, pediatric drugs, and innovative bio products for use of treatment. According to the CFDA Circular, the regulatory data protection periods are arguably extended based on the types of drugs – six years for innovative drugs; 10 years for orphan drugs and pediatric drugs in innovative drugs; three years for orphan drugs and pediatric drugs in modified new drugs; 10 years for innovative bio products for use of treatment. Also, the data protection periods apply to new drugs approved in EP, US and JP if the application is filed to CFDA within one year of their approval.

China now also proposes patent term extensions for some new drugs in view of the time waiting for clinical test and CFDA approval, but has provided no details yet. Also, it remains unclear as to whether the extensions can be applied to method patents for preparing new drugs. The change will require legislative changes to the Patent Law and Patent Examination Guidelines.

Innovators should keep a close watch on what kind of new drugs can get benefits from the patent term extensions and be well prepared to apply for extensions.

All these proposed changes, if executed properly, are arguably the most exciting reforms in decades when it comes to the legal protection of pharmaceutical innovations in China. As there are many uncertainties ahead and more specific rules are expected, both originators and generic companies should keep updated of further developments in policy and rules, and be prepared for the upcoming patent linkage system in China.

Li WuSteve Song

AnJie Law Firm26/F, Tower D, Central International Trade Center6A Jianguomenwai Avenue, Chaoyang District, Beijing 100022, PR ChinaTel: +86 10 8567 5988Fax: +86 10 8567

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