Written by ：Tai Hong、Wei Jie
Translated by ：Cheng Cheng
In recent years, the Central Committee of the Central Committee of the Communist Party of China (“CPC”) with General Secretary Xi Jinping at the core leader has repeatedly stressed that “innovation is the first driving force to lead development, and protection of intellectual property rights is to protect innovation”, especially “to accelerate the construction of intellectual property rights protection system in emerging fields and business types.” As an important industry related to public health, the Central Committee of the CPC and the State Council have also proposed to promote relevant innovations and set up a supporting protection mechanism in intellectual property in several documents such as the Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices and the Opinions on Strengthening the Protection of Intellectual Property Rights. Among them, under the purposes of “promoting structural adjustment and technology innovation in drug and medical device industries, improving industrial competitiveness” and “protecting the lawful rights and interests of patentees, reducing the risks of patent infringements by generic drugs, and encouraging the development of generic drugs”, exploring and establishing a drug patent linkage system has become an important task repeatedly mentioned.
In the spirit of implementing the establishment of a drug patent linkage system, the establishment of such drug patent linkage system has been fully discussed in the past few years. On October 17, 2020, the Standing Committee of the National People’s Congress passed the Fourth Amendment of the Patent Law, wherein Article 76 stipulates that in the process of assessment and approval for the marketing of a drug, the applicant for the marketing of a drug and the relevant patentee or interested party may resolve related patent disputes through judicial or administrative means. This indicates that China will officially implement the drug patent linkage system after amendment of the Patent Law takes effect on June 1, 2021.
On this basis, the National Medical Products Administration (“NMPA”) and the China National Intellectual Property Administration jointly announced the Implementation Measures for Early Resolution Mechanism in Drug Patent Disputes (Trial) (Draft for Comments) on September 11, 2020 in response to the administrative dispute resolution mechanism of Article 76, and the Supreme People’s Court announced the Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Drug Marketing Evaluation and Approval (Draft for Comments) on October 29, 2020 in response to the judicial dispute resolution mechanism in Article 76. The two drafts collectively constitute the design framework of the current Chinese drug patent linkage system.
We have conducted a comprehensive review of these drafts, and found that they have introduced systems such as litigation (or administrative ruling) confirming falling within the scope of patent protection (or not), nine-month waiting period, withdrawal or loss compensation by the patentees or interested parties. The design of some of these systems is similar to the relevant systems in South Korea and Canada. Here, we compare the overall systems of South Korea and Canada with the system designs proposed in the above two drafts, and discuss the overall design ideas of the Chinese drug patent linkage system for readers’ reference.
Patent registration system and its correction system
The South Korean drug patent linkage system provides for a patents registration system strictly managed by South Korea’s National Food and Drug Safety Department (MFDS). MFDS will strictly examine whether the scope of each registered claim covers the original research product before registration. MFDS has also established administrative procedures for raising objections to the registration results and requesting corrections thereof after registration, and if the parties are not satisfied with the administrative decision, they may request judicial review.
The Canadian drug patent linkage system provides for a patent registration system administered by Health Canada. Health Canada will also strictly examine whether each registered patent contains registrable claims corresponding to the original research product before registration. After registration, anyone can bring a lawsuit to the Federal Court of Canada to request cancellation of registration.
In the design of the Chinese drug patent linkage system, there is no stipulation that the drug administration department needs to conduct a pre-examination of the content of the patent information registration platform, nor is there a dispute resolution mechanism for correcting registration. It only stipulates, “Applicants or holders of the drug marketing license shall be responsible for the authenticity, accuracy and completeness of the relevant patent information submitted thereby.”
In fact, as far as the accuracy of patent information registration is concerned, there are mainly non-strict examination represented by the United States and strict examination represented by South Korea and Canada. In the patent linkage system in the United States, FDA usually does not examine the registered patents. If the parties have any objection, they can only cancel the registration by filing a lawsuit to the Court, which reflects the American characteristics of judicial dominance. In the patent linkage system represented by South Korea and Canada, the administrative department plays a leading role, making the registration accuracy somewhat increase, but also sacrificing efficiency and requiring certain administrative resources. At present, China has not made it clear whether any third party can object to the registration of patent information, and whether the decision made in response to such objection is an administrative decision that can be subject to administrative reconsideration and judicial review. We are of the opinion that whether to establish a correction mechanism for patent information registration and how to implement the correction mechanism will be a hot issue to be discussed before the drug patent linkage system takes effect.
In the South Korean drug patent linkage system, it is stipulated that applicants for marketing a generic drug are required to notify the patentees or interested parties of their drug marketing application within 20 days after filing a generic drug application, and this date is used as the key date to define the “first generic drug” in submitting a patent linkage challenge.
In the Canadian drug patent linkage system, it is stipulated that applicants for marketing a generic drug needs to send a notification to the patentee or interested parties and copy it to Health Canada when filing a generic drug application. The notification should include information related to the registered patent, such as the active ingredient, dosage form, dosage, route of administration, and medical use of the drug, and state the detailed facts and legal basis that the patent right is not infringed or the patent should be invalidated. Health Canada will review the notification, and require the applicants for marketing the generic drug to make corrections and send a copy to the patentees or interested parties for notifications that do not meet the requirements.
There is no notification system in the design of the Chinese drug patent linkage system. It only stipulates that applicants for marketing a generic drug shall submit a declaration when submitting an application for marketing license. The application and declaration will be publicized to the public, “the patentees or interested parties who have objections to the patent declaration or the basis of the declaration may, within 45 days from the date when the national drug evaluation agency publishes the application for marketing license for drugs, file a lawsuit with the People’s Court or apply for an administrative ruling with the patent administrative department of the State Council on whether the relevant technical solutions for the drug applied for marketing fall within the protection scope of relevant patent rights.”
The notification system is a regime adopted in the drug patent linkage system of major countries in the world. Depending on the circumstances of each country, sometimes the notification is carried out between the parties concerned, and sometimes it is transmitted through the drug administration department. The main reason why notification system is widely used is that it is conducive to promoting dispute resolution. Since the notification includes specific reasons and basic facts for not infringing the patent right or for the patent right to be invalid, the patentees and interested parties can more clearly judge whether generic drugs have infringed upon their patent rights before initiating dispute resolution procedures, which can effectively reduce the burden of proof and the litigation costs of the parties especially in the field of patents relating to complicated technology such as pharmaceutical compositions. In addition, since the holder of the marketing license of the original research drug is not necessarily the patentee, it may not have the qualifications to initiate patent-related lawsuits or administrative procedures. The notification system can effectively promote the parties with real rights to participate in the dispute resolution through mechanisms such as notification forwarding. In addition, in the systems of South Korea and other countries, the order of notifications can also be used to judge the qualification of the first generic drug, which, to a certain extent, also reduces disputes between generic drugs with respect to the exclusive period of the first generic drug.
Burden of proof
In South Korean drug patent linkage system, although there is no requirement for generic drug marketing applicants to disclose any technical information to the patentees or interested parties, according to the first case after the implementation of the South Korean drug patent linkage (Pfizer v. Penmix, 2016Kahap503614), the patentee Pfizer filed an infringement lawsuit without obtaining any preliminary evidence, and finally obtained the support of the Seoul Central District Court of South Korea and successfully obtained a sales ban on generic drugs. The Court held that the patentee could not obtain the technical information that only the drug-marketing applicant possesses. If the drug-marketing applicant does not provide it, the drug administration department would be required to provide relevant materials. After that, in 2020, South Korea has amended its Patent Law and introduced the discovery of evidence system. The Court will have the power to request the drug administration department to provide relevant materials.
In the Canadian drug patent linkage system, it is stipulated that applicants for the marketing of generic drugs need to disclose detailed technical information to the patentees or interested parties. In addition, Canada has introduced the discovery of evidence system, which enables the Court to conduct full fact-finding in the proceedings.
In the design of the Chinese drug patent linkage system, it is stipulated that “applicants for drug marketing license shall submit a copy of the technical materials that they have declared to the national drug evaluation agency and that correspond to whether or not they fall within the scope of protection of the relevant patent rights to the People’s Court during the first-instance defense.” We believe that this distribution of burden of proof fully takes into account the difficulty of producing proof by the patentees or interested parties before the marketing of generic drugs, eliminates the complicated court procedures of issuing administrative investigation orders at the request of the parties in countries such as South Korea, and embodies the characteristics and advantages of the linkage of judicial and administrative information in China.
In the South Korean drug patent linkage system, the patentees or interested parties may apply to the South Korean District Court for an injunction to stop the sales of generic drugs, or request the administrative agency to confirm that the technical solutions of generic drugs fall within the scope of patent protection. On the other hand, generic drug enterprises may request the administrative agency to invalidate the patents, or confirm that the technical solutions of generic drugs do not fall within the scope of patent protection. The administrative confirmation procedure is a procedure stipulated in the Korean Patent Law applicable to all types of patents, and is mainly used to prevent infringement in advance. It should be noted that there is no lawsuit to the Court confirming that the technical solutions of generic drugs do not fall within the scope of patent protection in the Korean drug patent linkage system.
In the Canadian drug patent linkage system, it is stipulated that the patentees or interested parties may file a fictitious infringement lawsuit in the Federal Court and apply for an injunction to stop the approval of the marketing of generic drugs. On the other hand, generic drug enterprises may apply to the administrative agency or the Court for patent invalidation. Canada has not introduced procedures to confirm whether the technical solutions of generic drugs fall within the scope of patent protection.
In the design of the Chinese drug patents linkage system, in addition to the existing patent invalidation system, a new administrative confirmation procedure similar to that in South Korea has been introduced, which is only applicable to the patentees or interested parties requesting the administrative agency to confirm that the technical solutions of generic drugs fall within the scope of patent protection. In addition, a new judicial confirmation procedure has been introduced, which is applicable to the patentees or interested parties requesting the judicial authority to confirm that the technical solutions of generic drugs fall within the scope of patent protection, and the applicants for marketing of drugs requesting the judicial authority to confirm that the technical solutions of generic drugs do not fall within the scope of patent protection.
Due to the introduction of proceedings confirming not falling within the scope of protection, the litigation burden of other generic drug enterprises may increase. Different from the decision of patent invalidation procedure that is universally valid, a lawsuit confirming not falling within the scope of protection does not have a universal validity. Under the circumstance that a patent is declared valid in the patent invalidation procedure, the earlier decision has already become universally binding on the same or similar facts and reasons. Therefore, generic drug enterprises that submit application for marketing license may reassess the validity of the patents and whether to challenge the validity of the patents, thus effectively reducing the impulse of other generic drug enterprises to apply for marketing license before the expiration of the patents. However, the confirmation of not falling within the scope of protection is only binding on both parties of the case, and is not binding universally. Therefore, if there are a plurality of generic drug enterprises that want to apply for a marketing license separately over a long period during the duration of the patent, they will have to file separate lawsuits to confirm not falling within the scope of protection or request for patent invalidation. In fact, the procedure for confirming not falling within the scope of protection does not have the characteristics of universality, which is also the main reason why generic drug enterprises in the Korean drug patent linkage system tend to choose this procedure. The waste of judicial resources caused by similar or identical facts and reasons in multiple trials is also the focus of controversy over the procedure.
Due to the introduction of administrative or judicial procedures that confirm not falling within the scope of protection, the patentees or interested parties need to be prepared to deal with litigation at any time. As mentioned above, without establishment of a notification system, it may lead to difficulties for the parties to respond to the litigation objectively. Therefore, the right of the parties to participate in the litigation and administrative procedures should be guaranteed in the process design thereof. In addition, the allocation of burden of proof should be set up in the procedure of confirming not falling within the scope of protection, so as to prevent generic drug applicants from concealing some information in the relevant procedures to obtain a judgment confirming not falling within the scope of protection, and then obtaining a marketing license after correcting some of the declared information, thus leading to re-entering a larger-scale patent dispute involving the availability of medicines to the public after the marketing.
In the South Korean drug patent linkage system, it is stipulated that the patentees, interested parties or generic drug-marketing applicants will automatically be given a nine-month sales ban after initiating judicial or administrative confirmation procedures. Within nine months, MFDS shall continue the evaluation and approval process, and may approve the marketing license. However, under the circumstance that the dispute has not been resolved within nine months but the marketing license has been approved, generic drug products are still under the ban and cannot be marketed for sale. In particular, the generic drug approval process of MFDS can usually be completed within 4 to 7 months, so the nine-month sales ban has practical effects.
In the Canadian drug patent linkage system, there is a 24-month waiting period for marketing approval. Health Canada does not stop the technical evaluation during the waiting period, but does not approve the marketing license until the dispute is resolved. According to Canadian drug regulatory and judicial practices, disputes can usually be resolved within the 24-month waiting period, and the technical evaluation of generic drugs can be completed.
In the design of the Chinese drug patent linkage system, although a nine-month waiting period is stipulated as in South Korea, according to the current practice of the generic drug marketing evaluation of the NMPA and the judicial practice of the Beijing Intellectual Property Court, neither the generic drug marketing evaluation can be completed, nor can the dispute be resolved through judicial channels or even the first-instance judgment can be obtained during the nine-month waiting period.
We are of the opinion that, according to current relevant practices, the nine-month waiting period is indeed too short to play a real role in promoting early dispute resolution. Regarding the resolution of this issue, in addition to extending the nine-month waiting period, it is also possible to consider setting up a special court in the Beijing Intellectual Property Court to hear related cases and other special systems to promote the early settlement of disputes.
Compensation measures for generic drugs
In the South Korean drug patent linkage system, in order to compensate for the first generic drug that was successfully marketed, a nine-month market exclusivity period is stipulated for the first generic drug. The nine-month market exclusivity period mainly takes into account the time interval between the marketing of the South Korean drugs and their inclusion in the national health insurance. In practice, there are also cases where multiple generic drug enterprises concurrently applying for marketing share the nine-month exclusive period. In the South Korean drug patent linkage system, there is no provision that generic drug enterprises can counterclaim the patentees or interested parties to request compensation for delayed marketing.
In the Canadian drug patent linkage system, it is stipulated that in the event that the patentees or interested parties lose the case, the applicants for marketing generic drugs can file a lawsuit with the Federal Court to request compensation for the delayed marketing, which may even exceed the losses objectively suffered by generic drug enterprises. However, due to the opposition from some Canadian domestic enterprises, there is no provision in the Canadian drug patent linkage system that the first generic drugs can enjoy a period of market exclusivity.
In the design of the Chinese drug patent linkage system, it is not only stipulated that the generic drug that is the first to be successful in challenging the patent validity and is the first to be approved for marketing can enjoy a 12-month market exclusivity period, but also stipulated that “where the patentees or interested parties abuse their rights, initiate the lawsuit referred to in Article 76 of the Patent Law and withdraw the lawsuit without justifiable reasons, or all the claims are not supported, the People’s Court can accept the lawsuit initiated by the drug marketing license applicants requesting for compensation for the losses incurred due to the suspension of the approval of the drug marketing and the reasonable expenses of the lawsuit.” This shows that in the design of the Chinese drug patent linkage system, both an exclusive market period and “compensation for withdrawing the lawsuit and losing the lawsuit” are provided for generic drugs.
However, under the framework of the Chinese Patent Law, no such withdrawal or loss compensation mechanism has been set up for patents in other fields. Setting this provision only for drug patent disputes is a discriminatory treatment against drug patents, and may cause confusion in the trial practice of patent infringement in other fields. In addition, the parties cannot guarantee that the interpretation of the claims and the determination of evidence and facts will be supported by the People’s Court, so that it may lead to loss of the case due to differences in the interpretation of the claims, which is also common in any patent infringement litigation. Even under such circumstances, filing a lawsuit is still an act of lawfully exercising the patent right under the framework of the Patent Law, and is not an act of improperly utilizing the patent right. If the consequences of this lawful exercise of the patent right are completely attributed to the patentees or interested parties, and it is stipulated that administrative punishment (“joint punishment for dishonesty”) or judicial punishment (“compensation for losses and litigation costs requested”) can be imposed thereon, it will actually weaken the patentees’ ability to exercise legal rights and may obviously deviate from the legislative purpose of the Patent Law to protect innovation.
We are of the opinion that the abuse of rights by the patentees or interested parties constitutes an act of unfair competition, and thus it should be dealt with in accordance with the Anti-Unfair Competition Law. It is not appropriate to set up a separate discriminatory provision for the patent disputes related to drug marketing application, nor should any withdrawal or loss of a case be regarded as an abuse of the patent right. It is more appropriate to distinguish strictly between the abuse of rights and the legitimate exercise of patent rights. The real abuse of patent rights to gain unfair competition benefits should be stopped, and the legitimate exercise of patent rights should be encouraged with early resolution when the drug is applied for marketing.
In summary, we have conducted a comparative study and discussion on the currently proposed framework of the Chinese drug patent linkage system and some specific measures of the Korean and Canadian drug patent linkage systems. We are of the opinion that, the currently proposed system is still under discussion, and some specific measures and systems need to be clarified urgently. It is necessary to integrate patent examination and trial practice and drug evaluation and approval practice to arrive at a comprehensive solution. No matter how the system is designed, the starting point of the drug patent linkage system is still to “protect the legitimate rights and interests of patentees, reduce the risk of patent infringement of generic drugs, and encourage the development of generic drugs”. All system designs should focus on two objectives of “innovation-imitation balance” and “early dispute resolution”.
At a time when Chinese pharmaceutical companies have turned to high-end imitation in an all-round way and head companies have entered the field of innovative pharmaceuticals, and even reached the world’s leading level in some fields, innovative development should be encouraged and intellectual property protection should be strengthened. Only by providing high-end generic drugs and concurrently providing new drugs with more curative effects can we truly solve the contradiction between imitation and innovation, so that old drugs can be popularized through imitation, and patients can get access to more new drugs. We expect that through the implementation of the drug patent linkage system, it will not only encourage and promote the development of high-quality generic drugs, but also strengthen the confidence of innovative drug enterprises in the protection of China’s intellectual property. Under the strategy of encouraging innovation and protecting intellectual property formulated by the Party Central Committee and the State Council, the overall progress in China’s biomedical field will be promoted, so that the overall innovation capability and competitiveness will reach the international advanced level.
This article is a research project supported by Beijing Adi Paike International Consulting Co. Ltd.
Thanks to CHENG Yongshun, director of Beijing Intellectual Property Institute, WU Lijuan, deputy director of Beijing Intellectual Property Institute, and CHEN Jie, general counsel of Beijing Adi Paike International Consulting Co. Ltd. for their comments and suggestions on this article.
 Article 7 of the Implementation Measures for Early Resolution Mechanism in Drug Patent Disputes (Trial) (Draft for Comments)
 Article 3 of the Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Drug Marketing Evaluation and Approval (Draft for comments)
 Article 17 of the Implementation Measures for Early Resolution Mechanism in Drug Patent Disputes (Trial) (Draft for Comments)