Fellowship Available in Empirical Chinese Legal Studies

Berkeley Law is offering a fellowship in Chinese law and society.  Qualified applicants must have strong English language skills, be engaged in full-time law teaching or academic research, hold a primary appointment in Mainland China or Hong Kong, and hold a Ph.D. or S.J.D.   The position is also open to qualified individuals seeking to do empirical research on China’s intellectual property system for the next academic year (2020-2021).

The deadline for applying is November 15.  Interested applicants can write to Rstern@law.berkeley.edu for additional information, as well as to request any necessary extension of time to apply.

Upcoming Events – Early November

On the calendar:

Philadelphia friends: I will be at U Penn on November 12, speaking from 4:30 – 6:30 with Zhou Hanhua (CASS) and Samm Sacks, (New America) on technology issues in US-China relations.

Other events:

On Wednesday November 6, I will be speaking with Philip Rogers on supply chain disruption and strategies at the sourcing summit  in San Francisco (6:15-7:00 PM) with Greg Fisher of the Berkeley Sourcing Group.  The topic is supply chain disruption and counter-strategies.

On November 13, I will be speaking at the IP Dealmakers Forum in New York City with Jamie Simpson, Chief Counsel, House Judiciary Subcommittee on Courts, IP, and the Internet and  Malathi Nayak, Reporter, Bloomberg Law (moderator).  The topic is “Patent Policy Update: US and Beyond”.

Looking forward to catchup and engaging with my panels and the audience!

Licensing IP In a Changing Trade Environment

 

This first part of my two-part article, Licensing IP in a Changing Trade Environment first appeared in Intellectual Asset Management  (IAM) issue 97, published by Globe Business Media Group – IP Division. To view the issue in full, please go to IAM Media

The second part of the article on how a changing geopolitical climate is affecting IP licensing is expected in IAM issue 98.

Second Annual Berkeley-Tsinghua Transnational IP Litigation Conference Is Fast Approaching

Transnational-Conference-new-ver-823x1024

Berkeley Law and Tsinghua law will be co-hosting their Second Annual Conference on Transnational IP Litigation, at the campus of UC Berkeley on October 22, 2019.  Details, including registration information, are available here.

The program will look at strategic concerns in many of the hot issues in cross-border US-China IP litigation, including trade secret cases, standards-essential patents, whether foreigners “win” in each other’s jurisdictions, Section 337, criminal cases, on-line enforcement, civil litigation and the role of China’s new IP courts, administrative challenges to validity, forum non conveniens claims, enforcement at trade fairs, and other issues.  Please register soon if you are interested in attending.

We have great speakers and we look forward to having a great audience!

China’s “Naked Bolar” and the Tapering Momentum to Protect Innovative Pharmaceuticals

There have been several important developments in recent weeks involving pharmaceutical IP protection in both mainland China and Taiwan.  Based on these developments, mainland China appears to be slowing its momentum to afford better IP protection to innovative pharmaceutical products (perhaps as a negotiating position in the Trade War), while Taiwan is pursuing a more protective approach.

On August 26, 2019, China’s National People’s Congress adopted the new Drug Administration Law (“DAL”), which will take effect on December 1, 2019. The DAL was passed after almost two years of review and deliberation.  The legislative history is set forth in the  NPC Observer.    The new law addresses some important issues involving counterfeit and substandard medicines.  However, it does little to improve the IP regime for innovative medicines.

As noted in this blog, there had been expectations that certain IP issues such as patent linkage and regulatory data protection might be reflected in the DAL and especially pending IP legislation.  In the latest draft of the Chinese Patent Laws presented to the State Council in December 2018, no detailed improvement mechanisms of the patent examination/granting system were included with respect to pharmaceutical patents were included.   It was hoped that a linkage system would emerge as part of a package of legal reforms to resolve the US-China trade war or to implement as earlier CFDA policy decision.

China has long adopted one small part of a modern IP/regulatory approval mechanism to encourage its generic sector.  China’s “Bolar Exemption” which was incorporated into the 2008 Patent Law amendments (Article 69), exempts from infringement producing, using, or importing patented drugs or patented medical apparatus and instruments, for the purpose of providing the information required for administrative examination and approval.   This type of Bolar Exemption has often been called a “naked Bolar exemption” as it provides for the erosion of the innovator’s patent rights to exempt from infringement research to introduce competing generic drugs.  It is “naked” as it it does not compensate the innovator for the losses of the patent term caused by this exemption nor for the resultant instability to any marketing exclusivity the innovator may face by reason of accelerated challenges to the patents it holds.   One way of compensating the innovator for such erosion of the term is to extend it on the “back end”  before its expiration.  A 2019 draft of the patent law amendments sought to correct this lack of a patent term extension.  Another way of providing for greater stability would be establishing a patent linkage regime which “links” marketing authorization with patents that read on the relevant pharmaceutical product or successful challenges to its exclusivity.

The current naked Bolar regime has several adverse consequences. The most obvious and significant is that it does not provide legal support for approval and marketing of generic drugs that are proven not to infringe an innovator’s patent rights, as a “patent linkage” regime might.   A Bolar exemption only addresses research intended to support regulatory approval and is not an exemption from infringement.  To the extent that Chinese regulatory authorities may be relying on the Bolar exemption to approve the marketing of infringing generics, such an effort is legally misguided.  A naked Bolar is not a substitute for an IP and regulatory regime that balances the needs of generics and innovators.  As Amcham noted in its comments on the original Bolar exception provision: “Effective IP protection for pharmaceutical products requires notice, transparency, and time to resolve legal issues prior to the approval of a generic product.” Such protections are not afforded under the existing regime and could be with an effective linkage regime.

Another adverse consequence is that it erodes the term of the patentee without the kind of bargaining that went into the US Bolar exemption, creating a kind of sui generis exemption from infringement for additional acts of research to facilitate product introduction which is not otherwise permitted under the patent law.  To the extent that the naked Bolar expands research exemptions to production and warehousing of an infringing generic pharmaceutical, and does not adequately limited or compensate the rights holder,  it may violate the terms set forth the in the WTO decision EU v Canada (DS/114) where the WTO noted that the Canadian Bolar exception could only apply to regulatory review where  “no commercial use is made of resulting final products.” (line 7.45).   The Bolar exemption should not be used to bootstrap a broader researcher or pre-marketing exemption.  As former Chief Judge Rader noted of the US patent law in discussing research exemptions: “the Patent Act leaves no room for any de minimis or experimental use excuses for infringement. Because the Patent Act confers the right to preclude ‘use,’ not ‘substantial use,’ no room remains in the law for a de minimis excuse.”  (Embrex v. Service Engineering, 216 F.3d 1343 (Fed. Cir. 2000).

Finally,  the “naked Bolar” sends a wrong signal by suggesting that China is not fully committed to developing an innovative pharmaceutical sector, despite China’s considerable human resources, investments, rhetoric and planning to the contrary.

Judging by recent generic drug approvals in China, there may be decreased momentum on the ground to protect innovative pharmaceuticals through limiting regulatory approval during the pendency of relevant patent protection.  Several generic versions of innovative pharmaceutical products have recently been approved by China for different manufacturers at the time of these recent DAL amendments, including Azilsartan, a product originally developed by Takeda that addresses hypertension, and is now produced by Zhaoke Pharma, a wholly-owned subsidiary of Lees Pharma. Azilsartan and Esketamine (a Janssen product for treatment-resistant depression) are also now being produced by Jiangsu Hengrui Medicine.  Pomalidomide,  a Celgene-developed product for treating multiple myeloma,  is produced by Chiatai Tianqing Pharma.  Bendamustine, a Teva product for  chronic lymphocytic leukemia, is being produced by Nanjing Simcere Pharma.  These products have obtained approval priority from CFDA and are expected to be approved by the time the new DAL comes into effect.  As is evident from this list, some products (Azilsartan) are being produced in generic form by more than one manufacturer.  This phenomenon of multiple competing generic manufacturers who may not have had to pursue patent challenges to the innovator to obtain marketing approval (as in a linkage regime), could also result in competition amongst generic manufacturers without strong incentives for follow-on innovation to the original compound.

By comparisons to this apparent backsliding in Mainland China, the Taiwan Executive Yuan has passed the bill to enact the new Pharmaceutical Affairs Act (“PAA”) on January 31, 2018. Patent linkage was specifically approved in Chapter 4 of the new PAA. Previously, in 2018, the Taiwan Food and Drug Administration had issued two drafts of the Enforcement Rules for Patent Linkage. Further, in May 2019, the Taiwan Ministry of Health and Welfare and the Ministry of Economic Affairs held a public hearing to clarify the intent to extend the patent linkage system in PAA to biosimilars. In July 2019, the Ministry of Health and Welfare officially announced that it is considering adding transitional clauses to exempt biosimilars which have obtained official clinical trial approvals during the implementation phase of patent linkage system in Taiwan.

While there appears to be weakening momentum for patent linkage, the DAL does change the regulatory regime for counterfeit medicines and vaccines.  In an apparent effort to address public health needs, the DAL, as revised, modifies the definition of counterfeit drugs.   Under the prior version of the DAL, unapproved imported drugs are deemed as counterfeit. Although the new DAL still prohibits importing and selling of unapproved drugs in large quantity, the importation of small amounts of drugs which have been legally marketed in other countries for urgent clinical needs is exempted under the new DAL, subject to other relevant laws and regulation.  The DAL also seeks to strengthen regulation over vaccine manufacturing, most likely in response to the vaccine scandal of 2018. Under the DAL, out-sourcing of vaccine manufacture is strictly prohibited. The punishment on manufacture and supply of counterfeit vaccine has increased from 5 times of revenue to 30 times of illegal proceeds.  The vaccine Marketing Authorization Holder (“MAH”) must meet certain standards set out in the new Vaccine Administration Law. The regulators will also establish a national traceable platform for the production, transportation, and storage of vaccines.  Lastly, new mechanisms such as the MAH system, defective drug recall system, filing system of clinical trial institutions will be implemented.  The existing “Good Manufacturing Practice for Pharmaceutical Products” (GMP) certification system for drug manufacturers and the “Good Supply Practice for Pharmaceutical Products (GSP) certification system for drug suppliers will be canceled.

Looking at all of the various legislative and regulatory developments in Mainland China and Taiwan, it is hoped that mainland China will ultimately find the right balance of incentives to encourage the further development of its innovative pharmaceutical sector, much as the US did with its Hatch-Waxman Act, while continuing to develop a secure supply of high quality innovative and generic products.

This article was written by Mark A. Cohen and Angel Liu.

Some Upcoming Events and Opportunities

Here are some events and opportunities for the 2019-2020 academic year:

  1. 1. Bloomberg’s New Economy Forum is broadcasting a panel discussion on “Technology, Innovation and US-China Collaboration” on August 6 from 3:30-6:00 PM Pacific Standard Time in conjunction with the Asia Society. The discussion will be broadcast live on the Bloomberg Terminal and Bloomberg New Economy Forum YouTube Channel. It will also air on Bloomberg TV on August 9.  I will be joining as part of the invited Town Hall.
  2. On Wednesday August 7 at 12:30 PM EST, AIPLA is hosting a webinar on “US and China Export Control Laws and their effects on IP Protection Strategies.” I am moderating.  Here is the link for further information.
  3. On September 10, 2019, I will be speaking in Brussels, Belgium on “Geopolitical Aspects of SEPs: push pull forces in China and other jurisdictions” Here is the link. Readers of this blog may receive a 20% discount by using the code: CIPR. The code can entered at the very end of the registration process.
  4. Save the date: On October 22, 2019, Berkeley Law will be hosting its second program on transnational IP litigation with Tsinghua Law School. We already have several judges committed to attending.  Watch this link for further information.
  5. On November 12, 2019 from 4:30-6:30 PM, I will be at U Penn for its annual Policy Roundtable. The focus this year will be on technology issues.
  6. On November 13, 2019, I will be speaking at the IP Dealmakers Forum in New York City on the role of IP in the US-China Trade War.  There is a $200 discount with promo code: IPDF19_Speaker.
  7. Save the date: Berkeley Law is looking forward to welcoming back two giants of Chinese legal studies the week of March 15, 2020, Profs. Stanley Lubman and Jerome Cohen for a planned one and a half day program looking at some of the big picture issues in Chinese law today.

And an Job Opportunity: The Berkeley Center for Law & Technology at UC Berkeley School of Law is seeking to hire a Legal Research Fellow for its Asia IP Project, for an approximate one-year term with the possibility of renewal.  This position is open until filled.  Here is the link for more information, including required qualifications and application materials.   If you have questions about the position, please contact academicpositions-law@berkeley.edu.  UC Berkeley is an AA/EEO employer.

Delay in the Courts… To Prove This One We May Yet Have to Wait…

On July 4, 2019, I posted a blog asking for help regarding rumors of delay and higher-level review of IP cases involving foreigners. Here is the follow-up. 

Spoiler alert: if you are looking for a smoking gun, you won’t find one.

Jacob Schindler from IAM pointed out that he looked into the issue for his magazine and after speaking to a number of lawyers and patent owners with active assertion campaigns in China, “found no evidence that this is true in any general sense.” Jacob noted that “the most likely explanation for delays faced by some US litigants is even more innocuous. Foreign companies, including US firms, seem to be big fans of the Beijing IP Court. And that has led to a very busy docket.” This perspective that clogged dockets are leading to delays has been cited by many, and a few people noted that the issue had been raised in various meetings or conferences.

Erick Robinson relied on his own experience prosecuting Non-Practicing Entity (NPE) cases, and commented in his blog that he had detected no changes. He further stated that claiming “‘cases can be decided but only upon approval from the Supreme People’s Court’ is obviously alarming, but without proof, this seems to be just more US politicizing of the trade war.” I will return to the issue of the trade war and patents in a future blog.  

One well-informed China-resident lawyer informed me that she “heard from a few lawyers that SPC instructed lower courts to suspend adjudicating all US-related cases for at least six months since the end of 2018.” This May, she advised, the SPC lifted the ban and now only supervises “sensitive cases.” For less sensitive matters, lower courts may proceed as they wish. This six month period identified by this lawyer roughly coincides with the period during which I had been hearing this rumor of delay. Others also confirmed that there was high-level supervision.   

The counter-factual that there has been no interference in court cases or administrative proceedings is perhaps easier to disprove. Many individuals have indicated concerns about informal interference in proceedings. Courtney Macintosh of Baker & McKenzie noted that “[w]e have been told by local enforcement authorities not to expect any nice treatment cause of trade war, so it is complex and not so straightforward.” The consulting firm Rouse had also observed what they thought was a trade-related impact in the negotiation of licensing deals requiring local government approval, with local governments “falling over” to ensure that they did not appear to be pressuring companies to transfer technology as a condition of investment approval. AmCham China’s 2019 Business Climate Survey for the first time listed “bilateral tension in US-China trade relations” as a top-five business concern (45% of respondents), and also noted that high tech and research-intensive companies were the most likely to feel less welcome than before (54%).

Some individuals suggested that there is no political interference at all in Chinese judicial proceedings. While an extensive analysis of the manner in which politics interferes in adjudication is beyond the scope of this blog, there is considerable literature around how politics influences Chinese court decisions, and there is no indication that IP cases are exempt from such influence.

First of all, as a de jure matter, an SPC decision to delay foreign cases is not inconsistent with Chinese civil procedure law.  Chinese courts are authorized to delay foreign civil proceedings, including IP litigation. Section 249 of the Civil Procedure Law provides that “The period for the trial by the people’s court of civil cases involving foreign parties shall not be subject to the restrictions of Articles 149 and 176 of the Law.” Articles 149 and 176 require first and second instances cases to be resolved in six to three months respectively, except when otherwise authorized by supervisory authorities.

Second, the courts themselves recognize that they are not exempt from politics. Prof. Susan Finder’s  Supreme People’s Court Monitor recently discussed this in her analysis of a speech by SPC Justice Liu Guixiang. Liu noted that “The People’s Court is first and foremost a political organ. It must put political construction in the first place and clearly talk politics.” The speech noted four principles, including “[t]o uphold the absolute leadership of the party,” and that “judicial independence” of the West must be resolutely resisted. 

Academic literature also has shown documented political influences and the data supporting it.  Prof. Perenboom’s China’s Long March toward Rule of Law (2002) surveys the many ways that “judicial independence” can be compromised in China’s system (pp. 280-342).  Prof. Howson’s article “Judicial Independence in China: Lessons for Global Rule of Law Promotion” notes that Shanghai courts “evidence serious independence limitations” in two areas: acting as the handmaiden of policy implementation in contravention of what the Company Law allows, or directly by blanket rejection of public company/large plaintiff cases.  Profs. Xin He and Su Yang looked at how the “have’s” come out ahead in Shanghai court cases and “cast doubt on the party capability theory.” The authors “speculate[d] that the causes of judicial inequality in China lie not only in resource gaps but also in the roots of the law and the nature of the court.”

Denying case acceptance has long been recognized as a political tool of the courts to push off politically sensitive cases, although it may be less frequent in foreign-related cases

Higher-level supervision is also well documented, in addition to being specifically provided for in the civil procedure law. Such higher-level supervision appeared prominently in the WTO IP enforcement case with China (DS362), when the US side presented a letter from China’s Supreme People’s Court on how to best handle a copyright issue that was then sub judice in Hunan (Exhibit US-60, Letter from the Supreme People’s Court to the Hunan Province Higher People’s Court in Zheng Haijin v Xu Zheng Xiong,  知监字 [1998]). As the Panel Report discusses, this letter was contradicted by a letter of the National Copyright Administration of China to the lower court with the opposite position. Panel Report Sec. 7.51.

Political interference may also originate from the court that hears the case, particularly its adjudication committees (shenpan weiyuanhui). Such committees play an important role in ensuring that cases are consistent with political directives. As the Duihua Foundation points out: 

“[Adjudication Committees] are unique to the Chinese judicial system and exist at  each of the four levels of China’s court system, from basic-level county courts up to the Supreme People’s Court. The committees meet regularly to discuss important or difficult cases, ‘sum up judicial experience,’ and review other important matters related to case adjudication. Generally, they are composed of the president and vice-presidents of the court, as well as the heads of the court’s tribunals—many of whom are, in effect, administrators rather than working judges.  

Committee meetings may be attended by the head of the procuratorate, which has a dual function as prosecuting body and overseer of judicial activity, as well as members of the judicial panel hearing the case under discussion. Court rules encourage submission of written case reports summarizing the facts of the case, major issues of contention, and preliminary opinions on how the case should be handled, but some cases are simply presented orally. Detailed minutes of the committee’s discussions are kept, but they are classified as state secrets and do not become part of the formal trial record.

Among cases that adjudication committees routinely take up are those ‘involving serious threats to national security,’ the death penalty, and ‘important’ matters involving foreigners or persons from Hong Kong, Macau, or Taiwan, as well as cases with multiple parties (quntixing anjian) that have a major social impact or could easily intensify conflicts. Meetings are held several times per month, and multiple cases are normally discussed at each meeting.” [emphasis supplied]

Such supervision need not be adverse to a foreigner’s interests. Politically sensitive litigants, domestic or foreign, use court supervision to advance their claims, as has been documented in an article by Profs. Feng Yuqing and Xin He.

Chinese behavior overseas may reveal an expectation that political interference or supervision in judicial processes is not unusual. For example, China reported an ersatz JCCT outcome to “give review priority” to a Chinese application on the basis that it believed that the USPTO had given unfair treatment to a patent application by the SOE, IWNCOMM. By contrast, the  US outcome sheet does not reflect any such commitment.  

In the absence of a “smoking gun” does the data suggest any changes in Chinese disposition of US or foreign patent cases?  The databases will not reveal this information until, if at all, next year for this year. Even then, as Prof. Benjamin Liebman and others have pointed out in “Mass Digitization of Chinese Court Decisions: How to Use Text as Data in the Field of Chinese Law”, there is a “need for humility and methodological pluralism among scholars seeking to use large-scale data from Chinese courts. The vast amount of incomplete data now available may frustrate attempts to find quick answers to existing questions…”   Finally, even if there were some delays or additional oversight in the handling of foreign-related cases, this may not prove the existence of a new internal directive or prejudice.  It may simply be due to existing civil procedures or courts exercising some greater prudence at this moment in time. 

We will need to wait and see.

Postscript of July 31, 2019:

Since this blog was posted, I have received two additional emails regarding the impact, if any, of the trade war on foreign-related IP litigation, particularly patent litigation involving Americans.

One well-placed source advised me that if there was any delay in adjudicating foreign IP cases, it would be due to the rapid growth in IP dockets in China and the relative flexibility in timing afforded adjudication of foreign-related IP cases.   This explanation is also quite plausible.  Overall IP cases did increase by 40.97% to 283,414 accepted cases.  Patent cases increased by 35.53% to 21,699.  These are huge increases and foreign cases may get delayed as courts adjust to their dockets.  See 中国法院知识产权司法保护状况 2018 年)(Intellectual Property Protection by Chinese Courts in 2018).

Another source told me that their client was told that due to the trade war and attendant “sensitivities”, the court would not be issuing its decision at this time.  No new timeline was offered.

References to “sensitivity” or “inconvenient time” can be a euphemism for political concerns or they can reflect real-world issues like a clogged docket or a complex case.  I can remember once as a government official, I directly asked a Chinese colleague and old friend if the time was “really” inconvenient to meet me, or whether this was simply a  way of avoiding conflict.  He responded with a long list of other commitments and told me “we look forward to seeing you, but it is really quite busy now.”  We both laughed.

Please continue to write in any other observations you may have.