Category Archives: Judicial Interpretation

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The Cart Before the Horse in China’s Patent Linkage Regime

Since China’s legislature amended the patent law on October 17, 2020 and China’s National Medical Products Administration (NMPA) and  its National IP Administration (CNIPA) published the Implementation Measures for the Early Resolution Procedures for Drug Patent Disputes (Trial) (Draft for Comment) ( 国家药监局综合司 国家知识产权局办公室公开征求《药品专利纠纷早期解决机制实施办法（试行）(征求意见稿）》意见) (the “Rule”) on September 11, 2020, several people have written to me who are bewildered about the sequence of rules being proposed on patent linkage in advance of the enactment of patent linkage into law.  This post analyzes whether this “cart before the horse” scenario should be a concern for US pharmaceutical companies, and what this counter-intuitive sequencing may suggest for China’s new patent linkage regime.  

This is indeed an unexpected circumstance.  There was no advance word that the Rule was being prepared for public release. CNIPA and NMPA’s parent agency, the State Administration for Market Regulation (SAMR), did not include a patent linkage rule in its 2020 legislative work plan.  CNIPA also had not included a patent linkage rule among its top 100 IP projects for 2020.  However both SAMR and CNIPA did include the more general Implementing Regulations for a revised patent law in their anticipated legislative work for 2020.   By contrast, the Beijing IP Court issued a research report on Patent Linkage (中国药品专利链接制度研究) in late September, which advocated judicial reforms to support a linkage regime.  In addition, the Supreme People’s Court in its 2020 annual plan announced its intention to draft a judicial interpretation (JI) for patent linkage cases.  They have not yet released their draft JI.

This “cart before the horse” Rule may trace part of its origins to the Phase 1 Trade Agreement (January 15, 2020) (the “Agreement”).  The Agreement did not explicitly require that the civil courts play the leading role for patent linkage disputes. The Agreement also failed to establish an “artificial infringement” regime for the Courts to rule that an application for marketing approval of a patent drug constitutes infringement. Instead, it required that China adopt “procedures for judicial or administrative proceedings and expeditious remedies”, and that China “may … provide” administrative remedies for resolution of linkage disputes (Art. 1.11).   In so doing, the Agreement left open the possibility that the administrative agencies would play the dominant role in a patent linkage regime.

More generally, the Agreement also authorized a leading role for administrative IP enforcement in a range of areas with its repeated references to campaign-style administrative enforcement.  The Agreement also did not acknowledge or seek improvements to China’s notable IP-related judicial reforms.   The Agreement was also immediately preceded by an important State Council/Party Central Committee plan that called for strengthening of administrative enforcement (Nov. 24, 2019), and that was considered in its time to be a high-level policy precursor to the Agreement. This policy evolution has also been accompanied by changes to all of China’s major IP laws including the Trademark law, the Patent Law, the Anti-Unfair Competition Law, as well as proposed Copyright Law Amendments, that all further commit China to strengthened administrative enforcement of IP.

CNIPA and NMPA took the next step of securing a key role for their agencies in patent linkage when they drafted and published the Rule.  I use the term “Rule” (規章) or “Departmental Rule” (部門規章) in this blog as a term of art, consistent with China’s Law on Legislation 立法法.  The nomenclature is also consistent with China’s own descriptions of its legal system  upon acceding to the WTO.  A Rule is a legislative document enacted by a departmental agency that is inferior to a Law （法律）that has been passed by the National People’s Congress or  a State Council-enacted Regulation （法規）.  As set forth in the hierarchy of the Law on Legislation, it is also inferior to many types of local legislation.  As with other Rules, NMPA/CNIPA does not use the word “rule” in its September 11 pronouncement.  It instead calls its legislation “procedures” (办法). However, do not be misled! The Law on Legislation does not use “Procedures”  as a term to categorize legislation, even if regulatory agencies use this term in their own enactments.  When a Departmental Agency enacts a legislative document it is typically a “Rule” under the Law on Legislation based on the enacting agency and the legislative process. The categorization of legislation is often not immediately clear from its own wording.  Moreover, the legal status can also become murkier if sui generis or inter-agency procedures not otherwise in the Law on Legislation are involved.

In amending the Patent Law, the NPC cemented the leading role of NMPA and CNIPA by declining to legislate on linkage in detail and delegating rule-making authority to these agencies. According to Article 76,  “procedures” (or a “Rule”) will be drafted by NMPA and CNIPA to govern “pharmaceutical approvals and applications for marketing approvals.” Article 76 further requires the “procedures” to be delivered to the State Council for its approval before implementation (国务院药品监督管理部门会同国务院专利行政部门制定药品上市许可审批与药品上市许可申请阶段专利权纠纷解决 接办法，报国务院同意后实施).  By delegating drafting authority to NMPA and CNIPA and legislating that the State Council will be the final arbiter of its contents, the Patent Law has likely placed the NMPA and CNIPA Rule within that murky class of sui generis enactments.   

In its final form the State-Council approved patent linkage Rule is unlikely to be in conflict with any explicit Patent Law Amendment provisions. The State Council approval mechanism also still leaves open the possibility for additional policy interventions that are consistent with the Patent Law.  One important modification that might be considered would be to authorize the Ministry of Justice (MOJ) take a more active role in the drafting of the Rule or craft the Rule as a Regulation promulgated by the State Council itself. Pursuant to the administrative restructuring of March 13, 2018, MOJ is required to perform the legislative functions formerly performed by the Legislative Affairs Office of the State Council  (《第十三届全国人民代表大会第一次会议 关于国务院机构改革方案的决定》，批准《国务院机构改革方案》, which previously prepared Regulations.   

If the State Council were to take a leading role in drafting on patent linkage, past practice would suggest it will ensure that all agencies concerned would have an opportunity to comment.  The agencies would not only include NMPA and CNIPA but could also include the courts, trade, health, science or industrial planning and development agencies, as well as authorities responsible for personnel and budgeting.   A Regulation or sui generis Rule which involves all relevant agencies might also obviate the  failures of a prior linkage rule in 2002 which relied exclusively on administrative rule making.  As the late Prof. Benjamin Liu wryly observed at that time: “the SFDA  [predecessor agency to NMPA] does not always succeed with its gate-keeping function.”  Deputy Director Ding Jianhua of SFDA also succinctly stated the problem:   “SFDA is not responsible for IPR.” [1]

Judicial involvement in this legislation is needed to harmonize the legal complexities of patent linkage which complex issues of patent law, civil law, administrative law, and pharmaceutical regulation.  A lack of judicial involvement confounded the implementation of the 2002 rule.  This 2002 Rule (and subsequent amendments) was further stymied by later legislative changes in the patent law when China added a “Bolar exemption” to exempt pre-marketing approval efforts by generic companies from claims of infringement.  In Prof. Liu’s words, this exemption  “swallowed the rule of patent linkage.”  Bolar exemptions are well-known in international practice, being an exemption from civil infringement claims and are within the purview of the courts.  Overly-broad Bolar exemptions can raise concerns over compliance with TRIPS and other international IP obligations.

China’s vast administrative system must surmount other challenges to lead a patent linkage regime. These challenges include: a lack of administrative enforcement transparency; uncertainty regarding coordination between judicial and administrative enforcement; differing legal appeal routes and standards for litigating infringement which may lead to undermining of one system over another; concern for the systemic impacts on China’s IP regime by relying on administrative interventions rather than the civil system; limited foreign utilization of the patent administrative enforcement system particularly for high value pharmaceutical rights; and the inherent “fox guarding the hen house” fear when the administrative agencies that grant patent rights and marketing authorizations are also tasked with enforcing these important rights. 

Long-term observers may also fret that CNIPA and NMPA are an “odd couple” to administer a linkage regime  Although they are housed in the same mega-agency, SAMR, NMPA in recent years has been a leading advocate for  patent linkage, while  CNIPA had been viewed as less supportive. There are also continuing concerns over CNIPA’s excessive invalidation of pharma patents.

At this stage, the most appropriate corrective to these various challenges would be to leverage the State Council’s authority to take a leadership role in implementing Article 76 of the Patent Law, as well insure that there is conforming language in the Patent Law Implementing Regulations which MOJ will likely be coordinating in the near future.  An effective linkage regime for China will not only need to balance the interests of generics and innovators in China’s linkage regime, but also between the courts and the range of concerned administrative agencies.

Where will China go next at this important juncture on patent linkage?  Berkeley Law will be convening a webinar on China’s patent linkage regime as part of a multi-part series on food and drug law.  I will be joined by He Jing from the GEN law firm, Cui Can from Morrison and Forster, Dr. Karen Guo from Novo Nordisk and Xuejiao Hu from Beigene.  The event will take place on November 17.  Registration information is available here

[1] Benjamin Liu, ”Fighting Poison with Poison? The Chinese Experience with Pharmaceutical Patent Linkage,” 11 J. Marshall Rev. Intell. Prop. L. 623 (2012).

Note: The Photo above by Unknown Author is licensed under CC BY-SA

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Translations of Civil Trade Secret and Criminal IP JI’s Available

The Gen Law Firm (己任律师事务所) has graciously provided us with translations of two recently released judicial interpretations with red-lining to compare with the prior public comment drafts. 

The civil trade secret judicial interpretation was released on September 11, 2020.  I blogged about it here.  

Translation of Civil Trade Secret JIDownload

On September 13, a criminal IP judicial interpretation, which also includes criminal trade secrets, was released by the Supreme People’s Court and Supreme People’s Procuratorate (最高人民法院  最高人民检察院 关于办理侵犯知识产权刑事案件具体应用法律若干问题的解释 [3]).

Translation of Criminal IP JIDownload

These translations are very timely in light of the recent USPTO conference on trade secret developments in China.

Please send me any comments that you may have prepared on these or other laws, regulations, rules, judicial interpretations released for public comment with a note regarding whether the comments can be shared on this blog.

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New SPC Guiding Opinion on E-Commerce and IP

On September 12, 2020, the Supreme People’s Court issued its new “Guiding Opinion on the Trial of Civil Cases of Intellectual Property Rights Involving E-Commerce Platforms”  关于审理涉电子商务平台知识产权民事案件的指导意见 (the “Guiding Opinion”).

This Guiding Opinion explicitly references China’s E-Commerce law.  A translation is available here. I previously discussed the drafting of that law here.  As best I can tell this document was not anticipated in the SPC’s JI drafting agenda of earlier this year.    That is likely because strictly speaking a “Guiding Opinion” is not a judicial interpretation.  As one observer has noted: “These notices and opinions encourage judges to make decisions, or local courts to explore new mechanisms based on their attitudes. The SPC will sometimes formulate official judicial interpretation based on the judicial practice after these documents are published.”

The Guiding Opinion should further help implement obligations set forth in Section 1 (E) of the Phase 1 Trade Agreement regarding “Piracy and Counterfeiting on E-Commerce Platforms”, although It is not a specifically enumerated “deliverable” in that Agreement.  The Phase 1 Agreement does include a number of specific reforms that the US and China agreed to, including “extend to 20 working days the deadline for right holders to file a judicial or administrative complaint after receipt of a counter-notification”; “ensure validity of takedown notices and counter-notifications, by requiring relevant information for notices and counter-notifications and penalizing notices and counter-notifications submitted in bad faith” and  that “China shall provide that e-commerce platforms may have their operating licenses revoked for repeated failures to curb the sale of counterfeit or pirated goods.”  These reforms may be reflected in other legislative or judicial acts.

In the absence of a complete translation, I offer here one provision regarding implied knowledge of infringement by an e-commerce platform in the Guiding Opinion ,which is likely intended to help implement Arts. 38, 41, 42 and 45 of the E-Commerce law:

“电子商务平台经营者存在下列情形之一的，人民法院可以认定其“应当知道”侵权行为的存在：

　　（一）未履行制定知识产权保护规则、审核平台内经营者经营资质等法定义务；

　　（二）未审核平台内店铺类型标注为“旗舰店”“品牌店”等字样的经营者的权利证明；

　　（三）未采取有效技术手段，过滤和拦截包含“高仿”“假货”等字样的侵权商品链接、被投诉成立后再次上架的侵权商品链接；

　　（四）其他未履行合理审查和注意义务的情形”

“The People’s Court may determine that an e-commerce platform operator ‘should be aware of’ the existence of infringement under the following circumstances:

1) Failure to perform legal obligations such as formulating intellectual property protection rules and reviewing the operating qualifications of operators on the platform;

(2) Where there is no review of the proof of rights of operators whose store types on the platform are marked as “flagship store”, “brand store”, etc.;

 (3) Failing to adopt effective technical means to filter and block infringing product links containing the words “high imitation” and “fake goods”, and links to infringing products that are re-listed after the complaint is established; and

(4) Other circumstances where reasonable review and care obligations are not performed.”

What constitutes “effective technical mean to filter and block” or  “reasonable review and care” are key issues in the Guiding Opinion and for the future.  This Guiding Opinion offers some concrete examples. As technology evolves in such areas as machine learning and recognizing of fake products and fake product purveyors, the concepts of “effective” and “reasonable” may necessarily evolve.  These changes in technology could impose greater technical and financial obligations on e-commerce platform operators. As I recall, the evolving nature of these technologies was discussed about a decade ago by the late Prof. Guo Shoukang and hosted by AmCham on e-commerce liability, and it remains true today. 

Terms such as “effective” and “reasonable” in the Guiding Opinion offer an opportunity for the courts to flexibly address newly emerging challenges as they arise.  These general concepts are also in synch with a trend towards greater flexibility by the Chinese courts in addressing emerging legal and technical challenges in China.  As with the definitions of “bad faith” which are also described in the Guiding Opinion Arts. 6, 8 and 10 for platform business operators  and rights holders providing notifications and counter-notifications of infringement, the concept of “implied knowledge” is part of a broader effort to incorporate “good faith” -type obligations into Chinese IP and civil law generally. 

Please send in any corrections or comments.