Beijing IP Court Report on Proposed Patent Linkage Regime

The Beijing IP Court has recently released a Report on patent linkage, which highlights the legal challenges that the courts may face in implementing the proposed linkage regime, entitled  “Research on the China Pharmaceutical Patent Linkage System” (中国药品专利链接制度研究) (the “Report”) (China Trial magazine (中国审判).  The Report references the various developments in patent reform as well as Notice 55 (2017) of CFDA “Policies Relevant to the Protection of the Rights and Interests of Innovators for the Encouragement of Innovation in Drugs and Medical Devices (Draft for Public Comment)” (食品药品监管总局就鼓励药品医疗器械创新保护创新者权益征求意见) (the “Innovation Proposal”), which I discussed here.  The legal challenges identified in the Report include the following:

1.The Report notes that the proposed regime does not currently impose a compulsory litigation system. In the absence of such a legal requirement to litigate, the administrative power cannot interfere with the free will of the parties, i.e., it cannot require the parties to avail themselves of a linkage system. 

My comment: For a generic company to be able to enter the market in advance of patent expiration, it will need to utilize the litigation system.  Otherwise, it should be denied marketing approval.  On the other hand, if an innovator wants to challenge a generic company that has obtained a marketing approval without a finding of non-infringement/invalidity/patent expiration, it should be able to bring a litigation through the linkage regime as plaintiff.  According to recently proposed rules, generic applicants claiming to fall outside of existing patent scope or seeking to invalidate patents, would be subject to suit by the innovators via a court or CNIPA within 45 days of seeking regulatory approval (Art. 7).  In addition, there should be little incentive to sue outside of the newly established linkage process for generic or innovative companies.  If a generic company wishes to use normal civil and administrative procedures to sue an innovator, courts should be required to implement similar expedited procedures to the linkage regime.

2. The second issue identified by the Court is the conflict between “artificial infringement” and the current Patent Law. According to the Report, the patent linkage system adds the new concept of an application for regulatory approval to the scope of infringing patent acts, or a concept of “artificial infringement.” However, the Patent Law does not stipulate the act of applying for regulatory approval as an act prohibited by patent rights and subject to injunctive or other relief. This will bring a series of problems in the judicial process. In addition to the risk of dismissal due to the lack of a legal basis, a court can determine the accused infringement generic drugs fall into the scope of patent protection, but due to the Bolar exemption, the acts of preparing a generic drug for market may not constitute patent infringement.  

My comment: China’s Bolar exemption is being used, once again to advance an extensive safe harbor from commercial scale infringing acts done in anticipation of market entry, which is a potential TRIPS violation (Art. 30). Although I agree with the Report that this issue should be clarified, I disagree with the absolute necessity of clarifying what constitutes an artificial infringement, as the statute should be interpreted in accordance with China’s international obligations (including the TRIPS Agreement, and the Phase 1 Trade Agreement), as well as with prior practice of China.  It is also wrong to assume that linkage is a wholly new concept to China’s legal system, which this analysis might imply.  China had a limited patent linkage regime in the past without a concept of “artificial infringement.”  It was also administered by the courts.  The late Prof. Benjamin Liu discussed this regime in an article in 2012:

“Previously, Chinese courts reached inconsistent decisions as to whether the unauthorized making and using of patented products during the course of preparing for a drug registration constituted patent infringement. For example, in 2000, the Chongqing Intermediate People’s Court imposed damages against generic company for the unauthorized use of patented technology in connection with drug approval in Glaxo v. Southwestern Pharm.  Later, in 2005, the Jilin Intermediate People’s Court ordered a generic defendant to stop its drug registration process after finding that the unauthorized use of patented traditional medicine formulation in the course of registration is intended for infringing production in Chengdu Kanghong Pharm. v. Liyuan Pharm.Other courts were less sympathetic to the patentee….”

3.The third issue that is there is no guarantee that the specific deadlines will be observed. The Report notes that the timelines are tight, and there could be difficulty in communicating and responding.  Moreover, many of the innovators are multinational companies.  Even if there are representative offices of such multinationals in China, the 20-day period is obviously insufficient to inform the decision-making department and respond. 

My comment: I agree with this assessment. The relationship between the periods being established by the linkage regime and China’s Civil Procedure Law  (Art. 250) which permits the suspension of certain litigation time frames for foreign related cases also needs to be clarified.

4. As a fourth issue, the Report notes that the way to challenge others’ patents is incomplete. The Report notes that in the drug patent linkage systems in the United States, Canada, and Taiwan, the patent challenge program has set two challenges — patent invalidity and patent non-infringement.  However, the challenge set by the Innovation Proposal is only the challenge of non-infringement of patent rights, and not patent invalidation. In fact, a patent invalidation challenge approach is more conducive to competition among generic drug companies as a whole, and it is conducive to subsequent imitation by other generic drug companies, which can play a greater role in drug accessibility. 

My comment: I agree that this is a potential problem.  One solution would appear to be in the first instance to permit the Beijing IP Court to hear both validity and infringement combined, much as has the new national appellate IP Court has piloted late last year in Xiamen Power Electronic Technology Co., Ltd. v.  LG Electronics (Tianjin) Appliances Co., Ltd.  Secondly, administrative validity procedures should be expedited, with the Beijing IP court authorized to reach a final administrative decision on validity, rather than requiring remands to CNIPA.

5.As a fifth issue, the Report notes that many operational regulations of the patent linkage system need to be refined. For example, issues such as the determination of the court of jurisdiction, the choice of the cause of the case, the time limit for prosecution, procedures for challenging invalidity and non-infringement, and the connection between judicial and administrative agencies need to be determined.

My comment: I agree with this assessment as well. 

In addition to the above, the Report makes a recommendation regarding which court should have jurisdiction over linkage disputes. The Report notes that “the Beijing Intellectual Property Court specializes in national patent administrative authorization and confirmation cases and Beijing patent infringement cases. The case has a complete range of categories, a large number of cases, a large number of technical judges, a deep legal literacy, and solid practical skills, and can undertake the trial of patent challenge cases.”

My comment: I agree with an assessment that the Beijing IP court should take exclusive jurisdiction over China’s linkage regime for the reasons stated.  However, in order for a linkage system to work well, it is also important that the courts take a less restrictive view regarding pharmaceutical validity cases, particularly involving post-filing supplementation of data which has long been a bilateral bone of contention.

Any discussion regarding patent linkage in China must also return to basics: if the innovator’s patents are not being granted, then there are not patents to “link” to, and the linkage regime would be of little use.

Draft NMPA and CNIPA Rules on Patent Linkage Released for Public Comment

China’s National Medical Products Administration on September 11, 2020, in conjunction with the China National IP Administration  released the draft “Implementation Measures for the Early Resolution Mechanism for Drug Patent Disputes (Trial) (Draft for Comment)” (the “Draft Measures”) for public 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 announcement includes the text of the draft measures and an accompanying explanation.  Note that this drafting is occurring at the same time as the patent law is undergoing amendment, and the Supreme People’s Court had also  announced a plan on March 31, 2020 to issue a judicial interpretation on patent linkage (Provisions on Several Issues concerning the Application of Law in the Trial of Pharmaceutical Patent Linkage Dispute Cases 关于审理药品专利链接纠纷案件适用法律若干问题的规定).   

Some background: patent linkage is contemplated by the Phase 1 Agreement which calls for an “Effective Mechanism for Early Resolution of Patent Disputes.” (Sec. 1.11), and by the draft patent law amendments released in July 2020 (Art. 75).  SAMR’s earlier legislative plans  and CNIPA’s 100 IP project list for 2020 did not specifically call for enacting of linkage regulations.  The Phase 1 Agreement calls for “procedures for judicial or administrative proceedings and expeditious remedies, such as preliminary injunctions or equivalent effective provisional measures, for the timely resolution of disputes concerning the validity or infringement of an applicable patent claiming an approved pharmaceutical product or its approved method of use.” It does not notably, call for only a judicial or administrative system to implement the linkage regime, nor does it identify a requirement of “artificial infringement” whereby a generic company’s seeking to challenge an innovator’s marketing exclusivity would constitute patent infringement.  Some observers have thought that the recent experiment by the national appellate IP court combining an infringement and validity trial might serve as a useful judicial pilot for patent linkage determinations.

The Draft Measures refer back to the patent law for authorization, and also appear to govern both judicial and administration actions.  Although a detailed analysis will require further examination and review, the Draft Measures appear on first glance to be an effort by NMPA and CNIPA to anticipate proposed legislative changes by beginning the work on what might ultimately become an agency rule.  NMPA has issued many similar “implementing provisions” over the past several years.  A further clue in this regard is that comments are to be prepared on a form, which is then to be sent to NMPA, rather than to the State Council or Ministry of Justice – who normally prepare State Council regulations.  Chinese IP agencies have in the past announced draft rules or implemented them in advance of actual legislative changes, perhaps out of confidence in the ultimate passage of superseding legislation, but also, in my view, to advance the discussion on important issues and help advocate for particular positions.

Please send me your comments and any translation that you can share on this important document.

Update of September 16, 2020: Courtesy of King & Wood Mallesons, here is an English translation of the draft proposed rule for public comment.