More Policy Discussions on Pharma IP Reform

There appear to be some serious discussion of late regarding China using its IP laws to encourage more innovative drugs.  One significant advance was the recent amendments to China’s Patent Examination Guidelines to permit post-filing supplementation of data in certain circumstances.

In addition to this reform, there is also talk of China addressing issues involving data exclusivity, lack of patent term extension and patent linkage.

CFDA Commissioner Bi Jingquan noted some of these developments at a press conference at the time of the NPC Meeting on February 27,2017:

鼓励药品的创新。我们要研究鼓励药品创新的政策,完善药品专利链接和数据保护制度,并且实现境内外临床数据的国际互认,降低企业的研发成本。

We want to study the policy of encouraging drug innovation, improve patent linkage and the data protection system, and to achieve domestic and international clinical data mutual recognition, reducing the cost of R &

Commissioner Bi also made a similar point in an interview on October 31, 2016:

..要努力建立鼓励创新的药品审评审批制度,完善法规制度、政策措施、技术指南,以临床为导向重构药品审评流程,以审评为中心整合监管资源,提高审评能力和监管效率,研究临床试验管理、数据保护、专利链接等与创新密切相关的政策,以监管制度创新推动制药业转型升级和供给侧结构性改革。

efforts should be made to… research clinical trial management, data protection, patent linkage and other policies closely related to innovation, to promote regulatory innovation to promote the transformation and upgrading of the pharmaceutical industry and supply side of the structural reform.

One pharma company (  天士力) CEO also made a case for patent term extension at the NPC meetings, due to regulatory delays.

None of these pharmaceutical IP issues are totally new to China.  Hopefully, their endorsement by industry and government leaders will help speed their consideration  and implementation.

 

27th JCCT Concludes in DC: Many IPR-Related Outcomes

 

JCCTPanorama.jpg

The 27th Joint Commission on Commerce and Trade concluded in Washington, DC on Wednesday, November 23, 2016, in time for the Thanksgiving holidays in the United States.  Here is a link to the U.S. government fact sheet.  The following is my summery of IP-related issues –

Amongst the “core” IP issues the fact sheet notes that China agreed to “take further efforts to combat bad faith trademark filings.”  Regarding technology transfer, China advised that it is “actively conducting research on the Technology Import and Export Administration Regulations (2002) (TIER) to address U.S. concerns.”  Both of these statements are forward leaning although they admittedly lack specificity.  Regarding trade secrets protection, China agreed that “ in practice, trade secrets misappropriation may be committed by individuals, including employees, who may not be directly involved in the manufacture or sale of goods and services” , thus addressing the concern that the trade secret provisions of the anti-unfair competition law only address commercial undertakings (this issue was also addressed in the draft revisions of the AUCL that was released earlier this year).  China also announced that it plans to bolster other elements of its trade secrets regime, including with respect to  evidence preservation orders  and damage calculations.  Also on the technology side, China also confirmed that “the government has never asked the fund to require compulsory technology or IPR transfer as a condition for participation in [state semiconductor] Funds’ investment projects.”

Issues involving entertainment market access in China also got some attention.  Regarding music licensing, China committed to “issue a measure allowing foreign-invested enterprises to engage in online music distribution and revoking the requirement established by the Ministry of Culture’s 2009 Circular on Strengthening and Improving Online Music Content Examination.”  Regarding theatrical film distribution, which had been the subject of a settlement of a WTO case between the United States and China, China affirmed that it will “enter into consultations with the United States in calendar year 2017 in order to provide further meaningful compensation to the United States.”  Furthermore, the United States and China agreed that, as part of the calendar year 2017 consultations, they will seek to increase the number of revenue-sharing films to be imported each year and the share of gross box office receipts received by U.S. enterprises.

There are several outcomes which are cooperative in nature.  Regarding on-line IP issues, both sides committed to training of small and medium-sized enterprises as well as exploring the use of big data and other new information technologies to enhance the capability for combating infringement and counterfeiting online.  A program on copyright protection for live sports broadcasts is planned for 2017.  In addition, China committed to further study the feasibility of protecting the broadcasts of sporting events under its Copyright Law and the United States “welcomes further clarification” on this issue from the Chinese judiciary “at the earliest possible time.”    Other cooperative programs include ones on: “legal protections for product and service designs, and U.S. trade dress protections “; “criminal enforcement of trade secrets and counterfeit pharmaceuticals”; a joint conference in 2017 on criminal law, legislation and enforcement “to share experiences on recent trends in technologies, business models, and legal developments”; and a workshop on Judicial IPR Protection in China in 2017.

Often events happen on the margins on the JCCT which may not be fully reflected in JCCT outcomes.  There were two notable developments around the time of the JCCT affecting intellectual property rights.  One was the publication of the draft revisions of China’s patent examination guidelines, which address post filing data supplementation, software and business method patents.   Post-filing supplementation of data has been the subject of prior JCCT and bilateral commitments.  Another development involved de-linking of government procurement policies with indigenous innovation, which has been the subject of a recent State Council document that, according to the fact sheet, “requir[es] all local regions and all agencies to further clean up related measures involving linking the indigenous innovation policy to the provision of government procurement preferences….”

The JCCT has a long history, but has typically grown in scope and significance over the years as the US and Chinese economies have increasingly become interdependent.  This was the last JCCT of the Obama administration.  It will next be up to the Trump Administration to decide how to guide the JCCT to continue to play a useful role in bilateral trade relations.

The above are my personal, non-official observations.  All photos are by Mark A. Cohen.

JCCTwangyang.jpg jcctend

 

JCCT 2014 Winds Up – Joint Fact Sheets Now Released

JCCT2014

The 2014 JCCT was hosted by the US government in Chicago, Illinois this year. Here is a link to the updated English  fact sheet (released Dec. 29) (Chinese:第25届中美商贸联委会联合成果清单)  that is now a joint fact sheet.    Here is a summary of the IP accomplishments of this year’s JCCT according to the joint fact sheet:

One significant outcome involved “technology localization” which is the practice whereby China grants tax preferences based on where IP is owned or R&D is undertaken.  Here is what the fact sheet says about the outcome in this area:

The United States and China commit to ensure that both countries treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights.  ..Both China and the United States confirm that the government is entitled to take measures to encourage enterprises to engage in research and development and the creation and protection of intellectual property rights. 

In my personal estimation, the significance of this outcome is that China committed to not discriminating in awarding tax preferences based on where IP is owned.  To a degree this reflects footnote 3 of the TRIPS Agreement, which prohibits discrimination in “protection” of IP, which includes “matters affecting the use of intellectual property.”

Regarding service invention compensation, which has been important to readers of this blog, the JCCT commitment reflected the accomplishments of the 2014 Innovation Dialogue regarding freedom of contract:

The United States and China commit to protect the legal rights of inventors in respect of their inventions and creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws, commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between employers and inventors concerning inventor remuneration and awards.

Another JCCT outcome involved protection of trade secrets in government regulatory proceedings:

The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law…

The rather “hot” issue of geographical indications was also the subject of an “outcome” involving not extending GI’s to generic terms and establishing procedures to object to and cancel the registration of the GI.

There were also a number of cooperative commitments which will likely be a focus of various bilateral discussions and programs, including on technology licensing, bad faith trademark registrations, judicial best practices, data supplementation for pharmaceutical patents, IP in standards setting, sale of IP-intensive goods and services, and addressing on-line infringement.

The revised joint fact sheet also includes a joint commitment on abusive litigation:

Patent Protection and Bad Faith Litigations

  • The U.S. and China remain committed to promoting a robust intellectual property system that will incentivize future innovation and economic growth in both countries. Both parties are to strengthen cooperation to protect innovators from bad faith litigations, including to hold a joint seminar on IP licensing, so as to create positive conditions for innovation.

 

 

There were also outcomes that weren’t focused on IP but have significant IP implications.  One involved medical device and pharmaceutical market access, where China committed to accelerate approval procedures, which has long been hampered by inadequate resources at China’s Food and Drug Administration.  Another involved clarifying standards for antimonopoly law enforcement, including providing for greater due process and law firm access.  Still another commitment involved collaboration on law firm market access, which certainly affects foreign IP lawyers practicing in China.

In my personal experience, this 25th JCCT might equally be labeled JCCT v. 3.0.  The JCCT has changed to accommodate the growing complexity and importance of US-China trade.  In its first version (1983 to approximately 2001), the JCCT was as often a rather sleepy technical exchange mechanism.  I remember attending an early JCCT dealing with the enforcement of arbitration awards.  Another iteration (v 2.0) was under the leadership of Vice Premier Wu Yi after China’s WTO accession.  The JCCT then became a mechanism for negotiating trade issues with the Vice Premier chairing on the Chinese side and the Secretary of Commerce and US Trade Representative as formal co-chairs, but with an important added role for the Secretary of Agriculture.  Version 3.0 includes the same leadership structure, but with more involvement by industry and the host locality through various programs and symposia, joint fact sheets, and commitments to move negotiations changes in the negotiating calendar, including “a year of continuous work to address important issues facing our two nations.”

The above are my personal, non-official observations.

China’s Patent Domination?

Thomson Reuters just released a new report on China’s Innovation Quotient  (Trends in Patenting and China’s Trends in Global Innovation).  This is the fourth in a very useful multi-year series on Chinese patenting trends.

The report looks at Chinese domestic patent data to conclude that China has “risen in patent dominance” and, hence, innovation.  The report also notes that pharma is driving the patent boom.  China has nearly 80 percent of world share in patents for alkaloid/plant extracts, and around 60 percent of global share of pharmaceutical activity – general patents. However, the plant extract filings are held by thousands of individual inventors with a handful of patents each, rather than portfolios maintained by universities or corporate entities that would be seen stateside.  Many of these patents may also involve traditional Chinese medicine (TCM).  Low service invention rates, such as may be reflected in these patents,  may also reveal problems in patent quality.  A deeper analysis would need to correlate new patents with marketing approvals and actual patent maintenance and utilization rates.

The report also notes increasing numbers of forward-looking citations to Chinese data processing patents (1.17 times each).  This is far behind the United States (6.72 times forward looking citations), but exceeds South Korea and is close to Japan and Europe (p. 9).  To me this useful data suggests that the United States remains the source of pioneering innovations and corroborates Chinese notions that it has yet to achieve any breakthroughs in IT technology, despite it having become a manufacturing powerhouse and an overall increase in Chinese patenting activity.

The key weakness with this report is that it equates increases in patenting activity with “surge[s] in innovation.” (p. 6).  That assumption may apply in other countries, but it is less clear in China due to a number of factors including: low patent maintenance rates, patent subsidies and other government-supported market “distortions” such as awards to localities or enterprises, lower quality associated with the large number of non-service invention patents, lack of correlation with commercialization data, and the apparent disparity between low quality domestic patents and high quality overseas filings, amongst other factors.

The report also analyzes patent litigation data from the Ciela database (www.ciela.cn).   It properly notes that “Foreign plaintiffs in patent litigation win materially more often against domestic defendants than domestic plaintiffs do: a 75 percent win rate against a 63 percent win rate sinc 2006.”  However, the report does not underscore that this data – like the patenting data – needs to be treated critically. Foreigners are a disproportionately small percentage of the civil IPR docket.  Indeed, foreigners may only be filing a small share of cases out of concern for other risks of litigation, including low damages, government relations “costs,”difficulties of enforcing judgments, and difficulties in sustaining judgments on appeal.  This information might also be compared with data from the United States on foreign “win” rates .  In fact, the initial data that I collected showed that foreigners due worse on appeals in China than they do in the United States, and then they also do worse on appeal than they do in trials of first instance in China.

In an important but unrelated event, IPKey posted the presentations from its recent conference on IP and innovation.  The conference addressed many of the topics I outlined above, including the role of subsidies in China’s innovation strategies.

 

IPR Deliverables at the Strategic & Economic Dialogue

Xi Jinping's Opening Speech

Xi Jinping’s Opening Speech

The US and China recently concluded their Sixth Strategic and Economic Dialogue. IP-related outcomes involved such areas as: trade secret protection; cooperation with China’s judiciary; and software procurement. In addition there were other outcomes with IP-related deliverables in such areas as antimonopoly law and control over active pharmaceutical ingredients.

Excerpts from the Joint Fact Sheet are below —

Trade Secrets:

The United States and China affirm that they do not approve of trade secret theft for commercial advantage and that the protection and enforcement of trade secrets is essential to maintain fair competition and to develop an innovative economy. Both sides are to pursue criminal and other actions to deter the misappropriation of trade secrets, and make information available to the public about their actions, to the extent permitted by law. China has incorporated the protection and enforcement of trade secrets into its 2014 Priorities of the Nationwide Crack Down on Intellectual Property Infringement and Production of Counterfeit and Shoddy Products, published by the State Council on April 14, 2014. As its next step, China is to vigorously investigate and prosecute trade secret theft cases; ensure that civil and criminal cases are tried and the judgments are published according to law; and protect trade secrets contained in materials submitted by companies as part of regulatory, administrative, and other proceedings according to Chinese law. China is also to undertake publicity and education activities to improve the awareness of companies and the general public regarding the protection of trade secrets; to undertake studies and research on trade secrets law and related legislative and policy issues; and is to continue engaging in technical exchanges with the United States on these issues. China affirms that it is to continue prioritizing trade secrets protection and enforcement and is to take positive actions that are to be included in upcoming work plans.

Trade Secrets and Administrative Licensing:

…Further, the United States and China commit to strictly implement existing laws and regulations to adequately protect any trade secret or sensitive commercial information provided by the applicant during the administrative licensing or approval process, consistent with laws.

Judicial Cooperation:

Building on the prior successful exchanges between the United States and China at the Joint Commission on Commerce and Trade (JCCT) Intellectual Property Rights Working Group and at meetings among relevant agencies, the United States and China are to continue to promote exchanges between respective Intellectual Property (IP) agencies, including judicial and administrative bodies, on topics of mutual interest, such as enforcement, transparency, and specialized IP courts. These
discussions and any recommendations are to be reported to the JCCT and other bilateral meetings.

Software Procurement:

China confirms that the Deployment Standards for the Assets of the Office of General Software of Government Agencies is a measure designed to strengthen the administration of spending and implement the CPC Central Committee’s call for frugality. This measure was drafted with the intention to not have any purpose or effect of creating obstacles to international trade. The United States and China are to continue to engage on ways to address any obstacles to trade facing companies.

Other Outcomes with IP Implications

Antimonopoly Law:

The United States and China recognize that the objective of competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries, and that enforcement of their respective competition laws should be fair, objective, transparent, and non-discriminatory. China commits that its three Anti-Monopoly Enforcement Agencies (AMEAs) are to provide to any party under investigation information about the AMEA’s competition concerns with the conduct or transaction, as well as effective opportunity for the party to present
evidence in its defense.

Active Pharmaceutical Ingredients:

To advance the shared goal of ensuring access to safe and high-quality medicines for patients and protect supply chain integrity, to affirm the responsibilities of the manufacturers and regulators over the life-cycle of the drug to ensure product quality, and to fight against illegal actions to manufacture, distribute, and export counterfeit and substandard active pharmaceutical ingredients (APIs) and APIs used for counterfeit and substandard products, China commits, during the process of revising the Drug Administration Law (DAL), to develop and seriously consider amendments to the DAL requiring regulatory control of the manufacturers of bulk chemicals that can be used as APIs (“bulk chemicals”), including “export only” producers and distributors. To this end, China commits to hold a multi-ministerial work mechanism on a potential regulatory and enforcement framework to develop the oversight of bulk chemicals, and a roadmap for implementation, by the end of this year. The United States commits to continue to review its authority to exclude from consideration the import of bulk chemicals from firms that are not registered with China Food and Drug Administration (CFDA). In addition, the United States and China commit to deepen technical exchanges, trainings, and regulatory cooperation to enhance the safety of bulk chemicals traded between the United States and China, and to exchange views on the user fee programs at the upcoming pharmaceutical working group meeting of the JCCT.

There is also a separate US Fact Sheet which further elaborates on these deliverables.

Vice President Biden and Pharmaceutical Innovation

Innovative pharmaceutical companies have been facing a number of challenges in obtaining or maintaining patents in China. One of these issues has involved progressively more restrictive interpretations of Art. 26.3 of the Patent Law (enablement or sufficiency of data disclosure). This issue has been previously highlighted here (https://chinaipr.com/tag/enablement-requirement/). In addition to these challenges, pharmaceutical companies had been unable to supplement data, the Patent Examination Guidelines have been applied in a retroactive manner to impose new and unanticipated burdens on applicants who were previously granted patents, and the actual standard of sufficiency of data disclosure appears to have been raised in successive editions of the Examination Guidelines. Here are comparison charts that I prepared on some of the progressively higher burdens being imposed in the Examination Guidelines.

Now we have a statement in the Joint Fact Sheet from the Vice President on his recent trip to China (December 5, 2013) that addresses some of these issues. Of particular importance is SIPO’s public recognition as a result of the Vice President’s visit that its Examination Guidelines are governed by Article 84 of the Law on Legislation, which limits their retroactive effect. This can have important consequences beyond Article 26.3, and should require limit SIPO’s discretion in applying different versions of the Examination Guidelines to previously granted patents:

“China affirms that the Chinese Patent Examination Guidelines permit patent applicants to file additional data after filing their patent applications, and that the Guidelines are subject to Article 84 of the Law on Legislation, to ensure that pharmaceutical inventions receive patent protection. China affirms that this interpretation is currently in effect.”

See Joint Fact sheet: http://www.enewspf.com/latest-news/latest-national/latest-national-news/48457-joint-fact-sheet-on-strengthening-u-s-china-economic-relations.html?tmpl=component).