Supreme People’s Court Releases New Patent JI For Public Comment

On June 1, the SPC released a new draft judicial interpretation on patent validity litigation for public comment (最高人民法院关于审理专利授权确权行政案件若干问题的规定(一)[公开征求意见稿]).  Comments are due within a month.  The Chinese draft is found here.  Here is a translation provided by the Anjie law firm.

The draft should be of interest to foreign companies, who frequently challenge final decisions of the Patent Review Board at the Beijing IP Court. According to data published by the Beijing IP court, in 2013, nearly 35% of the administrative patent cases involved foreigners.   According to the SPC’s report on IP litigation for last year (to be further discussed in a future blog) there were 872 such adminsitrative patent cases in 2017,a decline fo 22.35% from the prior year.

One provision directly addresses post-filing supplementation of data in chemical patents.  The draft seems to suggest that post filing experimental data will be accepted when there is an different technical effect for review that is  “directly and unambiguously” disclosed in the application.  On first read, this seems to be a narrower view than the revised patent examination guidelines which look to whether the data can be obtained from the original application (补交实验数据所证明的技术效果应当是所属技术领域的技术人员能够从专利申请公开的内容中得到的).   Western pharmaceutial companies reportedly still are having difficulties having post-filing data accepted by SIPO and the courts, despite several years of engagement on this issue.  Here is the relevant paragraph fromt the proposed JI:

datasupplementation If Please send me any comments on this provision or – even better – if any organizations or companies want to share your formal comments on the JI, I would be happy to post them here.  (rev. 6/21/2018 to include link to translation)

Draft of Data Exclusivity Rules Released by CFDA

CFDA just released on April 25, 2018 its Public Comment Draft of Pharmaceutical Data Exclusivity Implementing Rules  (provisional)  药品试验数据保护实施办法(暂行)征求意见稿 , available here (the web version is here) .  Comments are due by May 31, 2018 at yhzcszhc@cfda.gov.cn.

Article 5 proposes six-year data protection (which was China’s WTO commitment) for “innovative new drugs”.  “Innovative therapeutic biologics” are eligible for 12-year data protection (the previous May 2017 CFDA circular said 10 years).  The draft clearly encourages MNCs to include China in international multicenter clinical trials and to concurrently apply for market introduction in China (which can include other countries).  Full-term protection (6/12 years) is only available in this scenario.  Reduced Chinese data protection terms of one to five years may occur due to delays in introduction in China.  As a policy matter, this draft appears intended to help encourage conducting clinical trials in China as well as new product introduction into the Chinese market

Thanks to my friend and former student Jill (Yijun) Ge at Clifford Chance for bringing this to my attention and providing an initial review.  I welcome readers to submit English translations of this draft for me to post.

This is one of several exciting new developments in the pharma IP sector in China.  To help better understand the business implications of these changes, the Berkeley Center for Law and Technology is planning on hosting a half day roundtable discussion on pharmaceutical IP developments in China on May 30, one day before the comment period closes.  Seats are limited.  Please contact chinaipr@yahoo.com or mark.cohen@law.berkeley.edu for further information.

April 10 – 16, 2018 Updates

1.New Policies for  Innovative Drugs in China.  Premier Li Keqiang held an executive meeting of the State Council on April 12, 2018 to adopt a series measures to encourage the importation of innovative medicines into the Chinese market, to enhance intellectual property protection, and to lower the price of medications. The measures involve the exemption of cancer drugs from customs duty, reduction of drug prices, expedition and optimization of the process for authorization on the commercialization of imported innovative medicines, enhancement in intellectual property protection and quality monitoring.

The measures on enhancement in intellectual property protection includes the 6-year maximum data exclusivity period for innovative chemical medicines.  Further, a maximum of 5 years’ compensation of patent term will be offered for innovative new medicines which are applied for commercialization on domestic and overseas markets simultaneously (which appears to be a patent term extension system). See more discussion of the original CFDA proposals which these these appear to draw on here.  It’s still unclear how such policies will be implemented, The specific policies announced by the official in English is available here.

2.China to introduce punitive damages for IP infringements. According to an interview with Shen Changyu on April 12, China will soon introduce punitive damages for IP infringements. Shen said a fourth revision of the Patent Law will come faster than expected. “We are introducing a punitive damages system for IPR infringement to ensure that offenders pay a big price.” Shen also called on foreign governments to improve protection of Chinese IPR.

3.Commerce Blocks China’s ZTE from Exporting Tech from U.S.  The U.S. blocked Chinese telecommunications-gear maker ZTE Corp. from exporting sensitive technology from America.  According to a statement by the Commerce Department, ZTE made false statements to the Bureau of Industry and Security in 2016 and 2017 related to “senior employee disciplinary actions the company said it was taking or had already taken.”. ZTE did not disclose the factthat it paid full bonuses to employees who engaged in illegal conduct, and failed to issue letters of reprimand, the Department said.  Alleged export control violations had also been implicated in the NDA dispute between Vringo and ZTE involving settlement of patent claims, which were previously discussed here.

4.Judge Orrick Issues Anti-suit Injunction Against Huawei.  In the continuing transpacific saga of Huawei v Samsung, Judge Orrick of the N.D. of California issued an anti-suit injunction against Huawei’s implementing a Shenzhen intermediate court’s injunction against Samsung for the same patents in suit.  A good summary from the essentialpatentblog is found here.  The redacted decision is here.   One possible explanation for Huawei’s strategy might be that Huawei was trying to get a quick decision from Shenzhen, its home court, on a matter also involving an overseas litigation, such as Huawei obtained in the Interdigital dispute, and is also a common enough Chinese litigation tactic.  Such a decision might have tied Judge Orrick’s hand on at least the Chinese patents in suit, as well as on licensing behavior.  Judge Orrick in fact noted that “Chinese injunctions would likely force [Samsung] to accept Huawei’s licensing terms, before any count has an opportunity to adjudicate the parties’ breach of contract claims.”  (p. 17). 

Although anti-suit injunctions may be more common in common law jurisdictions,  it is wrong to assume that Chinese courts take a strictly “hands-off” attitude towards foreign proceedings.  One aggressive Chinese response might be to borrow a page from a Chinese (Wuhan) maritime court decision of last year, where the Chinese court issued an anti-anti-suit injunction, ordering a foreign ship owner to withdraw an anti-suit injunction in Hong Kong.  Commentators have also suggested that generally Chinese courts more commonly ignore these injunctions entirely.  Another approach was taken by the Shenzhen court in Huawei v Interdigital,  where the court imposed imposed damages on a US party seeking injunctive relief (an exclusion order) in a US Section 337 proceeding involving FRAND-encumbered SEP’s.   This did not constitute an anti-suit injunction, but rather “anti-suit damages.”  These actions may be based more on notions of judicial sovereignty than comity.  Judge Orrick for his part, did undertaken a comity analysis in rendering his decision, which is part of the non-confidential order he signed.

Probably the best approach however is for the parties to amicably resolve their disputes through arbitration or mediation. After all, even Huawei and Interdigital were ultimately able to settle their differences.

April 3 – 9, 2018 Updates

1.China pushes generics over brands with another round of new pharma policies. The General Office of the State Council on April 3rd, 2018 issued “The Opinion on Reforming and Improving Supply and Use of Generic Drugs” (国务院办公厅关于改革完善仿制药供应保障及使用政策的意见 国办发〔2018〕20号), to promote China’s generic pharmaceutical industry. The State Council said it would draw up new incentives aimed at encouraging the development and production of generic drugs, a move it said would help safeguard public health, reduce medical bills and spur innovation.

According to the document, CFDA and the National Health Commission will compile and actively update a drug list that encourages companies to produce generic versions. That list will include medications for rare diseases, major infectious diseases and pediatric treatments, as well as important drugs that are short in supply. Certain qualified generics makers are allowed to be designated as High and New Technology Enterprises (HNTE) with commensurate income tax reductions (see more about China’s practice of providing tax incentives to high tech enterprises here).

The State Council also said that with regard to IP protections, China will “strike a balance between the interests of patent holders and the public,” and would strengthen anti-monopoly enforcement. (Note that the recent combination of agencies involved with antitrust enforcement, IP with CFDA may offer increased opportunities for such antitrust enforcement). An “early warning” mechanism to prevent generic drug producers from infringing patents will be established. The policy also restates that China considers compulsory patent licensing (CPL) a bona fide option during public health emergencies or shortages of key drugs; however China has not explicitly implemented a CPL to date.

China is a major branded generics market and innovative pharma companies are heavily dependent on this market in the absence of a robust market and incentives for innovative pharmaceuticals. The Opinion also states that when there is a bioequivalence determination, the generic drug should be marked as a substitute for the innovative drug and release such information to the public. In the absence of special circumstances, no brand name could be written on the prescription.

With regard to intellectual property, the Opinion further states:

“…In accordance with the principle of encouraging the creation of new drugs and the development of generic drugs, research and enhance a system of pharmaceutical intellectual property protection that is compatible with China’s economic and social development level and industrial development stage, and fully balance the interests of drug patent holder and the public. Implement the patent quality improvement project and cultivate more core, original and high-value intellectual property. Strengthen the enforcement of anti-monopoly law in the field of intellectual property rights, prevent the abuse of intellectual property rights and promote the listing of generic drugs while fully protecting innovations in the pharmaceutical field. Establish and improve the patent early-warning mechanism in the pharmaceutical field to reduce the risks of patent infringement of generic pharmaceutical companies.”

按照鼓励新药创制和鼓励仿制药研发并重的原则,研究完善与我国经济社会发展水平和产业发展阶段相适应的药品知识产权保护制度,充分平衡药品专利权人与社会公众的利益。实施专利质量提升工程,培育更多的药品核心知识产权、原始知识产权、高价值知识产权。加强知识产权领域反垄断执法,在充分保护药品创新的同时,防止知识产权滥用,促进仿制药上市。建立完善药品领域专利预警机制,降低仿制药企业专利侵权风险.”

2. SIPO releases the 2017 China Patent Survey Report.  The State Intellectual Property Office (SIPO) recently released the 2017 China Patent Survey Report, which is the third time that the national patent-related survey results are publicized.

In 2017, the patent survey covered 23 provinces nationwide and was carried out concerning the valid patents and the patent holders who owned such valid patents at the end of 2016. The survey was launched in March 2017 and was completed at the end of 2017. 15,000 questionnaires about patent holders and 43,000 questionnaires about patent information were released. Over 85% of the questionnaires were returned.

According to the report, China’s overall environment of patent protection has been significantly enhanced, but still not to a level that is satisfied. More than 88% of patent holders believe that patent protection needs to be further improved in China. The report also notes that the emerging industries with strategic significance rely more on patents to gain their competitive edge and have better utilization of patents. Chinese universities have strong innovation capabilities, but their utilization rate of patents in 2016 (12.7%) was much lower than enterprises (59%). The lack of professional technology transfer team was considered to be the biggest obstacle for Chinese universities. The continuing focus on Chinese universities is odd, since universities should have a primary goal of information dissemination, not patent acquisition, but this is not necessarily a bad thing.

3. Chinese national convicted in US for stealing a valuable U.S. trade secret: Kansas rice seeds.  A scientist from China has been sentenced to 10 years in prison in the United States for stealing seeds of genetically modified American rice, the Department of Justice announced Wednesday.  The Chinese scientist Weiqiang Zhang is a U.S. legal permanent resident residing in Manhattan, Kansas. Zhang was convicted on Feb. 15, 2017 of one count of conspiracy to steal trade secrets, one count of conspiracy to commit interstate transportation of stolen property and one count of interstate transportation of stolen property. Zhang was working as a rice breeder at Ventria Bioscience, a biopharmaceutical company that creates genetically modified rice. According to trial evidence, Zhang stole hundreds of rice seeds from the company that had cost millions of dollars and taken years of research to develop and kept at home. In the summer of 2013, personnel from a crop research institute in China visited Zhang at his home in Manhattan.  On Aug. 7, 2013, U.S. Customs and Border Protection officers found seeds belonging to Ventria in the luggage of Zhang’s visitors as they prepared to leave the United States for China.

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.