IP House’s Snapshot of Medical and Health Industry

IP House  has recently published a  Statistical Report on IP Cases in the Medical and Health Industry (December 2017) (Chinese language) covering 391 medical and health industry cases closed from January 1, 2016 to June 30, 2016. Among those cases, 158 were civil cases (67 patent and 91 trademark) and 233 were administrative cases (40 patent and 193 trademark).

As explained in further detail below, this time-limited snapshot of medical and health industry cases shows a relatively low utilization by foreigners of civil infringement remedies in both patent and trademark matters.  Foreigners, including Americans, did actively use judicial review procedures of patent and trademark office decisions.  The cases also show low damage awards for pharma infringement cases despite a high win rate.

Patent

  1. Civil Cases

There was a total of 67 civil patent cases in medical and health industry. Guangdong and Jiangsu were the top 2 provinces with close to 42% of the patent litigation. Among all the civil patent cases, around 74.6% were infringement cases, with the balance involving ownership and contract disputes. Infringement of utility model patents and invention patents were the top two claims of action at 24 and 19 cases respectively.   Amongst invention patents, 14 involved medical devices and 5 involved compound patent claims.

Foreigners were minority plaintiffs in these cases, accounting for only 6 out of 67 civil patent cases.  Only one case involved a US party.   Other countries included Japan (2), Norway (2) and Germany (1).   The foreign plaintiff win rate was 83.3% with average damage of 162,001 RMB, slightly higher than the overall winning rate of   82.1%. This “win rate” is approximately similar to win rates being generally report for patent infringement cases in China as reported in a recent article by Bian Renjun.   First instance (一审) infringement trials on average took took 226 days; second instance infringement actions  (二审) on average took 120 days.

Average damages in these actions was 439,896.2 RMB.   Of these, more than 95% of cases used statutory damage to calculate damages.  Two cases that awarded more than 1 million RMB in damages, which were calculated as lost profits.

The principle reason that plaintiffs lost was that the accused product was deemed “not within the scope of protection.” Invalidity was another reason.

  1. Administrative Cases

There was a total of 40 patent administrative cases in the medical and health industry, involving appeals of decisions of patent office decisions.   US entities were a party in seven of the fourteen foreign administrative cases.  This relatively high proportion of foreign administrative cases follows a pattern in judicial IP actions in China where foreign companies generally enjoy a  higher proportion of cases involving validity than in infringement matters.  Amongst all of these cases, the administrative judgment was vacated by court for 6 cases.

As for review period, action of first instance on average took 446 days, and actions of second instance took on average 248 days. Administrative cases took much longer than civil cases to review.  Amongst the administrative cases 72.5% (29 cases) involved drugs, and 27.5%, (11 cases) involved medical devices.  Furthermore, 33 cases involved invention patents and 7 utility model patents

Trademark

  1. Civil Cases

There was a total of 91 trademark cases, where Jiangxi and Guangxi were the top 2 provinces with most cases.  A majority of these cases involved trademark infringement (88). Plaintiff won 78 cases with a win rate of 85.7%. Trademark civil cases on average took 185 days until the first instance judgment and 106 days for second instance judgment.  Drug and health products constituted 81.8% of these cases, with average damages of 61,412.9 RMB.  All these cases used statutory damages, and only one case involved a foreign party (USA).

The relatively low level of trademark infringement cases may be due in part to the active roles played by SAIC in administrative trademark matters, including their handling of foreign related cases as well as administrative enforcement matters undertaken by CFDA and takedown activities by online etailers.  However, the concentration of cases in Jiangxi and Guangxi is difficult to explain, except perhaps due to inexact reporting procedures.

  1. Administrative Cases

There was a total of 193 trademark administrative cases. Among those cases, 62.2% or 120 cases were brought for review on refusal (驳回复审). Administrative judgements were vacated by court for 49 cases. On average, trademark administrative cases took 266 days for actions of first instance, and 113 days for action for second instance.  Foreign cases accounted for 75 of these administrative trademark cases with the US being the party for the most cases (22 cases), following by Japan and Germany.

In administrative trademark cases, when the applicant had been refused grant of the trademark, the courts primarily ruled on the basis that the same similar trademark was used in the same or similar type of product (87 cases).   Another frequent basis was that a trademark was deceptive, and led to consumer confusion regarding quality and origin.

Implications for the future:

This data, although limited, is suggestive of what a further landscape for pharma patent litigation will be if China institutes a patent linkage system.  To speculate: the data does not suggest that foreigners will rush in to assert infringement of their patents, but rather that foreigners currently play a limited role in infringement litigation.   The high foreign and domestic win rate on infringement matters also suggests that a linkage regime could therefore be very helpful in securing cost effective and timely protection of patent rights, even if this right may not be asserted with great frequency.  Finally, the data also suggests that foreigners appear relatively comfortable in pursuing challenges to administrative action in pharma IP matters, and therefor may ultimately be willing to avail themselves of a patent linkage regime administered by CFDA and the courts. I believe a greater factor in determining how much a linkage system may be utilized may be the development of new, innovative drugs that are patent protected by foreign or domestic entities.

Perhaps the readers of this blog have a different opinion –  we look forward to receiving them.

Written by Mark Cohen with the assistance of Emily Yang.