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.

 

 

 

 

Justice Tao Kaiyuan and the Role of the Judiciary

MadameTaoMichelleLee

Justice Tao Kaiyuan of the Supreme People’s Court, who had been to the United States in 2015 delivering important speeches on rule of law, has recently published an article on “Giving Full Play to the Leading Role of Judicial Protection of IP Rights“ 充分发挥司法保护知识产权的主导作用”(Dec. 31, 2015).  The article is receiving considerable attention in China, as it was published by Qiu Shi, 求是(“Seeking Truth”), a bimonthly political theory published by the Central Party School and the Central Committee of the Communist Party of China.  The publication of the article appears to be timed with the release of the recent draft of the Patent Law Amendments, comments for which were due the day after publication (January 1).  The proposed patent amendments would strengthen the role of administrative agencies in IP enforcement, to the possible detriment of the judiciary.

The author of the article is no less important than its contents.  Madame Tao knows patents.  She was the former Director General of the Guangdong Patent Office and therefor once had “vertical” reporting responsibility to SIPO (see picture above taken by me of Madame Tao [on the right] with USPTO Director Michelle Lee taken in 2015).  Although the article was authored in her name, many in China were speculating that the article was approved by higher authorities – perhaps Zhou Qiang, the President of the Supreme People’s Court, with Madame Tao serving as an appropriate messenger.

The concerns about this draft on patent law enforcement are not that different from those in the earlier (2012) draft when I blogged in “Why the Proposed Amendments to the Patent Law Really Matter … and Maybe Not Just For Patents” that “the changes strike me as a rather sudden about face in China’s march towards better civil protection of IP.” Madame Tao takes this several steps further.

Madame Tao’s article is divided into three parts: (1) The important meaning of giving full play to the leading role of the judicial protection of IP rights; (2) The key factors that constrain the leading use role of judicial protection of IP; and (3) Key measures in giving full play to the leading role of judicial protection of IP rights.   Here are some of the points she makes:

Madame Tao refers back to the National IP Strategy and related documents, such as the Third Plenum, the NPC’s decision to establish IP courts, and the Action Plan for the National IP Strategy to underscore the well-established, leading role of the courts in enforcing IP.

Her article compares certain key elements of judicial protection versus administrative protection.  In her view, judicial enforcement can curtail abuses of administrative enforcement.  It also has other advantages.  It has clear rules.  It is transparent.  It can help establish guidance for businesses by establishing clear standards for similar disputes (a possible nod to efforts at developing case law/guiding cases).  Moreover, civil enforcement comports with notions of private ownership and the development of markets and creation of a fair competitive environment in China.  Madame Tao especially underscores the role of the courts in supervising administrative agencies.  As I have noted, this is also an important part of the foreign IP docket in China.  Madame Tao states that the judiciary should also actively guide administrative law enforcement in investigation and review of evidence, and determination of infringements.

Madame Tao also calls for greater coordination in administrative and judicial roles in IP protection, noting that administrative enforcement played an important leading role in the beginning of China’s IP enforcement environment.  Administrative enforcement has “in a short time met the need for building effective IP protection.”  However, the “growing maturity” of the judicial system has caused increasing problems in the coordination process.

Madame Tao also calls for specific policy initiatives, many of which are already underway.  She calls for greater deterrent civil damages, including by revising patent, copyright and unfair competition laws based on experience of the trademark law revisions.   She also suggests that a discovery system should be considered.  Civil and criminal divisions in IP should be unified.  She suggests that a specialized national IP court should be researched and promoted, and she calls for the unification of technical appellate cases, perhaps like the CAFC.  She also notes that the division between infringement and validity determinations in the courts in patents and trademarks should be addressed, and calls for improvements in the availability of provisional measures.

She calls for greater improvements in judicial protective measures, including in obtaining evidence and the convenience and effectiveness of remedies.  Among other specific judicial reforms, she also suggests exploring intellectual property case law, improving judicial accountability and developing judicial professionalism.  Finally, Madame Tao also calls for expanding international awareness by IP judges to better protect national interests and to increase China’s IP influence.

Altogether, a tour de force.

Here’s what her speech looks like in a machine-translated wordcloud:taowordcloud

 

 

 

Withering Problems in China’s Patent Drive? – The Latest from SIPO

SIPO’s six month report on patent filings, available on line in China shows some surprising data for the first six months of 2014.

Regionally, Jiangsu and Beijing are in the number 1 and 2 slots in terms of patent applications.  Both regions showed continued growth (slide 3).  Guangdong, however, showed a slight decline.  Anhui, Guangxi and Guizhou showed the most increase in patent applications in percentage terms (70-90%).  Interestingly, while invention patent applications increased by about 4% from domestic applicants, foreign applications were down about 11% (slide 9).  In general, increases in  Chinese-origin invention patents applications in China were not offset by decreases in utility model and design patents, with an overall decrease of 8 percent for Chinese versus a 2% overall increase for foreigners.

In terms of patent grants, amongst foreign countries, the United States showed an increase of 12% from the same period last year, while Japan and Germany (number 1 and 3, respectively amongst foreign filers), both showed declines of about 4.5%, as reflected in the following chart:

foreignpatentrates

In this chart, the orange and blue bars represent 2014 and 2013 respectively.  Japan, the USA , Germany, Korea and France are the first countries listed to the far left on the x axis.    The y axis reveals the number of granted invention patents in 2014.  The chart shows that patent grants were down for all three top foreign applicants for the first half of 2014 (by the percentages at the top of this graph). However, this could be due to drops in applications from several years prior.

The problem of low maintenance rates for Chinese-source patent applications also remains acute.  As I have previously blogged, China already shows lower patent maintenance rates than other IP-5 jurisdictions.  This report makes it clear that Chinese filers appear to be the predominant parties in China who prematurely curtail patent protection (p. 15).

patentmaintenance

The green line represents domestic patent filers; the orange line is foreign patent filers.  The x axis shows the year of the patent, through its 20th year, while the y axis shows percentage of patents filed.  The close-up image in the upper right corner is of SIPO’s own preparation.

The report also identifies Beijing as the city with the highest density of patents per capita (nearly 5,000 per million people).  Shanghai and Tianjin follow.  This further underscores that innovation is an urban phenomenon (page 17).  Guangdong also remained the main filer of PCT applications with nearly 6,000 applications — outpacing second place Beijing with about four times the number of applications (p. 25).

Some of the more dramatic changes are in utility model patents and design patents.  UMP applications from China dropped by 7.5% and design applications dropped by 28%.  The most dramatic drops were in non-service applications for UMP’s and in service inventions for designs (24.5% and 34.9% respectively).  However, foreign applications for UMP’s and designs continue to grow from a modest base (p. 29).   Non-service inventions still play a large role in China’s domestic utility model and design patent application portfolios (about 26.4% and 50.7% respectively).

 

In summary, the data shows continuing dramatic changes in China’s patent system, including shifting trends amongst domestic and foreign filers.  My guess is that the report shows the impact of an increased focus on invention patents by the government, and a decline in subsidies for utility model and design patents in key patenting regions.  The increase in service inventions for UMP’s is significant as it may show a shift to patenting in UMP’s for enterprises that actually practice the invention.   The rapid increase in regions like Anhui may be due to active government support in those regions.  The drops in patent filings for foreigners are surprising considering China’s continuing economic growth.  The report also underscores a predictable rise in China’s cities as centers of patenting activity.  Although individual PCT filers are not identified, the growth in PCT filings is probably to continued growth of companies like Huawei and ZTE from Guangdong.

December 11 in Beijing – International Program on Utility Model Patents

On December 11, SIPO, USPTO and other patent offices (Japan, EPO, Germany and Korea)  as well as companies and their counsel will be participating in an exciting international utility model program at the Changfugong Hotel in Beijing.  The free-of-charge program will cover both the protection and enforcement of UMP’s.  China’s UMP system has been the subject of some controversy due, in part, to its exponential growth, the vast predominance of Chinese ownership of UMP’s,  and the large damages that have sometimes been awarded in favor of Chinese patentees. This program will help shed light on the use (and abuse) of UMP’s, and compare China’s systems with those in other countries.

SIPO’s 2012 “Report on the Situation Regarding National Patent Strength”

SIPO’s recently released its  “Report on the Situation Regarding National Patent Strength”, (Chinese: “2012年全国专利实力状况报告”)This report provides a glimpse into the various measures that SIPO uses to quantify how local patent offices are being rated by SIPO.  Knowing these data can be very useful in understanding what the incentives are for evaluating innovation and patent protection in China’s various localities and, accordingly, can help in how a foreign company approaches a local IP office to better enlist their support.  In theory, it should also help in identifying the regions that are affording better patent protection in China to foreigners. 

 The report  is intended to be based on certain objective, common, sustainable, and easy to obtain data.  Some of the data that is used are:

(a)    Number of invention patents in effect held per capita.  This is the first item listed by SIPO and it does not include utility model and design patents, which are not substantively examined. 

(b)   Other patent data: including Patent Cooperation Treaty patent filings; patent maintenance rates; patent abandonment rates (as a negative factor).

(c)    Type of patent applicant data: service invention patent rates; patents filed by large and medium sized enterprises.

(d)   Commercialization data: ratio of R&D to patents filed; hypothecation of patents; licensing contracts for patents; patents that are being used in commercial production (based on a ratio of new products from high tech industries and patent applications from high tech industries); and awards for high quality patents.

(e)   Litigation and enforcement data: First instance patent cases in the courts; settlement rates for patent litigation; data on patent “passing off”; data on cross-boundary cooperation on administrative patent disputes; data on human resources in administrative patent enforcement, use of administrative complaint lines, and expenses for special enforcement campaigns.

(f)     Legal and administrative structure: SIPO is trying to encourage local patent offices to be active and independent of other agencies, such as Science and Technology Bureaus, in which some local patent offices are located.  In addition, SIPO is encouraging promulgation of local legislation on patents, including incorporation of the national IP strategy and economic plans into local level policy and actions.

(g)     Cooperation with SIPO on national projects: including recognition as a model locality for IP protection, or the presence of model enterprises for IP protection.

(h)   Services and civil society: presence of in-house IP departments in companies; presence and availability of Patent Agents; use of electronic filing mechanisms for patents and electronic information services; presence of public service organizations for patents (typically government-organized non-governmental organizations); participation in SIPO training programs (including distance learning programs).

The overall leaders in this statistically-intensive report: Guangdong, Beijing, Jiangsu, Zhejiang and Shanghai (in that order).   Comparative data to last year and to individual benchmarks are also provided.  These five leaders are not necessarily the leaders in other areas, including those that may be of concern to foreigners.  For example, in IP protection, the leaders were: Guangdong, Shandong, Hunan, Sichuan and Jiangsu.  Beijing and Shanghai were a more distant 11th and 16th place, respectively.  Beijing, Guangdong and Shanghai were also the top three jurisdictions for IP services.

The report should be used cautiously by foreign investors and rigthsholders as there is much  of concern to foreigners that is not utilized in the report, for example: numbers of foreign-related civil or administrative cases, availability of provisional measures, receptivity and accessibility of local complaint centers (including trade fairs) to  foreign complainants, availability of expert foreign language lawyers and service providers,  presence and engagement  of foreign-related civil society (INTA, QBPC, RDPAC, AmCham’s, etc.),  existence of policies that on their face discriminate or support foreign rights holders ,  availability of criminal remedies for IP infringement,  existence of “notorious markets” for IP infringing products, and evaluation of the locality by other reports on IP protection (e.g, annual Chamber reports, Section 301 reports).  In addition, as indicated above, the priorities that SIPO assigns to different factors would be different for foreigners.  Nonetheless, this is a useful report that can help foreigners in determining how “patent-friendly” different jurisdictions in China are, and can also assist in compiling a more narrowly focused report that highlights issues of concern to foreigners regarding IP protection in different regions of China.  

I also personally commend SIPO for its transparency in making this available on line.

Judicial Trends in Beijing … and Countercyclical Trends

The Beijing Intellectual Property Institute, which is run by former Judge Cheng Yongshun (www.bipi.org)  reports the following data on the Beijing IP litigation for the first half of 2012: Continue reading