Bolar例外条款源自美国1984年颁布的《哈奇-韦克斯曼法案》（Hatch-Waxman Act），不过在许可提前仿制的同时，为了平衡利益，《法案》同时规定了“专利链接制度”和“药品专利期限补偿制度” ，后两者却并没有在2008年被采纳。“2008年的修法可以说把这个政策取了一半，更倾向于仿制药。现在我们把另一半给加了进来。”李博士说。
A Boost To Innovation
The fourth revision of the Chinese Patent Law was adopted in October last year and will come into force on June 1. It’s been 12 years since the law was revised the last time. Legal experts say that the new law will have a significant impact on China’s pharmaceutical industry and predict its new compensation rules will give rise to a large number of patent lawsuits.
The Chinese Patent Law was first promulgated in 1984, and revised once every eight years in light of the changes of domestic and international economic environment and patent protection needs. Although the fourth revision came a bit late – it’s been 12 years since the third revision of the law in 2008 – the new law, which becomes effective in mid-2021, is expected to have big influence.
Speaking of the background of this revision, the evolution of the Chinese Patent Law should be understood in a broader context, says Sam Li, partner at Wanhuida Intellectual Property.
Li tells ALB that each revision of the Patent Law involves complex and interesting domestic and foreign backgrounds. In January 1992, the Sino-US “Memorandum of Understanding on the Protection of Intellectual Property Rights” was signed; thus the 1992 revision directly corresponds to the content of the MOU. “The major change in the 1992 revision is that pharmaceutical products are included in the scope of protection of the Patent Law, which has a positive impact on the development of China’s pharmaceutical industry.”
The second revision took place in 2000, “when China became a member of WTO. The purpose of the revision was quite simple, to make China’s patent protection consistent with WTO requirements. After this revision, the Patent Law was in general in line with international standards. In fact, it was since then that Chinese lawyers started to handle more cases in the patent practice area, in particular patent litigation cases. Then the law was revised the third time in 2008 in response to many issues discovered in domestic practices.”
“But the 2008 revision didn’t resolve all the disputed issues at that time. Therefore, the authorities started to work on the fourth revision right after the third one, which is finally accomplished in 2020,” Li says.
Talking about the purpose of the fourth revision, Long Chuanhong, vice president at CCPIT Patent and Trademark Law Office, tells ALB: “the domestic and international economic environment, innovation environment, and competition situation have under-gone significant changes since 2008. In 2014, the Standing Committee of the National People’s Congress inspected the implementation effect of the Patent Law, and discovered a number of problems, including low quality of patents, frequently-occurred infringements, insufficient capacity for the use of patents, and lack of strong public and market service capabilities. The purpose of this revision is to solve these problems at the institutional level.”
“The fourth revision of the Patent Law is the inherent demand arose after China’s economic development has reached a new stage.”
— Long Chuanhong, CCPIT Patent and Trademark Law Office
In his 2021 New Year’s address, President Xi Jinping reiterates that technological innovation is the core. Meanwhile, the era call for strong legal protection of innovation, and the newly revised Patent Law conforms to the status quo. “China is in a critical period of transforming its development mode, optimizing economic structure, and changing the leading force of growth,” Long says, adding that “the fourth revision of the Patent Law is precisely the inherent demand arose after China’s economic development has reached a new stage.”
Li believes that the fourth revision also needs to be seen in the global context, “in particular that quite a number of provisions in the new law correspond to those in the Phase One Trade Agreement between China and the United State concluded in January 2020. Therefore, this revision was also driven by the Sino-U.S. trade agreement. This actually shows that in addition to competition, there’s also communication and cooperation between the world’s two largest economies,” he says.
FEELING THE IMPACT
Both lawyers predict that China’s pharmaceutical industry will be most affected by the new law.
Long explains why the new law focuses on the pharmaceutical industry. For the pharmaceutical industry, “new drug R&D requires high investment, but faces challenges such as low output, high risk, low success rate, long R&D cycle, and a small number of patents; therefore, it heavily relies on patent protection.” He then further explains it with some specific data: in 2010, the R&D investment for a single drug was $2.5 billion, while the overall clinical trial success rate from 1995 to 2007 was only about 12% on average; and it can take up to 14.5 years from the discovery of a drug to obtaining the marketing approval.
“In a sense, there’ll be no pharmaceutical innovation without effective patent protection,” Long says.
In Li’s view, this revision actually completes the “proposition” regarding the protection of pharmaceutical patents which was not completely done in the 2008 revision of the law.
“One important change in the 2008 revision was to encourage the development of generic drugs by adding the Bolar exception clause,” Li says. According to the Bolar exception clause, enterprises producing generic drugs can make corresponding production and preparation before the patent term of patented drugs expires, in order to provide the information needed for administrative examination and approval. Since the purpose of such production and preparation activities is to obtain approval for marketing, not to actually sell the generic drugs, these activities are not deemed as infringements.
The Bolar exception clause originates from the Hatch-Waxman Act promulgated in the United States in 1984. However, in order to balance the interests while permitting in-advance production or preparation of generic drugs, the Act also includes the “patent linkage system” and the “extension of the term of patent protection for brand name drugs”, which were not included in the 2008 revision of the Chinese Patent Law. “It can be said that the 2008 revision adopted only ‘half’ of the policy with the intention of protecting generic drugs, now the other half has also been included in the new revision,” Li says.
Long further explains that the patent linkage system “aims to link the procedures for approving the marketing of generic drugs with patent infringement litigation, so as to resolve patent infringement disputes at the early stage during the marketing approval procedures.” That is, the patentee of a drug can file a lawsuit in the court, and the generic drug involved can be marketed only after the court rules that the generic drug does not infringe the patent right in question.
The system for the extension of the term of patent protection for brand name drugs can compensate for the patent validity period occupied by the time period for obtaining new drug marketing approval. According to the new law, “with regard to invention patents for new drugs that have been approved for marketing in China, the patent administrative department under the State Council shall, at the request of the patentees, compensate the paten-tees by extending the patent term,” Long says.
Given that the above-mentioned new systems are quite complicated, Li observes that “not only the Patent Law has been revised, but the drug administration, patent office, and courts have also actively introduced supporting measures and draft implementation rules.” Li believes that it is to meet the requirements of the Sino-U.S. Phase One Trade Agreement, and is also closely related to the supply-side reform of China’s pharmaceutical industry launched in 2015, that is to improve the competitiveness of generic drugs, and protect the healthy development of the market.
In terms of how to implement the new systems, Li believes that “each link needs to be refined.” He predicts that the new law will encourage the growth of pharmaceutical companies with competitive edge, even trigger a big wave of M&As in the pharmaceutical industry in China. “We expect to see exciting stories in the next few years,” Li says.
EXPECT MORE DISPUTES
Another major change in the new revision of the Patent Law is the change and addition of provisions on infringement compensation.
In Li’s opinion, the provisions of the old law on the damages can no longer provide strong protection in order to stimulate innovation.
Long points out in detail two changes in terms of infringement compensation. The first is that “the new revision includes a new punitive compensation system, which is, in the case of intentional infringement on patents and the circumstances are serious, the court may, on the basis of the amount of loss suffered by the right holder, benefits gained by the infringer, and patent license fee, decide the amount of the damages, ranging from one time to five times the aforesaid amount.” The second is that the upper limit of legal compensation is increased from 1 million yuan ($155,000) to 5 million yuan.
“Further, in order to solve the problem that it’s difficult to provide evidence in patent cases, the new law stipulates that if the right holder has made every endeavour to provide evidence, while the infringement-related account books and materials are mainly in the possession of the infringer, the court can order the infringer to provide evidence,” Long says, adding that “these measures are expected to fundamentally solve some long-standing problems in China in terms of patent protection, such as difficulty in producing evidence, high costs, and low damages.”
Speaking of the possible future impact of the new compensation rules, Li tells ALB that on one hand, the increase in statutory damages “bolsters the deterrence against infringements, especially to curb small-scale and low-cost infringements”; on the other hand, promoting the implementation of punitive damages can “stimulate the courts to make bolder attempts when determining the amount of damages.” For example, when determining the loss suffered by the right holder, there already exist many models in economics, which are expected to be applied to the court ruling process in the future.
Meanwhile, both Li and Long point out that the implementation of the new law will provide opportunities for more companies that value innovation to awaken the “sleeping” patents; but companies should try not to abuse the rights, and not to deliberately change their intellectual property departments from a “cost centre” to a “profit centre”. Long suggests that when an infringement occurs, “the company should be clear about the purpose of filing a lawsuit, and make a good litigation strategy beforehand.” Mean-while, “in order to make full utilization of patent intangible assets and realize the market value, companies can also promote transformation and application through non-litigation means, including licensing, transfer, construction of patent pools and other operating approaches.”
OPPORTUNITIES AND CHALLENGES
The new Patent Law will come into force in less than five months. What new opportunities are facing intellectual property lawyers?
The new compensation rules “give a large room for lawyers to take proactive actions. Lawyers need to work together with the parties concerned to find creative solutions, for example, when seeking compensation, what economic model can be used by the court as the basis for argument, so as to truly realize the legislative intent of the new Patent Law,” Li says.
“We are also discussing that when trying complex cases, we could hear infringement issues and compensation issues separately to give lawyers more room and time to prepare their arguments. In addition, according to the new evidence rules, evidence collection assisted by the court’s public powers will be greatly increased. All of these will give more room for the parties concerned and lawyers to take the initiative to work,” Li adds.
Long points to the opportunities in two other areas. One is in the pharmaceutical area, for example, the “patent linkage system. The system might lead to an increase in the number of invalid cases of drug-related patents which are already hot spots. Mean-while, the system provides for a new cause of dispute, and the judicial litigation and administrative rulings resulted therefrom are brand new businesses. Furthermore, the system for the extension of the term of patent protection also gives opportunities for law firms to provide their clients with services covering the whole life-cycle of a drug,” Long says.
The other opportunity is that “since the new Patent Law has revised the definition of design patents, and sets forth new provisions on the protection of partial designs, these all bring new business opportunities. The administrative and judicial practices related to partial designs are brand new to everyone, and there are a lot of new issues to be resolved step by step,” Long continues.
“The laws and legal systems are becoming increasingly complex and well-developed. It is a challenge that how to do a good job in a more developed legal environment.”
— Sam Li, Wanhuida Intellectual Property
“The law is playing an increasingly important role in economic and social life, while the laws and legal systems are becoming increasingly complex and well-developed. These are good things for lawyers,” Li summarizes. Needless to say, challenges coexist with opportunities – “more developed laws are facing more interconnected problems, for example, the Patent Law interconnects with the laws governing the pharmaceutical industry, compensation with investment and economic models, abuse of patent rights by the right holders with anti-monopoly, and the Patent Law with the procedural law and political development. It is a challenge that how to do a good job in a more developed legal environment,” Li says.
To contact the editorial team, please email ALBEditor@thomsonreuters.com.