September 23, 2020 - Asia, Intellectual Property, Regulatory

China Patent Linkage Update: Codification and Rulemaking

On July 3, 2020, China’s National People’s Congress published the second draft of the latest amendment to China’s Patent Law (the “Draft Amendment”) for public comments, which were allowed to be submitted by August 16, 2020.  The Draft Amendment included proposed revisions to 19 articles from the first draft of the amendment published in 2019, and revisions to more than 30 articles in the current Patent Law.  Of significant interest to the Life Sciences industry among these revisions was the introduction for the first time of patent linkage provisions to the Patent Law (the “Patent Linkage Provisions”).  Below is a brief summary of the key Patent Linkage Provisions:

  • Where a patentee or an interested party believes that a drug that is the subject of a generic drug registration application (the “Generic Application”) falls within the scope of the relevant patent published on China’s approved drug patent information registration platform (the “Platform”), the patentee or the interested party may file a lawsuit before a People’s Court or apply for an administrative ruling by China National Intellectual Property Administration (CNIPA) within thirty days after the date of publication of the Generic Application by China’s National Medical Products Administration (NMPA).
  • If the patentee or the interested party fails to file the lawsuit or apply for the administrative ruling within the time limit, the generic drug registration applicant (the “Generic Applicant”) may petition that a People’s Court or CNIPA confirm that the drug does not fall within the scope of the relevant patent.
  • If the People’s Court or CNIPA issues an effective adjudication or ruling within nine months after accepting the filing by the patentee or the interested party, with respect to a chemical drug’s Generic Application that has passed technical evaluation, NMPA may decide whether to grant approval of the Generic Application based on such adjudication or ruling.

The legislative bases for the Patent Linkage Provisions were two opinions jointly issued by the General Office of the Chinese Communist Party Central Committee and the General Office of the State Council: the Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices, issued in October 2017, which provided that “a system linking drug evaluation and approval with drug patents shall be explored and established to protect the lawful rights and interests of patentees, reduce the risks of patent infringement by generic drugs, and encourage the development of generic drugs” (the “First Opinions”), and the Opinions on the Strengthening of Intellectual Property Protection, issued in November 2019 (the “Second Opinions”).  The most recent push for the legislative development has been attributed to the signing of the Economic and Trade Agreement Between the Government of the People’s Republic of China and the Government of the United States of America on January 15, 2020.

The Patent Linkage Provisions have provided a procedural framework and have set the stage for NMPA and CNIPA to work together and jointly promulgate detailed regulations that are intended to address many questions left unanswered by the Patent Linkage Provisions.  In its April 2020 plan for the advancement of implementation of the Second Opinions, CNIPA set a goal to “establish an early dispute resolution mechanism for drug patents” by the end of October 2020.  Since then, NMPA and CNIPA have had many discussions with legal experts and experts in the fields of patent and drug administrations, and industrial representatives and associations, resulting in the publication for public comments on September 11, 2020 of the draft Trial Implementing Methods for Early Resolution of Drug Patent Disputes (the “Draft Methods”).  Public comments on the Draft Methods are allowed to be submitted by October 25, 2020.

This article will analyze the Patent Linkage Provisions in light of the Draft Methods, focusing on questions left unanswered by the Patent Linkage Provisions and how those questions may have been addressed by the Draft Methods.

Constructive notice to patentee and requirements of patentee to take advantage of the constructive notice

The Patent Linkage Provisions are silent on the obligation of the Generic Applicant to notify the patentee of the branded drug.  Both the First Opinions and the Relevant Policies on Encouraging Drug and Medical Device Innovation and Protecting Innovators’ Rights (Draft for Public Comments), published by NMPA’s predecessor on May 12, 2017 (the “Policies”) have placed the burden on the Generic Applicant to notify the patentee of the Generic Application.  The Policies further required the Generic Applicant to declare that the subject drug of the Generic Application does not infringe the patentee’s patent.  The Generic Application and the Generic Applicant’s declaration would constitute constructive notice to the patentee, but whether the patentee can take advantage of such constructive notice would heavily depend on how much information is included in such constructive notice. 

The Draft Methods are consistent with the constructive notice mechanism, and have confirmed that the constructive notice will be in the form of declarations by the Generic Applicants.  Specifically, the Draft Methods require the Generic Applicant to submit, together with the Generic Application, a declaration with respect to each relevant branded drug patent registered on the Platform.  Both the Generic Application and the corresponding declaration(s) will be published by NMPA.  The declaration may be in one of four types:

  • That the Platform does not include any relevant branded drug patent information;
  • That the relevant branded drug patent registered on the Platform has expired or has been declared invalid;
  • That the Platform includes relevant branded drug patent, and the Generic Applicant promises not to market the generic drug prior to the expiration of the patent; or
  • That the relevant branded drug patent registered on the Platform should be declared invalid, or the generic drug does not fall within the scope of the patent.

The Generic Applicant is not obligated to make any declaration with respect to a branded drug patent that is not registered on the Platform, and the Draft Methods have made it clear that the early dispute resolution mechanism does not apply to patents not listed on the Platform.  Therefore, in order to take advantage of the constructive notice and the early dispute resolution mechanism offered by the Draft Methods, an obvious task for the branded drug patentees/branded drug registration applicants is to register the relevant branded drug patents on the Platform.  The Draft Methods have provided detailed requirements on the timing of the registration (at the time the branded drug registration application (the “Branded Application”) is submitted, within 30 days after publication of the issuance of the patent during the pendency of the Branded Application, or within 30 days after information on a patent registered on the Platform is changed), and the types of drug patents that are registrable on the Platform.  Specifically, (i) chemical drug patents registrable on the Platform include patents directed to active pharmaceutical ingredient (API) compounds, compositions comprising APIs, and their medical uses, (ii) biologics patents registrable on the Platform include patents directed to the sequences or structures of the biologics, and (iii) traditional Chinese medicine (TCM) patents registrable on the Platform include patents directed to TCM compositions, TCM extracts, and their medical uses.  Branded drug registration applicants or patent owners are obviously encouraged to register as many registrable patents on the Platform as possible, so that they may be included in the Generic Applicants’ declarations that constitute constructive notice to the patentees and serve as basis for the patentees to file a lawsuit or apply for an administrative ruling against the Generic Applicant.

30-day time limit and its preclusive effect?

The legal significance of the 30-day time limit provided by the Patent Linkage Provisions remains to be clarified.  For example, will the patentee be precluded from filing patent infringement lawsuit against the Generic Applicant later during the pendency of the Generic Application in the event the patentee fails to file the lawsuit or initiate the administrative proceeding against the Generic Applicant within the 30-day time limit?  Will the fact that the Generic Applicant petitions or fails to petition that the Court or CNIPA confirm that the generic drug does not fall within the scope of the relevant patent make a difference in any potential preclusive effect?

The Draft Methods extended the 30-day time limit set forth in the Patent Linkage Provisions to 45 days, a discrepancy that will ultimately need to be resolved, and clarified that in the event the patentee or the interested party fails to file the lawsuit or initiate the administrative proceeding within the 45-day time limit, NMPA can make a decision whether to approve the Generic Application based directly on the conclusion of the technical evaluation and the Generic Applicant’s declaration(s).  This does not answer the preclusive questions discussed above.  In addition, the Draft Methods require that the patentee or interested party submit to NMPA the notice of acceptance of the lawsuit or the administrative proceeding within 10 days after such notice is issued by the People’s Court or CNIPA, respectively, but do not spell out any consequences of failure to submit the notice within the 10-day time limit.

CNIPA’s role in resolving patent disputes

The Patent Linkage Provisions provide that the patentee may file an infringement lawsuit against a Generic Applicant or seek an administrative ruling on the same issue by CNIPA and, failing that, the Generic Applicant may petition the Court or CNIPA to confirm that the generic drug does not fall within the scope of the relevant patent.  These provisions seem to empower CNIPA to both adjudicate infringement and declare non-infringement to the same extent a People’s Court is empowered to do.  This seems to be an unorthodox legislative move.  The issue of empowerment aside, CNIPA proceedings do not necessarily take a shorter time than Court proceedings, and the Patent Linkage Provisions will inevitably prolong the entire adjudication process in the event CNIPA’s rulings are appealed to the Courts, which often occurs.  It is worth noting that under the Policies, filing for a CNIPA ruling of infringement upon notice of a Generic Application and the Generic Applicant’s non-infringement declaration is not an option.

In addition, the Patent Linkage Provisions are silent on CNIPA’s established jurisdiction over the validity of issued patents.  It is unclear whether the Generic Applicant’s right to petition that a People’s Court or CNIPA confirm that the drug does not fall within the scope of the relevant patent includes the right to seek invalidation of the relevant patent or is limited to seeking a declaration of non-infringement.

According to the Draft Methods, one of the outcomes of the Court or CNIPA proceeding initiated by the patentee or the interested party is the invalidation of the relevant patent.  It appears that the Draft Methods have already contemplated a prolonged battle, perhaps in multiple venues, between the patentee and the Generic Applicant, such that a proceeding by which the patentee seeks to enforce its patent rights may ultimately result in the invalidation of the patent.

Waiting period and NMPA’s role

According to the Patent Linkage Provisions, NMPA may decide whether to approve a chemical drug’s Generic Application based on the People’s Court’s adjudication over the patentee’s filing of the infringement lawsuit or CNIPA’s ruling in the administrative proceeding.  Such provisions appear to be an attempt to regulate NMPA’s conduct by way of the Patent Law, and are inconsistent with the Policies, which provided that NMPA could prescribe an approval waiting period of up to 24 months after receiving proof of the filing of the patent infringement lawsuit.  It is impractical to expect the People’s Court or CNIPA to render any enforceable adjudication or ruling of infringement or non-infringement within nine months, so an obvious question is: What if no adjudication or ruling is made within the nine-month waiting period?  In addition, the Patent Linkage Provisions are silent on whether the technical evaluation of the generic drug will be suspended during the nine-month waiting period.  The Policies are clearer and consistent with the Opinions in both aspects, providing that NMPA may approve the Generic Application in the event the People’s Court fails to find infringement within the 24-month waiting period, and that NMPA will not suspend the technical evaluation during such period.  It is also interesting to note that the 9-month waiting period apparently only applies to chemical drugs, and the Patent Linkage Provisions are silent on how long a waiting period, if any, is applicable to biologics.

The Draft Methods have maintained the 9-month waiting period for chemical generic drugs, starting from the date the People’s Court or CNIPA accepts the lawsuit or the administrative proceeding, respectively, and clarified that technical evaluation of the chemical generic drug is not suspended during the 9-month period.  The Draft Methods obligate the patentee or interested party to submit the adjudication of the Court or the ruling of CNIPA to NMPA within 10 days after receipt of the adjudication or ruling.  In the event the adjudication or ruling is that the Generic Application falls within the scope of the relevant patent, NMPA will suspend the administrative approval process of the chemical drug’s Generic Application until 20 business days prior to the expiration of the relevant patent.  In the event the adjudication or ruling is that the Generic Application does not fall within the scope of the relevant patent or that the parties settle, or the relevant patent has been declared invalid, the Generic Application will continue its administrative approval process.  The Draft Methods also clarified that in the event the Court or CNIPA has not made a valid adjudication or ruling and the parties have not settled, the chemical drug’s Generic Application will continue its administrative approval process.  However, if later during the pendency of the Generic Application an adjudication or ruling is made that the Generic Application falls within the scope of the relevant patent, the administrative approval process will be suspended as if the ruling was made within the 9-month waiting period.  Any suspension of the administrative approval process, whether within or after the 9-month waiting period, may be lifted in the event the original Court adjudication or CNIPA ruling has been overruled by a final Court order.

It is worth noting that the Draft Methods have provided no waiting period for the Generic Applications of biologics and “same name, same prescription” TCMs, and state that NMPA can make its approval directly based on the conclusion of the technical evaluation.  In the event a patentee or interested party initiates a Court or CNIPA proceeding, the adjudication or ruling from such proceeding is that the biologic or TCM Generic Application falls within the scope of the relevant patent, and the adjudication or ruling is made during the pendency of the Generic Application, NMPA will require as part of its marketing approval (assuming technical evaluation has been passed) that the biologic or TCM may be marketed only after the expiration of the relevant patent.

Other noteworthy provisions of the Draft Methods in favor of Generic Applicants

According to Articles 9 and 10 of the Draft Methods, the patentee/interested party’s right to initiate a Court or CNIPA proceeding seems to be limited to the circumstance where the Generic Applicant has submitted a declaration that the relevant branded drug patent registered on the Platform should be declared invalid, or the generic drug does not fall within the scope of the patent, i.e., the fourth type of declaration discussed above, and in the event a declaration of the first or the second types is submitted by the Generic Applicant, the corresponding Generic Application will go through the regular administrative approval process and be approved based on the conclusion of the technical evaluation.  This apparently prejudices against the patentee because it is possible that a declaration of the first or the second types is submitted by the Generic Applicant negligently, and the Draft Methods only seek to punish against intentionally fraudulent declarations filed by the Generic Applicant, where the punishment is the prohibition for one year of submitting the same type of Generic Application and not any remedy to the patentee.  In the event a patentee thinks that a generic drug infringes its relevant patent right after the generic drug has received marketing authorization, the patentee may still file infringement lawsuit.  The marketing authorization will not be revoked by NMPA, however, and its validity is not affected by the infringement lawsuit.

The Draft Methods incentivize the first approved generic drug that has successfully challenged a branded drug patent by giving the generic drug a 12-month market exclusivity period since its approval, during which time NMPA will not approve the marketing of any generic drug of the same type, provided that the period of market exclusivity does not go beyond the challenged patent’s expiration date.  NMPA will not suspend the technical evaluation of other Generic Applications of the same type as the generic drug during its market exclusivity period, but will suspend the administrative approval process of the other Generic Applications until 20 business days before the expiration of the market exclusivity period.

With the proposed codification of the Patent Linkage Provisions into the Patent Law and the proposed rulemaking by NMPA and CNIPA, China’s patent linkage legislation is moving full steam ahead.  The Supreme People’s Court also hopes to issue its judicial interpretation on trials involving drug patent linkage issues by the end of 2020, hopefully further addressing questions left unanswered by the Patent Linkage Provisions and the Draft Methods.  China’s patent linkage legislation and rulemaking are happening at multiple governmental branches, and certainly worthy of close monitoring and careful analysis.