Underpinned by the governmental support, the pharmaceutical industry is booming in China, offering some promising business opportunities for the European SMEs. However, despite the improvements in Chinese IP laws and regulations, IP infringements are still commonplace in China. Thus, European SMEs wishing to do business in the pharmaceutical sector in China need to pay attention to IP issues. Today’s blog post discusses IP protection measures in the Pharmaceutical industry, focusing especially on patents and trade secrets as the main IP protection measures in the Pharmaceutical Industry.
IP Protection in the Pharmaceutical Industry
China is one of the largest pharmaceutical markets in the world. Its development is high on the government’s reform agenda, as they seek to provide stimulus and intensify research and development (R&D) activity. This, coupled with enhanced health awareness among a rapidly growing patient pool, makes the country an increasingly attractive market for foreign business. The China IPR SME Helpdesk explains the current intellectual property regime in China, and says that better enforcement will create a more secure environment that can attract more R&D and stimulate higher levels of innovation in China’s pharmaceutical industry.
The level of intellectual property (IP) enforcement in China has constrained pharmaceutical companies’ efforts in carrying out R&D activities in the country. However, China’s Patent Law is soon due to be revised, and is expected to foster greater innovation and slow the proliferation of counterfeit drugs. A growing number of companies have become increasingly attracted to having an R&D center in China, as a local presence provides generally lower cost base and favorable tax rates.
China’s Patent Law protects technological innovations for active pharmaceutical ingredients, drug combinations, pharmaceutical formulations, preparation processes of pharmaceutical products, new medical indications of a known drug and medical devices, among others. Most pharmaceutical innovations are protected by invention patents which provide 20 years’ protection.
A pharmaceutical company must continuously monitor the patent status of the related subjects of its own products and design a R&D strategy predicated on filing a series of patent applications around its own innovations. It seems that the antibody drug Genetech could be a good example of an effective monitoring strategy, with over 60 Chinese patents/applications protecting its preparation processes, and its combination with other drugs, among other innovations.
Research and development for new drugs is risk-intensive and costly. Before carrying out R&D in China, companies should conduct ‘freedom to operate’ (FTO) patent research to ensure that there is no risk of infringing another party’s patent rights or ongoing patent application.
To assess novelty and inventiveness, companies must perform a patent search before filing the application through a local patent agency. A patent search should be exhaustive, covering all scientific and chemical aspects and possible variants. This typically includes a drug’s Chinese general name and trade name, the structure of the compound, possible variants in structure, the corresponding general formula, medical use, combination use and preparatory method.
Patentable subject matter includes the general formula of a compound, its composition with a combination of two agents, its release control formulation, sequences of amino acids and sequences of DNA/RNA, preparation processes. However, treatment/diagnostic methods of diseases and first medical use are un-patentable in China.
A substance found in nature and existing in its natural state is also not patentable. However, if a substance can be isolated or extracted from nature for the first time, where the physical or chemical parameters are unknown in the prior art and can be precisely characterised, and it has industrial value, both the substance and the process for obtaining it will be patentable. For example, obtaining a plant extract and the process of extraction is patentable in China.
Concerning infringement cases, the plaintiff carries the burden of proof unless the patent concerned is a method patent, in which case the burden is transferred to the defendant. According to China’s Patent Law, where a dispute arises from an alleged infringement of the patent right, the patentee or any interested party may institute legal proceedings in the people’s court, or request the local Patent Administration Department (PAD) to handle the matter. If the PAD decides that there has been an infringement, it may order the infringer to stop the infringing act immediately.
A pharmaceutical trademark is a mark registered with the Chinese Trademark Office and can be a newly created mark or a Chinese transliteration of a trademark. The drug name of pharmaceuticals includes the common name and trade name. The common name refers to the drug’s legal name approved by the Pharmacopoeia Commission of the Ministry of Health. The Trademark Law prevents common names from being registered. For instance, Paracetamol is a common name of a pharmaceutical for curing fever and therefore cannot be registered. In fact, different manufacturers often use the same common name on pharmaceuticals with the same prescription or the same variety of drugs.
The trade name of pharmaceuticals is decided by the manufacturers of the drugs themselves, and can be applied for as a trade mark. Under a same common name, the drugs could have different trade names. Trade names distinguish different providers of the same pharmaceuticals. For instance, Motrin and Tylenol are both trade names of pharmaceuticals for curing fever. They share the same common name, but by bearing different trade names, consumers can distinguish between the two.
It is important to avoid making a trade name a common name. A classic example is the case of Aspirin, where consumers became accustomed to ascribing Aspirin, a trade name at the time, to all pharmaceuticals treating arthritis, rendering it a common name in practice. As a result, the rights owner, Bayer, lost its trademark in many countries due to its failure to clarify Aspirin’s status as a trade name. The following actions should thus be considered to avoid generalisation of the trade name of pharmaceutical products:
- A trade name should be as distinctive as possible. It is important to avoid using a name related to the features or functions of the pharmaceutical. For instance, Motrin is translated as MEI LIN in China without literal meaning. It does not include any descriptive nature of the drug. Thus, it is not easy for Motrin to be mistaken for a common name.
- The owner of pharmaceuticals in China should not claim the trade name if a trade name is listed in pharmaceutical nomenclature. The mark will likely be regarded as a common name and can consequently be used by any party.
- If any competitor uses a trade name as a common name, timely action should be taken, such as sending a cease and desist letter to the infringer and publicising the infringement in newspapers and magazines, among other actions.
The complexity of R&D processes concerning new drugs makes protection of trade secrets critical to pharmaceutical companies. High employee turnover in the industry makes it very important to sign a confidentiality agreement before employee participation in a R&D project. Furthermore, companies should set up relevant internal rules and physical technological and contractual measures to prevent unauthorised use of and disclosure of trade secrets.
Inspection of computer hard drives and monitoring emails of employees with access to technical secrets and know-how is also critical. A robust monitoring system of disclosure in the public domain can disincentivise unlawful actions on the part of current and former employees. Once an ex-employee has shared a secret with the third party or has filed a patent application, in practice, it is advised to first attempt a settlement through negotiation with the infringer before pursuing a long and costly lawsuit.
Most disputes between business partners often relate to misuse of the involved technology secrets by the patent licensee. Once there is a dispute, be sure to collect evidence to demonstrate unauthorised access to the involved technical secrets and similarity of the alleged know-how and the involved technical secrets before commencing litigation. Be sure to protect the technology secret during litigation by asking for a closed hearing. Collecting evidence on trade secret theft is difficult and borne by the plaintiff. It is therefore advisable to seek the court’s assistance in issuing an investigation order or evidence preservation during litigation by submitting a reasonable requirement.
The pharmaceutical sector is rapidly developing under the current reform agenda, with impending changes to the Patent Law expected to safeguard R&D activities. This will hopefully result in better protection and stronger enforcement mechanisms for technological innovations and a more stable operating environment for European businesses.
China IPR SME Helpdesk Team
The China IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (email@example.com) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The China IPR SME Helpdesk is co-funded by the European Union.
To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/.