Recent Developments in China's IP Laws and Regulations Concerning Pharmaceuticals

Issue 21 By Zhnag Qingkui,[Comprehensive Reports]

The pharmaceutical field in China is a special, but important technical field characterized by large investments, high risk, long duration and heavy dependence on IP protection for pharmaceutical inventions on the one hand, and variance in the price of pharmaceuticals caused by IP protection, and its ill effects on the public health on the other. Given this, the Chinese government attaches great importance to IP protection for pharmaceuticals, and has drafted a series of regulations for it, trying to balance the above two aspects in light of the national conditions.

I. Briefing on China’s IP legislations concerning Pharmaceuticals

China has worked out a series of laws and administrative regulations for IP protection concerning pharmaceuticals to encourage R&D and technical innovations, regulate the research, examination and approval of new drugs, enhance the supervision and control over pharmaceuticals, maintain market order, and guarantee medication safety, so as to safeguard the health of the people. These laws and regulations include the 1985 Patent Law, which came into effect on April 1 of that year and provided process patent protection for inventions and innovations in the pharmaceutical field, and released product patent protection for pharmaceuticals on Jan. 1, 1993 after its amendment that year; the Trademark Law which was adopted on August 23, 1982, came into force on Jan. 1, 1983 and later amended in 1993 and 2001 respectively; the Pharmaceutical Administration Law adopted on Sep. 20, 1984 and implemented as of Dec. 1, 2001 after the same year’s revision; the associated Procedure for Examination and Approval of New Drugs and Regulations on New Pharmaceuticals Protection and Technique Transfer that became effective on 1985 and was revised in 1999. In addition, the State Council adopted the Regulations on the Protection of Varieties of Traditional Chinese Medicines and the Regulations on Administrative Protection of Pharmaceuticals respectively on Oct. 14 and Dec. 12, 1992, which both became effective on Jan. 1, 1993. Furthermore, as a supplement to IP legislation, the NPC Standing Committee promulgated the Law of Unfair Competition on Sep. 2, 1993. Practice shows that the implementation of these laws and regulations has produced positive effects in the development and market control of pharmaceutical products in China.

II. Features of IP Laws and Regulations concerning Pharmaceuticals

As different government branches drafted these legislations, variations occur in terms of the object, term, period and means of protection. The following paragraphs are a brief introduction to their characteristics.

1. Patent Protection

(1) Objects of and Qualifications for Protection
       Patent protection for pharmaceuticals targets the inventions and innovations in new pharmaceutical fields, including newly developed bulk drugs (active ingredient), new pharmaceutical productions or compound formulas, and new preparatory technologies and their improvements. Novelty, creativeness and practical applicability are the most decisive qualifications for the authorization of protection, wherein “novelty” means that before the date of  filing, no identical invention has been publicly disclosed in publications in China or abroad or has been publicly used or made known to the public by any other means in China, nor has any other person filed an application previously with the Patent Office which described an identical invention and was published after the said date of filling; “inventiveness” means that, as compared with the technology existing before the date of filing, the invention has prominent substantive features and represents notable progress; “practical applicability” means that the invention can be made or used and can produce effective results.

(2) Period and Means of Protection
       The current Patent Law stipulates that the period of patent rights for inventions shall be twenty years running from the date of filing. After the grant of patent right, no entity or individual may, without the authorization of the patentee, exploit the patent; that is, to make, use, promise to sell or sell the patented product, or use the patented process, promise to sell, sell or import the product directly obtained by the patented process, for production or business purposes. If any acts of infringement arise from the exploitation of a patent without the authorization of the patentee, the patentee or interested parties may directly file a suit in the people's court, or request the administrative authorities for patent affairs to handle the matter and to order the infringer to stop the acts of infringement and compensate for losses. The Rules for Implementation of the Patent Law stipulates that for any identical invention, only one patent right shall be granted. Therefore, patent right is exclusive.

2. Trademark Protection

(1) Objects of and Qualifications for Protection
       Trademark protection for pharmaceuticals targets the visible signs used to distinguish the goods in drug handling or sales. For registration, it is required that no other person has registered the same or similar trademark for the same or similar goods.

(2) Period and Means of Protection
       The period of validity of a registered trademark is ten years, running from the date of approval of the registration. Where the registrant intends to continue to use the registered trademark beyond the expiration of the period of validity, an application for renewal of the registration shall be made within six months before the said expiration, and the period of validity for each renewal of registration shall be ten years. Once registered, the pharmaceutical trademark will enjoy an exclusive right in the country or place of registration. No one shall use the same or similar trademarks on pharmaceuticals that are the same or similar without the permission of their owners. If any acts of infringement arise, the infringed party may file a suit in the people's court, or request the administrative authority for industry and commerce to handle the matter.

3. Administrative Protection for New Drugs

(1) Objects of and Qualifications for the Protection
       New drugs to be protected refer to those that have never been produced in China. They are divided into five categories respectively according to their natures of being traditional Chinese medicines, chemical drugs and biological products.

(2) Period and Means of Protection
       According to the Regulations on New Pharmaceuticals Protection and Technology Transfer promulgated on April 22, 1999 by the State Drug Administration (SDA), the periods of protection for new drugs are 12 years for Category I, 8 years for Categories II and III, and 6 years for Categories IV and V. A new drug will be protected after the “New Drug Certificate” is issued by the SDA. Without the technology transfer from the owner of the “New Drug Certificate”, no entity or individual is allowed to produce drugs similar to the new drugs that are within the period of protection, nor is the drug administration department permitted to conduct the relevant examination.

However, the drugs that have been under examination before the aforementioned approval are subject to continued examination and approval. Thus it can be said that the “New Drug Certificate” is not unique. In other words, the protection for new drugs has no absolute exclusivity in nature, and is relatively exclusive in the pharmaceutical market. 

4. Administrative Protection for Pharmaceuticals

(1) Objects of and Qualifications for Protection
       Administrative protection is set for pharmaceutical inventions by the enterprises or individuals of other countries that have signed agreements with China. To be protected, they have to meet the following requirement:
       a. The exclusive right for invention is under no protection prior to Jan. 1, 1993 as prescribed in the Patent Law;
       b. During the period from Jan. 1, 1986 to Jan. 1, 1993, an exclusive right was obtained to prohibit other persons from producing, using or selling the invented pharmaceutical in the applicant’s home jurisdiction;
       c. The invented pharmaceutical was not available in the Chinese market before the filing date for administrative protection. 

 (2) Period and Means of Protection
       The period of administrative protection for pharmaceuticals is seven years and six months, running from the date of issuance of the certificate of administrative protection. The public health sector of the State Council or the public heath department of a province, autonomous region or municipality directly under the State Council shall not approve anyone else to produce or sell the pharmaceuticals without permission from the owner of the exclusive right of the pharmaceutical. If any unauthorized activities occur, the owner of the pharmaceutical’s exclusive right may request the relevant governing sector under the State Council to stop the infringement activities, and/or directly file a lawsuit in the people’s court for economic compensation.

5. Protection for Varieties of Traditional Chinese Medicines

(1) Objects of and Qualifications for Protection
       The objects of protection for varieties of traditional Chinese medicines shall be those produced in China and listed as standardized medicines at the state level. To obtain protection, the medicines must have special or noticeable results for a given disease, and meet the set quality requirements and standards. 

(2) Period and Means of Protection
       All varieties of traditional Chinese medicines are divided into Grade I and Grade II for their protection. The protection period for Grade I is 30 years, 20 years and 10 years respectively, and for Grade II is 7 years. The period may be extended continuously after its expiration with an extension term not longer than the first approved period. The period of protection for Grade II, however, can only be extended once. During the period of protection, the traditional Chinese medicines granted protection shall be only manufactured by enterprises with "the Certificate of Variety of Traditional Chinese Medicines Under Protection". Unauthorized production of any protected traditional Chinese medicine is subject to punishment for producing fake medicines by the health administrative departments at the county level. However, if a given variety of traditional Chinese medicine granted protection was produced by more than one enterprise before its approval, those enterprises not under protection may re-apply for “the Certificate of Variety of Traditional Chinese Medicines Under Protection” within the prescribed time limit. From this, we can see that the protection for traditional Chinese medicines is not exclusive either.  

6. Protection for Trade Secrets

(1) Objects of and Qualifications for Protection
       Trade secrets in the Law of Unfair Competition is defined as technical and economic information that is unknown to the public, economically beneficial to the proprietor, functional, and protected with confidential measures by the proprietor. Under this definition, trade secret in the pharmaceutical field protected by the Law is the technical and economic information conforming to these qualifications, such as formulation, manufacturing process and methods.

(2) Period and Means of Protection
       No specific term is provided for the protection of trade secrets. As long as the right owner takes appropriate confidential measures, the formulation and method of production for the pharmaceutical will be kept as secret for a long time, and will continuously bring economic benefits. Where any enterprise or individual infringes trade secrets, the right proprietor may request the relevant control and inspection authority to order the infringer to desist from the illegal act and may, according to circumstances, impose a certain fine.

III. Latest Development of IP Laws and Regulations concerning Pharmaceuticals

1. Revision of Patent Statutes

Since China’s entry into the WTO, this world organization and its TRIPS agreement have undergone continuous developments and improvements. Accordingly, the patent statutes in China have been revised in recent years in the following ways:

(1) The Measures for Compulsory License on Patent Implementation Concerning Public Health Problems was adopted. 
       In Nov. of 2001, WTO delivered the Doha Declaration on TRIPS and Public Health, agreeing that “TRIPS can not and shall not prevent its members from taking measures to ensure the public health”. Then on August 30, 2003, the implementation resolution of the Declaration was adopted, stating that under certain conditions, the right of compulsory licensing of pharmaceuticals may be extended to the level at which the pharmaceutical can be exported to the most underdeveloped countries, a breakthrough to the restriction that compulsory licensing is only applicable in domestic market. In response to these new international developments, SIPO promulgated the Measures for Compulsory License on Patent Implementation Concerning Public Health Problems on Nov. 29, 2005 in the form of an order from the Director, which came into force on Jan. 1, 2006. Furthermore, the NPC Standing Committee approved the Protocols of Revision of TRIPS on Oct. 28, 2007 in order to maintain a balanced relationship between intellectual property and public health.

(2)The Patent Law is under its third revision.
         On Dec. 27, 2006, SIPO submitted the revised draft of the Patent Law to the State Council for review. In the draft, three articles are related to the pharmaceutical field: Article 26 is supplemented with the obligation of disclosing genetic resources; Articles 49 is supplemented with compulsory licensing rules in the face of a “public health crisis”; and Article 63 is supplemented with Item 5 exceptions of infringement, that is, “to produce, use or import patented pharmaceuticals or patented medical equipment for the purpose of obtaining and providing the information required for the administrative examination and approval of the pharmaceuticals or medical equipment, and to produce, import or sell the patented pharmaceuticals or patented medical equipments for the same purpose.”

(3)The Guidelines for Patent Examination is under constant revision.
         On May 24, 2006, SIPO, in the form of an order from the Director, publicized the revised guidelines for examination which became effective on July 1, 2006. The following points are concerned with patent examination of pharmaceuticals:
         (i) Experimental data must be supplied to prove the pharmaceutical’s curing effect when the existing technology is not sufficient for the technicians in this field to predict it;   
         (ii) It is not allowed to try to deal with such deficiencies as insufficient disclosure and the absence of an instruction manual by re-supplying the test data.  
         (iii) Inventions on medical use have no “novelty” if they cause no changes to the medical process mechanism or the route of medication.
         (iv) Traditional Chinese medicines may be defined according to their production method. Different methods must result in different products; otherwise they will have no “novelty”.

2. Changes in Administrative Protection for New Drugs

Generic drugs are also under the administrative protection for new drugs. The original administrative protection system for new drugs is not necessary since the patent protection system is applied to pharmaceuticals, and conflicts may arise between these two systems. For these reasons, the State Food and Drug Administration (SFDA) abolished the previous Procedure for Examination and Approval of New Drugs and Regulations on New Pharmaceuticals Protection and Technology Transfer; that is, the administrative protection for new drugs no longer exists. 

3. Developments in Regulations on the Protection for Varieties of Traditional Chinese Medicines

We can say that protection for varieties of traditional Chinese medicines is a follow-up supplement to the protection for patents and new drugs, as well as an extension and reinforcement of IP protection for pharmaceutical inventions in terms of its function that is similar to the “supplementary protection certificate” of pharmaceutical patents used in some developed countries. We can also say that this is reasonable to some extent as it makes up for the defects of the above-mentioned administrative protection for pharmaceuticals that is solely enjoyed by foreigners.

At present, however, problems still remain in the protection for traditional Chinese medicines. Firstly, it is not always intellectual property that is under protection, as “novelty” is not required for protection for varieties of traditional Chinese medicines, and non-original pharmaceuticals may also receive protection, but normally existing technology falling into the public domain shall not be granted protection. Therefore it will undoubtedly harm the public interests to authorize certain enterprises to monopolize such existing technologies.

Secondly, the same type of medicine produced by several manufacturers may also receive this protection. As a result, one or more producers of the medicine will be forced to apply for protection and face extra costs.

Thirdly, when protection for varieties of traditional Chinese medicines, pharmaceuticals and other IP protection forms are coexisting, the rules allowing several producers to enjoy protection for the same type of medicine will possibly harm the interests of the original owner of the pharmaceutical IP rights, cause conflicts and contradictions with the prior patent right, and consequently impair the patent system protection action.
Fourthly, the excessive protection period for traditional Chinese medicines will possibly result in high pharmaceutical prices for a long time, which is adverse to the users’ interests.

Finally, the protection for varieties of traditional Chinese medicines is only applicable for those medicines produced in China, not for those imported to China. This may be charged with being discriminatory and failing to comply with the principle of national treatment under TRIPS. Therefore in recent years, the departments concerned have been widely soliciting comments in their preparation for amending the Regulations on the Protection of Varieties of Traditional Chinese Medicines.

4. Promulgation and Revision of the Measures for Pharmaceutical Registration

The revised Measures for Pharmaceutical Registration (Trial) was promulgated on Dec. 1, 2002 by SFDA, and put into practice on May 1, 2005. The Measures included the linkage articles concerning patent protection and the protective articles concerning undisclosed information. Since March 10, 2007, SFDA had been inviting, via the Internet, public comments on the revised draft. The revised Measures came into force on Oct. 1, 2007, which mainly contains: 

Article 18 regarding the drug or its formulation, manufacture process and application, the applicant shall submit documents explaining the patent status in China owned by itself or others and its ownership status. If others hold a patent in China, the applicant shall submit a letter of guarantee stating that the pharmaceutical will not infringe the patent rights of others. For the explanation or declaration from the applicant, the regulatory department of pharmaceuticals shall display them on its website.

If disputes over patent rights arise in the registration process, relevant laws and regulations shall be followed for a solution.

Article 19. As to a drug for which others have obtained patent protection in China, one may apply for registration two years prior to the expiration of the patent. SFDA shall review the application according to this Regulation and, after expiration of the patent, issue the license number, “Certificate for the Registration of Imported Drug” or “Registration Certificate of Medical Products” for those drugs that meet the requirements.

Article 20. According to Article 35 of the Regulations for Implementation of the Drug Administration Law, for a period of 6 years from the date of the original applicant's approval, SFDA shall not approve a subsequent application that uses, without the express consent of the original applicant, the undisclosed test data and other data generated by the original applicant for submission of an application for manufacturing or marketing of a drug containing new chemical ingredients, unless the submitted data is generated by the subsequent applicant itself.

About the author:
    Zhang Qingkui, head of the Pharmacy and Biotech Examination Department of SIPO.

                                                                                      (Translated by Hu Xiaoying)

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