On 29 November 2005, the State Intellectual Property Office ("SIPO") of China issued the Measures for Compulsory Licensing of Patents Concerning Public Health ("Measures"). The Measures will have a profound impact on international pharmaceutical companies not only with respect to their operations in China, but also to their business in many other parts of the world.
Article 49 of the current Patent Law provides that when an emergency or an extraordinary situation occurs in China, or for the purpose of the public interest, SIPO may grant a compulsory licence for the exploitation of an invention patent or utility model patent. The Measures now define "public interest" to include the prevention and control of the breakout and spread of infectious diseases, as well as the treatment thereof. "National emergency" means a public health crisis caused by the breakout and spread of infectious diseases. "Infectious diseases" include AIDS, Tuberculosis, Malaria and many others prescribed in the PRC Infectious Diseases Prevention and Treatment Law. Such interpretation has its origin in the Doha Declaration passed at the WTO Ministerial Conference in 2001. Compulsory licensing may be granted for any patented products or products produced using patented methods for treating infectious diseases in the following situations:
Domestic production for domestic use.
Where China has the capacity to produce a medicine patented in China, the Ministry of Agriculture or the Ministry of Health may petition SIPO for a compulsory licence for the production and sale of such patented medicines.
Foreign production for domestic use.
For a patented medicine for infectious diseases which China has no or insufficient capacity to produce, the relevant government authorities may petition SIPO for a compulsory licence for the importation of the medicines. The Measures prohibit the re-exportation of such medicines to any third countries or regions. The Measures require the Chinese licensee to pay reasonable compensation to the patentee, except where the foreign manufacturer has already paid the patentee.
Domestic production for foreign use.
As the reverse of (2), where a WTO member or a least developed non-member notifies China of its desire to import medicines for infectious diseases from China, the relevant Chinese government authorities may petition SIPO for a compulsory licence. The Chinese licensee which manufactures such medicines is required to pay reasonable compensation to the patentee.
The PRC Patent Law prohibits the importation of a patented product without the authorisation of the patentee. The Measures do not clearly state that parallel imports are legitimate yet provides that for such importation, a compulsory license is not necessary. It appears to suggest that a parallel import under "national emergency or for the public interest" is in reality legitimate although the law remains unclear on the issue.
The Measures entered into force on 1 January 2006.
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