China: New Chinese Patent Law: What Does It Mean For Life Sciences Companies ?

After more than three years of preparation work, the revised PRC Patent Law ("New Patent Law") was finally promulgated on 27 December 2008 and will enter into force on 1 October 2009.

As a major emerging economy, China is striving to become an innovative country while facing major concerns such as accessibility to and affordability of medicines. The New Patent Law reflects this dilemma and thus the implementation difficulties are foreseeable

Changes to the patent regime that will mostly affect life sciences companies are genetic resources based patent, compulsory licence, parallel import and bolar exception. This article describes and comments these significant changes.

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After more than three years of preparation work, the revised PRC Patent Law ("New Patent Law") was finally promulgated on 27 December 2008. The New Patent Law will enter into force on 1 October 2009.

Changes to the patent regime that will mostly affect life sciences companies are genetic resources based patent, compulsory licence, parallel import and bolar exception.

Genetic resources

The New Patent Law has introduced for the first time a compliance requirement and a disclosure obligation for the application of patents based on genetic resources.

Firstly, Article 5 provides that no patent shall be granted if an invention is based on genetic resources obtained or used in violation of any laws or administrative regulations.

Where Article 27.2 of the TRIPS Agreement only provides that "Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality (...)", Article 5 sets out a general reference to "laws and regulations", which could seem to imply future more detailed laws and regulations on this matter.

Secondly, Article 26 of the New Patent Law requires the applicant to disclose and explain the direct and original source of the genetic resource. If the applicant is not able to disclose the original source, the applicant must provide the reasons.

This obligation is in line with and in advance of an international trend of introducing such disclosure obligations. For example, the Swiss patent law of 2008 includes such a disclosure obligation. In addition, 110 WTO members, including China, had proposed in the Doha negotiations in July 2008, to consider including a disclosure obligation in the TRIPS Agreement. The disclosure obligation is welcome at a same time for a better transparency in the access and benefit sharing of genetic resources, according to the Convention on Biological Diversity and the Bonn Guidelines on Access and Benefit Sharing. It is also believed that this disclosure obligation will improve the patent examiners' work.

However, Article 26 triggers many questions as to its implementation. How will the "direct source" and "original source" be defined? Which reasons would be acceptable for not disclosing the original source? Such questions may lead to implementation uncertainties and life sciences companies need to keep a close eye on them to ensure these requirements are complied with before they apply for a patent.

Compulsory licence

In addition to the circumstances of national emergency, extraordinary state of affairs, public interest or major technical progress of prominent economic significance based on a patent, which were already foreseen in the former patent law, the New Patent Law adds new grounds under which the Patent Office may grant a compulsory licence for patents.

Firstly, Article 48 provides that a compulsory licence may be granted when:

  • a patentee fails to exploit or fully exploit his patent without any justifiable reason within 3 years of the patent grant date or 4 years of the patent application date.
  • the patentee has been exploiting the patent rights in a monopolizing manner.

It is noted that the wording of Article 48 is vague which renders its application uncertain. At very least, definitions of "failure to exploit", "justifiable reason" or "monopolizing behavior" need to be provided to avoid any detrimental effects to patent holders.

Secondly, Article 50 provides that for reasons of public health policy, the Patent Office has the right to grant Chinese companies licences for patented medicines to be manufactured and exported to countries or regions with which the PRC has concluded related international treaties.

This provision implements the Decision of the Amendment of the TRIPS Agreement (2005) ratified by China on 28 November 2007, which reads that "the obligations of an exporting Member under Article 31(f) [according to which a compulsory licence shall only be granted for the supply of the domestic market of a Member] shall not apply with respect to the grant by it of a compulsory licence to the extent necessary for the purposes of production of a pharmaceutical product(s) and its export to an eligible importing Member(s) (...)".

Parallel import

The New Patent Law explicitly confirms that parallel import is not considered to be a patent infringement.

Article 69 of the New Patent Law provides that the use, offer for sale, sale and importation of patented products or products made from a patented method, which have been sold by the patent right holder or the entity or individual authorized by the patent right holder, shall not be considered as patent infringement.

Until the adoption of the New Patent Law, Chinese law did not contain such a provision. Without any legal basis, Chinese courts could inconsistently allow or condemn parallel import practices.

This provision provides clarification but is likely to further more affect the pricing of patented medicine made by foreign invested companies in China, because domestic companies have the right to import the products directly from another country where the price is more competitive.

Bolar exception

The Bolar exception has also been incorporated into the New Patent Law. Article 69 (5) provides that the manufacture, use and import of patented medicine or medical devices by someone other than the patent holder shall not be considered to be a patent infringement if such manufacture, use or import is solely for the purpose of obtaining administrative approval for the pharmaceuticals or medical device.

Unlike the EU Bolar exception clause, which literally limits the purpose of the Bolar exception to an abridged application process for generics, the Chinese Bolar exception may be applicable for new drugs.

Besides, it should be noted that China's drug approving authority, the SFDA, currently regulates that the applicant of a generic of a patented drug can only be accepted two years prior to the expiration of the patent. With this provision, the application of Bolar exception in China seems subject to a time limit.

The New Patent Law brings clarity to the former patent regime, but many terms which have been used remain to be defined.

As major emerging economies, China is striving to become an innovative country while facing major concerns such as accessibility to and affordability of medicines. The New Patent Law reflects this dilemma and thus the implementation difficulties are foreseeable.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 11/03/2009.

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