China Issues Rules for Claiming Patent Infringement against Drugs in Approval Stage

On 5 July 2021, China’s Supreme People’s Court issued the Rules on Several Issues Concerning the Application of Law in the Trial of Civil Cases of Patent Disputes Related to Drug Registration Applications[1] (“Litigation Rules”). The Litigation Rules elaborate on one of the two mechanisms that parties may use to challenge, on the basis of pre-existing patent rights, drug approval applications filed to China’s National Medical Products Administration (“NMPA”). While the most recently revised version of China’s Patent Law, promulgated on 17 October 2020 and effective as of 1 June 2021, provided for a “drug patent linkage system” putatively somewhat like that under the U.S. Hatch Waxman Act, so that patent right holders would not have to wait until drug manufacturers obtain approval to market and sell drugs before the rightsholders could claim patent infringement, the details of the system were not clear until the release of the Litigation Rules and the Measures for the Implementation of the Early Resolution Mechanism for Drug Patent Disputes[2] (Trial) (“Administrative Measures”) a day earlier. The Administrative Measures detail a mechanism whereby patent holders and other relevant parties may submit challenges directly to the China National Intellectual Property Administration (“CNIPA”), whereas the parties may use the Litigation Rules to submit challenges to courts. This Newsletter summarizes key points of the Litigation Rules.

Standing, Cause of Action and Relief

Three categories of parties have standing to initiate a case under the Litigation Rules: parties holding relevant patent rights registered in the NMPA’s platform,[3] parties sublicensing such patent rights and the drug approval applicants themselves.

The cause of action per the Litigation Rules is to be limited to a confirmation (akin to a “declaratory judgment” in some other jurisdictions) of whether a drug under review by the NMPA falls within a valid patent’s scope of protection.[4] As such, the case is not a patent infringement litigation in the strict sense, and legal remedies such as compensation for losses are not available. Instead, holders of patent rights can obtain a court judgment of “patent infringement”, which according to the Administrative Measures will require the NMPA to cease its review of a drug approval application, whereas drug approval applicants can obtain a confirmation that their drug does not fall within the scope of protection of the relevant patent(s), which may be used (though is not necessarily binding) if the applicants, after obtaining NMPA approval and bringing the drug to market, are subsequently sued for patent infringement.

In addition, from the time a plaintiff initiates a litigation, the NMPA should suspend review of the drug approval application for up to nine months or, if earlier, until the litigation is concluded.

Initiating a Claim against Drug Approval Applicants

All claims under the Litigation Rules are to be filed in the Beijing Intellectual Property Court. The principal materials to be submitted in such a case are:

• information related to the drug to be marketed and sold, as disclosed in the application materials submitted by the applicant to the NMPA, including the drug’s name, type, registration category, etc.;
• information related to the patent(s) that would be infringed by the drug to be marketed and sold, including the designations of the patent, the relevant claims, etc.; and
• materials showing how the drug to be marketed and sold infringes the relevant patent(s).

Protection for IP and against Malicious Litigation

The Litigation Rules reflect China’s focus over the last few years in strengthening intellectual property protections, perhaps considering the greater possibility or extent that proprietary information may be disclosed in cases under the Litigation Rules compared to other patent disputes. The Litigation Rules expressly require all parties keep confidential the trade secrets and other business information received during a case and expressly provide that any unauthorized disclosure or use will result in civil liability.

The Litigation Rules also afford drug approval applicants some protection against malicious litigation. They provide that if a plaintiff sues a drug approval applicant even though the plaintiff knew or should have known that the drug does not fall within the scope of protection of the patent on which the claim is based, the drug approval applicant can then claim compensation from the original plaintiff for losses caused, e.g., litigation expenses or business losses from a delay in the NMPA’s approval process.

Takeaways

China continues to frequently and substantially advance its intellectual property framework, including augmenting individual aspects, rights, etc. and making systematic, synergistic, etc. improvements. The Litigation Rules, which are in fact only one of two, parallel mechanisms, embody both kinds of advances. In systemic terms, they help realize the long-anticipated linkage between the approval of (in most relevant cases, generic) drugs and patent rights that might underlie yet be undermined by the drugs. In concrete terms, the Litigation Rules afford holders of existing rights tied to drugs or associated patents a more direct, economical and likely effective way of limiting or even eliminating improper encroachment on their rights. At the same time, ventures seeking to bring new (generic or other) drugs to market may benefit by obtaining an earlier, clearer idea of the extent to which their businesses plans may be challenged. All the above is reinforced by the Litigation Rules designating the Beijing Intellectual Property Court as the court of sole jurisdiction to hear such cases: this court incorporates the height of skill and experience in dealing with intellectual property disputes, so it should be a welcome venue for parties to efficiently, fairly and effectively resolve disputes concerning the right to bring particular drugs to market in China.

1. 《关于审理申请注册的药品相关的专利权纠纷民事案件适用法律若干问题的规定》.
2. 《药品专利纠纷早期解决机制实施办法（试行）》.
3. Note that not all patents, not even all patents that could have drug applications, are required to be registered in the NMPA’s platform, but such registration is a pre-requisite to initiating a case under the Litigation Rules. The platform can be accessed at https://zldj.cde.org.cn/home.
4. As a technicality, drug approval applications to the NMPA must make one of the following four stipulations, and cases can be brought under the Litigation Rules only for applications with the fourth stipulation: 

• No patents registered on the NMPA’s platform relate to the drug.
• The patents on the NMPA’s platform that are related to the drug have been terminated or declared invalid, or the drug approval applicant has obtained the relevant patent right holder’s license.
• The drug applicant undertakes to not put the drug on the market until the relevant patent rights of the related patents registered on the NMPA’s platform have expired.
• The patents on the NMPA’s platform that are related to the drug should be declared invalid or the drug does not fall within the scope of those patents’ protection.