China Patent Enforcement Comments to USPTO
The importance of intellectual property protection is now understood in China. However, it appears as though the IP laws are implemented and enforced in ways that benefit Chinese companies over foreign companies. If China aims to be a leader in biotechnology it needs to understand that intellectual property protections are fundamental for creating an enabling environment for biotechnology. In this regard, China has yet far to go.</p>
By Electronic Submission
Office of Policy and External Affairs
United States Patent and Trademark Office
Alexandria, VA 22313-1450
Re: Request for Comments on Intellectual Property Enforcement in China
Attn: Elizabeth Shaw
Dear Ms. Shaw,
I am writing on behalf of the Biotechnology Industry Organization (BIO) in response to the Request for Comments on Intellectual Property Enforcement in China. BIO is a non-profit organization with a membership of more than 1,100 biotechnology companies, academic institutions, state biotechnology centers, and related organizations in all 50 U.S. States and 32 countriesaround the world. BIO’s members are involved in the research and development of health care, agricultural, industrial, and environmental biotechnology products. The U.S. life sciences industry, fueled by the strength of the U.S. patent system, supports more than 7.5 million jobs in the United States, and has generated hundreds of drug products, medical diagnostic tests, biotech crops, and other environmentally-beneficial products such as renewable fuels and bio-based plastics.
The majority of BIO’s members are small and medium sized enterprises that currently do not have products on the market. As such BIO’s members rely heavily on the strength and scope of their patents to generate investment to take their technologies to commercialization. More and more, BIO’s members are looking abroad as they expand their markets and R&D and commercialization efforts.
China, in particular, is viewed by BIO as a key emerging market. Many of BIO's more established companies already do business in China, and over recent years several of BIO's small and medium sized members have also expressed an interest in doing business there Itsrecently announced 12th 5-Year Plan provides considerable support for biotechnology innovation and aims to support both the development and manufacture of new biotechnology products. This 5-year plan holds substantial promise to elevate China’s position and leadership in the industry.
Earlier this year, BIO hosted a mission to Beijing and Shanghai where 13 CEOs of small and mediums sized biotechnology companies met with key research parks and government officials. Furthermore, in October BIO hosted its first ever BIO China event which attracted over 700 biotechnology professionals from China and other parts of Asia along with professionals from US and Europe.
Accordingly, legislation and regulation that have the potential to impact the biotechnology sector are of great importance to BIO. The importance of intellectual property protection is now understood in China. However, it appears as though the IP laws are implemented and enforced in ways that benefit Chinese companies over foreign companies. If China aims to be a leader in biotechnology it needs to understand that intellectual property protections are fundamental for creating an enabling environment for biotechnology. In this regard, China has yet far to go.
Courts Rules are Insufficient to Enforce Patent Rights
Because of the significant investment that is required to bring a biotechnology product to market--often hundreds of millions of dollars-- one of the most critical aspects of patent enforcement rights is injunctive relief. In this regard, Chinese law has an ineffective preliminary injunction mechanism as it fails to stop the filing and authorization of a generic product. Biotechnology companies are advised by Chinese law firms that the company must wait until the product is actually sold in China before a patent holder can bring an infringement action. This is because the Supreme Peoples’ Court has cautioned lower courts from issuing preliminary injunctions for ‘complicated’ technologies and the rules for preliminary injunctions require a decision in a 48 hour window. As a result, judges often refuse to entertain preliminary injunction motions because they are unable to reach a decision on the motion within the prescribed time limit. Thus, biotechnology companies cannot obtain an injunction until the conclusion of the infringement suit. Additionally, success in an infringement action does not limit the State Food and Drug Administration (SFDA) from approving other generic applications.
One critical deterrent for patent infringement is the damages that an infringer must pay upon a finding of infringement. In China, our members have found statutory compensation insufficient for infringement of U.S. patents. This, in conjunction with the inability to obtain a preliminary injunction results in significant costs to the U.S. innovator and minimal loss to the infringer of Chinese patent law. Statutory compensation for infringement should be towards the statutory ceiling of RMB 1,000,000 and should also include a punitive damages provision (e.g. treble damages).
Finally, our members also report problems with the notarization requirement, discovery procedures, and compliance with court orders in infringement suits. Notarization requirements are cumbersome and provide notice far too early for the potential defendant. China also has prohibitive discovery procedures which greatly hinders U.S. patent holders to bring infringement actions. Even when U.S. patent holders are successful, they often report that court orders are routinely ignored by defendants and the defendants pay little to no consequences for disobeying a court order. Finally, China restricts expert testimony to government or court-sanctioned experts. These ‘experts’ are not familiar with the technology and cannot adequately testify in an infringement action.
ChinaPatent Enforcement does not Effectively Address the Exportation of Infringing Products
The Chinese government contends that exportation of illegally manufactured infringing products does not violate U.S. company patent rights in China. These products are not subject to SFDA oversight or regulatory review. As a result, the quality and quantity of the exported drugs and API is indeterminable. Additionally, Chinese law does not allow for a preliminary injunction to stop the export of these infringing products. Chinese law requires a sale in China (and not an export sale) in order to infringe a patent. Chinese customs procedures require identification of the exporter and successful enforcement of patent rights in Chinese court; which as mentioned before is impossible without a sale in China. Chinese generic manufacturers take advantage of this loop-hole by only exporting their products outside the country. However, even in cases where a generic manufacturer sells their product in China and abroad, damages are calculatedonly on lost profits in China (not abroad) which does not adequately redress the violation of Chinese patent law.
Chinese Agencies Undermine U.S. Patent Rights in China
China’s patent enforcement involves government efforts to undermine U.S. patent rights in China. As an example, the National Program for the Development of Major Drugs is a government sponsored program which funds the manufacture of generic versions of U.S. patented pharmaceuticals. The Ministry of Health and the State Food and Drug Administration (SFDA) both are stakeholders in this program. Moreover, the SFDA also will not recognize U.S. patent rights through mechanisms such as patent linkage. The SFDA claims no responsibility for enforcing patents and reviews generic filings without considering whether or not those granting authorization would induce generics to violate Chinese patent law.
Compulsory Licensing Threats
While a few people complain that compulsory licensing is not used enough, our biotechnology companies report that they are consistently threatened with compulsory licenses in pricing negotiations.
In conclusion, BIO appreciates the opportunity to provide comments regarding patent enforcement in China and we agree generally with the recommendations made by all industry sectors as reflected in the attached document.
Vice President of Global Intellectual Property Policy
Biotechnology Industry Organization
Senior Vice President for International Affairs
Biotechnology Industry Organization