This article is derived from “Preparing for China’s patent linkage system”, first appeared in IAM Life Sciences: Key issues for senior life sciences executives 2021, and is accommodated in line with the implementing measures and judicial interpretations recently issued on July 04 & July 05, 2021, respectively.
The patent linkage system refers to the ‘linkage’ between the regulatory approval of generic drugs and the patent protection of the relevant innovative drugs. When the owner of a generic drug applies for marketing authorisation, the drug regulatory department will work together with the patent administration department on the patent issue. If there are relevant patent disputes, the drug approval process will be postponed until the disputes are resolved. Under this system, the patent dispute would be resolved at an earlier stage, avoiding uncontrolled damage to the patent owner and bringing certainty to the generic manufacturers and their marketing strategy.
The concept of ‘patent linkage’ was first put forward in the Hatch-Waxman Act 1984. Along with other provisions – including abbreviated new drug applications, Bolar exemptions, patent-term extensions and data exclusivity – it constitutes an integral system necessary to balance both the innovator’s and the public’s interests.
In the third amendment of the Patent Law, the Bolar exemption was introduced in China for the purpose of promoting the marketing of generic drugs, with other provisions protecting the innovator’s interest being left behind. The incomplete nature of this reform brought controversy to the infringement determination of a generic drug company’s application for marketing authorisation. In practice, the court used to place a generic drug application under the Bolar exemption, unduly enlarging the coverage of this provision, meaning that innovative drug companies could not prevent infringing acts before they occurred.
With this background, establishing the patent linkage system in China has become an increasingly eye-catching topic, as well as one of the most important highlights in the recent revision of the Patent Law.
Legal authority evolvement
Discussions have been held for years on building the infrastructure and regime for patent linkage in China. In 2017, the Central Committee of the Communist Party of China and the State Council issued “Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices and the Opinions on Strengthening the Protection of Intellectual Property Rights”, specifically reciting exploration and establishment of a drug patent linkage system. Relative research and discussions later became a hot topic in IP circles. With the promulgation of the Fourth Amendment of the Patent Law in 2020, the establishment of the patent linkage system in China has finally been settled.
In the recent revision of the Patent Law, Article 76 has been incorporated as a principled provision for the drug patent linkage system. Patent owners or the parties of interest can file a lawsuit or apply for an administrative ruling on the patent disputes related to the drugs with a marketing authorisation application, leaving the details of the implementation to be clarified in the implementing regulations.
On July 04 and July 05, 2021, the National Medical Products Administration (NMPA), the China National Intellectual Property Administration (CNIPA) and the Chinese Supreme Court issued implementing measures and judicial interpretation for patent linkage system. Together, these provisions constitute a framework for the future patent linkage system from both a judicial and an administrative aspect.
How the new patent linkage system will work
Under the patent linkage system, the NMPA establishes a patent information registration platform for marketed drugs, which could be seen as a Chinese counterpart of orange book. Generic drug companies will be required to submit a statement on the patent issues along with their marketing authorisation application. The statement will be categorised into four types:
− Type I – no relevant patent is found on the platform;
− Type II – the relevant patent is no longer effective or the generic drug company has been granted a license on it;
− Type III – the generic drug company commits to not placing the generic drug onto the market until the relevant patent expires; and
− Type IV – the relevant patent should be invalidated, or the generic drug would not fall within the scope of the patent.
Once the generic drug company submits a Type IV statement (ie, initiates a patent challenge), they are required to inform the marketing authorization holders (MAH) within 10 days. In this case, the MAH or the patent owners are given a 45-day period to start a lawsuit or apply for an administrative ruling. If the patent owner responds, a nine-month waiting period is triggered for chemical entities, during which the NMPA will not authorise the generic drug application unless the generic drug company wins the challenge. If a decision is made in favour of the patent owner, the NMPA will put the generic drug application on hold until the relevant patent expires. On the other hand, if the patent challenger successfully invalidates the patent and becomes the first to put the generic product on market, it would be awarded a 12-month market exclusivity, during which the NMPA would not authorise the same type of products, except for those from the co-challengers. To be noted, the waiting period would not be applied to biologics or traditional Chinese medicines.
The Chinese regime is similar to analogous systems in other jurisdictions, but there are several locally specific features.
Bifurcated adjudication system
One of the most important features of Chinese IP protection is the bifurcated adjudication system, under which both judicial and administrative approaches are available for the rights holder to assert its right. This feature is also reflected in the recently issued patent linkage system. As stipulated in the revised Patent Law, the rights holders are allowed to go to court or apply for an administrative ruling when facing a generic drug application that could potentially fall within the patent scope.
The bifurcated designation could provide a diverse and flexible approach to patent dispute resolution. Compared to the conventional judicial litigation, administrative enforcement would be less time consuming as examiners have more professional knowledge to apply. This would be of great significance in view of the time-sensitive patent linkage system. According to the implementing measures, both an effective judgement and an administrative ruling will be treated as the resolution of a patent linkage dispute. While in view of the conventional judicial practice, the nine-month waiting period might be a tight schedule for the court to issue an effective judgement, especially in case when either party appeals. On the other hand, the administrative approach with a more efficient proceeding seems to be a more reasonable way to give a ruling result within the waiting period, thus constitutes an attractive ‘plan B’ for patent dispute resolution.
Of course, this does not mean the judicial approach is just a nominal procedure. Under the current bifurcated system, the administrative rulings still need to go for judicial review, which means the decisions made by the patent office are not final and could potentially be reverted by the court. Relying on the administrative approach only would bring uncertainties to the drug company’s decision-making process, which means the judicial approach should not be abandoned and instead, should be carefully designed to accommodate the patent linkage system.
In view of the issued stipulations, the Chinese bureau is working on setting up an expedited procedure specifically for patent linkage cases to promote early dispute resolution. Article 76 of the revised Patent Law specifies patent linkage litigation as a judicial confirmation procedure rather than a complete infringement litigation, which is further reflected in the recently issued judicial interpretation. This means, in principle, the court or the patent office need only decide whether the generic drug falls within the patent scope, and the procedures such as requirement on formality documents and evidence cross-examination could be potentially simplified. The specific proceeding of this confirmation procedure is to be clarified by the Beijing IP court, and the first choice of patent linkage approach depends on how the court designs an expedited judicial procedure that better fits into the time-sensitive patent linkage framework.
Enforcing the patent under the patent linkage system
In the earlier discussions, people have raised concerns on the accessibility and consistency issue of evidences during the patent linkage litigation. Since the patent linkage litigation is taken place before the marketing of the generic drugs, the brand companies would not have access to the product and thus may have to carry a heavy burden of proof, making the enforceability an issue. For this, the judicial interpretations from the SPC involve several provisions to balance the positions of the brand company and the generic company in the patent linkage system.
From a more general side, in November 2020, the Supreme Court issued an updated judicial interpretation on the evidence of civil litigation of intellectual property, with several provisions focusing on the difficulty of proof for rights holders. On the one hand, the interpretation specifies a more reasonable distribution of burden of proof in specific situations. On the other hand, it also clarifies the court’s right to order the parties to submit evidence that is under their control, and stresses the consequence of obstruction of proof. This could be particularly significant for the patent linkage system, for which, as indicated above, the potential accessibility and consistency issue of the technical information held by generic drug companies has become a concern.
In addition to setting up general rules for patent infringement disputes, provisions regarding enforceability issues specific to patent linkage are also proposed by the Supreme Court and the CNIPA. According to the recently issued judicial interpretation, the burden of providing technical materials submitted to the NMPA is on the generic drug company’s shoulder and is stipulated to be mandatory, and the consistency between the materials submitted for litigation and regulatory purposes is further stressed. In the administrative measures issued by the CNIPA on July 05, 2021, a discovery-of-evidence system is also involved, enabling the patent office to verify the authenticity of relevant evidence with the drug regulatory department.
As a result, to start a patent linkage litigation, what is to be provided by the brand companies would involve: relevant patent information, the generic drug information, and the type IV statement made by the generic drug company, all of which are obtainable from public resources, making it more reasonable for the right holders to assert its right.
Impact of the patent linkage system
The patent linkage system was introduced to provide an early resolution mechanism for patent disputes. It was envisaged that a well-functioning system would resolve the drug patent disputes before marketing a generic drug. For the innovators, an early settlement would avoid uncontrolled damage, while effective patent protection would encourage them to put more effort into exploiting innovative drugs. For the generic drug companies, the system would avoid significant indemnification due to the infringement of a marketed generic drug, bringing more certainty and encouraging more considered commercial strategies. The patent linkage system also introduces a patent challenge mechanism that would advance the commercialisation of generic drugs. As a result, patients would have access to more effective drugs at a lower price.
With the structural transformation of the Chinese pharmaceutical industry toward an innovation-driven direction, the introduction of a brand-new patent linkage system in China represents significant progress towards the completion of a system that protects both the innovators’ initiative and the public interest. Under the innovation-driven policy, healthy development of the Chinese pharmaceutical market is to be expected.