The National Medical Products Administration and the China National Intellectual Property Administration (CNIPA) jointly released on July 4, 2021, the "Measures for the Implementation of Early Resolution Mechanism for Pharmaceutical Patent Disputes (Trial)" ("Measures"). On July 5, 2021, the Supreme People’s Court (SPC) promulgated the “Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Cases involving Patent Disputes Related to the Application for the Registration of Pharmaceuticals” (“Judicial Interpretation”). The Measures, which act in concert with the Judicial Interpretation flesh out the rules on which the Chinese patent linkage regime is to operate in practice. Both enters into force as of the date of promulgation.

The 14-article Judicial Interpretation stems from a 19-article draft (2020 Draft), which was released, on October 29, 2020, to solicit public comments. The substantial contents of the 2020 Draft’s provisions regarding jurisdiction, eligibility of parties, suspension of suit, confidentiality obligations of the parties, requirement on technical solutions submitted to court, behavior preservation and res judicata remain intact in the final text of the Judicial Interpretation.

With respect to these subjects, the Judicial Interpretation provides:

• The first instance of pharmaceutical patent linkage litigation is under the jurisdiction of the Beijing IP Court (Article 1).
• Eligible litigating parties refer to the patentee, the stakeholder[1] and the applicant seeking the drug marketing approval (Articles 3 and 4)
• In principle, the court shall dismiss the party’s application for suspension of a patent linkage litigation, provided that the application is based on the ground that an application for the declaration of invalidation of the relevant patent right has been accepted by the CNIPA (Article 6).
• The parties shall assume the obligation of confidentiality for the business secrets or other business information obtained in the litigation that needs to be kept confidential (Article 8).
• Where the drug related technical solutions submitted to court by the applicant for the drug marketing approval is obviously inconsistent with the technical materials declared to the National Medical Products Administration so as to obstruct the court proceeding, the said applicant shall be subject to fines, detention or criminal prosecution based on the severity of the circumstances (Article 9).
• In principle, the court shall dismiss the patentee or stakeholder’s behavior preservation request for the prohibition of drug marketing application or administrative review and approval (Article 10).
• In a patent infringement suit or a suit seeking declaratory judgment of non-infringement involving the same patent right or the same drug applied for registration, where the party argues that the determination on whether the technical solution of a generic drug at issue falls within the protection scope of the relevant patent shall be based on an effective judgment of a patent linkage suit (res judicata), in principle, the court shall uphold such claim, unless there is evidence to prove otherwise (Article 11).

Compared with the 2020 Draft, the Judicial Interpretation explicitly categorises in Article 1 pharmaceutical patent linkage litigation as the "disputes where a declaratory judgment is sought as to ascertain whether the generic drugs seeking marketing approval falls within the protection scope of patent rights". In a nutshell, the Judicial Interpretation features substantial amendments in terms of the right of action, the materials for filing the case, grounds of defense and the damages regime.

Exercising the right of action

Article 4 provides that “where the patentee or stakeholder fails to file a lawsuit within the prescribed time limit[2], the applicant seeking the drug marketing approval may initiate a lawsuit before the court, requesting a declaratory judgment being made as to affirm that the drug applied for registration does not fall into the protection scope of the relevant patent”.

The Judicial Interpretation provides the order in which the parties exercise their rights of action: 1) the patentee or stakeholder; 2) the applicant seeking the drug marketing approval. The approach is conducive to avoiding parallel litigation, which could complicate procedures and cause unreasonable delays in drug approval.

Materials for filing the case

Article 3 provides that “where the patentee or stakeholder initiates, in accordance with Article 76 of the Patent Law, a proceeding before the court, the patentee or stakeholder shall submit, in accordance with Article 119.3 of the Civil Procedure Law, the following materials: (1) the relevant patent information registered on the platform created by the competent administrative department under the State Council, including the patent title, patent number, and related claims; (2) The information of the drug applied for registration and published on the platform created by the competent administrative department under the State Council, including the name, type and the registration category of the drug, the correspondence between the drug applied for registration and the listed drug involved, among others; and (3) The fourth types of declaration made by the applicant for drug marketing approval and the basis for the declaration”.

The Judicial Interpretation offers operational guidance in terms of preparation of the technical materials of suit, with all the information mentioned in the preceding paragraph available on the China Listed Drug Patent Information Registration Platform.

Correspondingly, the Measures provides in Article 6 that the generic drug applicant is obliged to perform the notification obligation. Article 6 reads: “…the national drug evaluation agency shall make the application and declaration available to the public so that such information is accessible on the China Listed Drug Patent Information Registration Platform, within 10 working days since the acceptance of the generic application. The applicant for the generic drug shall notify the holder of the marketing approval of the corresponding declaration and the basis thereof”. With the availability of technical evidence on public accessible platform, the burden of proof for the patentee or stakeholder is somehow alleviated. According to answers to questions from journalists, which accompanies the Judicial Interpretation release, Article 3 is also applicable to the applicant seeking drug marketing approval[3].

Grounds of defense

Article 7 enumerates the defense that could be employed by the generic drug applicant to argue non-infringement, namely the prior art defense (Article 62[4] of the Patent Law), prior right defense (Article 75.2[5] of the Law), and so forth.

In comparison with the 2020 Draft, the Judicial Interpretation made substantial revisions to the grounds of defense. It amends "statutory circumstances that shall not be deemed as infringement of patent rights" to "circumstances fall under those as stipulated by Article 75.2 of the Patent Law" (prior right defense).

Article 75 of the Patent Law provides the “statutory circumstances that shall not be deemed as infringement of patent rights", which encompasses Bolar Exception (Article 75.5[6]). Application for a drug marketing approval per se involves the act of implementing patented technology for the purpose of providing information required for administrative review and approval. Now that the legislative purpose of introducing a patent linkage regime in Article 76 of the Patent Law intends to resolve pharmaceutical patent disputes prior to the marketing of the generic drug by vesting the parties with the right to file a declaratory suit, if the applicant for drug marketing approval is allowed to use, in a patent linkage suit, Bolar Exception as the ground of non-infringement defense, it would contravene the legislative purpose of the patent linkage regime. It is speculated that this potential “pitfall” prompts the legislators to revisit and revise the text on the grounds of defense in the Judicial Interpretation.

In the final text, the Judicial Interpretation also deletes the expression "upon the request of the marketing approval applicant", which means that court may exercise discretion in making a declaratory judgment in absence of the applicant’s request.

During the public comment period, Article 9.2 of the 2020 Draft has sparked controversy among practitioners due to its ambiguity in defining the “circumstances where the related patent right shall be declared invalid”. It is therefore welcome that the Judicial Interpretation deletes the paragraph, which is conducive to boosting trial efficiency.

Damages regime

Article 12 reads: “where the patentee or stakeholder knows or should have known that the asserted patent rights should be declared invalid or the relevant technical solution of the drug applied for registration does not fall into the protection scope of the patent right, yet still institute a court proceeding or request an administrative ruling being made, the applicant for the drug marketing approval may file a suit for damages before the Beijing IP Court”.

In contrast to Article 17 of the 2020 Draft, the Judicial Interpretation underlines mens rea (“knows or should have known”) rather than the outcome of suit (“the suit is withdrawn without a justified reason, or none of the patentee’s or stakeholder’s claims is upheld”) in delineating the prerequisites to initiate a suit for damages. In other words, the Judicial Interpretation raises the threshold, requiring applicant for drug marketing approval proving the subjective fault of the patentee or stakeholder in order to claim damages, making the outcome of the patent linkage suit irrelevant.

Patent linkage is a brand-new regime in China. The issues that went unaddressed in the Judicial Interpretation remains to be clarified in the future judicial practice. Patentees and stakeholders of pharmaceutical patents need to keep abreast of the future legislative moves and case law evolvements in order to stay on top of the patent linkage practice in China.

Authored by Guan Yue