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China's Patent Law Reform: Patent Linkage, Term Restoration & The Phase One Trade Agreement

Updated: Aug 15, 2020

The Patent Law of The People's Republic of China as at December 27th 2008, has been undergoing a series of reforms, which recently culminated in a Second draft of amendments to the Patent Law (Chinese version; English coming soon). These amendments partially align patent regulations in China, to those in the United States. Partial harmonisation with United States patent law is the inevitable consequence of China’s treaty obligations under the United States-China Phase One Trade Agreement, signed by the United States President and China’s Vice Premier Liu He, in January 2020. The Agreement's Intellectual Property Chapter requires China to provide for early resolution of patent disputes and effective patent term extension, provisions which are a highlight of the Second Draft Amendments and significant for pharmaceutical patent holders. The amendments to China's patent law also coincides with a significant milestone in its patent filings within the PCT system. At the end of 2019 WIPO's Patent Cooperation Treaty System recorded 58, 990 Chinese patent filings, compared with 57,840 US patent filings. China's tech giant, Huawei Technologies was also the number one patent filer (4,411 applications). However the patent linkage and term restoration amendments are of significant importance for pharmaceutical companies engaging in generic or original drug research and development.

U.S. Patent Linkage

(The following section is based on an unofficial translation of the Chinese version of the 2nd draft text)

,Patent linkage systems create a neutral regulatory space, allowing patent holders of branded pharmaceuticals to protect their interests, while also giving generic pharmaceutical competitors the possibility to challenge the validity of claims made by the patent holder. In the linkage system established by U.S. patent law, early dispute resolution mechanisms avoid potentially long and costly court disputes, as regulatory bodies can more effectively review the validity of the claims from the parties concerned, before escalating to litigation. In essence, this system creates accountability where both patent holding and generic parties are able to reduce business risk by early resolution of infringement and invalidity claims. This also subjects regulatory and administrative agencies to an additional level of scrutiny, regarding the correctness and quality of their review and approval procedures. Under the U.S. Drug Price Competition and Patent Term Restoration Act 1984, better known as the Hatch-Waxman Amendments, early resolution is facilitated by the establishment of the Approved Drug Products with Therapeutic Equivalence Evaluations or the Orange Book. Generic pharmaceutical manufacturers that file §IV Abbreviated New Drug Applications (ANDAs), must certify that the Orange Book-listed drug patent is invalid, not infringed or unenforceable, with regard to the generic equivalent they intent to put forward for marketing approval. The generic company must also notify the patent holder of the challenge and the ANDA application. This allows the patent owner 45 days from the date of the ANDA notification, to file an infringement suit. If this deadline is met by the patent owner, this will usually result in a 30-month stay of marketing approval of the generic drug. The first generics company to submit a 'substantially complete' application with paragraph IV certification for a specific dosage formulation of the drug, upon ANDA approval, will receive 180-day exclusivity for the marketing of this formulation.

China Draft Patent Linkage

The patent linkage and early resolution system proposed in China's Second Draft Amendments remedies the deficiencies of the January 2019 First Draft Amendments, which lacked patent linkage for early dispute resolution, but included term restoration for time lost during the marketing approval process. China's patent linkage system outlined in the Second Draft Amendments has some similarities with the Hatch-Waxman Amendments to the U.S. Patent Act. However, it does deviate from U.S. practice in some nuanced but important aspects. 1.) The Chinese drug administration is responsible for publishing drug application filings, while the U.S. system delegates this responsibility to the generic company applicant. 2.) Th procedural time limit for commencing infringement action under China's patent law amendments is 30 days from the publishing of the application by the Chinese drug administration; whereas US patent law provides at the

latest 45 days from receipt of the noitce letter for an ANDA filing. 3.) Where an infringement challenge has been filed by the patent owner within the prescribed time limit, there is no express legal provision requiring the patent administration to provide a mandatory stay of marketing approval for the generic drug. Where there is an administrative ruling or a decision by the Patent Administration or the People's Court, within nine months of the date of acceptance by the patent holder, the drug administration can determine, in accordance with the decision or administrative ruling, whether or not to issue marketing approval for the generic drug. In contrast, the Hatch-Waxman Amendments generally provide a 30-month stay, where an infringement claim is duely submitted within the legally mandated period. Addititionally, the Second Draft Amendments do not make any express provisions for grants of marketing approval exclusivity for generics, as is available for §IV ANDAs receiving first approval (180-day exclusivity) under the Hatch-Waxman Amendments. The Second Draft Amendment's lack of any limited exclusivity period, offered to the first to file an approved generic drug marketing application, makes it less attractive for multinational generics companies, in comparison to the U.S. 180-day §IV ANDA exclusivity.

Patent Term Restoration

The 2008 Patent Law currently in force for China does not contain express provisions for restoring time lost from the standard 20 year duration for an invention patent, due to administrative and regulatory delays. According to the Second Draft Amendments, draft Article 42.2, the Patent Administration Department of the State Council can consider requests for patent term extension/restoration when there has been 'unreasonable' delays in the examination of a patent. However, delays caused by the actions of the applicant will not be compensated for in any extension granted. In order for a term extension/restoration request to be valid, the patent must have been granted more than 4 years after the Chinese filing date, and more than three years after the patentee requests examination in China. The maximum additional period of term restoration/extension allowable, is five years. The Second Draft Amendments do not provide a clear legal definition for what consistutes 'unreasonable delay'. However, upon a reading of draft article 42.2 and 42.3 of the Amendments, it may be deduced that unreasonable delay could be interpreted as a period exceeding 4 years from the filing date in China, or 3 years following the request for examination; the later date of the two could be considered as evidence for establishing 'unreasonable delay'.

The Phase One Trade Agreement & Patent Law Harmonization

China’s obligations in respect of pharmaceutical patents under the US-China Phase One Trade Agreement contain several complex commitments. In Section C of the Intellectual Property Chapter (Chapter 1) on Pharmaceutical-related Intellectual Property, Article 1.10§1 requires China to allow patent applicants to, ‘rely on supplemen

tal data to satisfy relevant requirements for patentability, including sufficiency of disclosure and inventive step, during patent examination proceedings, patent review proceedings, and judicial proceedings.’ Early dispute resolution obligations found in the Second Draft Amendments are provided for in the Phase One Trade Agreement under Article 1.11§1 and 2. Most obligations arising from the foregoing Articles have been met, to varying degrees. Article 1.12 which outlines China’s obligations in respect of patent term extension under the Agreement in paragraphs 1 and 2, are reflected in the Second Draft Amendment.

NB:This blog will be following developments with the Second Draft Amendments and further implementations of China's obligations under the US-China Phase One Trade Agreement.

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