China’s new grounds for defence and damages indicates tougher rules on patent linkage

On 4 July 2021 the National Medical Products Administration and the China National Intellectual Property Administration (CNIPA) jointly released measures to implement an early resolution procedure for pharmaceutical patent disputes. The following day the Supreme People’s Court promulgated provisions on several issues concerning how the law is applied in civil case trials involving patent disputes related to pharmaceutical registration applications. The judicial interpretation, which provides clarity on the Chinese patent linkage suit, entered into force on the date of promulgation.

The 14-article judicial interpretation stems from a 19-article draft, which was released for public comment on 29 October 2020. The substantial contents of the 2020 draft’s provisions with regard to jurisdiction, eligibility of parties, case suspension, confidentiality obligations of the parties, requirements for technical solutions submitted to court, behaviour preservation and res judicata remain intact in the finalised text.

Article 7 clarifies the defence mechanisms that generic drug applicants can use to argue non-infringement, including, among other things, the prior art defence (Article 62 of the Patent Law) and prior right defence (Article 75.2).

The judicial interpretation has made substantial revisions to the grounds for defence. It has amended the statutory circumstances that are not deemed to infringe patent rights to cover circumstances that fall under those stipulated by Article 75.2 of the Patent Law (ie, prior rights defence).

Article 75 of the Patent Law outlines the statutory circumstances that are not considered to be patent rights infringement, which encompasses the Bolar Exception (Article 75.5). Applying for drug marketing approval per se involves implementing patented technology in order to provide information required for administrative review and approval. The purpose of a patent linkage regime in Article 76 is to resolve pharmaceutical patent disputes prior to the generic drug entering the market. It would thus contravene the legislative purpose of the patent linkage regime in cases where the accused applicant for drug marketing approval is allowed to use the Bolar Exception as grounds for defending non-infringement in a patent linkage suit. It is speculated that this potential pitfall has prompted the legislators to revisit and revise the text on the grounds of defence in the judicial interpretation.

In the finalised text, the expression "upon the request of the marketing approval applicant" has been removed, which means that the 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 sparked controversy among practitioners due to its ambiguous definition of ‘circumstances where the related patent right shall be declared invalid’. It is therefore welcome that the judicial interpretation does not include this phrase.

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 the 2020 draft version of Article 17, the judicial interpretation focuses on the intention or knowledge of wrongdoing rather than the outcome of the case (“the suit is withdrawn without a justified reason, or none of the patentee’s or stakeholder’s claims is upheld”) in clarifying the prerequisites to initiate a suit for damages. In other words, the new measures raise the threshold, which requires applicants for drug marketing approval to prove the subjective fault of the patentee or stakeholder in order to claim damages. This makes the outcome of a patent linkage suit irrelevant.

Patent linkage is new in China and issues that went unaddressed in the judicial interpretation will require further clarification in future judicial practice. Patentees and stakeholders of pharmaceutical patents need to stay abreast of the future legislative moves and case law in order to keep on top of the patent linkage process in China.