With the Patent Law (2020 Amendment), Regulations on Several Issues Connected withApplicable Laws on Hearings of Civil Cases Arising from Patent Rights Relating to Drug RegistrationApplications, Early Drug Patent Dispute Resolution Mechanism Implementation Rules(Experimental), Administrative Decision Making Rules of the Early Drug Patent Dispute ResolutionMechanism and other laws, rules and regulations being officially taken into action, the Chineseearly drug patent dispute resolution mechanism (“drug linkage system”) continues developingwith great impact on pharmaceutical businesses. This article is intended to analyze thismechanism and its impact on pharmaceutical businesses.

I. Drug Patent Registration and Genetic Drug Statements

(I) Drug patent registration

1. Registrant
Holder of the license for market launch of the drug

2. Registration date
Within thirty days after the date of the drug registration certificate

3. Registered items

Drug name, preparation, specifications, holder of the license for market launch of the drug,patent number, patent name, patent owner, patent licensee, date of grant of the patent license,expiration date of the protection term of the patent, patent status, patent type, connectionbetween the drug and claims for its patent, correspondence address, contact person and contact information. In case of change of registered information, the holder of the license for marketlaunch of the drug should update the information within thirty days after the change becomeseffective.

4. Patent types that can be registered

Drug patents that can be registered through the Chinese drug patent market launch informationregistration platform include:

(1) Patents on active compound ingredients of chemical drugs (not including original drugs),patents on drug combinations containing active ingredients and patents used for medicines;

(2) Patents on traditional medicine combinations, patents on extractions from traditionalmedicines and patents used for medicines;

(3) Patents on sequence structures of active ingredients of biological products and patents usedfor medicines.

The above patents do not include patents on intermediates, metabolites, crystal structures,production and testing methods.

5. Consequences of delay in completing registration formalities

The early patent dispute resolution mechanism is not applicable in patent cases where the patentis not registered through the early patent dispute resolution mechanism. After grant of approvalfor market launch of a drug, alleged patent infringement cases should be resolved according toPatent Law and other relevant laws and regulations. Non-cancellation of the decision to launch alegally approved drug on the market will not affect its force.

(II) Generic drug statements

1. Contents of the statement

The applicant for a generic chemical drug should make a statement on each of drug patentsrelated to the generic drug by referring to patent information available on the Chinese drugpatent information market launch registration platform when filing the application for market launch of the drug.

The statements are classified into four categories. Statement A: no patent market launchinformation on copied drugs is available on the Chinese drug patent information registrationplatform; Statement B: patent rights related to copied drugs recorded by the Chinese drug patentmarket launch information registration platform were terminated or declared as invalid;Statement C: the applicant for the generic drug promises to suspend market launch of the drugbefore expiration of the term of patent rights related to copied drugs recorded by the Chinesemarket launch drug patent information registration platform; Statement D: patent rights relatedto copied drugs recorded by the Chinese drug patent market launch information registrationplatform should be declared as invalid or the generic drug does not fall within the protectionscope of the patent rights.

2. Statement date

Within ten working days after acceptance of the generic drug application, the national drugevaluation authority should publicize details of the application and an applicable statementthrough an information platform.

3. Statement notice

The generic drug applicant should notify the market launch license holder of the applicablestatement and the basis on which the statement is made. If the market launch license holder isnot the person entitled to the patent, the former should notify the latter. The basis for thestatement of not falling into the protections scope of the patent rights should includecomparisons between the technical plan for the generic drug and related patent claims andrelevant technical documents.

II. Administrative Decisions and Actions

1. Time and person of filing a request for an administrative decision or action

(1) Persons entitled to patents
If the person entitled to or with interests in a patent disagrees with any of the four statements on patents relating to a generic chemical drug registration application, they can bring an actionto the people’s court or file a request for administrative decision with the patent administrationof the State Council to decide whether the technical plan for the drug pending market launch fallswithin the protection scope of the patent rights within forty five days from the date when thenational drug evaluation authority publicizes the application for license for market launch of thedrug.

(2) Applicants for generic drugs

If the person entitled to or with interests in a patent fails to bring an action to the people’s courtwith the prescribed period of time, the applicant for the generic drug can sue to the court toconfirm the drug to be registered does not fall within the protection scope of the patent rights.

2. Authorities accepting requests for administrative decisions or actions

The person entitled to a patent or applying for a generic drug can request for administrativedecision with the National IP Office or directly bring an action to the people’s court. In a drugpatent case, if a person involved does not accept the administrative decision made by theNational IP Office, the person can sue to the people’s court after receiving the administrativedecision.

3. Waiting period

The drug regulation department of the Statement Council gives a nine-month waiting period fora generic chemical drug application after receipt of a copy of the case filing or acceptance noticefrom a court or the patent administration of the State Council. The waiting period is given onlyonce in one case, starting from date when a court files the case or the patent administration ofthe State Council accepts the case. The national drug evaluation authority will continue technicalevaluation within the waiting period.

4. What to do after the national drug evaluation authority receives the court or administrativedecision.

The person entitled to or with interests in a patent who has filed a generic chemical drug registration application triggering a waiting period should submit related documents to thenational drug evaluation authority within ten working days after receiving a judgement ordecision. The national drug evaluation authority should do appropriately with a generic chemicaldrug registration application passing the technical evaluation based on valid court judgement oradministrative decision of the patent administration of the State Council.

(1) If the generic chemical drug registration application is found to fall within the protection scopeof patent rights, the application should be transferred to the administrative approval stage beforethe term of the patent rights expires;

(2) If the generic chemical drug registration application is found not to fall within the protectionscope of patent rights or the parties involved settle, the application should be transferred to theadministrative approval stage according to related procedures;

(3) If the related patent rights are legally found as invalid, the generic chemical drug registrationapplication should be transferred to the administrative approval stage according to relatedprocedures;

(4) If the drug regulation department of the State Council does not receive valid court judgementor mediation instruments or administrative decision of the patent administration of the StateCouncil within the waiting period, the related generic chemical drug registration applicationshould be transferred to the administrative approval stage according to related procedures;

(5) After receiving valid court judgement or administrative decision of the patent administrationof the State Council within the administrative approval period and finding it within the protectionscope of patent rights, the drug regulation department of the State Council should submit therelated generic chemical application to the national drug evaluation authority to transfer theapplication to the administrative approval stage before the term of the patent rights expires.

After the drug regulation department of the State Council decides to suspend the approvalprocess, if the court overturns the administrative decision, the parties involved settle, the relatedpatent rights are declared as invalid or the person entitled to or with interests in the patentwithdraws the action or request for the administrative decision, the generic drug applicant may apply for market launch of the generic drug to the drug regulation department of the StateCouncil, which can decide whether to approve the application or not.

5. CDA can directly give approval if no action or request for administrative decision is filed.

If the person entitled to or with interests in a patent fails to file an action or a request foradministrative decision within the prescribed period of time, the drug regulation department ofthe State Council can directly decide whether to approve for market launch of a generic drug onthe basis of technical evaluation results and the drug applicant statement.

6. What to do with a patent declared as invalid in whole or in part

In a drug patent case decided by an administrative authority, if part of claims related to the patentin dispute is declared as invalid by the National IP Office, the administrative decision should bemade on the basis of claims that remain valid; if all claims related to the patent in dispute aredeclared as invalid by the National IP Office, the request for the administrative decision shouldbe refused.

7. Special provisions of not falling within the protection scope of patent rights

If an applicant for market launch of a drug claims there is one of circumstances in Article 67(Technology Now Available) and Item 2, Article 75 (Right of Prior Use) of Patent Law and the courtfinds it is true after investigation, the court should decide technology related to the drugregistration application does not fall within the protection scope of the related patent rights.

8. Confirmation of prior decision

In an action for infringement or non-infringement of the same patent rights or drug registrationapplication, if one of parties involved claims technology used for the drug in dispute falls or doesnot fall within the protection scope of the patent rights on the basis of an effective judgement inArticle 76 of Patent Law, in general, the court should allow this unless evidence shows technologyused for the drug in dispute and that for the drug registration application are inconsistent or thecause of the new claim is accepted.

9. Punishment for dishonest acts such as counterfeits and falsification

People should be legally responsible for submitting false or counterfeit statements, deliberatelyregistering patents whose protection scope is not related to drugs approved for market launchor which are not a type of patents that should be registered with the Chinese drug patent marketlaunch information registration platform, or infringing related patent rights or causing damage toother parties involved.

An applicant for market launch of a drug may bring a action for damages to Beijing IntellectualProperty Court against the person entitled to or with interests in the related patent who bringsan action or a request for administrative decision mentioned in Article 76 of Patent Law whenthey know or should know the patent rights should be declared as invalid or technology used forthe drug registration application does not fall within the protection scope of the patent rights.

III. Impact of the early drug patent dispute resolution mechanism on pharmaceutical businesses

1. Impact on drug patent market launch license holders

(1) Attach importance to drug patent registration and prepare drug patent registration strategieswell

Drug patent market launch license holders should attach importance to drug patent informationregistration and decide patent registration strategies used in the drug approval process byreferring to existing patent portfolio planning strategies of pharmaceutical businesses. Drugpatent registration applicants should prepare patent registration strategies suitable for their ownpharmaceutical businesses by taking into consideration various factors such as protection scope,characteristics and term of different types of patents (for example, biological target, compound,preparation, drug combination, drug use/indication patents). Before filing a patent registrationapplication, the applicant should make a rigorous analysis of the patent to avoid being punishedfor registering a patent whose protection scope is not related to drugs approved for marketlaunch or which is not a type of patents that should be registered with the Chinese drug patentmarket launch information registration platform.

(3) Establish a system adaptable to the early drug patent dispute resolution mechanism
Patent owners should file a dispute resolution application within forty five days from the date of receiving a notice from a generic drug applicant, so they should create a system for registereddrug patents that adapts to the early drug patent dispute resolution mechanism and ensuretechnology, people (internal patent team or external patent lawyer) and strategies are availablein advance so that quick and prompt acts could be done after receipt of statement noticedocuments from the generic drug applicant.

Judging from the existing system design, courts or the National IP Office may shorten theexamination period. In particular, courts may finish the preliminary examination within the nine-month waiting period. Therefore, patent owners have to finish all their work to resolve a patentcase within a shorter period of time, which is a big ask for an action team to work efficiently andcooperate with each other.

2. Impact on generic drug applicants

(1) Generic drug applicants should be prudent to issue a Statement D.

After issuing a Statement D, a generic drug applicant needs to notify patent owners of thestatement and technology related to the generic drug so that they can obtain technology usedfor the generic drug quickly. Considering this, the generic patent applicant should be prudent toissue a Statement D. They should guarantee anything contained in the statement is true and makea full plan for a patent action that the patent owner may bring. Generic drug applicants shouldmake rigorous comprehensive analyses of related drug patents, including stability, protectionscope and design conflict analyses before issuing a Statement D.

(2) First generic drugs approved for market launch because of a successful patent challenge willbe granted a twelve-month monopoly period.

First generic drugs approved for market launch because of a successful patent challenge will begranted a period of exclusive market occupation. Within twelve months from the approval dateof a drug, the drug regulation department of the State Council cannot approve for market launchof generic drugs of the same type, except successful common patent challenges. Due to thetwelve-month monopoly period for first approved generic drugs, pharmaceutical businesses willbe much more active in filing generic drug applications. However, the period of exclusive market occupation does not apply to drugs with the same name and prescription as traditional Chinesemedicines and drugs similar to biological medicines. Within the period of exclusive marketoccupation, the drug regulation department of the State Council cannot grant approval formarket launch of generic drugs of the same type, but does not stop technical review.

(3) The validity of drug patents may be the main target of generic drug applicants’ attacks.

Considering characteristics of generic drugs and the twelve-month monopoly period for firstgeneric chemical drugs approved for market launch because of first successful patent challenges,generic drug applicants may challenge the validity of related drug patents as an important task inthe drug development stage.

(4) Patent teams will have more demanding tasks.

Considering characteristics of generic drugs, generic drug applicants need full cooperation withand strong support from internal and external patent teams and rounds of evidence collectionand discussion before issuing a Statement D. A generic drug applicant will have a big problemafter submitting a false or vulnerable statement.

It is obvious that the early drug patent dispute resolution mechanism is important forpharmaceutical businesses. For pharmaceutical businesses that are well familiar with themechanism, it is certainly useful to resolve drug patent cases with other pharmaceuticalbusinesses.