Intellectual Property Issues in the Pharmaceutical Industry in China

China is one of the major pharmaceuticals producers in the world, and its pharmaceutical industry is a key contributor to the country’s rapid economic growth. However, counterfeiting of pharmaceuticals is common. Most would attribute the problem to the inadequate protection of intellectual property rights in the industry. However, this industry is in fact, from the naming of a single drug to the innovative development of new pharmaceutical technology, interwoven with IP issues. This following discusses the IP protection offered under the current IP regime in China.

Names of Pharmaceuticals — Generic and Commercial Names

The naming of pharmaceuticals is governed by the Trademark Law and other regulations and provisions from the Supreme People’s Court and the State Food and Drug Administration in China (SFDA). In the past, apart from Chinese traditional medicinal herbs, no drugs could be sold without a trademark. However, this requirement was removed by the Drug Administration Law.

Currently, without approval from the SFDA, the use of unregistered trademarks or other drug names on labels of pharmaceuticals is prohibited, according to the Rules for Management of Labels and Direction of Use for Pharmaceuticals of the SFDA. Therefore, pharmaceutical trademarks have to be registered like other trademarks before they can be used.

The registration of the pharmaceutical trademarks is subject to same substantive examination as other trademarks. An absolute ground for refusal is that the mark refers to the “generic” names, as listed in the Pharmacopoeia of the PRC, of the goods concerned.

On the contrary, it is common for “commercial names” to be considered as quasi-trademarks of the drugs as commercial names are used to refer to the drugs, especially now that there is no longer the requirement that a drug must have a trademark. However, under the law, advertisement of a drug cannot be in the commercial name of the drug alone, and using a trademark as the generic name of the drug requires approval from the SFDA.

There are further guidelines under the Notification of Further Standardizing Pharmaceutical Product Names in 2006 on the commercial names of pharmaceuticals. For example, the same drug manufactured by the same producer with the same active ingredients but adopting a different dosage must use the same commercial name.

Moreover, the commercial names:

• Must be composed of Chinese characters only, without any device, Latin letter, number or symbol;

• Must not contain any word that is banned under the Trademark Law, such as “red cross” and “red crescent”;

• Must not consist of or incorporate any element that is phonetically or visually similar to the generic name of the drug.

Given the fact that there are more restrictions placed on commercial names than pharmaceutical trademarks, it is more favourable to have the names registered as trademarks.

Ingredients and Production Methods — When are Patents in Play?

Scientific discoveries, methods for the diagnosis or for the treatment of diseases are not patentable. Pharmaceutical ingredients and products are patentable, only if novel, inventive and of practical application. The patentee enjoys the exclusive right to manufacture, advertise and exploit new ingredients and production methods during the patent term.

The introduction of the Amendments to the Patent Law provides an exemption to the infringement of a patentee’s right by allowing generic drug manufacturers to manufacture a generic drug before the patent expires so that they can compete with the patentee.

Further, for the purpose of public health, the Patent Administrative Department of the State Council may grant a compulsory license for patented drugs so as to allow production of the drugs, if the pharmaceutical patentee has not exploited or sufficiently exploited the patent without any justifiable reason after the expiration of 3 years from the grant of the patent and of the expiration of 4 years from the filing date of application.

Confidential Ingredients and Production Methods — Protected by Trade Secrets

If pharmaceutical manufacturers do not want to disclose the materials or technology used in pharmaceuticals production, or if they cannot or do not obtain patent registration, they can rely on the protection of trade secrets.

Under the Anti-Unfair Competition Law, trade secrets include information:

•   (i)  Which is unknown to the public;
•  (ii)  Which is capable of bringing economic benefits to the right holder and has practical applicability; and
• (iii)  For which the right holder has taken measures to keep it confidential, e.g. by restricting access to the information or binding persons with access to the information with confidential agreements.

With this in mind, businesses should ensure there is a clause in their staff employment contracts stipulating that the formulas or other drug production know-how are regarded as confidential and should not be divulged to third parties during the term of employment and also after the termination of the employment contract.

Confidential information is not required to be disclosed to the public. As there is no fixed expiry term for the protection of trade secrets, there should not be the problem of an influx of generic drugs after the expiry of say a patent right. However, if the confidential information has leaked out and a third party subsequently applies for a patent, the original owner of the confidential information may be prohibited from using the same materials or technology.

Pharmaceutical Packaging Design — Copyrightable Work

The packaging of a pharmaceutical may be considered of a special and innovative design. In such case, they would be protected by both the design patent right and by copyright. The major advantage of copyright over the design patent right is that the former arises once the work is created, without any requirement of registration. There is also no requirement that the owner takes any measures to ensure its confidentially.

However, on the other hand, the automatic nature of copyright causes considerable burden to the right owners when they are required prove ownership of their rights upon infringement. In China, there is a recordal system for copyright which records the details of the copyrighted work and the ownership of the work. It serves as prima facie evidence of ownership if a dispute arises.

Conclusion

As discussed, there are various means of intellectual property protection available to the pharmaceutical industry in China. Drug developers and pharmaceutical companies should, therefore, take appropriate steps to better utilize the current regime in protecting their IP rights.