Spotlight on Greater China: navigating a shifting patent landscape

Kicking off the webinar, Lu Zhou, partner in the Hogan Lovells General Corporate and M&A practice, noted that many life sciences and health care companies lack significant experience with the patent linkage and patent term extension systems in China, given how new these frameworks are. These options raise complicated questions and opportunities for the sector and provide an interesting touchpoint for comparing the Chinese market to other jurisdictions.

The new patent linkage system: what are the benefits for pharmaceutical companies?

Adopted in 2020 and implemented from 1 June 2021, the Chinese drug patent linkage system was one of several significant revisions to the patent law designed to encourage companies to develop and seek approval in China of new, innovative drug products, and to encourage generic companies to challenge reference product patents. As its name implies, the patent linkage system provides a mechanism to “link” the patent status of an originator drug to its Chinese marketing authorization, and in some respects is analogous to the U.S. Food and Drug Administration’s “Orange Book”.

Julia Peng, counsel in the Hogan Lovells Fidelity¹ Intellectual Property Litigation practice, gave an overview of the legal framework of Article 76 of the Fourth Amendment to the Chinese Patent Law, which provides a process for evaluating drug patent approvals under a U.S. Hatch-Waxman-style incentive system.

What types of patents can be linked?

First, Ms. Peng noted, drug marketing approval holders in China must register the relevant patent information on the Patent Information Registration Platform for Drugs Marketed in China (Platform) of the Chinese National Medical Products Administration (NMPA). Registration must take place within 30 days of grant of the drug registration certificate and upon change of registered patent information. Limited types of drugs are eligible for registration; for chemical drugs, patents to active ingredients, medical composition containing active ingredients, and medical use patents are eligible, whereas for biological products, patents to sequence structure and medical use are eligible. Ms. Peng advised that patents to intermediates, metabolites, crystal forms, preparation methods, detection methods are not eligible are not eligible for listing, although Ms. Peng pointed out that in practice, certain process patents with composition or medical use claims have been successfully registered with the Platform.

Who are the players?

When a generic applicant submits an application for marketing authorization, it must make a declaration to NMPA regarding the originator patent information under one of four Categories:

1. No patent information about the originated drug is registered on the Platform;
2. The patents of the originated drug on the Platform are invalid or terminated, or the generic applicant has been granted a license;
3. The patents of the originated drug are on the platform, but the generic drug will not be marketed until the expiration of the corresponding patent term;
4. The patents of the originated drug on the Platform shall be declared invalid (Category 4.1) or do not cover the generic drug (Category 4.2)

Ms. Peng explained that authority for resolving these proceedings resides with the Beijing Intellectual Property Court as well as the Chinese National IP Administration (CNIPA). The interplay among the various players is depicted schematically below:

A tight timeline

If the patent owner or stakeholder objects to the generic drug applicant’s declaration, Ms. Peng explained, the patent owner or stakeholder must take action within 45 days from the NMPA disclosing the generic drug’s marketing authorization application. Importantly, Ms. Peng highlighted that 45 days is a very tight timeline for the patent owner or stakeholder to prepare for a court action. Thus, she advised, stakeholders should prepare as much as possible in advance to have authorization documents, legal team, claim charts, experts, and possible witnesses at the ready.

Upon commencing the case filing (whether in the Beijing IP Court or with CNIPA), Ms. Peng advised, a nine-month waiting period is implemented for chemical generic drugs, during which application for generic registration will be suspended and the generic drug can’t be approved. (There is no corresponding waiting period implemented for biological products or Chinese herbal drugs).

Ms. Peng also noted certain nuances regarding timing of filing. For example, there is no automatic suspension or stay in the Beijing IP court if a parallel CNIPA case is pending. However, CNIPA will not accept a patent linkage action if a court action has already been filed. In considering the choice between the Beijing IP Court and CNIPA, Ms. Peng pointed out that the Court allows for an application for interim injunction if the case can't be decided within the recommended nine-months resolution period, which CNIPA does not. However, CNIPA could provider a quicker process and has the possible advantage of technically trained Examiners.

Originators should also note that the generic drug dossier must be provided to the patent owner/stakeholder in a patent linkage action, subject to certain limited confidentiality obligations. Generic drug applicants are obliged to provide technical details of the drug application and it is expected that patent linkage cases are to be decided primarily based on the application materials submitted by the generic applicant to NMPA. Ms. Peng pointed out that a successful patent challenger whose generic drug obtains a market approval is entitled to a one-year exclusivity. 

Ms. Peng also provided an overview of cases filed in the few months that the new system has been “live”. Notably, despite the short timeline since implementation, the Beijing IP Court has already published one decision adjudicating a patent linkage case (Chugai v. Haihe). In addition, at least 28 patent linkage adjudication cases have been completed by CNIPA, among which eight petitions were upheld in favor of the patent owner, five petitions were rejected in favor of the generic drug applicant, and ten actions were withdrawn. Thus, at least within the first batch of published cases, both the Court and CNIPA appear to be making every effort to keep within the recommended nine-month period for resolution.

Patent term extension for pharmaceutical patents

Also adopted in 2020 and implemented from 1 June 2021, Article 42.3 of the amended Patent Law provides a new patent term extension (PTE) provision for pharmaceutical patents. Similar to the legal regimes in the European Union and U.S., these provisions compensate for time spent during the regulatory approval process and allow patentees of innovative pharmaceuticals to apply for PTE of up to five years, if the effective term of the patent after obtaining marketing approval is less than 14 years.

One patent – one drug

Andrew Cobden, counsel in the Hogan Lovells Intellectual Property, Media, and Technology practice, pointed out that although the law is in effect, the Draft Implementation Rules (issued 25 November 2020) governing their application in practice are still in draft form, and therefore some uncertainty remains as to which patents and/or drugs will be eligible for PTE. For example, Mr. Cobden noted, the draft rules state that extension applies to those patents related to active ingredients of new drugs approved for marketing for the first time in China, which are related to a product, preparation process, or medical uses, for chemical, biological, and Chinese herbal drugs. However, it remains to be seen in practice how the terms “new drug” approved for marketing “for the first time in China” will be interpreted by the authorities.

Mr. Cobden advised that according to the Draft Implementation Rules, PTE protection shall be limited to one patent if the drug is protected by multiple eligible patents, and one drug if the patent covers multiple eligible drugs. In addition, the PTE application must be filed within three months of the drug’s marketing approval date. The PTE application is filed with CNIPA, with the possibility to appeal to the Court if not satisfied by CNIPA’s decision. Third parties wishing to invalidate a PTE will also apply to CNIPA.

To address the new protocol, CNIPA has issued two draft amendments to the Patent Examination Guidelines, with some small changes between the first (issued 3 August 2021) and second (issued 31 October 2022) drafts. Notably, however, both draft Guidelines specify that PTE eligibility is applicable to patents directed to chemical, biological, and Chinese herbal drugs. Moreover, a PTE eligible patent is only available for apply for innovative drugs (Class 1) and certain new modified drugs (Class 2), including esters or salts of a known active agent (Class 2.1), improvement of vaccine strains of preventive biologics (Class 2.2), new indications of therapeutic biologics (Class 2.2), new compound preparations of known active ingredients having significant clinical advantages (Class 2.3), and new indications of chemical drugs (Class 2.4). Importantly, Mr. Cobden pointed out, this requires that the originator’s marketing authorization was applied for first in China before marketing authorization is obtained anywhere outside of China.

A strategic shift?

By contrast, most drugs currently registered in China are in Class 5 (having been previously marketed overseas). Mr. Cobden advised that companies interested in the possibility of PTE in China must file their marketing approval applications in China at an earlier time than they would have done in the past. In addition, while pre-clinical trials and product registration testing can generally be done abroad, sponsors should consider conducting their clinical trials in China at a fairly early stage to support the Chinese marketing authorization application.

Mr. Cobden highlighted that pharmaceutical originators need to continue to monitor developments regarding the final version of the Implementation Rules. As noted above, under the current drafts, only Class 1 and some Class 2 will be eligible for PTE in China, which, for many multinationals, would require a shift in the cadence of their market authorization filings in order to take advantage of these protocols. It will be also be important to take a multidisciplinary approach: originators should be prepared to align IP, regulatory, marketing, and sales teams to ensure PTE eligibility for those drugs that are most important for the Chinese market.

Finally, Mr. Cobden noted, originators should carefully consider which patent(s) to consider applying for PTE because any one patent can be used only once and any drug/marketing authorization can only be covered by one patent. A robust Chinese divisional application filing strategy balanced with new priority filings directed to different medical indications will help support flexibility in making these choices in the future.

Why Hogan Lovells?

The Asia-Pacific region presents an immense, but also immensely challenging, commercial opportunity for future-ready pharmaceutical, biotech, medical device and health care companies.

We have been supporting clients in Asia-Pacific for over three decades and we are backed by a global dedicated life sciences practice comprising over 500 lawyers around the world. Leveraging the full-service capabilities of our offices within the region, we can offer a dedicated team of culturally-attuned, multi-jurisdictional and multi-practice lawyers with substantial experience and background in the life sciences and health care sector and the ability to advise on the full scope of issues in this sector.

We hope that the above summary has highlighted some key considerations in order to prepare for and navigate evolving issues, risks, and opportunities relevant for your commercial interests in the APAC region.

The webinar slides are available here.

You can access a summary of Session no. 1: “Internal investigations and enforcement trends in the Life Sciences sector in China” here, a summary of Session no. 2: “China’s data protection regime and risk management for handling of human genetic resources under relevant regulations in China” here, and a summary of Session no. 3: “Out-licensing to Chinese counterparties, including related necessary IP protections” here.