IPR CHANGES IN CHINA

For a country with only 25 years of IPR protection tradition, China has come a long way. China is preparing a third round of amendments to the PRC patent law (to be finalized by 2008).⁶ These amendments have resulted from China's entry into the World Trade Organization (WTO). The proposed changes indicate that China is continuing to strengthen and harmonize its legal system for IPR protection. The shifts will likely include: 1) changes in the patent application process; 2) amendments regarding legal requirements for patentability; 3) amendments regarding the exemptions to patent infringement; 4) amendments to establish a special appellate court to handle IPR cases.

MANAGING IPR RISKS IN CHINA

According to Perkins Coie's Michael Wise, foreign entities conducting business or considering doing business in China should incorporate IP risk management strategies as a component of their business plan. If a company is to establish an R&D facility in China, emphasis should be placed on managing the IP asset leakage and protection. To prevent this, precautions should be taken such as using experienced IP professionals in establishing the facility, creating confidentiality policies, and training employees. The majority of employees in China have not been exposed to confidentiality policies, so the company should educate and train all the employees about these policies.

An R&D company should aggressively seek patent protection for inventions made in the R&D facility in China. Despite the current limitations of IPR protection and enforcement in China, filing patent applications today may provide valuable IPR protection in years to come. Due to the brief history of patent protection in China and the differences between US patent law and the PRC patent law, many concepts are foreign to the Chinese, including Chinese patent attorneys.

CONCLUSION

IPR protection in modern China has had a very brief history. Despite such a short timeframe, in that short time China has made impressive progress in protecting and enforcing IPR. China still has a long way to go. As the Chinese economy matures and China transitions from a manufacturing-based economy to a technology-based economy, IPR will become more important. The recent rise in patent application filings by domestic and foreign applicants bodes well for China and reflects an increased confidence in the future of patent protection and enforcement in China. The Chinese government is aware of the need to improve IPR protection and enforcement. The proposed third amendments to the PRC patent law will hopefully continue to improve the situation. The key question is when Chinese IPR protection and enforcement will meet international standards.

That timeframe may be shorter than some anticipate. Novartis is investing US $100 million in its first comprehensive R&D center in Shanghai, Jeffrey Li, president of Novartis China, told reporters from China Pharmaceutical News, "Pharmaceutical R&D is...very sensitive to IPR issues. If a novel compound can get effective IP protection it may generate billion of dollars of profits...Novartis is fairly confident with China's IPR protection. We are voting [for China's IPR protection] with billions of dollars."

Special thanks to Michael Wise, partner in the Los Angeles office of Perkins Coie, a member of the firm's intellectual property practice group, and chair of the firm's China intellectual property practice; Zhaohui Wang (Zoe), PhD, and James Zhu, PhD, senior patent associates at Perkins Coie ( http://www.perkinscoie.com/).

Eric Langer is president of BioPlan Associates, Rockville, MD, 301.921.9074, elanger@bioplanassocicates.com

REFERENCES

1. Wise M, et al, Protection and enforcement of biopharmaceutical intellectual property rights in China–a rapidly evolving system. In: Langer E, editor. Advances in biopharmaceutical technology in China. Rockville, MD: BioPlan Associates; 2006.

2. American Chamber of Commerce; American corporate experience in a changing China–insights from AmCham business climate survey, 1999–2005. Beijing, China: American Chamber of Commerce; 2006.

3. China Intellectual Property News (State Intellectual Property Office); http://www.nipso.cn/; 2005 Dec. 19.

4. Judicial Interpretation of the Supreme People's Court on Questions Regarding Applicable Laws for Adjudication of Patent Dispute, Article 21, effective 2001; Jul 1.

5. White Paper on the New Development of Intellectual Property Rights Protection in China. Issued by the Chinese government; 2005; Apr 21.

6. Liu W. Patent Law Reform Set in Motion. China Daily, 2005; Nov 24.