China Today: Intellectual Property Protection in China: Does it Warrant Worry? - The recent rise in patent application filings reflects new confidence in the future of patent protection - BioPharm

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China Today: Intellectual Property Protection in China: Does it Warrant Worry?
The recent rise in patent application filings reflects new confidence in the future of patent protection


BioPharm International
Volume 20, Issue 5

CHINA'S IPR ENFORCEMENT SYSTEMS

Chinese remedies for patent infringement are similar to US remedies. In a patent infringement case, the patentee may seek injunctive relief and monetary damages. However, unlike US plaintiffs, Chinese plaintiffs often demand a public apology for the infringing activities. Patent infringement damages may be calculated as lost profits of the patent holder or benefits gained by the infringer. If royalty payment references are unavailable, a court may award damages from 5,000 yuan (US $625) to 500,000 yuan (US $62,500).4 Since the damages awarded for patent infringement in China are insignificant compared with the millions of dollars routinely awarded in US patent cases, the lack of meaningful damages for patent infringement is a significant issue between the United States and China.

Enforcing patent infringement judgments can be difficult in China due to local economic protectionism. If the defendant is a major employer in the region and produces significant tax revenues to the local government and the plaintiff has no operation in the city or province, the local government has no incentive to enforce the judgment against the defendant. If enforcement of the judgment would result in the closing of the business or severely curtail the success of the company, the local government may not cooperate in enforcing the judgment. This creates tension between the central government and the local government. The uncertainty in enforcement of judgments, in combination with the low damages available for relief, has discouraged many foreign companies from pursuing patent infringement actions in China. The lack of transparency in the Chinese court system and the interconnection of the parties further deter foreign companies from suing. Court decisions often are not published.

Through 2004,5 IP offices nationwide accepted 12,058 patent dispute cases, of which 10,411 cases (86.3%) were completed. In 2004 alone, the Chinese IP offices took on 1,455 patent dispute cases and uncovered 3,965 fake patent cases.

CRIMINAL PENALTIES


China's Changing IP Landscape
IPR infringers in China may be subject to criminal penalties. From 1998 to 2004, 2,057 criminal cases were adjudicated in Chinese courts, and 2,375 individuals were convicted. According to the criminal law, "counterfeiting other people's patents" will, under "severe circumstances," result in either fines or up to three years of imprisonment or detention, or both. Criminal penalties for trade secret theft are punishable by either fines or up to three years of imprisonment or detention, or both. Trade secret theft causing damages of more than 2.5 million yuan (US $312,500) to the holder of the trade secrets is punishable by three to seven years of imprisonment.

From 2000 to 2004, 2,533 suspects were arrested and 2,566 were charged by the prosecutors' offices for IPR crimes. In 2005, the police department investigated 1,799 cases and solved 1,470 cases (up 46% from 2004).

PFIZER'S RECENT CASE

Pfizer's Viagra patent case has received significant worldwide press. The patent claims the use of sildenafil citrate, the active ingredient of Viagra, for treatment of male erectile dysfunction. An invalidation proceeding joined by 12 domestic Chinese pharmaceutical companies was initiated in 2001. Nearly three years later, the reexamination board issued a decision declaring the patent invalid. Pfizer immediately appealed. In June 2006, the Beijing No. 1 Intermediate People's Court dismissed the reexamination board's invalidity decision and remanded the case to reevaluate the validity of the patent. An appeal was filed by the Chinese companies to reverse the decision. Without new evidence, it may be difficult for the Chinese companies to reverse the decision. The development of the Viagra case has been closely watched by Chinese and foreign companies as a test of China's IPR system. The Viagra case is an example of concerted efforts by Chinese companies to invalidate Chinese patents owned by a foreign pharmaceutical company. The fact that Chinese companies are monitoring and opposing the grant of Chinese patents demonstrates an increased awareness of other companies' IPR and a sophisticated IP strategy. Rather than simply ignoring Pfizer's patent, the Chinese companies challenged it in court.


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