In this edition of Life Sciences Spotlight, members in the DLA Piper Life Sciences team will assist in unravelling the
legal aspects of a real-world Life Sciences dilemma. In this issue, DLA Piper’s IP specialist, Ian Jebbitt and patent
specialist, Bing Li discuss implementing intellectual property enforcement strategies in China as part of
a worldwide strategy to prevent counterfeit pharmaceuticals from entering global markets.
Unravelling the Helix
FarmaPharma (FP) markets a prescription hormone replacement therapy pharmaceutical, ProductX,
internationally. After FP’s Australian Customer Care Complaint Centre received calls from patients who claimed
to be experiencing unprecedented and alarming side effects after using ProductX, FP investigated and determined
that counterfeit ProductX had entered the Australian market.
With DLA Piper’s assistance (see Unravelling
the Helix in Spotlight, Issue 4), FP filed copyright and trade mark Notices of Objection with Australian Customs,
who successfully intercepted and seized a number of shipments of ProductX en route to the Australian market
and provided FP with details regarding the exporters.
FP’s subsequent investigations revealed that counterfeit
ProductX has been imported into and exported from various ports located in South and East Asia, including
China, and that the supplier of the active pharmaceutical ingredient (API) used in the counterfeit ProductX is a
manufacturer located in Shenzhen, China.
FP’s Customer Care Complaint Centres in Asia, Europe and the United States have now begun receiving
complaints from customers complaining of side effects identical to those experienced by Australian patients who
were using counterfeit ProductX.
FP holds a granted Chinese patent covering the API in ProductX, and a registered Chinese trade mark covering
its distinctive ‘green and gold’ ProductX branding. As part of a worldwide strategy to minimise the amount of
counterfeit ProductX entering global markets, FP comes to you for advice about what it can do to minimise any
counterfeit ProductX being imported into or exported from China, and stop the counterfeit ProductX API supply
at its source in China.
How to minimise the future importation and exportation of counterfeit products
to and from China
As set out in Spotlight – Issue 4, FP has an obligation to ensure ProductX and all its pharmaceutical products are of the highest
quality and to prevent counterfeit medicines entering the market. FP should take the following steps to minimise the future
exportation of counterfeit products from China:
1. FP owns a registered Chinese trade mark covering its distinctive ProductX branding. If it hasn’t already done so, and as a
matter of priority, FP should record this trademark with the General Administration of Customs in China (GACC ). Once
recorded, the trade mark information will then be uploaded to the national GACC computer system and shared with local
Customs offices throughout mainland China. GACC proactively seizes counterfeit products. As such, the recordation of the
Chinese trademark with the GACC will result in the seizure and destruction of any imported or exported counterfeits that
bear FP’s distinctive “green and gold” ProductX branding, or anything similar thereto.
2. If FP is aware of any particular shipments of counterfeits entering or leaving China, it should file a complaint with the GACC
seeking the seizure and destruction of such counterfeits.
3. FP should also consider meeting with Chinese Customs to train Customs officers on how to identify counterfeit product.
How to stop the counterfeiting at the
suspected source in China
As a priority, FP should try to identify the source of the
counterfeits. In order to do this, FP should:
1. Analyse the packaging of the counterfeit product seized
to try to ascertain who is manufacturing the counterfeit
product (to the extent it is not the company based in
Shenzhen)
2. Conduct on-the-ground intelligence gathering
investigations into the API manufacturer based in
Shenzhen and/or any other entity that is referenced on
the packaging of the seized products to try to ascertain
the size and scale of the counterfeiting operation and
where any counterfeits are being seized, and
3. Monitor the internet to see if anyone is selling counterfeit
ProductX online (in both Chinese and English).
If a supply factory is identified, FP should seek to further
identify: customers, suppliers, any sub-contractors and
the ways in which counterfeit product is being imported,
exported and/or distributed in China. This should make
subsequent investigations and enforcement action easier
to execute.
Once FP has compiled this information, FP should, depending
on the scale of the infringement, undertake either or both of
administrative enforcement action to seize counterfeits and/
or Court based infringement proceedings.
It would also be prudent for FP to formulate a strategic
anti-counterfeiting plan which involves it being proactive
rather than reactive in terms of dealing with the import and
export of counterfeits to and from China. This would involve
continuing to gather intelligence and taking enforcement
action in a systematic and strategic manner against specific
predetermined targets, as opposed to undertaking
enforcement action on a piecemeal basis.
Other considerations for FP
If the production of counterfeit ProductX involves
infringement of FP’s patented active pharmaceutical ingredient,
this could be another ground on which FP could take action.
However, as Chinese customs and enforcement officials are
normally unwilling to take action on patent cases without a
court decision which found infringement, this will normally
involve FP having to first obtain a successful court decision
which increases the costs involved and the time it will take for
FP to take action.
What are FP’s enforcement options?
In terms of patent enforcement in China, FP will have
two options:
1. Initiating a court action to seek both damages and
injunctions, or
2. Filing an administrative complaint with the local intellectual
property bureau who has the authority to order the
infringer (counterfeit company) to cease and desist from
the infringement.
Due to various limitations on the administrative authorities,
such as no damages rewards and possibly no forum shopping,
filing a civil lawsuit with the court is a more popular
patent enforcement mechanism in China, especially in the
pharmaceutical area. However, it shall be noted that some
administrative authorities may have certain advantages over
the courts with respect to evidence collection primarily due
to their familiarity with the industry.
Thus, unless we conclude otherwise after detailed review
of the matter, it appears advisable to focus on filing patent
infringement lawsuit against the infringer for the remedies
of both damages and permanent injunctions (which is almost
always available in China), with the possibility of seeking
assistance from local (Shenzhen) intellectual property and/or
FDA authority primarily for evidence collection purpose.
Depending on the merits of the case, we will also aim to seek
a preliminary injunction which will significantly impact the
targeted infringer’s operation with immediate effect. Although
it has become rather difficult in securing such a preliminary
injunction, it is our experience that chance of success could be
enhanced through thorough preparation of the case and good
communications with the court.
Apart from patent enforcement, it should be kept in mind that
the local FDA (Shenzhen FDA) authority supervises the local
pharmaceutical industry. Should an investigation confirm that
there may be quality issues in certain infringement products
(counterfeit products), the complaint could be filed with such
local FDA authority with a view to, at least, deter the business
activities of such infringers.
Evidence collection
Given that there is no discovery proceedings in China,
a patent holder will need to collect the necessary evidence
to build a patent infringement case. It is recognized
that difficulties exist in collection of certain evidence.
Thus, Chinese Court’s have the discretion to intervene in such
an exercise by issuing an 'evidence preservation' order (which
essentially asks the targeted infringer or other relevant party
to disclose certain information) or conducting certain 'court
investigations'.
If necessary, we would aim to:
- Have a discussion with the local FDA (and/or other
governmental authorities) in advance with a view to have
such governmental bodies collect certain information from
the targeted infringer(s); and
- Aggressively seek an 'evidence preservation' order from
the Court in order to collect certain necessary evidence
from the targeted infringer and possibly governmental
bodies.
Timing and se quence of legal action
Our proposed strategy involves a possible combination
of both administrative complaints and court actions and
therefore requires delicate management of the timing
and sequence of actions. We anticipate to run the
administrative complaint proceeding (if necessary) in parallel
to preparation work of the lawsuit. As such, we expect
to initiate the lawsuit within six months upon completion of
the review and to receive a court decision in a 12 – 18 month
time-frame at the first Instance Court level.
The timing of initiation of the lawsuit will be dependent
upon two major factors: (1) the possible pursuance of
a preliminary injunction, which shall require an immediate
action to enhance the chance of success, and (2) the statute
limitation of two years which essentially allow the patentee to
collect damages for the infringement activities occurred during
the past two years before the initiation of lawsuit.
Prosecution history estoppel
In case the infringer initiates an invalidation against
the patent, please note that any statement made during the
invalidation proceedings will also form the prosecution history
and may therefore stop the patentee from expanding the
scope of the patent under the Doctrine of Equivalents.
As such, any pending or future invalidation proceedings should
be closely managed to avoid potential adverse impact on
future enforcement actions.
Ian Jebbit's perspective
Ian Jebbitt is an IP specialist based in Hong Kong. Ian focuses on a broad range of intellectual property matters throughout the Asia Pacific region. He has extensive experience assisting multinational clients with the acquisition and enforcement of IP rights, trademark and other IP litigation, licensing and commercial IP matters. You can reach him at [email protected].
Bing Li's perspective
Bing Li is a patent specialist based in Shanghai. Bing focuses on Chinese patent drafting, filing and prosecution as well as on international patent prosecution, especially in the biotechnology/pharmaceutical sector. You can reach him at [email protected].