Intellectual property protection for pharmaceutical companies in China
China offers significant pharmaceutical research and development opportunities for Canadian companies. When working with Chinese partners, Canadian companies need to consider how to protect their intellectual property (IP). On this page you will find information explaining Chinese legislation on IP protection in the pharmaceutical sector, and strategies to protect IP for your products or technologies.
Business should always seek professional legal advice on IP strategy development and contractual issues in the People’s Republic of China. The Canadian Trade Commissioner Service can provide a list of IP law firms.
Chinese law on IP protection of pharmaceuticals
Pharmaceutical companies can use the following IP rights:
Among these, patents are the most critical. According to current Chinese laws and regulations, pharmaceutical patents can include both products and methods. You can also patent:
- chemical components
- new methods
- new applications
The protection term is 20 years according to the current patent law. You cannot patent methods for diagnosis or treatment of diseases.
For innovative drug companies, it is important to start a patent application as early as possible. To complete the patent application, you must publish test data. However, it is not necessary to have human clinical trial data; you can also provide cell or animal tests. The data should prove the effectiveness of the drug.
According to the Patent Examination Guide of China, you can submit supplemental data after the application date. However, you can only use it to demonstrate the effect for which patent protection is sought in the original application. The patent review authority is more likely to accept the supplemental data if it meets the following two conditions:
- the effect has been clearly stated in the original application based on test data
- the supplemental data strengthens the comparison between the new technology and existing technology
Using or importing patented drugs to obtain regulatory approval
For generic drug companies, the current Chinese patent law has a regulation equivalent to the “Bolar Exception” in the US patent system. Generic drug companies can use or import patented drugs for the purpose of obtaining regulatory approval to register a drug, without this being considered patent infringement.
IP protection under the Marketing Authorization Holder system
China’s Drug Administration Law (2019) introduced the Marketing Authorization Holder (MAH) system. The MAH refers to the enterprise, drug research institution, or other entity, that obtains a drug registration certificate in China. This system allows the MAH to license manufacturing of the drug to another company. Foreign firms can be the MAH in China, but they have to fulfill their MAH obligations through a Chinese partner. This means foreign innovative drug developers can obtain a drug registration certificate in China even if the company does not have production facilities in China.
The MAH system allows MAH to manufacture the products by itself or delegate a third-party manufacturer to produce the products. Its implementation lowers the threshold of entrance to the market and enables research and development companies to focus on innovation and production companies to focus on manufacturing. For business models based on the MAH system, cooperation agreements are the most important tool to allocate rights and obligations, and to protect IP.
If the IP of an innovative drug developer is in technologies or techniques, the best approach is to apply for a patent. If the IP is in form of trade secrets, like a formula or know-how, contracts are the most efficient way to protect the IP. The key elements of the contract include the details of the trade secret, methods of protection and legal responsibilities for breaches. The MAH can also include a clause in the agreement to prohibit the partner from producing same or similar products during a certain period. The MAH should agree with the partner in advance on the ownership of any improvements to the IP or any new IP resulting from the collaboration.
What pharmaceutical companies can do
Develop an IP protection strategy
You should develop an IP protection strategy at the stage of product development. Normally companies have more than one type of IP, so your strategy may cover the protection of multiple rights.
Apply for a Chinese patent
Patents offer the strongest protection for pharmaceutical companies. Patents are a jurisdictional right, which means they are only legally protected in the territory where they are granted. To protect patents in China, you need to either:
- apply for a Chinese patent using the Patent Cooperation Treaty (PCT) channel in Canada
- file a separate application in China
Canada and China have a Patent Prosecution Highway pilot program. This allows the China National Intellectual Property Administration to use work already done by the Canadian Intellectual Property Office. This may greatly shorten the time for application review and decision-making in China.
Be cautious when making information public
Researchers should be careful when publishing academic papers or making company presentations with information that shows the novelty of the technology or products. Disclosing key information, such as chemical structure, may harm the patentability of the new invention.
Limit access to secret information
Although trade secret protection legislation in China has improved significantly in recent years, the remedies provided can only mitigate the damage caused by theft or infringement, not reverse it. You should protect trade secrets by:
- developing an internal information management system to limit access to secret information
- including confidentiality clauses in contracts with employees or partners to prevent them from disclosing trade secrets
- signing non-disclosure agreements with partners or potential partners whenever secret information is shared
- implementing secure procedures for transferring secret information
Protect trademarks early
Trademarks protect brand names. Since China is a “first to file” jurisdiction for trademarks, it is important to register in China as early as possible, even before approaching the market.
Decide protection strategy based on technology and budget and seek professional advice
For start-up companies that have a limited budget, it is critical to apply for a patent on core technologies focusing on advantageous techniques, and protect the rest as trade secrets. However, different strategies may be suitable for different IP owners depending on their circumstances. Always seek professional legal advice before engaging in market development efforts.
Develop strong contracts
A well-drafted contract is the most important form of protection for companies seeking:
- investment in China,
- partners in joint research and development
Contracts should clearly state the ownership of IP rights, including any new IP developed under cooperation, as well as responsibility for confidentiality. If there is joint ownership, both parties need to agree on the share of ownership and the process to implement IP rights. If data transfer is involved, companies also need to look at cybersecurity laws and regulations to make sure they comply with legal requirements.
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