China's IP Landscape Shiftin

June 16, 2017

China has become a leader in the medical technology market, experiencing average growth rates hovering around twenty percent for many years.  However, China has long experienced criticism for not effectively protecting intellectual property rights.  As a result, China has not always been an attractive place for foreign companies to file patents, or patent suits, related to the medical technology sector.
However, recent analysis suggests the landscape in China is shifting.
Recent years have seen an increased emphasis on enforcement of intellectual property rights.  The increased enforcement has come in the form of strengthening laws related to intellectual property, and in the creating of courts specializing in intellectual property-related issues.  Such efforts certainly are a driving force encouraging innovation on the domestic front.  However, it is also important to view such efforts as beneficial for foreign companies.  In other words, now is the time for foreign companies to take China seriously as a valuable enforcer of intellectual property rights.  With the medical device market in China second only to that of the United States, coupled with the increased emphasis on enforcement of intellectual property rights, China is now emerging as an attractive option for domestic and foreign companies seeking to protect and enforce their innovations.
                So what are some examples of the advantages?
            One example advantage includes costs related to the filing of suits in China for the owners of patents, both foreign and domestic.   Because there is a lack of discovery process in China, suits are often resolved in under a year.  Compare that to the United States, where getting to trial may often take in excess of two years.  Due at least in part to the swifter timeframe for settling suits in China, costs related to litigation are often a small fraction of what they may be in other countries, such as the United States. 
            Another example includes injunctions.  Patent holders that prevail in an infringement case in China have the right to an injunction.  Such an injunction applies not only to products sold in China, but also to export of goods made in China.  In the case of an injunction, the courts typically order the wrongdoer to make payments in the form of compensation or accounting of profits.  The courts also instruct the wrongdoer to make a public apology in a newspaper or trade publication to eliminate any ill effects from the actions of the wrongdoer.  With the increased enforcement of intellectual property rights in China, relief provided in the form of an injunction can be hugely beneficial to a company with intellectual property in China.
            Still another example relates to increases in amounts awarded for damages in China.  Historically, damage awards in China have been very low.  The low damage awards are due to the lack of discovery in China, which makes it challenging to obtain financial information that can be used to prove damages.  As a result, amounts awarded for damages have been typically limited to statutory damages, typically capped around $150K.  However, a recent ruling by China’s highest court shifts the burden of proof in situations in which damages information is challenging to obtain.  As a result, intellectual property holders in China can now recover legitimate damages.
            Finally, still other examples relate to how the United States has interpreted and applied recent Supreme Court rulings in several cases, as compared to China.  Examples of relevance include the 2012 decision in Mayo v. Prometheus, the 2013 decision in Association for Molecular Pathology v. Myriad Genetics Inc., and the 2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank International.  Briefly, the technology of Mayo included a personalized medical test for determining an optimal dose of a drug, where the optimal dose was a function of measured metabolite levels in a patient’s blood.  The Supreme Court ruled that such a method was ineligible for patent protection due to the relationship between drug dose and metabolite levels was a law of nature, and that additional claimed steps were simply routine activities of researchers.  The technology of Myriad included a genetic test for two genes associated with cancer, where the patent claimed segments of genomic DNA and complementary DNA (cDNA).  The Supreme Court ruled that natural occurring DNA segments are products of nature, and are thus patent-ineligible subject matter, while cDNA is patentable because it is not naturally occurring.  Alternatively, in the “Alice” case, the court found that a computer-implemented method for mitigating settlement risk was patent-ineligible because it “add[ed] nothing of substance to the underlying abstract idea.” 
            Such decisions of course impact medical technology sectors, including biotechnology, medical diagnostics, and pharmaceutical industries, in numerous ways which are outside the scope of this post.  Importantly however, is the fact that while the above-mentioned decisions have been strongly embraced and applied by the USPTO, such decisions have not been similarly followed in China.  Thus, the fact that such decisions are not currently an impediment to patent protection in China is yet another reason for pursuing patent protection in China for technologies related to the medical technology industry. 
In conclusion, given the above-described recent changes to the Chinese intellectual property sector, coupled with the emergence of China as a leader in the medical technology space, and the non-reliance in China on decisions by the US Supreme Court in terms of patent eligibility issues, obtaining and enforcing intellectual property rights should be viewed as more favorable in the current environment, and something companies looking to be players in the global economy should take initiative to understand and apply. 

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