Protecting patents after they expire

September 12, 2012 | BY

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Multinational pharmaceutical companies are facing strains on their revenues as many of their patents covering their biggest selling medicines are due to expire. But in China an SPC ruling on pen designs has shown that other IP rights could come to the rescue

The day after our on-site visit to one of Pfizer's plants in County Cork, Ireland, the US drug maker announced that it would cut 177 jobs there. The company said the cuts were in response to a fall in demand for some of its medicine and the need to cut costs. A study of Pfizer Ireland's business shows the primary reason for the cuts is that the patent covering Lipitor, the biggest-selling prescription drug in the history of pharmaceuticals, has expired and the active pharmaceutical ingredients (API) of Lipitor are produced in Cork.

It is not just Pfizer. All of the world's largest producers of new drugs and medicines are facing an unprecedented situation as key patents expire and generic drugs swoop in as more affordable alternatives. It is reported that these producers face billions in losses as their patents expire in the US. Although China is a fairly small market compared with the US, the situation here could be even worse as many local Chinese pharmaceutical companies are now counting down to these expiry dates. But it is possible for pharmaceutical companies to survive this challenge in China, particularly if they make the most of the different layers of IP protection available.

Patent protection basics

A patent is a form of intellectual property, which consists of a set of exclusive rights granted by a sovereign country to an inventor or its assignee for a limited period of time in exchange for the public disclosure of an invention. An invention, according to Article 2 of the PRC Patent Law (中华人民共和国专利法), includes inventions, utility models and designs.

The term “invention” means a new technical solution proposed for a product. Utility models means technical solutions proposed for the shape and structure of a product, or a combination of those products, which are fit for practical applicability. Designs cover a product, new designs of the shape, pattern, or a combination of these things, or the combination of the colour with shape and pattern, which creates an aesthetic feeling and is suitable for industrial application.

A product might be protected by many different layers of IP rights. For a newly developed medicine, for example, its API might be protected as a product invention patent, the process of how to make this API might be covered by another process invention patent, or trade secret. Also, the process of how to make the final product from the API might also be covered by some sort of IP protection, either by patents or trade secrets. Sometimes, the innovative shapes and pattern of the medicine might be protected as a design patent. Moreover, the brand of the product can be protected under the PRC Trademark Law (中华人民共和国商标法).

A landmark decision

A seemingly simple case about the counterfeiting of a retractable gel ink pen has led to a landmark ruling in the history of IP in China. In this recent case judged by the Supreme People's Court no 16 (2010) Min Ti Zi (Ink Pen Case), the Court has held that the main legal issues between the Parties in this retrial is whether a product, which has been covered by a patent right, could still be protected under the PRC Anti-unfair Competition Law (中华人民共和国反不正当竞争法 ) after the expiration of its patent right. The answer in short is yes.

The Supreme Court ruled clearly that an expiration of one IP right would not certainly lead to the expiration of all other IP protections on a product:

In most cases, if a design patent right is terminated due to the expiration of the patent duration or other reasons, the design will enter into public domain and be free for public use. However, within the intellectual property (IP) rights area, an object may be protected by several different layers of IP rights, and the termination of certain IP protections will not certainly result in losing protection by other IP rights. Moreover, besides IP law, the Anti-unfair Competition Law provides limited, additional and supplementary protection for certain civil rights under specified conditions.

This insight suggests some new ways that pharmaceutical companies could protect their IP if their product patent, such as the Lipitor patent, has expired.

In the Ink Pen Case, the Court ruled that “after the expiration of the design patent, the design will not certainly go into the public domain. It will be protected by the Anti-unfair Competition Law if it meets the protection requirements. Specifically, because the product shape might be considered as product packaging and decoration, it can be protected as the unique packaging or decoration to a well-known product in order to prevent confusion under the Anti-unfair Competition Law.”

This means that, after the expiration of a product invention patent, a company cannot seek exclusive rights over the composition of the product per se. However, that does not mean the company cannot protect its product at all. After the expiration of a product patent, the product does not have to pass into the public domain. It can be protected by different IP laws if it meets the protection requirements. Specifically, if the process of how to make the product is still available for patent protection and any third party uses the patented process to make the product, the company can still seek IP protection under the Patent Law. Moreover, if the process of how to make the product is protected as a trade secret and other companies obtain the technology by theft, or any other unfair means, the company can seek remedy through the Anti-unfair Competition Law.

Anti-unfair Competition Law protects shapes

Article 5 of the Anti-unfair Competition Law rules that using the name, packaging, or decoration unique to a well-known product without authorisation, or using any name, packaging, or decoration similar to that of a well-known product and thereby creating confusion about how to distinguish the products, will constitute unfair competition. Therefore, the unique packaging of a famous product can be protected under the Anti-unfair Competition Law. But what about the unique shape of a famous medicine? Can it be regarded as a decoration of a product and thus protected under Anti-unfair Competition Law after the expiration of the product invention patent? It is possible, but certain requirements need to be met.

In the Ink Pen case judged by the Supreme Court, the Court ruled that the decoration can be divided into two categories: text and pattern, and the shape of a product. Both of them are decoration of a product with the function to beautify the product:

Literally a product's decoration means the ornament of the product, with the function to beautify the product… The extension to this concept is the product's decoration can be divided into two categories: one category is text and pattern, which includes text, pattern, colour… the other category is shape, which is inherent in the product, includes the appearance shape which is the body or a part of the body of the item but with a decoration function, excludes the shape which solely depends on the nature of the product, is necessary to achieve certain technical effects or constitutes the substantive value of the product.

Furthermore, the Court ruled that the shape of the product needs to meet some strict requirements to get protection under the Anti-unfair Competition Law. Generally speaking, the company needs to prove the shape can distinguish the source of the product, which means the shape has acquired secondary meaning through use:

These requirements include at least: 1. the shape should have distinctiveness features which could be distinctive from general common design; 2. the relative public has already associated the shape to the specific manufacturer or provider through use in the market, which means the shape has acquired secondary meaning through use. In other words, to prove a certain shape is the unique decoration to a well-known product, novelty, uniqueness and the ability to attract consumers is not enough, and it has to distinguish the source of the product. As long as there is sufficient evidence to prove the shape can distinguish the source of the product, it can be protected as the unique decoration to a well-known product.

Make the most of your branding

As the patent life becomes more limited and the generics put more pressure on the market exclusivity, strong branding can be used to maintain distinctiveness beyond the life of a patent and ensure that the product remains profitable for longer.

After years of exclusively using certain products, the relevant consumers can be very familiar with certain brands. However, consumers do not really know generics and sometimes generics use a name that imitates a big brand, or use the brand to confuse consumers. Article 52 of the Trademark Law ruled that use of a trademark that is the same as or similar to a registered trademark for identical or similar goods without the permission of the trademark owner shall be deemed as trademark infringement.

Taking all the above issues into account, pharmaceutical companies are advised to take the following factors into account before taking the risky decision either to acquire a generic business or to compete with generic manufacturers on price:

  • Conduct an internal IP audit to identify the relevant patent/trademark/trade secrets in your IP portfolio;
  • Investigate and analyse background information about the competitors; and
  • Choose a suitable approach or a combination of approaches, looking at process patents, trade secrets, unfair competition and trademark litigation.

Cecilia Lou, Di Yao, King & Wood Mallesons, Shanghai



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