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Week ten

LawTech Talk, Oct. 2, 2007
Patents and Innovations in China’s
Biotech/Pharmaceutical Industries
Background and Questions
„ Outlines of National M&L Term S&T Development „ “innovation-oriented country” and “top 5 in annual „ Is there a strong correlation between patent and innovation? (More patents = more innovations?) „ Is a strong patent system beneficial to China’s innovation, and to the society as a whole? „ Is China’s patent regime appropriate for Theoretical Debates
„ Utilitarian Æ spur innovation (John Wiley, 1991) „ Disagreement on whether, or how well, this purpose „ Prospect theory: based on “tragedy of the commons” „ Competitive Innovation (Ken Arrow, 1962)„ Cumulative innovation (Merges and Nelson, 1990)„ The “tragedy of anticommons (Michael Heller, 1998)„ Industry-specific theory (Burk and Lemley, 2003) Case study on patent-innovation in
China’s biotech/pharma industries

„ China’s innovation strength and strategies in „ Patent filings and grants in these industries „ The problems in current patent law and the pending amendments relating to biotech and pharmaceutical industries „ The role of patent in innovation: reflections Innovation Strength
„ HGP: completed in 2003„ Bio-medical: „ Decoded genes for HBV, SARS, etc. „ Gene mutation chart for Chinese man’s No. 21 chromosome.
„ Plant: Bt rice and cotton, silkworm gene mapping, pest and disease „ Stem cell: superior technique„ Pharmaceutical: „ Biomedicines: EPO, G-CSF, Human Insulin Humilin, TPA, Epidermal growth factor, PCR enzymes, etc; and gene therapy drugs: e.g., Endostar, H101, Gendicine (P53) „ Vaccine: AIDS, SARS, Hapatitis A and B„ TCM: qinghao Su, TangHerb, fufang dansen diwan Innovation Models (or strategies)
„ 97-99% imitation rate„ Intense competition and legal risk „ “me too” and “me better”, e.g., Endostar, H101„ Advantages„ Difficulties: to get around patents „ “tough but unrewarding business”„ Only one (qing hao) but not patented„ Short fund, low tech. & lack high quality drug Problems and Causes
„ Fairly strong in up-stream basic research, weak in down-stream R&D and commercialization.
„ Broken chain of commercialization between: gov’t research institutes Æ universities Æ biotech firms Æpharma firms Æ healthcare system Æ market. „ Lack of expertise and good models in tech. transfer More Patents = More Innovations?
„ 20% annual growth in patent filings and grants: „ Gene: domestic increase (>60%), mostly for sequencing „ Pharma: steady , but mostly foreigners (80%) for „ TCM: mostly Chinese (96%); mostly for mixtures Are the Innovations Promoted by

„ But how about gov’t funded projects? „ Probably not in the beginning„ Funding not sufficient or appropriate„ Fund mostly upstream basic research„ Patents not owned by the research institutes Is China’s Patent Regime
Appropriate for Innovation?

„ Some subject matter not covered, e.g., transgenic animals and plants, human ESCs, methods of treatment and diagnosis of diseases, etc.
„ Inconsistency between law and practice, eg the above subject matter are excluded by law, but granted patents in practice through “back door” –process patent.
„ Incompatibility between patent standards and the characteristics of patentable subject matter, eg TCM Proposed amendments:
Implications for Innovations

„ “building an Innovation-oriented country”„ More clear ownership of patent rights: „ Joint patent holders„ state funded-projects „ No big breakthrough in patentable subject matter: „ Diagnosis and treatment of diseases„ Biodiversity and genetic resources „ Invention completed in China, but first patent in other countries: no Chinese patent can be granted.
Anticommons and Public Health
„ Measures useful to prevent the tragedy of „ Compulsory licensing„ Exemption for market approval„ Parallel import„ Prior art defence and malicious litigation„ Willful silence over infringing act„ Anti-competition „ Is there a “tragedy of anticommons” in China? „ Is there a public health crisis in China? If so, what caused?„ Will the re-balance be beneficial to China’s innovation? Conclusions
„ To some extent, yes. But more not always mean better „ Stronger patent Æ stronger innovation? „ To some extent, yes. Particularly for biotech/pharma. industries „ But needs to balance various interests.
„ Both the level of innovation and the level of patent protection in China is still fairly low: much room for improvement „ “prospect theory” and “anticommons” theory may work well in „ Suggestions: give patent protection to transgenic plants and „ “A gene is a kind of wealth. If China does not get its own gene patents, then in the next century its biotech industry – and in particular its pharmaceutical industry – will be like ‘the Admiral of the Northern Fleet who saw all his ships capsize and sink beneath the waves.’”(Tan Jiazhen) Patents for TCM in 4 categories in
1999, 2000 and 2003

Year / Mixture / Active agents / Equipments / Processes Increase in Pharmaceutical patents


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