Generic drugs should avoid infringement risks

Recently, the State Intellectual Property Office concluded the first two administrative adjudication cases concerning major patent infringement disputes, Guangdong Sunshine Pharmaceutical Co., Ltd. and its related party, Yichang Sunshine Changjiang Pharmaceutical Co., Ltd.

The enterprise Boehringer Ingelheim Pharmaceuticals Co., Ltd. ruled on the invention patent rights of oral hypoglycemic drug Linagliptin tablets (patent number: ZL201510299950.3). One of the focuses of the disputes in these two cases is whether the online behaviour of Sunshine on the centralized drug procurement platforms in multiple provinces constitutes a promised sale.

After the drug is approved for marketing, it is necessary to enter the hospital channel for sales, which usually requires the implementation of behaviours such as applying for entry into the medical insurance catalogue and listing on the drug procurement platform. before getting medicines.

According to the relevant provisions of the Patent Law, “After a patent for invention and utility model is granted, unless otherwise provided in this Law, no entity or individual may exploit the patent without the permission of the patentee, that is, for the purpose of production and business operation. Manufacture, use, offer to sell, sell, and import its patented products.”

Then, if the technical solution of a generic drug falls within the scope of patent protection of an innovative drug, whether a series of actions performed by the generic drug to enter the hospital’s sales channel constitutes a promised sale Or sale, which in turn constitutes patent infringement?

In fact, in recent years, it has not been uncommon for originator drug companies to file patent infringement lawsuits in court or complain to the Patent Administration Department on the grounds that generic drug companies’ listing on drug collection platforms in various places constitutes a promise to sell.

Generic drugs

Does the listing of generic drugs constitute an offer to sell?

Drug listing is not clearly defined, but generally refers to a behaviour in the process of drug procurement, that is, pharmaceutical companies make quotations within the price limit set by the procurement office through local drug procurement network information platforms, and determine the shortlisted drugs according to the price from low to high. The company then signs a supply contract with the hospital through the procurement information platform. As a part of drug procurement, drug listing has policy, administration and complexity.

In practice, if a generic drug is subject to patent infringement, most patent holders of innovative drugs will choose the generic drug company to file a patent infringement lawsuit in the court or file a patent infringement lawsuit with the court on the grounds that the behaviour constitutes a promise to sell when the generic drug company declares to be listed on the local procurement platform.

The patent administration department complained and asked the generic drug company to stop hanging on the Internet. my country’s judicial and administrative departments are also more inclined to believe that the above behaviour constitutes an offer to sell.

At the judicial level, the Supreme People’s Court held that in the patent infringement dispute between Jiangsu Hansoh Pharmaceutical Group Co., Ltd. and Sandoz Company, Hansoh’s purchase of the allegedly infringing products on the Internet belonged to the medical treatment in Fujian Province. The agency indicated its willingness to sell the allegedly infringing product.

Given that the alleged infringement occurred in Fuzhou City, Fujian Province, according to the relevant reply of the Supreme People’s Court, the first instance of intellectual property civil cases related to patents within the jurisdiction of Fujian Province are all under the jurisdiction of the Fuzhou Intermediate People’s Court. The court has jurisdiction.

In this case, the Supreme People’s Court refrained from commenting on the offer of sale in its ruling, holding that whether the act constituted an offer of sale under Article 11 of the Patent Law should be determined by the court of the first instance through a substantive trial. In essence, it tends to believe that the alleged infringing product listed on the Internet constitutes an infringing act of offering to sell.

In terms of administrative law enforcement, in the first two administrative adjudication cases of major patent infringement disputes concluded by the State Intellectual Property Office, the collegial panel held that the accused infringer made sales that infringed others’ patent rights before the actual occurrence of sales that infringed upon others’ patent rights.

The intention to express the right product constitutes an offer to sell. Where an intention to sell a product infringing another’s patent right is made by advertising, displaying it in a shop window, displaying it on the Internet or at a trade fair, or sending an infringing product for trial use, it may be deemed an offer to sell.

According to the “Guiding Opinions of the General Office of the State Council on Improving the Centralized Procurement of Drugs in Public Hospitals”, “All drugs (excluding Chinese herbal medicines) used in hospitals should be purchased through the provincial centralized drug procurement platform”, “Drug manufacturers are responsible for ensuring the quality of drugs. and the first person responsible for the supply”.

Therefore, drug listing on the Internet is a necessary behaviour for drug manufacturers to participate in centralized procurement through the provincial centralized drug procurement platform. Through this behaviour, they express their intention to sell drugs to the corresponding medical institutions. The drug manufacturers that have won the bid on the centralized drug procurement platform have Obligation to ensure the supply of medicines. In this case, the linagliptin tablets of the respondent, Dongyang Sunshine, have been approved by the State Food and Drug Administration for marketing approval, and are qualified to be sold in the market.

The alleged infringing products have been announced, published or listed on the relevant official websites of Shanghai, Guangdong, Jiangxi, Shaanxi, Inner Mongolia, Xinjiang, Guangxi, Jiangsu, Hunan, Hubei, Heilongjiang and Zhejiang and other provinces (autonomous regions and municipalities). Relevant official websites in Fujian, Shandong, Hainan, Gansu, Henan, Hebei, Ningxia, Yunnan, Guizhou, Qinghai, Sichuan, Beijing and other provinces (autonomous regions and municipalities) are at least listed on the Internet.

Sunshine has a clear intention to sell the alleged infringing products to medical institutions in the provinces (autonomous regions and municipalities) where the centralized drug procurement platform is located and has even implemented sales in Shanghai, Guangdong, Jiangxi and other places.

Accordingly, the State Intellectual Property Office determined that Dongyang Sunshine committed the act of promising to sell the allegedly infringing products, and the ruling required Dongyang Sunshine to immediately stop manufacturing, selling, and promising to sell the alleged infringing products nationwide and to remove the drugs that have been listed on the Internet. The procurement platform immediately withdraws the application for listing the alleged infringing product.

Generic drug companies listed drugs on the centralized drug procurement platforms in various places, and made a clear statement of their intention to have the drugs, drug prices, and hope that medical institutions would purchase them, which is an invitation to make an offer.

According to their own needs, the hospital selects from the procurement catalogues on the procurement platform and then goes through the hospital’s procurement process to finally determine which drugs to purchase.

That is to say, when a drug is listed on the procurement platform, it can be regarded as a statement of intention to sell the drug to an unspecified medical institution that intends to purchase the drug on the procurement platform; in addition, the drug listed on the Internet must have obtained a marketing license. Drugs have fully met the conditions for production and sales. Therefore, the act of listing drugs on the Internet constitutes an offer to sell in the sense of the Patent Law.

Whether the behaviour related to the drug listing constitutes a promise to sell

Some people believe that drug listing involves many complex factors, and it is not appropriate to simply and one-size-fits-all the behaviours related to drug listing as offering sales.

For example, Qualification declaration in the process of drug listing on the Internet is relatively independent. If it is identified as a promise to sell, it means that generic drug companies can only apply for qualifications, go online, and follow up after the expiration of the patent term. Quoting, bidding, sales and other links will extend the protection period of patent rights in disguise, and may directly affect the availability of drugs.

Therefore, it is necessary to carry out a detailed legal analysis and demonstration based on the national conditions of our country and combined with the basic facts.

The author believes that the above point of view is debatable. my country’s judicial practice has also undergone changes in the determination of promised sales.

In 2001, “Several Provisions of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Patent Dispute Cases” defined an offer to sell as “an indication of the intention to sell goods by means of advertisements, display in shop windows or exhibitions at trade fairs”. “.

With the development of the times, the “Guidelines for Determination of Patent Infringement (2017)” issued by the Beijing Higher People’s Court in 2017 and the “Guidelines for Administrative Adjudication of Patent Infringement Disputes” issued by the State Intellectual Property Office in 2019 have further clarified that on the “Internet” The intention to sell the product is expressed, once the product falls into the scope of protection of the patent rights of others, it also constitutes an offer to sell, which in turn constitutes patent infringement.

There is also a view that hanging on the Internet involves many processes such as review and publicity, quotation and bidding, winning the bid, procurement, and distribution, etc., and finally can be sold to the hospital. Therefore, it is necessary to distinguish different links and treat the behaviour of hanging on the Internet differently.

In this regard, the author believes that, on the one hand, procurement and distribution are behaviours that occur in the hospital after purchasing and contract to sign. These behaviours actually constitute sales and do not belong to the category of drug listings.

The drug listing itself should be regarded as a complete behaviour, and should not be subdivided into different links and identified separately. This is inconsistent with the usual practice for patent infringement determinations. On the other hand, the whole chain of drug procurement is running more and more tightly and smoothly, and various places have optimized and simplified the listing process, which has also greatly shortened the time from listing to the selection of generic drugs.

The reason why innovative pharmaceutical companies try to stop generic drugs from being listed on the Internet is that once the generic drugs are listed on the Internet, a large number of hospitals may soon sign purchase agreements with them, and innovative pharmaceutical companies will face how to stop the drugs. A difficult situation to sell in many hospitals.

This is also the reason why the TRIPs agreement clearly identifies the act of offering to sell as a patent infringement and believes that it should be stopped. That is, the act of offering to sell is prohibited in the Patent Law, which aims to control the infringement in its infancy, so as to avoid the spread of infringing products, which will lead to the expansion of losses for the patentee, and further increase the administrative and judicial costs.

The Supreme People’s Court also clearly pointed out in (2021) Supreme Law Zhixingzhong No. 451 and No. 702 Administrative Judgments: “The purpose of an offer to sell is to sell, which is a statutory and independent form of tort, and its civil liability shall not be assumed. The premise is whether the sale actually occurs.

Promising sales is, in nature, a unilateral expression of the seller’s will, not based on the fact that the product is in a state that can be sold. As long as there is a clear indication of the willingness to sell, it can be considered a promise to sell. When the two parties reach an agreement When it is agreed, it no longer belongs to the category of the offer to sell, but to the sale.”

Therefore, when the content of the intention to sell the product is clear and specific, it can be determined that there is an offer to sell.

To sum up, if a generic drug falls within the scope of patent protection for innovative drugs, its application for listing on the Internet and its participation in the purchase will constitute promised sales; if the relevant purchase agreement is finally signed, the behaviour will further constitute sales behaviour.

Legal Liability for Offered Sales

my country’s judicial practice regarding the legal liability of promised sales has undergone a change from not making compensation on the grounds that the promised sales infringement does not cause damage, to the fact that the promised sales infringement can cause reasonably inferred damages and can be independently awarded compensation.

Example: In 2015, the Shanghai Intellectual Property Court, in the case of a patent dispute over pyraclostrobin, dealt with the defendant’s promised sales at the 14th National Pesticide Exchange Conference and Agrochemical Products Exhibition held at the Shanghai World Expo Exhibition and Convention Center.

The infringement act did not support the plaintiff BASF’s claim for infringement compensation, but only supported reasonable expenses for rights protection, on the grounds that “with regard to the amount of compensation, the defendant’s promised sales did not result in a decrease in the market share of the plaintiff’s patented products, which resulted in the loss of its market share. Actual losses were incurred, so this court does not support the plaintiff’s claim for compensation for economic losses.”

The Supreme People’s Court also held a similar view in the case of Beijing Huajiesheng Electromechanical Equipment Co., Ltd. and Shenzhen Dingsheng Door Control Technology Co., Ltd. in the case of infringement of design patent rights. Civil Judgment]. In fact, the aforementioned ruling made by the State Intellectual Property Office did not involve the statement of damages.

In the case of Qingdao Qingke Heavy Industry Co., Ltd. v. Qingdao Chenyuan Machinery Equipment Co., Ltd. for infringement of utility model patent rights, which was decided in 2020, the Supreme People’s Court held that “promising to sell is a statutory and independent way of infringement. The civil liability for the tortious act of offering to sell is not premised on whether the sale actually occurs.

Once the promised sale occurs, because the price promised by the accused infringer is usually lower than the price of the patented product, it will have a psychological implication for potential consumers, affecting the reasonable pricing of the patented product; or causing consumers to give up buying the patented product and consider it instead Contact the accused infringer, causing delays or even reducing normal sales of the patented product.

In addition, the alleged infringer’s promise to sell may also adversely affect the advertising effect of the patented product. It can be seen that the existence of the act of offering to sell will cause damage to the patentee such as price erosion of the patented product, reduction or delay of business opportunities, etc. This damage is a result that can be reasonably inferred.

If there is damage to rights, there must be a relief. Unless otherwise specified by the law, the relief should at least include the two most basic forms of tort civil liability, namely cessation of infringement and compensation for losses, rather than only one of them. When it is difficult for the patentee to provide evidence to prove the specific losses suffered by him due to the act of offering to sell, he may calculate the number of damages in the form of statutory compensation. “

The author believes that the promised sale occurs before the actual sale, and the actual loss caused to the patentee often has not yet occurred.

According to the principle of filling in civil compensation, since it is difficult to prove that the promised sale has caused actual losses to the patentee, under normal circumstances, the promised sale does not bear the liability for compensation, but the reasonable expenses for the patentee’s rights protection can be supported.

However, in some disputes, if the patentee can prove that the promised sale has caused actual losses to him, the infringer should compensate for this part of the losses. This should be analyzed and determined based on the specific circumstances of each case.

There is a view that the patent law does not exclude the legal liability for damages to be applicable to the infringement of an offer of sale, so as long as the infringer commits the infringement of an offer of sale, even if no actual loss occurs, the infringed can claim the infringement according to the statutory compensation standard. This point of view is also debatable.

For drugs, it is necessary to consider their particularity. Once generic drugs participate in online procurement, it may cause irreparable losses to the market share of innovative drugs and drug prices. In this case, combined with the actual situation of the case, it is not inappropriate for the original research drug company to request the generic drug company to compensate.

With the strengthening of intellectual property protection, generic drug companies should fully evaluate whether the generic drug falls within the scope of patent protection of innovative drugs before applying for a drug listing.

Because once it falls into the scope of patent protection, both judicial authorities and patent administrative authorities are very likely to identify their online purchases as promised sales. Generic drug companies will not only be unable to continue to participate in online purchases but may also face legal liability for damages.

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