China’s Guiding Cases in IP Law, Part II: Infringement of Patent for Pharmaceutical Preparation Process

By: Han-Mei Tso

In March 2017, the Supreme People’s Court of China (“Supreme Court”) published its 16th set of guiding cases, including 10 intellectual property (“IP”) cases.  Among the 10 IP guiding cases, three of them relate to patent infringement.

In the June 2017 Osha Liang Newsletter, we discussed the first patent infringement guiding case in connection with liability of the e-commerce platform.  In this issue, we will look into the guiding case involving infringement of a patent for a pharmaceutical preparation process.

Guiding Case No. 84: Eli Lilly and Company v. Watson Pharmaceutical (Changzhou) Co., Ltd.

Eli Lilly and Company (“Lilly”) was the owner of the Chinese Invention Patent No. 91103346.7 (“Patent in Suit”) which relates to a process for preparing the drug olanzapine.  Lilly alleged Changzhou Watson Pharmaceutical Co., Ltd. (“Watson”) used the preparation process, infringing the Patent in Suit, to produce the drug olanzapine and sold the drug to the market.  Accordingly, Lilly filed a lawsuit at the Jiangsu Provincial High People’s Court (the “Jiangsu High Court”) against Watson for patent infringement.

In this case, Watson’s allegedly infringing drugs are the same as the new products prepared by the patented method.  There is no dispute between the two parties that the products of both sides are the drug olanzapine.  However, whether the preparation process for the products is the same became the focus of the dispute.

Article 57 of the Chinese Patent Law provides that in a patent infringement dispute involving a new product manufacturing method, the entity or individual who manufactures the same product as the product in the patented method should prove its product manufacturing method is different from the patented method.  Therefore, in this case Watson bore the burden of proof and had to show its olanzapine preparation process is different from Lilly’s patented method for producing the drug olanzapine.

In the first instance, Watson argued that its olanzapine preparation process has been approved and recorded by the State Food and Drug Administration (the “SFDA”), and therefore such preparation process is the actual method that Watson used to produce its drug olanzapine.  Nevertheless, the Jiangsu High Court cited a technical appraisal report made by the Shanghai Science and Technology Consultant Service Center in another case and concluded that Watson’s recorded production process for the active pharmaceutical ingredients actually could not produce olanzapine.  As a result, the Jiangsu High Court found that the key reaction steps recorded in Watson’s olanzapine preparation process lacked authenticity, so Watson’s approved and recorded olanzapine preparation process is not feasible.

Because Watson could not provide other evidence to demonstrate that the actual preparation process it uses to produce olanzapine does not fall into the scope of protection of the patent in suit, the Jiangsu High Court ruled that Watson failed to meet the burden of proof and is presumed to be liable to Lilly for patent infringement.

In the second instance, the Supreme Court overturned the decision of the first instance.  First of all, the Supreme Court reviewed the scope of the patent in suit and construed the asserted claim as open-ended.  Accordingly, the key factor for infringement analysis lay in comparing the reaction steps for the preparation of each party’s drug olanzapine.  The specific raw materials, solvents, or conditions for reaction should not be considered as the factors for comparison during the course of infringement analysis; otherwise, the scope of the patent right would be improperly limited.

Then, the Supreme Court identified what is the actual preparation process that Watson uses to produce olanzapine.  Different from the first instance, the Supreme Court recognized Watson’s olanzapine preparation process approved and recorded by the SFDA as being feasible.  Without other evidence to the contrary, it should be presumed that Watson’s approved and recorded process is the olanzapine preparation process actually used by Watson Company and should be deemed as the accused method for infringing analysis.  Interestingly, in the second instance Lilly’s expert assessor also admitted Watson’s recorded preparation process is feasible.

As for infringement analysis, the Supreme Court compared the reaction steps of Watson’s olanzapine preparation process with the asserted method claim of the patent in suit and determined the reaction steps as well as the reaction intermediate of Watson’s preparation process are different from Lilly’s patented method.  Moreover, the technical features corresponding to Watson’s olanzapine preparation process are not identical to the asserted patent, and its technical effects are also significantly different.  Thus, Watson’s olanzapine preparation process does not constitute the equivalent feature to the asserted process and does not fall into the scope of protection of the patent right.  Based on such conclusion, the Supreme Court ruled that the judgment of the first instance was mistaken on the finding of facts as well as application of the laws and therefore should be reversed.

In practice, this case illustrates how to identify the actual preparation process for an allegedly infringing drug in a patent infringement dispute involving a pharmaceutical preparation process.  According to the Key Points of Judgment addressed in this guiding case, in the absence of other evidence to the contrary, the preparation process for the allegedly infringing drug which has been approved and recorded by the authority of the drug administration should be presumed as being a feasible preparation process that is actually used to produce the allegedly infringing drug.  For the evidence presented to show the recorded preparation process is untruthful, the court should look for and fully review the evidence relating to technology sources, production procedures, batch manufacturing records, and the recordation documents of the allegedly infringing drug and determine the preparation process actually used to produce the allegedly infringing drug.  It was not appropriate that the first instance judgment determined the preparation process for the allegedly infringing drug approved and recorded by the authority of the drug administration was not feasible just by citing an appraisal report from another case and further presuming the accused preparation process fell into the scope of protection of the patent right.

In addition, the Key Points of Judgment for this guiding case indicate that to investigate the complex technical facts, such as the preparation process of the allegedly infringing drug, the various approaches, such as technical investigation officer, expert assessor, judicial appraisal, technology expert consultation, may be comprehensively used.  It is worth noting that during the second instance, the Supreme Court for the first time had a technical investigation officer participate in the trial.  That means, the technical investigation officer is no longer in a passive role that just assists the judge in understanding the technical issues but is elevated to an active role as the representative of the court to examine the parties and their technical experts inquiring into the technical issues, hear the parties’ opinions and statements, and clarify the related technical issues.  Moreover, the technical investigation officer can confirm the finding of the important technical facts by examining the parties, so as to assist the judge in having a thorough understanding to the technical facts or technical issues and to lay a solid foundation for a reasonable judgment.

It is believed that the system of the technical investigation officer now taking a substantive role in the IP judicial trial indicates that the quality of judicial review relating to patent litigation will be further improved, particularly for finding of the technical facts.