SIPO Publishes Compulsory Licensing Measures for Drugs to Treat Infectious Diseases

The State Intellectual Property Office (SIPO) issued the Measures for Carrying Out Compulsory Licensing of Patents on Issues Involving Public Health on November 29. The Measures permit government ministries to apply to SIPO for a compulsory license for patented pharmaceutical products that treat or prevent AIDS, tuberculosis, malaria, or other infectious diseases. In addition, WTO member governments that lack the capacity to produce sufficient quantities of these pharmaceuticals, or non-WTO members that are classified as “least developed countries,” may request that SIPO grant a compulsory license to produce these products in China, provided they are exported only to the requesting country. The Measures implement a World Trade Organization (WTO) decision on intellectual property protection for pharmaceuticals that permits the governments of countries facing public health crises, such as high rates of AIDS, tuberculosis, and malaria, to issue compulsory licenses for drugs that can treat or prevent those diseases.

The Measures require the licensee to pay a reasonable royalty to the patent holder. Article 31 of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs Agreement) permits WTO Members to have a legal process for issuing a license of patented products for domestic production and consumption without permission from the patent holder in certain circumstances. The WTO General Council's Decision on Implementation of Paragraph Six of the Doha Declaration on the TRIPs Agreement and Public Health (Decision) permitted the governments of countries without adequate pharmaceutical manufacturing capacity to ask that other WTO members produce pharmaceuticals to address public health crises and export them to the requesting country. The Measures explicitly implement both the terms of Article 31 of the TRIPs Agreement and the Decision. The Measures incorporate the Decision's instruction to provide for a reasonable royalty, but do not limit production under such compulsory licenses to only that amount necessary to respond to the crisis, as contemplated by the Decision. Director General Yin Xintian of SIPO's Department of Treaty and Law explained in a December 5 interview (in Chinese) with the Intellectual Property Law News that the Measures do not require SIPO to consider the amount of the royalty when determining whether or not to grant the compulsory license. If the parties cannot agree on a royalty, however, SIPO will set the royalty amount. Yin also clarified that the Measures permit parallel imports of patented products produced legitimately outside China without permission from SIPO.

With the introduction of the Measures, China becomes only the fourth WTO Member to adopt national measures incorporating the Decision, according to a December 14 article (subscription required) in Inside U.S.-China Trade. During the week of December 12, Swiss pharmaceutical company Roche Holding AG licensed the Shanghai Pharmaceutical Group to make a version of Tamiflu, its anti-influenza medication, to treat avian influenza. According to the Inside U.S.-China Trade article, the Chinese government would have produced a generic version of Tamiflu if the parties had not reached agreement on the terms of the license. The Measures provide the legal basis for SIPO to issue a compulsory license to permit such generic production.