Flourishing development of the new drug research and development (R&D) industry and rapid growth of the generic drug market are driving business development of the front-end raw material market, providing high-quality and stable reagent products enhancing R&D efficiency.
Given the large number of compounds used in the early stages of R&D and the considerable number of new compound products added each year, a small number of products under patent protection may exist among the many compounds sold by front-end raw material supply companies.
Whether such sales of suppliers to research institutions can apply the Bolar exception – and how to reasonably control the risk of patent infringement – has become a topic of concern in recent years.
Domestic and foreign status of the Bolar exception. The Bolar exception originated from a classic case of the US Court of Appeals for the Federal Circuit, which reflected the conflict between patent law and the Federal Food, Drug and Cosmetic Act.
In 1984, the US Congress amended the Patent Law, and article 271(e)(1) of chapter 35 of the US Code stipulated that: “It shall not be an act of infringement to make, use, offer to sell, or sell within the US or import into the US a patented invention solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.”
This provision clarifies that “reasonably related activities” that can apply the Bolar exception include manufacturing, using, offering to sell, or selling related products.
In judicial practice, as a common law country, the US has gradually expanded the interpretation of “reasonably related” and “patent invention” through precedents. In the case of Merck KGaA v Integra Life-sciences I Ltd, the Supreme Court held that this provision provides ample space for the use of patented drugs in activities related to federal regulatory procedures.
Preclinical research and experimentation on drugs or compounds that fail and are not submitted to the FDA can also be exempted, provided that the researchers had a reasonable basis for believing that the patented compounds may work and would eventually be appropriate as submissions to the FDA.
After a subsequent introduction of the Bolar exception in China, it was included in article 75 of the Patent Law: “The following circumstances shall not be deemed as infringement of patent rights: producing, using or importing patented medicine or patented medicinal equipment for the purpose of providing the information as required for administrative examination and approval, and producing and importing the patented medicine or patented medicinal equipment exclusively for the said purpose.”
Compared with the landing of the Bolar exception in the US, the current laws and regulations in China have not opened up the space for the interpretation of “reasonably related activities”, and have not explicitly stated whether the Bolar exception applies to sell or offer to sell.
Therefore, there are currently no relevant statutory interpretations and guiding cases within judicial rulings. In this context, there is subsequently a risk of intellectual property (IP) infringement for domestic companies that provide front-end chemical raw materials involving third-party patents to new drug research institutions.
DOMESTIC RISK CONTROLS
Due to the abundant and diverse categories of compound products used in early-stage R&D, front-end raw material supply companies supply tens of thousands of product categories to meet the R&D needs of new drug development companies and generic drug manufacturers. It is therefore impossible to exclude the possibility of selling products under patent protection.
Based on the dual considerations of business performance and compliance risk control, enterprises selling front-end compound raw materials can take the following steps to reduce their own infringement risks, avoid significant lawsuits and disputes, and prevent adverse impact on continuous operations.
Database check. Before the product is put on the shelf, the enterprise can use authoritative databases at home and abroad, and other tools, to conduct self-examination of the product’s patent authorisation status.
For products that are clearly not authorised and are within the domestic third-party patent period, enterprises should close their domestic information and sales channels, including but not limited to managing online sales websites’ public information, and distinguishing the availability of products by region.
Enhance training. Enterprises can strengthen specialised employee training to provide risk education and behavioural norms for situations that may constitute the behaviour of offering to sell in promotional activities.
Bolar exception? Due to incomplete and incomprehensive database information collection, it is not ruled out that some products may involve third-party patent protection. Therefore, after the product goes on sale, enterprises also need to take corresponding measures for risk control.
For example, during the sales process, if the direct customer is also an end customer, the enterprise can review their qualifications and sales purposes, control eligibility of the sales target and product use, and assist in judging the product’s sales purpose by tracking the purchase quantity and frequency of individual products to broaden the space for applying the Bolar exception in case of disputes.
If the direct customer is a distributor, the enterprise can use contract terms to manage the distributor and isolate third-party infringement compensation risks.
Regular follow-up. After the transaction is completed, the enterprise can establish and implement a regular customer follow-up system to supplement the confirmation of whether the transaction products are used for restricted purposes.
In addition to self-examination before a new product listing, enterprises should also conduct regular self-examination of products on sale and timely remove newly added products that are not authorised and are within the domestic third-party patent period.
Hu Qi is a partner and Gong Manyun is an associate at Grandway Law Offices
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