Protecting and Enforcing Trade Secrets in China

Shortly after the start of the 2014 Chinese New Year, China’s State Administration for Industry and Commerce (SAIC) announced the opening of a discussion regarding a revision to the 1993 Anti-Unfair Competition Law (AUCL). Since the AUCL includes provisions governing trade secret misappropriation, the up-coming revision may potentially bring important changes to the current regulatory and statutory channels for the protection of trade secrets. While the legislative effort for such revision, the exact changes to AUCL and the legal ramifications of the revision are yet to be seen, we at the BRIC Wall thought it would be helpful to review the currently available measures for protecting and enforcing trade secrets in China.

China’s Legal Framework for Trade Secrets

Unlike many other countries, such as the United States, Russia and South Korea, China lacks a national, unified trade secrets law. Instead, China protects trade secrets through a series of laws and regulations. The most important of these is the AUCL; however, other aspects of trade secret protection are included in Contract Law, Labor Contract Law, Company Law, Labor Law and Criminal Law, as well as several different regulations (such as the 1998 Provision Regarding the Prohibition of Trade Secret Infringement) and judicial documents (such as the 2007 Interpretation on Certain Issues Related to the Application of Law in Trials of Civil Cases Involving Unfair Competition).

Article 10 of the AUCL defines trade secrets as “technical and business information that is unknown to the public, which can bring economic value to the rights holder that has applicability, and for which the rights holder takes measures to protect their confidentiality.” The AUCL defines illegal behaviors related to trade secrets as including the direct acquisition of trade secrets via theft, inducement, coercion or other illegal means or the use of illegally obtained trade secrets. Also covered is the use or sharing of trade secrets by third parties who are not authorized by the owner for such use or sharing.

Options for Enforcing Trade Secrets in China

Companies have three enforcement options available in China. These are: administrative, criminal and civil enforcement.

Administrative enforcement – This type of enforcement is conducted by the local Administration for Industry and Commerce (AIC) offices, which are responsible under the AUCL to pursue trade secret misappropriation as well as other anti-competitive behavior. If an AIC finds misappropriation of trade secrets, it has the authority to order one or more remedies such as the destruction of products manufactured using the stolen trade secrets, return of the trade secrets to the owner and imposition of fines. Under AUCL, the fine ranges between RMB 10,000 to 200,000 (US$ 1,600 to 33,000). The fine may be higher in some provinces or cities; for example, the Enterprise Technology Secrets Protection Regulations in the Shenzhen Special Economic Zone (generally considered an advanced area for industrial and economic development) stipulate that the fine may be RMB 500,000 to 1000000 (US$ 82,000 to 160,000) if it is found that the misappropriating party obtained the trade secret through illegal means and disclosed, used or transferred the trade secret to others. To get an AIC to start such administrative enforcement, a trade secret owner must file a complaint with the local AIC office (or, in some places, the department of Market Supervision Administration Bureau), together with sufficient evidence to substantiate a claim of trade secret misappropriation. In practice, to initiate an administrative enforcement action, a trade secret owner has to convince AIC officials that a case of trade secret misappropriation may exist. Otherwise, AIC officials will not commence an investigation. This is a somewhat different evidentiary burden from that required in litigation, where a plaintiff, in order to win a case, has to provide more sufficient evidence of the misappropriation.

Administrative enforcement is an inexpensive, fast and effective mechanism to use for simple trade secret misappropriation cases. Specifically, the proceeding can be dealt with locally, as AIC offices can be found in each province in China. Additionally, the enforcement process can be carried out without legal representation by a lawyer. In addition to a fine, the trade secret owner may also obtain an injunction to prevent future trade secret misappropriation. In fact, the AIC exhibits a great impact on almost every aspect of local business through the many important regulations it administrates (such as advertising, consumer rights, labor, enterprise registration, and trademark protection). Moreover, the AIC has an Anti-monopoly and Anti-unfair Competition Enforcement Bureau, whose mission includes investigation into unfair competition practices (including the misappropriation of trade secrets). Thereupon, the importance of local AICs in protecting against trade secret misappropriation cannot be ignored.

However, administrative enforcement does have some disadvantages. Specifically, the amount of the fine is generally small and really does not function as a meaningful deterrent. Moreover, the enforcement process may not be transparent, and is limited to a specific geographic jurisdiction, which can be further complicated by local protectionism. Additionally, the damage suffered by an injured party is not likely to compensate that party for its complete economic loss. Therefore, administration enforcement is generally not suitable or the best option in cases involving complex, large scale trade secret misappropriation cases, or in cases where criminal or civil enforcements are sought. 

Criminal enforcement – In practice, a criminal enforcement proceeding can be brought when a plaintiff demonstrates that the loss due to trade secret misappropriation has reached the level of RMB 500,000 (US$ 82,000) or more. If the loss is “serious” (namely, if more than RMB 500,000 is involved) or “exceptionally serious” (namely, if more than RMB 2,500,000, or US$ 410,000 is involved), imprisonment of less than three years (for “serious” cases) or three to seven years (for “exceptionally serious”) can be imposed against a party found to have misappropriated a plaintiff’s trade secrets. In some instances, a fine may be also imposed together with imprisonment. Procedurally, a criminal case may be started using one of three approaches:

1. Public prosecution: Public prosecution occurs when a trade secret owner reports the misappropriation to the Public Security Bureau (PSB) which conducts a criminal investigation. Upon completion of the investigation, the People’s Procuratorate (PP) files for prosecution of the case with the Basic People’s Court (Basic Court). The Basic Court accepts criminal cases as a first instance courts.

2. When a trade secret misappropriation case is transferred from an administrative agency: During administrative enforcement of a trade secret misappropriation case, if the AIC believes or suspects that a crime has been committed (such as when the trade secret misappropriation causes a loss of more than RMB 500000 or causes the trade secret owner to go bankrupt), the administrative agency (such as the local AIC office) is required to transfer the case to a judicial agency (such as the People’s Procuratorate) for criminal prosecution.

3. Private prosecution: A trade secret owner may file a criminal complaint directly with the court if the trade secret misappropriation does not gravely harm the social order and state interest. According to Article 5 of the 2007 Interpretation (II) of the Supreme People’s Court and the Supreme People’s Procuratorate on Certain Issues Concerning the Specific Application of Law in Hearing Criminal Cases of Intellectual Property Rights Infringement, the People’s Court accepts an intellectual property right (IPR) criminal case filed directly by a victim when the victim produces evidence proving its case. IPR criminal cases that gravely harm the social order and state interest are publicly prosecuted by the PP. 

The possibility of imprisonment resulting from trade secret misappropriation has a great deterrent effect in China. Thereupon, criminal prosecution is an effective and useful option for plaintiffs in trade secret misappropriation cases. Another advantage of criminal enforcement is that the PSB can be used to facilitate evidence collection from a party suspected of trade secret misappropriation. In contrast, in a civil enforcement proceeding, the trade secret owner is on its own to collect evidence against the party suspected of the misappropriation, and typically, the PSB is not involved.

While evidentiary standards have been lowered as a result of recent judicial interpretations, resource issues (such as the difficulties associated with the collection of evidence) may still make criminal enforcement proceedings difficult to pursue. Moreover, the police may be reluctant to become involved in a trade secret misappropriation case when the value of the case is deemed to be “small” compared to other “high-profile” cases (namely, those trade secret misappropriation cases which have a high value, attract wide public attention or may cause a negative social impact). Another disadvantage of a criminal enforcement proceeding is that the trade secret owner cannot control the progress of the investigation and prosecution and must rely on the PSB and PP. The PSB and PP are not likely to notify or update a trade secret owner of the progress of a criminal enforcement proceeding. Additionally, difficulties may exist in situations where administrative proceedings are referred for criminal enforcement. Presently, the transfer of administrative enforcement proceedings from the administrative department to the judicial department is governed by administrative regulations, rather than by the law. The administrative regulations only provide guidelines of how to transfer a case to the judicial department but provide no information regarding the consequences of not transferring these cases. 

Civil enforcement – Civil enforcement is the most viable and commonly used option in China for trade secret protection. A civil action is filed with the Intermediate Court. The Intermediate Court is more specialized in intellectual property right enforcement than the Basic Courts. In a civil enforcement proceeding, a plaintiff must provide evidence demonstrating that:

1. Its trade secret(s) meets the statutory requirements (namely, it is unknown to the public, has an economic benefit and practical utility and the owner has taken reasonable confidentiality measures);

2. What the infringer (namely, the party that has misappropriated the trade secret) is using is similar or substantially similar to the plaintiff’s trade secret; and

3. The infringer obtained the trade secret through illegal means. 

The method of calculating the damages in a civil enforcement proceeding is similar to the method used for calculating damages in a patent infringement action. Specifically, damages can be calculated based on lost profits, defendant’s profits or a reasonable royalty attributed to the misappropriated trade secret.  Additionally, a permanent injunction is also available as a civil remedy.

A major disadvantage of a civil enforcement proceeding is the relatively high cost associated with such a proceeding. In addition, the damages awarded are often low and difficult to collect.  Moreover, there is a lack of independence of the judiciary in many jurisdictions. Furthermore, because China has no procedure for conducting discovery like in the U.S., the burden of gathering evidence rests solely on the plaintiff. Additionally, courts largely rely on documentary evidence, thus any evidence obtained in violation of law will not be accepted. Therefore, plaintiffs face a rather high evidentiary burden.

Nonetheless, compared to the administrative and criminal enforcement proceedings, civil enforcement proceedings offer a more effective and practical option for plaintiffs to protect their trade secrets. While administrative enforcement proceedings are fast and inexpensive, an AIC’s decision is not final and can be appealed to the courts. When a party found to have misappropriated a trade secret appeals an AIC’s decision to the court, it becomes very difficult for the AIC to stop the infringer or to compensate a trade secret owner for its loss through this mechanism. 

Also, although initiation of a criminal case can facilitate the process of collecting evidence through the use of the PSB, plaintiffs should also consider filing a separate civil enforcement proceeding along with a criminal enforcement proceeding (which a trade secret owner cannot control) to pursue civil liability and damages. The filing of a civil enforcement proceeding is particularly useful when a trade secret case is of less interest to the police.

Trade Secret Cases in China 

To date, the number trade secret misappropriation cases in China remains relatively small, compared to the number of litigations pursued for other intellectual property (IP) rights. According to the High Court of Shanghai city (one of the most economically invigorating cities in China), trade secret cases accounted for less than 2% of all IP cases during the period of 2009-2011. Among the 2% trade secret cases, less than 30% of the cases went to trial and resulted in a court decision. Moreover, trade secret infringement was found in less than 50% of decided cases. According to an AIC report, the AIC handled 540,000 cases under the AUCL during the past 20 years (namely, since the AUCL became effective). Of these, only 900 were trade secret cases (See the following Chinese web site). 

Additionally, local AICs, IP officials and judges typically have very limited experience and knowledge in handling trade secret cases. In fact, most trade secret cases are decided in favor of the defendant (thus resulting in failure for the plaintiff). The main reason for the failure of trade secret owners to prevail in these cases (whether in a civil enforcement proceeding or in a criminal enforcement proceeding aided by the PSB) likely resides in the difficulty plaintiffs have in collecting evidence to prove that: (1) the trade secret meets the statutory requirements (namely, it is unknown to the public, has an economic benefit and practical utility and the owner has taken reasonable confidentiality measures); (2) what the infringer is using is similar or substantially similar to the plaintiff’s trade secret; and (3) the infringer obtained the trade secret through illegal means. 

Best Practices for Maintaining and Protecting Trade Secrets in China

Companies should consider instituting one or more of the below best practices for maintaining and protecting trade secrets in China.

1. Identify the information considered to be a trade secret as well as the appropriate amount and type of protection needed for each trade secret.

2. Institute the necessary measures to limit access to the trade secret information. The steps taken should include the necessary physical and digital controls (such as requiring visitors to sign in before entering company premises, password and limited access protection to various computer data and files, etc.).

3. Institute human resource policies to protect trade secrets through the use of employment agreements, conducting ongoing internal training on trade secret and confidentiality obligations and establishing exit interview procedures to remind employees leaving the company of their trade secret and confidentiality obligations.

4. Use nondisclosure and confidentiality agreements when working with third parties.

5. Work with Chinese regulators when requested to submit confidential information to limit the amount of confidential information that needs to be submitted.

6. When working with Chinese companies, a foreign company should require effective implementation of the above confidentiality measures by the Chinese partner company in order to protect the foreign company’s trade secrets. 

This post was written by Lisa Mueller, Wei Yan and Ivan Shen of Shen Li and Partners. 

Divisional Practice in the BRICs and Other Countries – Part 8 of a 9-Part Series: Europe

This is Part 8 of a nine-part series examining divisional practice in the BRIC as well as several non-BRIC countries. To view Part 1 (Divisional Practice in Mexico), click here. To view Part 2 (Divisional Practice in Brazil), click here. To view Part 3 (Divisional Practice in the United States), click here. To view Part 4 (Divisional Practice in India), click here. To view Part 5 (Divisional Practice in Russia), click here. To view Part 6 (Divisional Practice in China), click here. To view Part 7 (Divisional Practice in Canada), click here.

Divisional Practice in Europe

Time Periods for filing a Divisional Application

For European patent applications, a divisional application must be filed while a parent application is pending.  In other words, a parent application cannot be granted, definitively refused or definitively withdrawn. A patent application is still considered to be pending:

1.  Until expiry of the deadline for filing an appeal (even if an appeal is not subsequently filed), when the Examining Division has refused a parent application; and

2.  While a patent application is involved in an appeal against a refusal by the Examining Division.

In April 2010, Rule 36 European Patent Convention (EPC) was amended to set strict deadlines for filing divisional applications. Two different scenarios for filing divisional applications were permitted depending on whether a divisional application was a voluntary or mandatory application. Under Rule 36(1)(a), an Applicant could file as many “voluntary” divisional applications as it liked provided that such applications were filed 24 months from the first communication from the Examination Division issued in a parent application. When an application was part of a chain of European parent and divisional applications (for example, when a parent application was itself a divisional application), the two year period began from the date of the first Examining Division communication issued in the earliest application in the chain of applications. Under Rule 36(1)(b), an Applicant could file a “mandatory” divisional application 24 months from the date of an Examining Division  communication containing an objection to the claims as lacking unity, provided such objection was being raised for the first time in the chain of applications of the same family. However, beginning April 1, 2014, this amendment to Rule 36 will be repealed. Therefore, as of April 1st, all that will be required is that a divisional application be filed while a parent application is pending.

Requirements for Filing a Divisional Application

According to Rule 40 EPC, when filing a divisional, the following must be supplied:

1.  A written statement that a European patent is being sought;

2.  Information identifying the Applicant or allowing the Applicant to be contacted; and

3.  A description or reference to a previously filed application (A reference to a previously filed application must state the filing date and the number of the application and the Office in which it was filed. Such reference must indicate that it replaces the description and any drawings).

When an application contains a reference to a previously filed application, a certified copy of the previously filed application must be filed within two months of the filing of the divisional application, unless the reference application was originally filed with the European Patent Office (EPO). If the previously filed application is not in an official language of the EPO (namely, in English, French or German), a translation into one of the official languages will be required within two months of the filing of the divisional application.

The filing and search fee for a divisional application must be paid within one month after filing. The designation fee must be paid within six months of the date on which the European Patent Bulletin mentions the publication of the European search report for the divisional application.

Claims of a Divisional Application

A divisional application may be filed with or without any claims. If a divisional application is filed without any claims, the EPO will set a two month period for the Applicant to provide a set of claims. Alternatively, a divisional application may be filed with the claims as originally filed in the parent or PCT application. However, the claims of a divisional application filed with the same claims of a parent or PCT application will need to be amended at some point during prosecution to ensure that neither the parent or divisional application claim the exact same subject matter from one another.

Double Patenting

The EPC does not explicitly contain any specific provisions prohibiting double patenting (namely, the case of co-pending European patent applications having the same filing date, filed by the same Applicant and claiming the same subject matter). However, the Guidelines for Examination in the EPO (Guidelines) in Section G-IV-5.4 state that “it is an accepted principle in most patent systems that two patents cannot be granted to the same application for one invention.” In fact, the Enlarged Board of Appeal (Board) in decisions G 1/05 and G 1/06 accepted a prohibition on double patenting. The reasoning the Board gave is that an Applicant does not have a “legitimate” interest in proceedings leading to the grant of a second patent for the same subject matter if the Applicant already possesses a granted patent for that same subject matter. According to the Board, it is permissible to allow an Applicant to proceed with two applications having the same description provided that the claims are distinct in scope and directed to different inventions.

In view thereof, substantial overlap between claims has been permitted by the EPO. For example, if claims to a narrow genus are obtained in a first application (such as a parent application), the EPO is likely to allow claims to a broader genus that encompasses the species in a divisional  application. Specifically, the Guidelines in Section G-IV-5.4 state that:

“…in the rare case in which there are two or more European applications from the same applicant definitively designating the same State or States (by confirming the designation through payment of the relevant designation fee) and the claims of those applications have the same filing or priority date and relate to the same invention, the applicant should be told that he must either amend one or more of the applications in such a manner that the subject matter of the claims of the applications is not identical, or choose which one of those applications he wishes to proceed to grant. If he does not do so, once one of the applications is granted, the other(s) will be refused under Art. 97(2) in conjunction with Art. 125. If the claims of those applications are merely partially overlapping, no objection should be raised (see T 877/06). Should two applications of the same effective date be received from two different applicants, each must be allowed to proceed as though the other did not exist” (emphasis added).

Therefore, practically speaking, an Applicant is unlikely to receive a double patenting objection by an Examiner in a divisional application provided that the Applicant can show that the claims in the divisional application do not contain the identical scope of the parent application.

Examination of Divisional Applications

A divisional application is treated as a separate application and is accorded a separate application number, requires separate fees, requires a separate request for examination, will be prosecuted separately from the parent application, and will result in an independent patent from the parent application. The fees for a divisional application are the same as for any parent application. The term of patent for a divisional application is twenty years from the filing date of the very first parent application.

Poisonous Priorities – The Problem of Toxic Divisional Applications

One very unique aspect about divisional practice in Europe involves the “self-collision” between parent and divisional applications that arises as a result of Article 54(3) EPC. Article 54(3) makes no distinction between earlier application filings of “others” or by the same inventor. Specifically, Article 54 EPC states:

1.  An invention shall be considered to be new if it does not form part of the state of the art.

2.  The state of the art shall be held to comprise everything made available to the public by means of a written or oral description, by use, or in any other way, before the date of filing of the European patent application.

3.  Additionally, the content of European patent applications as filed, the dates of filing of which are prior to the date referred to in paragraph 2 and which were published on or after that date, shall be considered as comprised in the state of the art (which is often referred to as a “whole contents” anticipation).

4.  Paragraphs 2 and 3 shall not exclude the patentability of any substance or composition, comprised in the state of the art, for use in a method referred to in Article 53(c), provided that its use for any such method is not comprised in the state of the art.

5.  Paragraphs 2 and 3 shall also not exclude the patentability of any substance or composition referred to in paragraph 4 for any specific use in a method referred to in Article 53(c), provided that such use is not comprised in the state of the art” (emphasis added).

Thus, under Article 54(3) EPC, the claims of a published divisional child patent application can anticipate or destroy the novelty (but not the inventive step) of the claims of a published pending or granted parent application or the claims of a published parent application can anticipate or destroy the novelty of the claims of a published pending or granted divisional child patent application. Such a scenario is often referred to as a “toxic” divisional or “poisonous” priority scenario.

When do such toxic divisionals or poisonous priority scenarios arise? Typically, problems involving toxic divisionals and poisonous priorities arise when both the parent and divisional application claim priority to the same earlier filed application (such as under the Paris Convention) but one or more of the claims in parent or divisional application is determined not to be entitled to priority to the earlier filed application. The following example illustrates the problem.

1.  On January 1, 2011, Applicant files a patent application in the EPO (priority application). The application describes and claims five compounds.

2.  On December 28, 2012, the Applicant files a second patent application in the EPO claiming priority to the application filed on January 1, 2011 (parent application). The parent application includes additional subject matter, including a description of a broad genus which encompasses the five species described and claimed in the priority application. The claims of the parent application are directed to the broad genus. The parent application is published by the EPO.

3.  On June 28, 2013, Applicant files a divisional application claiming the five species that were claimed in the priority application. The divisional application is published by the EPO.

In this scenario, the claims of the divisional application are likely entitled to the priority date of January 1, 2011. The claims of the parent application are likely not entitled to the priority date of January 1, 2011. Therefore, the subject matter of the claims of the divisional application can be used to destroy the novelty of the claims of the parent application (namely, a species anticipating a genus). The result would not change if the parent application had already issued into a patent. Moreover, the result would not change if the parent application claimed the species (and hence was entitled to priority) and the divisional application claimed the broad genus.

In view of the risks associated with toxic divisionals or poisonous priorities, Applicants should take care when deciding whether or not to file a divisional application and if so, with what claims. Once parent and divisional applications are published or granted, Applicants should take great care to avoid novelty attacks. Applicants should be particularly vigilant to ensure at the claims of a published parent or divisional application do not create novelty problems for the claims of a previously granted divisional or parent application. Such novelty problems could arise in a later filed opposition or subsequent litigation.

Other Important Information Regarding Divisional Applications

Unlike other jurisdictions where divisional applications can only be filed when a lack of unity objection is raised by the relevant Office, European divisionals can be filed at any time (namely, before receipt of the Search Report or issuance of any communication from the Examining Division).

Furthermore, unlike other jurisdictions where divisional applications can only be filed with claims directed to an invention other than the 1st invention identified by the relevant Office, European divisional applications can be filed (subject to the above considerations on double patenting) with claims directed to any subject matter, provided that the subject matter is literally supported by both the European divisional application as originally filed and the parent application(s) as originally filed. In particular, divisional applications can be filed with claims directed to subject matter only disclosed in the description and/or drawings of the parent application even where the claims of the parent application were never directed to such subject matter.

This post was written by Lisa Mueller and Micaela Modiano of Modiano & Partners.

BRIC-a-BRAC: March 14, 2014

1.  As a follow-up to our post on Patent Trolls: A View from Europe, on February 28, 2014, Apple Inc. (Apple) won dismissal of the US $2 billion patent infringement lawsuit brought by IPCom GmBH (IPCom) in the District Court of Mannheim, Germany. Specifically, the Court held that Apple did not infringe the two patents asserted by IPCom (although the reason for the decision was not given). IPCom is appealing the decision. Visit Bloomberg’s article to learn more about this decision.

2.  Is the road to riches for pharmaceutical companies not paved with biosimilars and the BRIC markets? This is the question examined in an article at philly.com. According to the article, it is becoming clear that only a handful of companies may make substantial profits with biosimilars. In fact, some suggest that biosimilars represent “fool’s gold” for many companies. With respect to the BRIC markets, the article notes that the sales in the BRIC countries, which were expected to spearhead pharma’s emerging markets strategy, are not meeting expectations. The reasons include price controls in China, India and Brazil as well as slowing growth in China and the use of compulsory licensing in India. Russia is struggling to keep investors due to the falling ruble and the Russia-Ukraine faceoff.

3.  Will there be a Global Regulatory Supergroup? According to Regulatory Focus (RF), U.S. and international regulators are working to create a new global regulatory organization whose focus would be on leveraging and sharing resources and information among various regulatory authorities. The announcement of the existence of this organization was made on March 6, 2014 by Margaret Hamburg, the Commissioner of the U.S. Food and Drug Administration (FDA), speaking at the Medicines and Healthcare Products Regulatory Agency’s (MHRA) Annual Lecture in London. According to Commissioner Hamburg, “Regulators around the world have begun to collaborate around the formation of an International Coalition of Medical Regulatory Authorities (ICMRA).” While the details of the ICMRA are still in the early stages, Commissioner Hamburg envisions that the organization will be a “high-level, strategic advocacy and leadership entity.” A full transcript of Commissioner Hamburg’s speech can be found here. Please watch the BRIC Wall Blog for further updates on the ICMRA.

Understanding Obviousness in Pakistan

An Overview of Obviousness in Pakistan

Under Pakistani Patent Law, once novelty of a claimed invention has been established, the next step in assessing patent eligibility involves determining the inventive step or nonobviousness of the claimed invention. Because nonobviousness is a legal conclusion based upon certain underlying factual determinations assessed from the standpoint of a person skilled in the relevant art, nonobviousness determinations typically involve a difficult and complex analysis of the invention and the prior art. While determining whether or not a claimed invention has been “made available” to the public prior to the earliest priority date of the application is typically all that is needed to establish novelty or a lack thereof, a determination of obviousness or nonobviousness is not as straightforward.

Depending on the technology or type of invention claimed, Examiners in the Pakistani Patent Office (PPO) generally utilize a mix of the problem-solution approach employed by the European Patent Office (EPO) and the approach relied upon by the English courts as set out by the Court of Appeal in Windsurfing International v. Tabur Marine (Great Britain) [1985] RPC 59 (Windsurfing) when assessing nonobviousness. Specifically, the problem-solution approach involves:

1. Determining the “closest prior art;”
2. Establishing the “objective technical problem” to be solved; and
3. Considering whether or not the claimed invention, starting from the closest prior art and the objective technical problem, would have been obvious to the skilled person.

The inventive step approach set forth in Windsurfing involves:

1. Identifying the claimed inventive concept;
2. Assume the mantle of the normally skilled but unimaginative addressee in the art at the priority date and to impute to him what was, at that date, common general knowledge of the art in question;
3. Identify what, if any, differences exist between the matter cited as being “known or used” and the alleged invention; and
4. Decide, without any knowledge of the alleged invention, whether these differences constitute steps which would have been obvious to the skilled man or whether they require any degree of invention.

To establish a prima facie case of obviousness, an Examiner must establish that there was some (1) teaching, motivation, or suggestion to combine the prior art to arrive at the claimed invention; and (2) that there was a reasonable expectation of success in doing so. For example, combining of two known compositions A and B to form a third composition C having the same purpose as compositions A and B would be sufficient to establish a prima facie case of obviousness. In contrast, if an Examiner is unable to provide a motivation for a skilled person to carry out a modification of the teachings of the prior art to arrive at the claimed invention or a reasonable expectation of success in doing so, then the Examiner has failed to establish a prima facie case of obviousness. Additionally, much like Examiners in other countries, Examiners in the PPO are not permitted to use hindsight or “ex post facto” analysis to combine the teachings of prior art to arrive at the claimed invention.

Tips for Responding to Obviousness Rejections

Focus not only on Differences but on the Invention “as a whole”

When responding to nonobviousness rejections, many Applicants focus solely on the differences between the claimed invention and the cited prior art. While such an assessment is part of a nonobviousness determination, Applicants should not forget that an obviousness inquiry also involves assessing the invention “as a whole”. For example, under the Pakistani Patent Law, when determining patent eligibility, it is improper to consider only the structure of a chemical compound while ignoring its properties. Furthermore, just because the differences between a claimed invention and the prior art may be small, minor or slight, does not necessarily mean that an invention will be considered to be obvious. Likewise, just because the differences between a claimed invention and the prior art are large does not necessarily mean that an invention will be transformed from being “obvious” to “nonobvious.”

Provide Evidence Demonstrating the Unmet Need, Failure of Others, Unexpected or Surprising Results

There are a variety of different ways that an Applicant can establish that a claimed invention is nonobvious over the prior art. For example, an Applicant can argue that the Examiner has not established a prima facie case of obviousness because there is (1) no teaching, motivation, or suggestion to combine the prior art to arrive at the claimed invention; and (2) that there was a reasonable expectation of success in doing so.

Alternatively, an Applicant can provide evidence that the invention solves an unmet need or problem that existed in the art as of the earliest claimed priority date of the application. When making such an argument, an Applicant should provide evidence demonstrating the difficulties or challenges faced by those skilled in the art in trying to solve the unmet need or problem. If the unmet need or problem and the evidence demonstrating the difficulties or challenges faced by those skilled in the art trying to solve the need or problem was not in the application at the time of filing, then such evidence (such as publications, an affidavit, etc.) can be submitted during prosecution.

Additionally, an Applicant can provide evidence (such as publications, a post-filing affidavit, etc.) demonstrating the failure of others to make or practice the claimed invention. Still further, an Applicant can demonstrate that the claimed invention exhibits “superior” or “unexpected” results or properties when compared to the prior art. “Superior” or “unexpected” results generally must be established by providing comparative data over the closest prior art. Such evidence may be included in the application as originally filed or may be submitted in a post-filing affidavit during prosecution. However, for evidence of “superior” or “unexpected” results to be given any weight by the PPO, a relationship between the nature of the evidence and the features or characteristics of the claimed invention that make it nonobvious over the prior art must be established.

Post-Filing Affidavits
As mentioned previously, post-filing affidavits can be used to submit evidence to establish nonobviousness.  There is no particular or preferred format for submitting a post-filing affidavit. After describing the skills and expertise of the Affiant, the affidavit may include as many details as necessary to establish nonobviousness. A copy of an affidavit submitted in another country can also be submitted. Notarization or legalization of the affidavit is not required.

This post was written by Naeema Sadaf (Miss) of PakPat World Intellectual Property Protection Services and Lisa Mueller.

The Copaxone Story in the U.S. and India

By: Lisa L. Mueller

Teva Pharmaceutical Industries Ltd. (Teva) markets Copaxone® (a 20 milligram daily injection) for the treatment of multiple sclerosis. The active ingredient is copolymer-1, or glatiramer acetate, which is a polypeptide product consisting of four different amino acids (alanine, glutamic acid, lysine and tyrosine). Copolymer-1 is a mixture of individual polymer molecules with different constituent ratios and thus different molecular weights. Annual sales of Copaxone® are approximately US$4.3 billon worldwide and account for more than half of Teva’s profit. Copaxone® is very expensive with many patients paying over US$40,000 per year for the drug.

In 2003, Natco Pharma Limited (Natco) began research to develop a generic version of Copaxone® in order to make a cost effective version of the drug available to patients in India. As a result of its efforts, Natco developed a novel process for producing copolymer-1 and filed patent applications covering its process. Presently, Natco’s copolymer-1 product is sold in India under the mark “GLATIMER”.

During the past seven years, there has been significant patent infringement litigation in both the U.S. and India between Teva and Natco involving Teva’s patents covering Copaxone®. Most recently, on February 28, 2014, the High Court of Delhi (High Court) dismissed Teva’s lawsuit seeking an injunction to prevent Natco from exporting its generic version of Copaxone®. In view of the legal actions involving the patents covering this product we at the BRIC Wall Blog thought it would be interesting to trace the evolution of this litigation to see where Teva might go from here.

U.S. and Indian Patents

In the U.S., at least 10 patents cover Copaxone®, specifically, U.S. Patent Numbers 5,800,808 (the “‘808 patent”), 5,981,589, 6,048,898 (the “‘898 patent”), 6,054,430 (the “‘430 patent”), 6,342,476, 6,362,161, 6,620,847, 6,939,539, 7,199,098 and 8,367,605. These patents issued between 1998 and 2013. The expiration date of the ‘808 patent is September 1, 2015, while the remaining nine patents expire on May 24, 2014. U.S. Patent Numbers 5,981,589 6,054,430, 6,342,476, 6,362,161 6,620,847, 6,939,539 and 7,199,098 were listed in the Orange Book for Copaxone® (collectively, the “Orange Book patents”).  All the patents are owned by Yeda Research and Development Co., Ltd. (Yeda) and exclusively licensed by Teva.

In India, Yeda filed application no. 93/DEL/2003 on May 2, 2003 for the product glatiramer acetate. A pre-grant opposition was filed by Natco raising issues of inventive step and an objection under Section 3(d) of the Indian Patents Act, 1970 (“the Act”). The application was rejected on March 3, 2009 as (1) obvious and lacking inventive step over the prior art; (2) not constituting an invention within the meaning of Section 2[1(j)] of the Act; and (3) not constituting patentable subject matter within the meaning of Section 3(d) of the Act. Yeda has appealed this decision. Nonetheless, Yeda obtained Indian Patent Number 190759 (the “‘759 patent”) claiming a process for manufacturing a co-polymer-1 fraction. Claims 1-3 of the ‘759 patent are reproduced here:

1. A method of manufacturing copolymer-1 fraction (a mixture of polypeptides composed of alanine, glutamic acid, lysine, and tyrosine in a molar ratio of approximately 6:2:5:1) used in pharmaceuticals, comprising reacting protected copolymer-1 with hydrobromic acid by known methods to form trifluoroacetyl copolymer-1, treating in a manner such as herein described said trifluoroacetyl copolymer-1 with aqueous piperidine solution to form copolymer-1, and purifying in a manner such as herein described said copolymer-1, to result in copolymer-1 having a molecular weight of 5 to 9 kilodaltons.

2. The method as claimed in claim 1, wherein said protected copolymer-1 is reacted with hydrobromic acid for 10-50 hours at a temperature of 20-28°C.

3. The method as claimed in claim 1, wherein said protected copolymer-1 is reacted with hydrobromic acid for 17 hours at a temperature of 26°C.

Mylan’s Agreement with Natco

On June 7, 2008, Mylan Pharmaceuticals Inc. (Mylan) signed a license and supply agreement with Natco for generic copolymer-1 pre-filled syringes. The agreement granted Mylan exclusive distribution rights in the U.S. and all major markets in Europe, Australia, New Zealand, Japan and Canada and included an option to expand into additional territories.

As a result of its agreement with Mylan, Natco developed two different generic copolymer-1 products using two different manufacturing processes. A first copolymer-1 product is made using a first manufacturing process and is sold only within India. A second copolymer-1 product is made using a second manufacturing process that is exported to Mylan.

U.S. Litigation

On December 27, 2007, Sandoz Inc. (Sandoz) filed the first abbreviated new drug application (ANDA) with the U.S. Food and Drug Administration (FDA) seeking approval to manufacture and sell its proposed copolymer-1 product before the expiration of the Orange Book patents. On June 29, 2009, Mylan filed its own ANDA.  In view of the ANDA submissions, Teva and Yeda separately sued Sandoz (in August 2008) and Mylan and Natco (in October 2009) in the U.S. District Court, Southern District of New York (U.S. District Court) for infringement of the Orange Book patents as well as U.S. Patent Numbers 5,800,808 (‘808 patent) and 6,048,898 (‘898 patent). Included among the patent claims asserted were claims 1-3 of the ‘430 and ‘898 patents, which are reproduced below.

Claims 1-3 of the ‘430 patent

1. Copolymer-1 having over 75% of its molar fraction within the molecular weight range from about 2 kDa to about 20 kDa, prepared by a process comprising the steps of:

reacting protected copolymer-1 with hydrobromic acid to form trifluoroacetyl copolymer-1 having over 75% of its molar fraction within the molecular weight range from about 2 kDa to about 20 kDa, wherein said reaction takes place for a time and at a temperature predetermined by test reaction, and

treating said trifluoroacetyl copolymer-1 having over 75% of its molar fraction within the molecular weight range from about 2 kDa to about 20 kDa with aqueous piperidine solution to form copolymer-1 having over 75% of its molar fraction within the molecular weight range from about 2kDa to about 20kDa.

2. The copolymer-1 of claim 1, wherein said protected copolymer-1 is reacted with hydrobromic acid for about 10-50 hours at a temperature of about 20-28°C.

3. The copolymer-1 of claim 1, wherein said protected copolymer-1 is reacted with hydrobromic acid for about 17 hours at a temperature of about 26°C.

Claims 1-3 of the ‘898 patent

1. A method of manufacturing copolymer-1 of a predetermined molecular weight profile, comprising the steps of:

selecting a predetermined molecular weight profile,

reacting protected copolymer-1 with hydrobromic acid to form trifluoroacetyl copolymer-1 having the predetermined molecular weight profile, wherein said reaction takes place for a time and at a temperature predetermined by test reaction, and

treating said trifluoroacetyl copolymer-1 having the predetermined molecular weight profile with aqueous piperidine solution to form copolymer-1 having the predetermined molecular weight profile.

2. The method of claim 1, wherein said protected copolymer-1 reacted with hydrobromic acid for about 10-50 hours at a temperature of about 20-28°C.

3. The method of claim 2, wherein said protected copolymer-1 is reacted with hydrobromic acid for about 17 hours at a temperature of about 26°C.

The lawsuits were consolidated and on June 29, 2012, the Judge found all nine patents valid, enforceable and infringed. Specifically, the Judge found Mylan had infringed seven of the patents and Sandoz infringed four patents. On July 26, 2013, the Federal Circuit ruled that four of the patents were valid but found five invalid for indefiniteness. Specifically, the Federal Circuit ruled that the claims of the five patents were indefinite because a person skilled in the art could not discern the boundaries of the claims. The patents declared invalid were U.S. Patent Numbers 5,800,808, 5,981,589, 6,048,898, 6,620,847 and 6,939,539. The patents held valid were U.S. Patent Numbers 6,054,430, 6,342,476, 6,362,161 and 7,199,098. The invalidation of the ‘808 patent was significant because of all the Orange Book patents, it had the longest expiration date (September 1, 2015).

On November 13, 2013, the U.S. Supreme Court denied Teva’s request to stay the Federal Circuit’s decision during appeal. As a result of the Supreme Court’s denial, Sandoz and Mylan can launch their respective generic versions of Copaxone® in May 2014 (rather than in September 2015).

Litigation in India

2007 Lawsuit

In 2007, Teva and Yeda filed a lawsuit against Natco in the High Court asking for a permanent injunction restraining infringement of the ‘759 patent as well as for a permanent injunction restraining Natco and its agents from directly or indirectly managing, selling or offering for sale, exporting, marketing, commercializing or registering copolymer-1 under the mark “GLATIMER” or any other mark. Teva and Yeda also asked for an order restraining Natco and its agents from exporting the infringing drugs, formulations or bulk drugs outside India. Additionally, Teva and Yeda sought an accounting of Natco’s profits and a decree for damages in the sum of approximately US$41,000.

Natco responded by arguing that its “GLATIMER” product did not infringe the ‘759 patent. Specifically, Natco argued that the process used to produce its “GLATIMER” product was completely different than the process recited in the claims of the ‘759 patent. In addition, Natco filed a counterclaim for revocation of the ‘759 patent. Natco argued that the patent was invalid for several reasons, including lack of novelty and inventive step and because the patent did not meet the criteria of patentability under the Act. The issues were framed in this litigation in May 2012 and a trial is currently in process.

2012 Litigation

On November 3, 2012, Teva ,Yeda and Teva API Limited (Teva India) filed a second lawsuit against Natco in the High Court seeking a permanent injunction to restrain Natco and its agents from directly or indirectly manufacturing, selling, offering for sale, exporting or registering the product that had been held by the U.S. District Court from infringing the ‘759 patent. Similar to the first lawsuit, Teva, Yeda and Teva India (collectively referred to as “Teva”) sought an accounting of Natco’s profits and a decree for damages. Teva argued in the complaint that the U.S. District Court decision lead to the conclusion that Natco was infringing the ‘759 patent based on the manufacture of copolymer-1 by Natco for export and sale to the U.S. Teva argued that “Natco’s act of manufacturing the glatiramer acetate product for sale in the U.S. and elsewhere amounted to a clear infringement of the ‘759 patent and was, therefore, liable to be restrained by permanent injunction”.

Teva argued that the High Court enjoyed jurisdiction to entertain the lawsuit because Natco was involved in a “large number of activities” that occurred in Delhi and targeted customers, consumers, suppliers and hosts of other people for various aspects of their business in Delhi. Examples given included the selling and offering for sale of products though distributors and agents in Delhi, the supply of its products to various hospitals and chemists throughout India as well as a distribution network in almost every city in India.

Natco argued that the process claimed in the ‘759 patent was not being practiced in Delhi as its manufacturing facilities were based in Hyderabad. Moreover, Natco agued that nowhere in its pleadings had Teva provided any evidence that there had been an infringement of the ‘759 patent in Delhi.

On February 28, 2014, the High Court found that it lacked jurisdiction and dismissed the lawsuit. The High Court reviewed the two processes used by Natco to manufacture copolymer-1 and noted that the present suit involved the process used by Natco for manufacturing copolymer-1 in India on behalf of Mylan for sale outside of India (the “Mylan process”) and not the process used by Natco for manufacturing copolymer-1 in India for sale within India.

The High Court stated that the averments in a complaint alleging infringement or apprehended infringement of a process patent have to be precise. Specifically, the High Court stated:

“…the averments in the plaint in the instant case have to be examined to ascertain if there is any specific plea that there is a violation of the process patent within the jurisdiction of this Court. The Court finds that there is no such specific averment. There is no averment that the process patent i.e. Indian patent No. 190759, or for that matter the ‘Mylan process’ is being practiced/infringed by Natco within the jurisdiction of this Court. This has also to be seen in the context of the fact that there is no denial by the Plaintiffs that there is no manufacture of the GA-second product (the Mylan process) in Delhi. There is also no denial by the Plaintiffs that Natco has at present its manufacturing facilities only in Hyderabad.

Since the suit concerns a process patent, the pleadings as regards the product being sold in Delhi or elsewhere, or the possibility of it being launched in Delhi or elsewhere cannot justify the jurisdiction of this Court. To recapitulate, in para 40 of the plaint it is averred that ‘The US Court decision leads to an incontrovertible conclusion of infringement of rights of Plaintiffs No. 1 and 2 in IN ‘759 based on the manufacture of glatiramer acetate by Defendant No. 2 for export and sale in the United States.’  In para 41 it is stated that Natco’s act of manufacturing the glatiramer acetate product ‘for sale in US and elsewhere amounts to infringement of the process patent. The averment is not that such manufacturing of the product for export to the US and elsewhere is happening or is apprehended to happen within Delhi. In the circumstances, the invocation of Section 48(b) of the Patents Act 1970 by the Plaintiffs to urge that the product obtained as a result of infringement of process is sold or apprehended to be sold in Delhi appears to be misconceived. The fact that Natco may have an office in Delhi or a distributor in Delhi is not relevant given the fact that the subject matter of the suit is a process patent, and the action brought forth is for alleged infringement of that process for the purposes of export to the US and elsewhere.” (emphasis added).

Where does Teva go from here?

As part of its campaign against generic versions of Copaxone®, Teva published data in January 2014 in PLOS ONE comparing Copaxone® with Natco’s “GLATIMER” product. The data in the article demonstrates significant differences in the biological and immunological effects between the branded drug and Natco’s generic version. However, the research was carried out in mice and not in humans. Despite this, Teva’s President of Global Research and Development and Chief Scientific Officer Dr. Michael Hayden remarked that, “The data from this paper shows the possible significant ramifications of changes in physiochemical properties between Copaxone® and a purported generic GA. This study suggests a distinct potential difference in the impact of a purported generic GA on the immune system of patients, with possible implications on efficacy and safety in RRMS patients. Teva believes the only way to truly understand the impact of these differences is by conducting a full battery of clinical studies.”

Additionally, Teva has developed a new three-times-a-week 40 mg/1 mL dosing regimen. In May 2013, Teva filed a supplemental New Drug Application with the FDA for this new regimen. Additionally, Teva filed for patent protection on the new regimen. So far, two U.S. patents have issued covering this regimen (U.S. Patent Numbers 8,232,250 and 8,399,413). These patents will expire in 2030.  Moreover, a Patent Cooperation Treaty application was filed covering this dosing regimen which was published as WO 2011/022063. The national phase was entered in a number of countries, including Australia, Canada, China, European Union, India, Japan, Korea, Mexico, New Zealand and Taiwan. It will be interesting to watch to see whether Natco develops its own version of this dosing regimen.

This post was written by Lisa Mueller and Nidhi Anand ‎of Chadha & Chadha.