China Watch 5: China's New Patent Law

Ronald Cass, Dean Emeritus of Boston University School of Law, and President of Cass and Associates, has a good article in the Wall Street Journal yesterday, "Patent Reform with Chinese Characteristics". The focus of his paper is China's recent Third Amendment to the patent law, which provides for, among others"

1. Encourage innovation in China and protect genuine inventiveness, such as increased protections for innovations created by cross-border research efforts.

2. Adoption of an “absolute novelty” standard, stop patent grants to Chinese applicants who were effectively “hijacking” inventions from abroad.

3. Provision for compulsory licensing (CL) by the State, without the approval of the patent holder, to anyone who is able to produce the product once given access to the patented technology.

Ron Cass noted that while the first two are positive development, the 3rd is not. And rightly so. China is among the major sources of counterfeit or substandard medicines that are exported to many countries. Copying and counterfeiting an existing product or technology is the mark of a non-innovator economy or company. A culture of innovation, of producing original products and new inventions, will help control if not erase this impression.

On the third reform, CL, the term "compulsory" already implies mandatory, coercive action by the State to confiscate or appropriate a license or any form of privately-owned property, physical or intellectual property. This immediately results in violation of private property rights and promulgation of the rule of law. These two principles, private property and rule of law, are the strongest mechanisms by which freedom by individuals and private enterprises are respected and innovation is encouraged.

There are some similarities between the Philippines' new "cheaper medicines law" and China's third amendment, in the conditions by which a CL can be issued by the state -- under national emergencies, anti-competitive behavior by the patent holder, etc. There could be an "Asian wave" of popularizing CL by Asian governments: Thailand, Philippines, China, also India? Other Asian countries may not be far behind.
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Meanwhile, I read yesterday in Business Mirror here in Manila, a news item, "Novartis picks RP as Asia research hub". This seems to be a brave move by Novartis considering that the "cheaper medicines law" is very bias against popular innovator drugs, and very lenient on generics drugs sale and manufacturing.

Novartis' research center will open by June this year, doing research and manufacturing for both generics and innovator drugs. Maybe their focus will be more on generics, considering the above discussions.

* See also: China Watch 4: Chinese Nationalism, Tibet, April 23, 2008