Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., A Dispute over Infringement of an Invention Patent CHINA GUIDING CASES PROJECT

Transcription

1 Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., A Dispute over Infringement of an Invention Patent Guiding Case No. 84 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on March 6, 2017) CHINA GUIDING CASES PROJECT English Guiding Case (EGC84) September 22, 2017 Edition The citation of this translation of this Guiding Case is: 礼来公司诉常州华生制药有限公司侵害发明专利权纠纷案 (Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., A Dispute over Infringement of an Invention Patent), STANFORD LAW SCHOOL CHINA GUIDING CASES PROJECT, English Guiding Case (EGC84), Sept. 22, 2017 Edition, The original, Chinese version of this case is available at 中国法院网 ( See also 最高人民法院关于发布第 16 批指导性案例的通知 (The Supreme People s Court s Notice Concerning the Release of the 16 th Batch of Guiding Cases), issued on and effective as of Mar. 6, 2017, This document was primarily prepared by Nathan Harpainter, Lisha Huang, Joseph Incalcaterra, Sean Webb, Peter Witherington, and Dr. Mei Gechlik; it was finalized by Sean Webb, Peter Witherington, Dimitri Phillips, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings, was done to make the piece more comprehensible to readers; all footnotes, unless otherwise noted, have been added by the China Guiding Cases Project. The following text is otherwise a direct translation of the original text released by the Supreme People s Court.

2 Keywords Civil Infringement of an Invention Patent Invention Patent for a Drug Preparation Method Scope of Protection Technical Investigator Ascertaining the Technical Process for the Preparation of an Allegedly Infringing Drug Main Points of the Adjudication 1. In a patent infringement dispute [involving] a drug preparation method, [a people s court] should, in the absence of other, contrary evidence, presume that the allegedly infringing drug s technical process filed with drug supervision departments is the actual technical process for the preparation [of the drug]. Where there is evidence to prove that the filed technical process of the allegedly infringing drug is not authentic, [a people s court] should fully review evidence, including technical sources, production procedures, batch production records, filed documents, etc. of the allegedly infringing drug, to determine, in accordance with law, the actual technical process for the preparation of the allegedly infringing drug. 2. [A people s court] may ascertain complex technical facts, including the technical process for the preparation of the allegedly infringing drug, by comprehensively using multiple means, including consultations with technical investigators, expert auxiliaries, and judicial appraisal as well as technology experts. Related Legal Rule(s) 1. Article 59 Paragraph 1, Article 61, and Article 68 Paragraph 1 of the Patent Law of the People s Republic of China (amended in 2008) 1 ([the equivalent provisions] applicable to this case were Article 56 Paragraph 1, Article 57 Paragraph 2, and Article 62 Paragraph 1 of the Patent Law of the People s Republic of China (amended in 2000)) 2. Article 78 and Article 79 of the Civil Procedure Law of the People s Republic of China 2 1 中华人民共和国专利法 (Patent Law of the People s Republic of China), passed and issued on Mar. 12, 1984, effective as of Apr. 1, 1985, amended three times, most recently on Dec. 27, 2008, effective as of Oct. 1, 2009, 2 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), passed on, issued on, and effective as of Apr. 9, 1991, amended three times, most recently on June 27, 2017, effective as of July 1, 2017, The 2017 amendment did not change the numbering of the provisions cited from the legislation.

3 Basic Facts of the Case On July 25, 2013, Lilly Company (also known as Eli Lilly and Company ) 3 claimed to the Higher People s Court of Jiangsu Province (hereinafter referred to as the Jiangsu Higher Court )[: during the alleged infringement,] Lilly Company held the invention patent (No ; [regarding] a method) involved in the case, and Olanzapine, 4 a drug prepared by [using] the patented method involved in the case, was a new product. WATSON Pharmaceuticals (Changzhou) Co., Ltd. 5 (hereinafter referred to as Watson Company ) used a preparation method that was within the scope of protection of the patent involved in the case to produce Olanzapine drugs and sold them to the market, infringing upon Lilly Company s method-invention patent involved in the case. Because of this, Lilly Company brought suit in the [present] case, requesting that the court order: 1. Watson Company to pay Lilly Company RMB 151,060,000 as compensation for economic losses and [to pay] Lilly Company RMB 28,800 as compensation [for amounts paid] for the purpose of stopping the infringement, including the fees paid for the investigation and collection of evidence and for other reasonable expenses incurred. 2. Watson Company to publish a statement on its website and in the Medicine Economic Reporter 6 to eliminate the adverse effects on Lilly Company caused by [Watson Company s] infringing acts. 3. Watson Company to bear lawyers fees of RMB 1,500,000 which Lilly Company [had to pay] because of the occurrence of this case. 4. Watson Company to bear all the litigation costs of the case. The Jiangsu Higher Court, during the first-instance adjudication, ascertained: The patent involved in the case is named Method for the Preparation of a Thieno- Benzodiazepine Compound, 7 with China s invention patent application number It 3 The name 伊莱利利公司 is translated herein as Eli Lilly and Company in accordance with the English name appearing on the company s website, at 4 The term 奥氮平 is translated herein as Olanzapine in accordance with the English term appearing on the website of WATSON Pharmaceuticals (Changzhou) Co., Ltd., at 5 The name 常州华生制药有限公司 is translated herein as WATSON Pharmaceuticals (Changzhou) Co., Ltd. in accordance with the English name appearing on the company s website, at 6 The name 医药经济报 is translated here as Medicine Economic Reporter in accordance with the name appearing on the publication as shown in images on its website, 7 The original text reads 制备一种噻吩并苯二氮杂化合物的方法, which is likely meant to be 制备一种噻吩并苯并二氮杂草化合物的方法, the name appearing in the Chinese patent involved in the case (No ), available at 869f0ed93f/CN C.pdf

4 was applied for on April 24, 1991, by Lilly Industries Limited, 8 a British [company], and the announcement date of the grant [of the patent] was February 19, On April 24, 2011, the patent involved in the case expired. On March 17, 1998, the patentee of the patent involved in the case was changed to Eli Lilly and Company Limited, 9 a British [company], and on February 28, 2002, the patentee was changed to Eli Lilly and Company. The claim in the grant announcement of the patent involved in the case is: 1. a method for preparing 2-methyl-10-(4-methyl-1-piperazinyl)-4H-thieno[2,3- b][1,5]benzodiazepine, or an acid addition salt thereof, 10 said method including: (a) making N-methylpiperazine react with a compound of the following formula, in [which] formula, Q is a radical capable of being split off, or 8 The name 利利工业公司 is translated here as Lilly Industries Limited in accordance with the name appearing in a U.S. patent which appears to correspond to the Chinese patent involved in the case; the U.S. patent is available at 9 The name 伊莱利利有限公司 is translated here as Eli Lilly and Company Limited in accordance with the English name found on the company s website, at 10 The original text reads 一种制备 2- 甲基 -10-(4- 甲基 -1- 哌嗪基 )-4H- 噻吩并 [2,3,-b][1,5] 苯并二氮杂, 或其酸加成盐的方法, which is likely meant to be 一种制备 2- 甲基 -10-(4- 甲基 -1- 哌嗪基 )-4H- 噻吩并 [2,3-b] [1,5] 苯并二氮杂草, 或其酸加成盐的方法, the phrase appearing in the Chinese patent, supra note 7, and is translated here in accordance with a corresponding phrase appearing in the apparently corresponding U.S. patent, supra note 8.

5 (b) making a compound of the following formula carry out a ring-closing reaction In July 2001, 11 the Institute of Materia Medica of the Chinese Academy of Medical Sciences 12 ([hereinafter] referred to as IMM-CAMS ) and Watson Company applied to the State Drug Administration 13 ([hereinafter] referred to as the SDA ) for a new drug certificate for Olanzapine and its tablets. On May 9, 2003, IMM-CAMS and Watson Company obtained a New Drug Certificate issued by the SDA for the active pharmaceutical ingredients ( APIs ) 14 of Olanzapine and Olanzapine tablets, while Watson Company [also] obtained an Approval Document for Drug Registration for Olanzapine and Olanzapine tablets. In the application materials for the new drug, the Research Materials and Literature on the Production Technical Process of the APIs recorded the technical process for the preparation [of the drug], viz., 4-amino-2-methyl-10-benzyl-thienobenzodiazepine, hydrochloride, 11 The original text reads 2001 年 7 月 ( July 2001 ) although this date is given as June 2001 further below in this Guiding Case and in the second-instance judgment, 礼来公司与常州华生制药有限公司侵害发明专利权纠纷二审民事判决书 (Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., The Second-Instance Civil Judgment of a Dispute over Infringement of an Invention Patent) (2015) 民三终字第 1 号民事判决 ((2015) Min San Zhong Zi No. 1 Civil Judgment), rendered by the Supreme People s Court on May 31, 2016, full text available on the Stanford Law School China Guiding Cases Project s website, at 12 The original text reads 中国医学科学院药物研究所 and is translated here as Institute of Materia Medica of the Chinese Academy of Medical Sciences based on the names used on the institute s website, 13 The original text reads 国家药品监督管理局 ( State Drug Administration, a.k.a. SDA ). In 2003, this entity underwent institutional reforms and was renamed 国家食品药品监督管理局 ( State Food and Drug Administration, a.k.a. SFDA ); in 2013, it was renamed as 国家食品药品监督管理总局 ( China Food and Drug Administration, a.k.a. CFDA ), with a website at See, e.g., and 14 The original text reads 原料药 and is translated herein as active pharmaceutical ingredients ( APIs ) in accordance with the translation used in a documented titled 美国药品注册技术要求 ( Technical Requirements for Drug Registration in the United States ) prepared by China s Ministry of Commerce, available at

6 methylpiperazine, and dimethylformamide are added and stirred, giving a crude product with a yield of 94.5%; [three substances, namely,] 2-methyl-10-benzyl-(4-methyl-1-piperazinyl)-4Hthienobenzodiazepine, glacial acetic acid, and hydrochloric acid, are added and stirred, and then [the result is] neutralized with sodium hydroxide to give a crude product with a yield of 73.2%; after being refined twice, the total yield is 39.1%. From an analysis of the reaction formula, [one can see that] this process is to have a formula (IV) compound react with methylpiperazine to produce a formula (V) compound and the formula (V) compound is then debenzylated to give a formula (I) compound. 15 In August 2003, Watson Company marketed Watson-Olanzapine 5mg-new antipsychotics, 16 which it produced, to Qingdao Seventh People s Hospital. 17 [As] recorded in [Watson Company s] product publicity materials, the main ingredient of Olanzapine tablets was Olanzapine, whose chemical name is 2- methyl-10-(4-methyl-1-piperazine)-4h-thienobenzodiazepine. In the handling of another case, Shanghai Science and Technology Consulting Services Center, 18 having been entrusted by the Jiangsu Higher Court [with an appraisal task], issued the (2010) Jian Zi No. 19 Technical Appraisal Report on August 25, The appraisal report stated: [one] cannot obtain Olanzapine APIs by following the technical process recorded in the Research Materials and Literature on the Production Technical Process of the APIs filed by Watson Company to carry out experiments. The conclusion of the appraisal was: the key reaction steps for producing Olanzapine APIs as recorded in materials filed by Watson Company lack authenticity and the filed production technical process is not feasible. After the appraisal report was cross-examined, Eli Lilly and Company agreed with it. Watson Company also did not have objections to the appraisal report, but insisted that a two-step method could be used to produce Olanzapine. It was merely because some content involving business secrets was not written in the filed materials that experts could not produce [Olanzapine] by following the filed materials. Watson Company argued that it had not infringed upon the patent involved in the case and the reasons were: from 2003 to date, 19 Watson Company used the technical process for the production of Olanzapine which [the company] reported for approval in its supplemental filing 15 The terms formula (IV) ( 式四 ), formula (V) ( 式五 ), and formula (I) ( 式一 ) refer to structural formulas provided and labelled as such in the Chinese patent involved in this case and the apparently corresponding U.S. patent, supra notes 7 and The original text reads 华生 - 奥氮平 5mg- 新型抗精神病药 ( Watson-Olanzapine 5mg-new antipsychotics ). 17 The name 青岛市第七人民医院 is translated here as Qingdao Seventh People s Hospital in accordance with the English name appearing on the hospital s website, 18 The name 上海市科技咨询服务中心 is translated here literally as Shanghai Science and Technology Consulting Services Center. 19 The original text has 至今 ( to date ) here. It is not clear from the context which date this refers to, e.g., the patent s expiration date or a date during the legal proceedings of the case.

7 [submitted] in That filed document was approved by the SDA on September 8, 2010, and [the filed technical process] was feasible. Given that Lilly Company did not provide any evidence to prove [what] Watson Company s technical process for the production [of Olanzapine was], [the people s court] should use the technical process for Olanzapine that Watson Company filed in 2008 as the technical process for comparison to determine whether or not there was infringement. In the SDA s Approval Document for a Supplementary Application for a Drug of September 8, 2010, submitted by Watson Company, the Application Content column stated: (1) to change the production technical process that has affected the quality of the drug; (2) to revise the registered standards of the drug. The Conclusion of the Review for Approval column stated: After review, [the SDA] agrees [to Watson Company s] change of the production technical process of this drug and revision of the quality standards [of the drug]. On the basis that the original synthetic route is not changed, [Watson Company] merely adjusts, in the changed production technical process, the solvents and reagents used in the technical process for the preparation [of the drug]. The quality standards are attached for implementation and are effective for a period of 24 months. In the Registration Materials for the Supplementary Application for Olanzapine, which was attached to the aforementioned 2010 Approval Document for a Supplementary Application for a Drug, the explanatory content of of Section 5.1 Research Materials and Literature on the Production Technical Process of the APIs was: According to our company s actual production of Olanzapine APIs and on the basis that the route of the production technical process reported in the original [filing] is not changed, [the company] has made some adjustments and changes to the technical process for the preparation of Olanzapine and has optimized the technical process to further enhance and guarantee the quality of the intermediates of Olanzapine and to effectively control the related impurities in the preparation process of Olanzapine.[.] Since the route of the technical process has not changed [and] the crystallization solvent in the final step has not changed, the structure and crystal form of the compound will also not change. In the course of handling the second-instance adjudication, the Supreme People s Court, in order to accurately ascertain the technical facts involved in this case[:] approved, according to Article 79 of the Civil Procedure Law [of the People s Republic of China] and Article 122 of the Interpretation of the Supreme People s Court Concerning the Application of the Civil Procedure Law of the People s Republic of

8 China (hereinafter referred to as the Interpretation of the Civil Procedure Law ), 20 Lilly Company s application to have an expert auxiliary appear in court; approved, according to Article 117 of the Interpretation of the Civil Procedure Law, Watson Company s application to have witnesses appear in court; notified, according to Article 78 of the Civil Procedure Law [of the People s Republic of China] and Article 227 of the Interpretation of the Civil Procedure Law, the personnel of the Jiangsu Science and Technology Consulting Center, 21 which issued the (2014) Si Jian Ding No Technical Appraisal Report, to appear in court; [and] designated for the first time, according to Articles 2 and 10 of the Interim Provisions of the Supreme People s Court on Several Issues Concerning the Participation in Litigation Activities of Technical Investigators of Intellectual Property Courts, 23 technical investigators to appear in court, who, together with all parties, asked the expert auxiliary, witnesses, and appraisers about related technical issues. The Supreme People s Court, during the second-instance adjudication, also ascertained: On October 28, 1999, Watson Company and IMM-CAMS signed a Technology [Transfer] Contract, 24 stipulating that IMM-CAMS transferred Olanzapine, an anti-schizophrenia drug researched and developed [by IMM-CAMS], and its formulations to Watson Company and that IMM-CAMS would be responsible for completing preclinical information for reporting and approval and [would be responsible for] reporting clinical [information] in Beijing. As for the standards and methods for inspection and acceptance [of Olanzapine and its formulations], [the standards] would be in accordance with the standards for approving new drugs and the inspection and acceptance would be [done] by methods used for obtaining approval documents for clinical [research] and new drug certificates. In other clauses [of the contract], both sides had stipulations 20 最高人民法院关于适用 中华人民共和国民事诉讼法 的解释 (Interpretation of the Supreme People s Court Concerning the Application of the Civil Procedure Law of the People s Republic of China ), passed by the Adjudication Committee of the Supreme People s Court on Dec. 18, 2014, issued on Jan. 30, 2015, effective as of Feb. 4, 2015, 21 The name 江苏省科技咨询中心 is translated herein literally as Jiangsu Science and Technology Consulting Center. 22 The original text reads (2014) 司鉴定第 02 号 ( ((2014) Si Jian Ding No. 02) ) although a Technical Appraisal Report ( 技术鉴定报告 ) designated (2014) 司鉴字第 02 号 ( ((2014) Si Jian Zi No. 02) ) appears twice further below in this Guiding Case. 23 最高人民法院关于知识产权法院技术调查官参与诉讼活动若干问题的暂行规定 (Interim Provisions of the Supreme People s Court on Several Issues Concerning the Participation in Litigation Activities of Technical Investigators of Intellectual Property Courts), passed by the Adjudication Committee of the Supreme People s Court on Dec. 30, 2014, issued on and effective as of Dec. 31, 2014, 24 The original text reads 技术合同书 ( Technology Contract ), which is likely meant to be 技术转让合同 ( Technology Transfer Contract ), appearing twice further below in this Guiding Case.

9 regarding the new drug certificate and the reporting of the production [of Olanzapine and its formulations] for approval. In the (Jing 99) Yao Shen Lin Zi No. 82 Application Form for Clinical Research of a New Drug completed by IMM-CAMS in October 1999, the reaction route drawn in the Technical Process for the Preparation [of the Drug] column was as follows: On November 9, 1999, with respect to IMM-CAMS s application for clinical research for a new drug, the Health Bureau of Beijing Municipality issued a Form to Report an Assessment of a Site for the Development of a New Drug. The Conclusion of the Assessment of the Site column [of the form] recorded: The institute has conditions to develop this raw material. Original records and experiment data are basically complete and the content is authentic. In June 2001, IMM-CAMS and Watson Company jointly submitted to the SDA the New Drug Certificate and Production Application ((2001) Jing Shen Chan Zi No. 019). With respect to that application, the Drug Administration of Jiangsu Province issued a Form to Report an Assessment of a Site for the Development of a New Drug on October 22, The Conclusion of the Assessment of the Site column [of the form] recorded: After the assessment of the site, [it is concluded that] the original records about the preparation and inspection of the [drug] samples are basically complete and the inspection equipment basically has the condition [for its proper operation]. The development unit does not currently have a workshop for producing APIs and is now applying for a new drug certificate for this drug. Based on Watson Company s application, the Drug Administration of Jiangsu [Province], on May 21, 2009, issued a letter to entrust the Drug Safety Supervision Division of the Food and Drug Administration of Changzhou Municipality, Jiangsu [Province], with examining Watson Company s Olanzapine production site and [with testing] product samples. With respect to the examination and [testing of product] samples, the Drug Administration of Jiangsu [Province] issued the Drug Registration Report on the Examination of a Production Site (Acceptance No. CXHB ), the Results of the Examination column of which recorded:

10 In accordance with relevant drug registration requirements for the examination of [production] sites, the first examination of the production site of the drug was carried out on July 7, The company s institution and personnel as well as production and inspection facilities can meet the production requirements of the drug. The raw and auxiliary materials can be traced, the primary raw materials are added in accordance with the prescribed amounts, and the production process is carried out in accordance with the reported technical process. On August 25, 2009, in accordance with relevant drug registration requirements regarding the examination of [production] sites, [we] examined various records of the three batches of products [numbered] , , and , including batch production records, inspection records, and records showing the use and inventory of raw materials. [Testing of] samples was carried out in accordance with the requirements for [testing] samples. The Conclusion of the Comprehensive Assessment column recorded: Based on the comprehensive assessment, the conclusion of the examination of the [production] site is: pass. In the Registration Materials for the Supplementary Application for Olanzapine attached to the Approval Document for a Supplementary Application for a Drug issued by the SDA to Watson Company on September 8, 2010, the following reaction route was drawn in The Route of the Technical Process of [Section] 5.1 Research Materials and Literature on the Production Technical Process of the APIs:

11 On March 5, 2015, the Jiangsu Science and Technology Consulting Center, having been entrusted by the Shanghai office of (Beijing) Fangda Partners 25 [with an appraisal task], issued the (2014) Si Jian Zi No. 02 Technical Appraisal Report, the Conclusion of the Appraisal section of which recorded: 1. The technical process for the preparation of Olanzapine that Watson Company filed with the SDA in 2008 is feasible. 2. The technical process for the preparation of Olanzapine that Watson Company filed with the SDA in 2008 was compared with Lilly Company s patented method (No ). The starting materials of both are secondary amines, but the routes of their technical processes for the preparation of [the drug] are different, as specifically shown in [the following observations]: (1) The key intermediates produced in the reactions are different; (2) The reaction steps are different: Watson Company [uses] a four-step method, whereas Lilly Company [uses] a two-step method; (3) The reaction conditions are different: in the substitution reaction, Watson Company uses dimethyl formamide as the solvent, whereas Lilly Company uses a mixed solvent of dimethyl sulfoxide and toluene as the solvent. During the second-instance trial, Lilly Company clarified that, in the [present] case, it demanded protection for method (a) in Claim 1 of the patent involved in the case. Results of the Adjudication On October 14, 2014, the Higher People s Court of Jiangsu Province rendered the (2013) Su Min Chu Zi No Civil Judgment: [the court orders] WATSON Pharmaceuticals (Changzhou) Co., Ltd. to pay Lilly Company RMB 3.5 million as compensation for economic losses and reasonable fees paid for the purpose of stopping the infringement. 2. [the court] rejects Lilly Company s other litigation requests. [The court also ordered that] the acceptance fee of the case was to be RMB 809,744, RMB 161,950 of which was to be borne by Lilly Company and RMB 647,794 by WATSON Pharmaceuticals (Changzhou) Co., Ltd. 25 The name 方达 ( 北京 ) 律师事务所 is translated here as Fangda Partners (Beijing) in accordance with the English naming appearing on the law firm s English website, with the addition of a literal translation of 北京 ( Beijing ). 26 The first-instance judgment has not been found and may have been excluded from publication.

12 Unconvinced, both Lilly Company and WATSON Pharmaceuticals (Changzhou) Co., Ltd. appealed. On May 31, 2016, the Supreme People s Court rendered the (2015) Min San Zhong Zi No. 1 Civil Judgment: [The court] revokes the (2013) Su Min Chu Zi No Civil Judgment [rendered by] the Higher People s Court of Jiangsu Province. 2. [The court] rejects Lilly Company s litigation requests. [The court also ordered that] the acceptance fees of the first-instance and second-instance [cases] were to be RMB 809,744 each, RMB 323,897 of which was to be borne by Lilly Company and RMB 1,295,591 by WATSON Pharmaceuticals (Changzhou) Co., Ltd. Reasons for the Adjudication In the effective judgment, the court opined: 28 Article 7 of the Interpretation of the Supreme People s Court on Several Issues Concerning the Application of Law in the Handling of Disputes over Patent Infringement provides: 29 When determining whether an allegedly infringing technical solution falls within the scope of protection of a patent, [a people s court] should review all of the technical features recorded in the claims asserted by the right-holder. Where the allegedly infringing technical solution includes technical features that are the same as or equivalent to all of the technical features recorded in the claims, the people s court should determine that [the allegedly infringing technical solution] falls within the scope of protection of the patent. Where, compared with all of the technical features recorded in the claims, the technical features of the allegedly infringing technical solution lack more than one technical feature recorded in the claims or have more than one technical feature that is neither the same as nor equivalent [to one 27 礼来公司与常州华生制药有限公司侵害发明专利权纠纷二审民事判决书 (Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., The Second-Instance Civil Judgment of a Dispute over Infringement of an Invention Patent) (2015) 民三终字第 1 号民事判决 ((2015) Min San Zhong Zi No. 1 Civil Judgment), rendered by the Supreme People s Court on May 31, 2016, full text available on the Stanford Law School China Guiding Cases Project s website, at 28 The original text does not specify which court opined. Given the context, this should be the Supreme People s Court. 29 最高人民法院关于审理侵犯专利权纠纷案件应用法律若干问题的解释 (Interpretation of the Supreme People s Court on Several Issues Concerning the Application of Law in the Handling of Disputes over Patent Infringement), passed by the Adjudication Committee of the Supreme People s Court on Dec. 21, 2009, issued on Dec. 28, 2009, effective as of Jan. 1, 2010,

13 recorded in the claims], the people s court should determine that [the allegedly infringing technical solution] does not fall within the scope of protection of the patent. In this case, the allegedly [infringing] drug that Watson Company produced and sold and the product prepared by the patented method involved in the case are the same, viz., Olanzapine. The determination of whether Watson Company s technical process for the preparation of Olanzapine fell within the scope of protection of the patent involved in the case involved the following three issues: (1) Concerning the scope of protection of the patent involved in the case Article 56 Paragraph 1 of the Patent Law provides: 30 The scope of protection of an invention or a utility model patent is [determined] in accordance with the content of the claims. The specification and attached figures may be used to explain the claims. In this case, Lilly Company demanded protection for method (a) in Claim 1 of the patent involved in the case. The claim adopts an open writing style. [The claim] sets only [two] limits the participation of tricyclic reductants and N-methylpiperazine in the substitution reaction and the [type of] radical in which substitution takes place. The scope of protection [of the claim] covers all the preparation methods for the production of Olanzapine in which the aforementioned tricyclic reductants and N-methylpiperazine are used to have substitution reactions in Q radicals. Regardless of what kind of reaction starting materials, solvents, or reaction conditions are used, [the preparation methods] are [still] within the scope of protection [of the claim]. Based on this, the key to the determination of whether Watson Company s technical process for the preparation of Olanzapine fell within the scope of protection of the patent involved in the case was the comparison between the reaction routes of the two technical solutions. Specific reaction starting materials, solvents, reaction conditions, etc. are not included in the scope of comparison for [determining] infringement; otherwise, this would improperly reduce the scope of protection of the patent involved in the case, harming Lilly Company s legal rights and interests. (2) Concerning the technical process for the preparation of Olanzapine actually used by Watson Company Article 57 Paragraph 2 of the Patent Law provides: Article 56 Paragraph 1 of the Patent Law as amended in 2000 corresponds to Article 59 Paragraph 1 of the Patent Law currently in affect. 中华人民共和国专利法 (Patent Law of the People s Republic of China), supra note 1.

14 Where a patent infringement dispute involves an invention patent for the manufacturing method of a new product, an entity or individual that manufactures an identical product should provide proof [to show] that the manufacturing method of its or his 32 product is different from the patented method. In this case, neither party had objections to [the fact that] Olanzapine was the [ ]new product[ ] referred to in the Patent Law. Watson Company should, with respect to [the assertion] that its technical process for the preparation of Olanzapine was different from the patented method involved in the case, bear the burden of proof. Specifically, Watson Company should provide evidence to prove that the reaction route of the technical process for the preparation of Olanzapine that it actually used did not fall within the scope of protection of the patent involved in the case; otherwise, [Watson Company] would bear the legal consequences of failing to adduce evidence the presumption that Lilly Company s allegation of infringement was established. In this case, Watson Company asserted that from 2003 to date, 33 it had continuously used the filed technical process that it [reported], as a supplement, to the SDA in 2008 to produce Olanzapine. It also submitted evidence to prove the technical process for the preparation of Olanzapine that it actually used, including its 2003 and 2008 batch production records for Olanzapine (First-Instance Supplementary Evidence 6), the production procedures [used] in 2003, 2007, and 2013 (First-Instance Supplementary Evidence 7), and the Approval Document for a Supplementary Application for a Drug (First-Instance Supplementary Evidence 12). As mentioned above, the key to the determination of [whether there was] infringement in this case was the comparison between the reaction routes of the two technical solutions. The reaction route of the filed technical process as supplemented by Watson Company in 2008 can be found in the Registration Materials for the Supplementary Application for Olanzapine that it submitted to the SDA. In [that document], the figure of Technical Process Routes under [Section] 5.1 Research Materials and Literature on the Production Technical Process of the APIs shows the reaction route as: the secondary amino group in the secondary amines is first protected with benzyl to prepare a benzylate (benzylation) and then a ring-closing reaction is carried out to produce benzyl-substituted thienobenzodiazepine, a tricyclic compound (reductant). The amino group in the reductant is substituted with N-methylpiperazine to form a condensate and then the benzyl is removed to produce Olanzapine. This court opined that the existing evidence on file could form a complete chain of evidence to prove that Watson Company, from 2003 to the date when the patent involved in the 31 Article 57 Paragraph 2 of the Patent Law as amended in 2000 corresponds to Article 61 Paragraph 1 of the Patent Law currently in affect. 中华人民共和国专利法 (Patent Law of the People s Republic of China), supra note The term his as used here is a gender-neutral term that may refer to her. 33 The original text has 至今 ( to date ) here. It is not clear from the context which date this refers to, e.g., the patent s expiration date or a date during the legal proceedings of the case.

15 case expired, continuously used the reaction route of its filed technical process, as supplemented in 2008, to produce Olanzapine. [The court s] main reasons were as follows: First, in 2008, when Watson Company put forward, to the SDA, a supplementary application for the registration of the drug Olanzapine, [it] clearly recorded the reaction route of its technical process for the preparation of Olanzapine in the Registration Materials for the Supplementary Application for Olanzapine that it submitted. With respect to that supplementary application, the drug supervision departments of Jiangsu Province carried out an examination of Watson Company s production site and tested product samples on July 7 and August 25, 2009, and [thereafter] issued the Drug Registration Report on the Examination of a Production Site (Acceptance No. CXHB ). The report showed that Watson Company s production process is carried out in accordance with the reported technical process and that testing of samples of three batches was carried out in accordance with the requirements for testing samples. The conclusion of the examination of the site was: pass. In other words, the filed technical process as supplemented by Watson Company in 2008 was examined by the drug supervision departments at the [production] site and [the process] was feasible. Based on this, on September 8, 2010, the SDA issued the Approval Document for a Supplementary Application for a Drug to Watson Company, agreeing to Watson Company s change of the production technical process and revision of the quality standards of Olanzapine. During the second-instance trial, Lilly Company s expert auxiliary agreed that the filed technical process that Watson Company supplemented in 2008 is feasible. The Jiangsu Science and Technology Consulting Center issued the (2014) Si Jian Zi No. 02 Technical Appraisal Report, the Conclusion of the Appraisal section of which also agreed that [t]he technical process for the preparation of Olanzapine that Watson Company filed with the SDA in 2008 is feasible. Therefore, [a people s court] should, in the absence of other, contrary evidence, presume that the filed technical process as supplemented by Watson Company in 2008 was the technical process for the preparation of Olanzapine that it actually used after it had obtained the Approval Document for a Supplementary Application for a Drug. Second, generally speaking, a technical process for the preparation of a drug that is applicable to large-scale industrial production [of drugs] has cumbersome steps and complex operations, and its formation cannot be accomplished easily. From the research and development stage to the actual production stage, the long-term technology accumulation [of a technical process for the preparation of a drug] is usually [carried out] under the circumstances that the basic reaction route remains stable while adjustments of reaction conditions and operational details are continuously optimized to address defects found in the actual production. Watson Company s technical process for the preparation of Olanzapine was assigned from IMM-CAMS. The two parties signed a Technology Transfer Contract on October 28, According to the stipulations in the contract, IMM-CAMS was responsible for completing preclinical information for reporting and approval and [was responsible for] reporting clinical [information] in Beijing.

16 In the (Jing 99) Yao Shen Lin Zi No. 82 Application Form for Clinical Research of a New Drug, which IMM-CAMS completed in October 1999, the reaction route drawn in the Technical Process for the Preparation [of a Drug] column showed that [IMM-CAMS] used a reaction route that was the same as the reaction route of the filed technical process as supplemented by Watson Company in With respect to that application for clinical research of a new drug, the Health Bureau of Beijing Municipality issued the Form to Report an Assessment of a Site for the Development of a New Drug on November 9, 1999, confirming that [o]riginal records and experiment data are basically complete and the content is authentic. On this basis, IMM-CAMS and Watson Company, in accordance with the stipulations in the Technology Transfer Contract, jointly submitted to the SDA the New Drug Certificate and Production Application ((2001) Jing Shen Chan Zi No. 019). With respect to that application, the Drug Administration of Jiangsu Province issued on October 22, 2001, the Form to Report an Assessment of a Site for the Development of a New Drug, confirming that the original records about the preparation and inspection of the [drug] samples are basically complete. Through a series of reviews, including the aforementioned examinations for approval, IMM-CAMS and Watson Company, on May 9, 2003, obtained a New Drug Certificate, issued by the SDA, for Olanzapine APIs and Olanzapine tablets. It could be seen from this that from 1999, Watson Company had a technical process for the preparation of Olanzapine whose reaction route is the same as that of its filed technical process as supplemented in 2008 and that [the company] used this to report the registration of the new drug for which a new drug certificate was obtained. Therefore, the probability that Watson Company used, prior to 2008, when the technical process was filed as a supplement, another preparation technical process whose reaction route is completely different to produce Olanzapine was not [deemed to be] high. Finally, in the Approval Document for a Supplementary Application for a Drug that the SDA issued to Watson Company on September 8, 2010, the Conclusion of the Review for Approval column stated: On the basis that the original synthetic route is not changed, the changed production technical process merely adjusts the solvents and reagents used in the technical process for the preparation [of the drug]. [In other words,] the SDA confirmed that the reaction route of the filed technical process as supplemented by Watson Company in 2008 and that of its earlier technical process for the preparation [of the drug] were the same. During the firstinstance adjudication, Watson Company submitted its production procedures [used] in 2003, 2007, and 2013 as well as [its] 2003 and 2008 batch production records of Olanzapine. Watson Company asserted that the above-mentioned evidence involved its business secrets and the firstinstance court organized the two parties to carry out cross-examination, for ascertaining the authenticity and relevance [of the evidence], that was not open to the public. This court, after review, [found that] Watson Company s 2003 and 2008 batch production records of Olanzapine were records made during the actual productions carried out in accordance with the production procedures [used] in 2003 and 2007, respectively. The above-mentioned production procedures and batch production records both showed that the basic reaction route

17 [actually used in] Watson Company s technical process for the preparation of Olanzapine and the reaction route of the filed technical process that it supplemented in 2008 were the same. [Watson Company], on the basis that [its] basic reaction route remained unchanged, merely adjusted and constantly optimized the reaction conditions, solvents, and other production details. Such a technology accumulation process was in line with actual production rules and routines. In conclusion, this court opined that the filed technical process that Watson Company supplemented in 2008 was authentic and feasible. From 2003 to the date when the patent involved in the case expired, Watson Company continuously used the reaction route of its filed technical process, as supplemented in 2008, to produce Olanzapine. (3) Concerning whether Lilly Company s allegation of infringement was established Comparing the reaction route of Watson Company s technical process for the preparation of Olanzapine and that of the patented method involved in the case, [the court found that] the differences between the two are different reaction steps and different key intermediates. Specifically, the [amino] group 34 in the tricyclic reductant used in Watson Company s technical process for the preparation of Olanzapine is protected by benzyl. Thus, a benzylation reaction step is necessarily present before the substitution reaction to produce a benzylated tricyclic reductant, and a corresponding debenzylation reaction step is necessarily present after the substitution reaction to obtain Olanzapine. However, in the reaction route of the patent involved in the case, the [amino] group in the tricyclic reductant is not protected by benzyl, and thus the corresponding benzylation reaction step and debenzylation reaction step do not exist. Article 17 Paragraph 2 of Several Provisions of the Supreme People s Court on Issues Concerning the Application of Law in the Handling of Patent Disputes provides: 35 Equivalent features mean the features that use basically the same means as those of the recorded technical features to realize basically the same functions and achieve basically the same effects, and, when an allegedly infringing act occurs, ordinary technicians of the field can think of these features without the need for creative work. In this case, in terms of the differences between the reaction route of Watson Company s technical process for the preparation of Olanzapine and that of the patented method involved in the case, first, the tricyclic reductant intermediate that is protected by benzyl and the tricyclic reductant 34 The original text has 胺基 here and in the following paragraphs, whereas 氨基 ( amino group ) is likely meant throughout. 35 最高人民法院关于审理专利纠纷案件适用法律问题的若干规定 (Several Provisions of the Supreme People s Court on Issues Concerning the Application of Law in the Handling of Patent Disputes), passed by the Adjudication Committee of the Supreme People s Court on June 19, 2001, issued on June 22, 2001, effective as of July 1, 2001, amended two times, most recently on Jan. 19, 2015, effective as of Feb. 1, 2015,

18 intermediate that is not protected by benzyl are different compounds. They have different chemical reaction characteristics. That is, in the tricyclic reductant intermediate that is not protected by benzyl, both the Q radical that is capable of being split off and the [amino] group can react with N-methylpiperazine, whereas in the tricyclic reductant intermediate that is protected by benzyl, because the [amino] group is protected by benzyl, it cannot have an unexpected substitution reaction with N-methylpiperazine and the substitution reaction can only happen in the Q radical. In the method of the patent involved in the case, benzylation and debenzylation reaction steps do not exist before and after the substitution reaction. Therefore, the two technical solutions are quite different in [their] reaction intermediates and reaction steps. Second, due to the addition of benzylation and debenzylation steps, Watson Company s technical process for the preparation of Olanzapine is detrimental to the yield of the final product. Because of the absence of benzylation and debenzylation steps, the yield of the patented [method] involved in the case will not be reduced. Therefore, the two technical solutions are quite different in [their] technical effects, such as the level of yield and other aspects. Finally, although benzylation of the [amino] groups in the above-mentioned tricyclic reductants to reduce side reactions is common knowledge in the field of chemical synthesis, this type of change is substantive. The reaction characteristics of the tricyclic reductant intermediate protected by benzyl have changed and the increase in reaction steps has also reduced the yield rates. In addition, the common knowledge about protection by benzylation merely explains that, compared with the patented method involved in the case, Watson Company s technical process for the preparation of Olanzapine has made limited improvements. It does not suggest that the technical means used by the two [methods] are basically the same. In summary, Watson Company s technical process for the preparation of Olanzapine and the patented method involved in the case are different, [as reflected in] whether the tricyclic reductant intermediates are benzylated intermediates and the resulting addition of benzylation reaction steps and debenzylation reaction steps. The corresponding technical features are also not technical means that are basically the same and the technical effects achieved are quite different. [Thus, the features] did not constitute equivalent features. Consequently, Watson Company s technical process for the preparation of Olanzapine did not fall within the scope of protection of the patent involved in the case. To summarize the above, Watson Company s technical process for the preparation of Olanzapine did not fall within the scope of protection of the patent involved in the case owned by Lilly Company. The first-instance judgment [was based on] erroneous determinations of facts and applications of law, which were corrected by this court. (Adjudication personnel of the effective judgment: ZHOU Xiang, WU Rong, and SONG Shuhua)