Legal Alert: New Hatch-Waxman-Style Patent Law Formally Adopted by China's National People's Congress; to Take Effect June 1, 2021

On October 17, China's National People's Congress (NPC) formally adopted a revised patent law that makes significant changes to that country's legal framework for pharmaceutical patents. The regulation, promulgated by China's National Medical Products Administration (NMPA), is the result of a preliminary trade deal with the U.S. signed in January that aimed to incorporate aspects of American patent law into the Chinese legal system. Principally, the NMPA law protects pharmaceutical patent rights and encourages competition by establishing a Hatch-Waxman-style litigation scheme for branded pharmaceutical companies and generics.

The NMPA law introduces a number of changes, including:

• A patent linkage system, wherein innovators may assert their patents during the generic approval process and obtain a nine-month temporary stay of regulatory approval upon the filing of a patent complaint. Though one significant difference from US law is that rather than the generic being obligated to give the patent holder notice, instead, the generic drug application will be published on the Chinese regulatory authority's website. That publication triggers a 45-day deadline to file suit.
• Extensions of Patent term to compensate for delays that are not the fault of the patentee. The first type, a patent term adjustment, applies to any patent and can extend the term to compensate for delays due to patent prosecution. A second type, a patent term extension, applies to drug patents and can increase the term to compensate for delays caused by the regulatory approval process.
• A 12-month exclusivity period for the first generic drug applicant who successfully challenges a reference product patent.
• Enhanced damages, wherein a damages award may be multiplied up to five times where willful infringement is found. The law also increases the maximum amount of statutory damages — awarded in cases in which it is difficult to determine the patent owner's loss or the infringer's profit — from 1 million yuan to 5 million yuan.
• A good faith requirement to limit abuse of the system. Drug companies that misuse patent rights in a way that harms the public interest or restricts competition may be held legally liable.

The new NMPA law is a significant departure from prior Chinese law and should strengthen the rights of patent holders in one of the world's largest pharmaceutical markets.