While China is a focus of attention for the healthcare industry as one of the world’s largest markets, a chief concern for the medical device industry is the risk from IPR infringement. For effective IP protection in the medical device industry, registration of IPR, management of IP during R&D, and sourcing are among the key issues to consider.
Types of IP Rights
Patents
Given the growing importance of the Medical Devices market, the importance of China in global supply chains, and the risk of infringement, companies should seriously consider filing patents in China for new inventions. Examination of Invention Patents, granted by the State Intellectual Property Office (SIPO) currently takes around 3 years.
China has recently enacted the third amendment to the Patent Law, which came into effect on 1 October 2009. This has a number of implications for the scope of protection and enforcement of Patents which companies should research in detail, including:
The ‘Bolar exemption’, which states that producing, using or importing patented medicine, or patented medicinal equipment for the purpose of obtaining approval does not constitute infringement. Bearing in mind that product approval is a lengthy process in the medical device industry, this rule may allow competitors to quickly launch competing products when the patent of the originator expires.
The absolute novelty standard. In line with international practice, patents must be examined against worldwide prior art, rather than only novelty in China. This will ensure that patents filed in China are genuinely novel and prevent ‘pirate’ applications of other’s technology patented elsewhere. It also means that foreign companies must be careful to ensure that disclosure outside China does not destroy novelty in China.
Utility Model & Design Patents
In addition to Invention patents, China also recognises Utility Model Patents and Design Patents. Both types of patent last for 10 years and as they are not examined, are granted within 1 year.
It is possible to apply for a Utility Model Patent and Invention Patent for the same subject matter, thereby protecting the invention more quickly.
Design Patents cover only the outward appearance of a product. In practice, it is common for infringing companies to register the designs of others, and to use their registration to sell infringing products or even threaten action against the originator or its suppliers. Owning a Design Patent can be effective simply by deterring competitors from copying you.
Copyrights
Electronic diagnostic devices are often operated with software and technical manuals. Both software and printed material, such as technical manuals are, protectable as works of copyright in China. Unlike Europe, China has a system for the registration of copyright. While this is not necessary to enforce one’s rights, it is a convenient way to show evidence of ownership, and is a straightforward procedure.
For devices that require clinical trials, the database resulting from the trials is also registerable as a work of copyright.
Trade Marks
The key issues for SMEs when dealing with trademarks are:
• Register new marks as early as possible, it can take 2-3 years for a trademark to reach registration in China.
• In China’s first-to-file system, unregistered trademarks are not protected unless they are deemed ‘well known’ in China. Few European SME brands meet this criterion.
• It is common for domestic applicants to register the English or Chinese trademarks of foreign companies in bad faith. Specialist advice must be sought in recovering trademarks infringed in this way.
Unfair Competition
China also provides protection for distinctive product markings, packaging, and decoration under the Anti-Unfair Competition Law.
Except in some special circumstances this Law does not explicitly cover the shape of products themselves, therefore Design Patents are the most direct method to protect product designs.
Trade Secrets China recognises protection for trade secrets, provided that physical and contractual barriers are in place for maintaining confidential information.
China’s Labour Contract Law allows for restrictive covenants to be imposed on key employees post-employment, although reasonable remuneration should be provided.
Companies should:
• Conduct an internal review of what information or know-how should be properly protected as a trade secret and whether such information is used in China.
• Ensure that such information is properly identified and that security measures are taken to isolate it from being freely circulated. Those employees or third parties that have access to such information should be strictly bound by confidentiality terms not to disclose the secret to others.
R&D and joint product development
While there are relatively few SMEs who have set up dedicated R&D initiatives in China, it is quite common for companies who are working with suppliers in China to conduct some form of joint development of new products.
When carrying out R&D in China:
• Ensure that you have audited the R&D process to ensure that key employees are covered by confidentiality agreements, that trade secrets are protected as recommended above, and that your patent management policies comply with Chinese law.
• If conducting joint development with another party, the contract should state clearly how newly created IPR will be owned. Contracts which do not allow an other party to derive any economic benefit from improvements or new IP will generally not be legally valid.
• Under the new Patent Law, inventions completed in China should file for a patent in China first, or seek a license from the State Intellectual Property Office to file overseas.
• The new Patent Law also specifies remuneration for inventors under employment. Companies should ensure that their remuneration policy for inventors complies with this requirement.
Product sourcing, distribution and licensing If you are considering sourcing products from China, distributing products in China, or licensing into China any products that may contain IP in the form of brands, patents or know-how, you should draft contracts that specifically identify and protect your IP from misuse by business partners.
Points to consider for SMEs sourcing, distributing, or licensing in China:
• Companies should conduct comprehensive due diligence on potential partners. This should include background checks on whether they have been involved in IPR disputes and obtain references and non-disclosure agreements (NDA) from other business partners.
• Contracts should be in Chinese, drafted in accordance with Chinese law, and both parties should ensure that they fully understand the terms.
• Companies should carefully review contract clauses that relate to any product or component that contains IP, including how they are produced, supplied and to guard against disclosure of information or a physical product that may contain proprietary IP.
Take-away message
Unless in exceptional circumstances, unregistered IP cannot be protected or enforced in China. There are simple and cost-effective registration services available for most types of IP, and registering sooner rather than later can be the most effective way to deter infringers and support future enforcement.
By Philippe Healey, Project Manager, China IPR SME Helpdesk
The China IPR SME Helpdesk is a European Commission funded project that provides free, practical, business advice relating to China IPR to European SMEs. To learn about any aspect of intellectual property rights in China, visit our online portal at www.china-iprhelpdesk.eu. For free expert advice on China IPR for your business, e-mail your questions to:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
. You will receive a reply from one of the Helpdesk experts within seven working days. The China IPR SME Helpdesk is jointly implemented by DEVELOPMENT Solutions and the European Union Chamber of Commerce in China(EUCCC).
Â
The ‘Bolar exemption’, which states that producing, using or importing patented medicine, or patented medicinal equipment for the purpose of obtaining approval does not constitute infringement. Bearing in mind that product approval is a lengthy process in the medical device industry, this rule may allow competitors to quickly launch competing products when the patent of the originator expires. 
China recognises protection for trade secrets, provided that physical and contractual barriers are in place for maintaining confidential information. 
If you are considering sourcing products from China, distributing products in China, or licensing into China any products that may contain IP in the form of brands, patents or know-how, you should draft contracts that specifically identify and protect your IP from misuse by business partners. 
