Compulsory licensing in China

Compulsory licensing refers to the legal mechanism enabling the China National Intellectual Property Administration (CNIPA) to authorise others to implement a patent without the permission of the patentee according to the law under certain circumstances.

• Patent Law of the People’s Republic of China (2008); 
• Implementing Rules of the Patent Law of the People’s Republic of China (2010);
• Measures on Compulsory Licence of Patent Exploitation (2012);
• Opinions of the General Office of the State Council on Reforming and Improving Policies on the Guaranteed Supply and Use of Generic Drugs (2018);
• Seed Law of the People’s Republic of China (2015).

Compulsory licensing applies to any invention patent, utility model patent and new varieties of plants although limitations exist under certain circumstances. For example, for a patent directed to semi-conductors, the compulsory licence shall only be granted for the public interest and be limited to the circumstance where a patentee’s exercise of the patent right is considered in accordance with the law to be monopolistic and its negative impact on competition needs to be eliminated or reduced.

3.1 Has any compulsory licence ever been issued in your jurisdiction? If yes, on what type of technology? 

No.

• Any entity or individual that is qualified to exploit an invention patent or utility model patent can apply for a compulsory licence.
• Yes. A foreigner, a foreign enterprise or any other foreign organisation that has no regular residence or place of business in China shall entrust a legally formed patent agency to handle the compulsory licensing relevant matters.

• Under any of the following circumstances, the CNIPA, based on the application of any entity or individual that is qualified to exploit an invention patent or utility model patent, grant a compulsory licence to any such entity or individual:
  • where, within three years of the date when the patent right is granted and within four years of the date of filing the application for a patent, a patentee, without any legitimate reason, fails to have the patent exploited or fully exploited; or
  • where a patentee’s exercise of the patent right is considered in accordance with the law to be monopolistic and its negative impact on competition needs to be eliminated or reduced.
• If a national emergency or an extraordinary state of affairs occurs, or if the public interest requires it, the CNIPA may grant a compulsory licence to exploit the patent for an invention or utility model.
• For the purposes of public health, the CNIPA may grant a compulsory licence in order to facilitate the manufacture of patented medicines and their export to countries or regions, which comply with the provisions of the relevant international treaties to which the People’s Republic of China has acceded.
• In the event that an invention or utility model for which a patent right has been granted represents a major technological advancement of remarkable economic significance, compared with an earlier invention or utility model for which a patent right has already been granted, if the exploitation of the later invention or utility model is directly dependent upon the exploitation of the earlier invention or utility model, then the CNIPA may, upon a request from the patentee of the earlier invention or utility model, grant a compulsory licence to exploit the later invention or utility model.
• Under the circumstance where a compulsory licence for exploitation is granted in accordance with the provisions of the preceding paragraph, the CNIPA may, upon the request from the patentee of an earlier invention or utility model, also grant a compulsory licence to exploit the later invention or utility model.

• Under any of the following circumstances, the CNIPA, based on the application of any entity or individual that is qualified to exploit an invention patent or utility model patent, grant a compulsory licence to any such entity or individual:
  • where, within three years of the date when the patent right is granted and within four years of the date of filing the application for a patent, a patentee, without any legitimate reason, fails to have the patent exploited or fully exploited; or
  • where a patentee's exercise of the patent right is considered in accordance with the law to be monopolistic and its negative impact on competition needs to be eliminated or reduced.
• If a national emergency or an extraordinary state of affairs occurs, or if the public interest requires it, the CNIPA may grant a compulsory licence to exploit the patent for an invention or utility model.
• For the purposes of public health, the CNIPA may grant a compulsory licence in order to facilitate the manufacture of patented medicines and their export to countries or regions, which comply with the provisions of the relevant international treaties to which the People’s Republic of China has acceded.
• In the event that an invention or utility model for which a patent right has been granted represents a major technological advancement of remarkable economic significance, compared with an earlier invention or utility model for which a patent right has already been granted, if the exploitation of the later invention or utility model is directly dependent upon the exploitation of the earlier invention or utility model, then the CNIPA may, upon a request from the patentee of the earlier invention or utility model, grant a compulsory licence to exploit the later invention or utility model.
• Under the circumstance where a compulsory licence for exploitation is granted in accordance with the provisions of the preceding paragraph, the CNIPA may, upon the request from the patentee of an earlier invention or utility model, also grant a compulsory licence to exploit the later invention or utility model. 

6.1 Any negotiation required between the applicant and the right holder before applying for a compulsory licence? 

It depends. A negotiation is required if the compulsory licensing is based on:

• the patentee’s failure to exploit or fully exploit the patent without any legitimate reason within three years of the date when the patent right is granted and within four years of the date of filing the application for a patent; or
• the exploitation of the later invention or utility model where the later patent represents a major technological advancement of remarkable economic significance, compared with an earlier patent, and the exploitation of the later patent is directly dependent upon the exploitation of the earlier patent.

6.2 Any urgent situation required in order to grant a compulsory licence?

No. But If a national emergency or an extraordinary state of affairs occurs, or if the public interest requires it, the CNIPA may grant a compulsory licence to exploit the patent for an invention or utility model.

6.3 Any minimum number of years required for the patent to be granted and/or implemented in order to be subject to compulsory licensing?

It depends. For compulsory licensing based on no exploitation or no full exploitation by the patentee without any legitimate reason, the patent has to be granted three years from the date of grant and four years from the date of filing the application for the patent.

No.

Yes. The decision to grant a compulsory licence shall stipulate the scope and time of implementation based on the reasons for the compulsory licence.

“CNIPA”-China National Intellectual Property Administration.

Anyone who requests a compulsory licence shall submit a written request for the compulsory licence to CNIPA and explain why, together with relevant supporting documents.

10.1 What materials need to be submitted to the competent authority?

In order to qualify for the compulsory licence, a written request including the following information is required:

• Name of a contact person for the requesting party including an address, postal code, and phone number.
• Nationality of the requesting party or the country or region where the registration is to be made.
• Name, patent number, date of application and date of official announcement of the invention patent or utility model patent for which the compulsory licence is being requested, and the name of the patentee.
• Reasons and circumstances for the request of a compulsory licence and the period for which the licence is being requested.
• Name and code of the appointed agency, as well as the name, practice certificate number and phone contact of the agent designated by said agency if appointed.
• The signature or seal of the requesting party, and the seal of a patent agency if such an agency is appointed.
• A list of annexed documents.
• Details of other relevant matters.
• The request and documents pertaining to the request shall be delivered in duplicate.

10.2 How long will it take to get a compulsory licence?

Unclear. The present law does not specify how long the CINPA shall make its decision.

Yes. Hearings are not required in the event a request for a compulsory licence is to be granted:

• under a national emergency or an extraordinary state of affairs, or for the public interest; or
• for the purposes of public health, in order to facilitate the manufacture of patented medicines and their export to countries or regions, which comply with the provisions of the relevant international treaties to which the People’s Republic of China has acceded.

Yes. A compulsory licence will terminate automatically if:

• the term of the compulsory licence prescribed in the decision on granting the compulsory licence expires; or
• the patent for which a compulsory licence has been granted has been terminated or declared invalid.

12.1 What are the conditions for the revocation/termination of a compulsory licence? 

Besides the conditions delineated under item a, the patentee may request CNIPA to make a decision on terminating the compulsory licence where the reasons justifying the compulsory licence cease to exist and are unlikely to recur prior to the expiration of the valid term of the compulsory licence as specified in the decision on granting the compulsory licence.

12.2 How should products made under a compulsory licence be treated if the compulsory licence is terminated/revoked?

The present law does not specify how to treat the products made under a compulsory licence if the compulsory licence is terminated/revoked.

Yes.

13.1 If the compulsory licensee is required to pay a royalty, how is the amount of royalty determined and who will decide the amount of the royalty?

Any entity or individual that obtains a compulsory licence shall pay reasonable royalties to the relevant patentee or address the issue of royalties in accordance with the provisions of the relevant international treaties to which the People’s Republic of China has acceded. In the event that royalties are to be paid, the specific amount to be paid shall be subject to consultation between the two parties. In the event of failure to reach an agreement between the two parties, the CNIPA shall make a ruling.

13.2 Is there any remuneration available for the right holders other than royalty?

No.

Yes. Where a patentee is dissatisfied with the decision of the CNIPA on granting a compulsory licence for exploitation, it may, within three months of receipt of the notification bring a lawsuit to the People’s court.

The present law does not address this point.

The present law does not address this point.

16.1 If the compulsory licensee discloses the confidential information in violation of its obligation, does the right holder have a basis of claim against the compulsory licensee? 

The present law does not address this point.  But the right holder has a claim on the basis of trade-secrets infringement.

Yes. For the purpose of public health, an entity satisfying the conditions for patent exploitation may request a compulsory licence for the manufacture of a patented drug exported to:

• a less developed country or region; or
• a developed or developing country that is a WTO member, which notifies the WTO and expresses its desire to be an importer in accordance with the relevant international treaty.

17.1 If the compulsory licensee is permitted to export products under the compulsory licence, are there any requirements and limitations on the export of such products?

Yes. The following requirements will be specified in the compulsory licence granting decision by the CNIPA:

• the amount of drugs manufactured based on a compulsory licence shall not exceed the amount needed by the importer, and all drugs must be exported to the importer;
• specific labels or marks shall be indicated on the drugs manufactured under a compulsory licence clearly indicating that they are manufactured according to the compulsory licence;
• the drugs shall have specific colours or shapes, or be packed in a particular manner if it is feasible and the price of drugs will not be significantly affected;
• before the shipment of drugs, the entity that has obtained the compulsory licence shall publish on its website or the relevant WTO website the amount of drugs shipped to the importer and the special production characteristics of the drugs referred to in the items above.

No.

Yes. This is feasible in theory, but difficult in practice. Historically, a compulsory licence has been used as leverage by the government to negotiate with drug companies in granting a licence. During 2005 and 2006, Roche granted two licences in China to produce a generic form of Tamiflu, an anti-viral medicine that could be used in treating bird flu. Shanghai Pharmaceutical Group was the first licensee. Shenzhen-based HEC Group was the second licensee. Guangzhou Baiyunshan Pharmaceutical Co. Ltd. applied for a compulsory licence but failed to get either the compulsory licence from CINPA or the licence from Roche.

Not yet.

No.

The present law does not address this point.

Yes, primarily for drugs. Specific labels or marks shall be indicated on the drugs manufactured under a compulsory licence clearly indicating that they are manufactured according to the compulsory licence; and the drugs shall have specific colours or shapes, or be packed in a particular manner if it is feasible and the price of drugs will not be significantly affected.

Yes. At least for drugs produced under the compulsory licence, the distribution channel should be published on the relevant website of WTO.

The present law does not address this point.