Ten years ago, if you asked a Chinese scientist whether he was interested in registering some intellectual property, the answer would probably be a sharp "no." The level of suspicion was so high and the level IP protection so low that secrecy was seen as the only means of keeping an idea secure.
After all, it wasn't until 1993 that patents and pharmaceutical compounds were officially covered by Chinese law.
Since then, conditions have improved greatly for both foreign and domestic pharma firms. Regulation is carried out by the State Intellectual Property Office (SIPO) and the State Food and Drug Administration (SFDA).
Rulings on patents are made by the Patent Reexamination Board (PRB), which operates under SIPO. However, the SFDA is the final arbiter. It is able to withold manufacturing licenses until it is happy that no patents have been infringed, even if the PRB has already ruled in favor of the applicant.
"You can get a court injunction to force the SFDA to withdraw the registration of a rival's license," said Tony Chen, a pharmaceuticals and biotechnology patent specialist for law firm Jones Day in Shanghai.
"This is very effective – there is one place in Beijing that everybody needs to pass through if they are to legally sell drugs to hospitals and pharmacies."
This regulatory structure doesn't reduce the number of patent infringements. If anything, it facilitates more cases coming to court. In 2005, China surpassed the US to become the world's most litigious country for IP disputes with 13,424 cases filed.
Only 268 of these involved foreign companies, a 76% rise on 2004 but still a relatively low number. Given that generic drugs account for 75% of the domestic drug market, it is not uncommon for copycat local manufacturers to either infringe against a patent on a foreign drug or appeal to the patent office for the foreign patent to be nullified in China.
Foreign firms' cautious approach to enforcement is blamed on unfamiliarity with Chinese civil litigation.
But a MNC with strong patents, particularly those covering active pharma compounds, can expect to be well protected. This was the case with Pfizer, which last year persuaded a Beijing court to overturn a patent office decision invalidating the company's exclusive rights to the main active ingredient in Viagra, the erectile dysfunction drug.
Nevertheless, the system still has its shortfalls. For drugs that were developed before 1993 patent law came in, MNCs are forced to rely on follow-on patents that apply to method of using the compound. In these areas guilt is more difficult to prove as the patent infringer can just claim to have used a different method.
"It's like a game of cat and mouse – some people are trying to find evidence while others are trying to hide it," explained Chen.
Another problematic area is patent linkage, whereby a manufacturer seeking to register a drug must declare that it does not infringe a third-party patent. Alternatively, the generic drug maker may apply to register an existing patent up to two years before the existing patent expires. Chen argues that the original patent holders have limited means by which to secure an extension or challenge the validity of the new patent.
"We heard that the Chinese government is not including patent linkage [in the current round of patent law amendments]," he said. "I think the domestic drug lobby is against it – they hope to be able to enter a market when patents have expired."