Sunday Local Selection: 95.6 mln RMB question, Hebei good/bad/ugly, new BMW product?, Taiwan Straits IP Centre, Nanning achievements, Starve Cancer to Death Medicine

Some local news items of China Intellectual Property 中國知識產權, Xinhuanet.com, Hebei.gov.cn, CNR.cn, Stats.gov.cn and China Quality Daily were presented in one article by China Daily about the following locations: Beijing, Hebei, Fujian, Guangxi, Guangdong.

The 95.6 million Renminbi question
The first item is about subsidies given to 600 companies in Beijing's technology hub Zhongguancun in the last four years. For every patent granted high tech companies received 5,000 Renminbi. The total amount of the subsidies in the last four years was 95.6 million Renminbi. The 95.6 million Renminbi question is of course, were the subsidies WTO compliant?

The good, the bad and the ugly in Hebei
The good: an eco-friendly farmer-entrepreneur who is considered a model inventor.
The bad: "Former wine deputy manager Wang Chunping was sentenced to life imprisonment and forfeited all personal property after he was convicted of making and selling fake wine in Qinhuangdao, capital of the northern province." However, Qinhuangdao (2.8 million + people) is a port city but not the capital. Shijiazhuang (10 million+ people) is the capital of Hebei province. Five of Wang's associates were sentenced to prison terms ranging from seven to 15 years.
The ugly: From 1998 onwards Wang and his employees added ingredients including water, sugar, alcohol and yeast to pulp and grape skin left over from the actual winemaking process. Wang was doing a quality fade out on his own product.

BMW new eco-friendly product?
The Fujian item was that the Xiamen (why spelled as Xiaman?) customs has seized 3,716 pairs of counterfeited shoes carried 19 well-known brands, including Nike, Adidas, Li-Ning, Dior, BMW. Did BMW really branch-out into this eco-friendly and safe mode of transport, or did they co-brand just like Ferrari with Puma? Please let me know if you know more about Beamster shoes.

A centre for cross-Taiwan Straits intellectual property exchanges was inaugurated at Xiamen University and will be part of the Fujian Intellectual Property Office (part of SIPO). 

Exhibition of IP achievements in Nanning

Nanning (capital of the Guangxi Zhuang Autonomous Region) "Law enforcement officers said the copycat products were seized in Nanning's wholesale market, ready to be shipped and sold in small shops in the countryside."

Starve cancer to death injection  

The Zhongshan University, in Guangzhou, (capital of Guangdong province) has developed a medicine that "cut[s] off the nutrient supply and metabolic channels of cancer cells to kill tumors," according to Professor Huang Wenlin, leader of the project. The new anticancer drugs injection of recombinant human endostatin adenovirus, recently completed phase II clinical trials in 11 hospitals. The medicine is protected by independent intellectual property rights in China. 

Besides, surgery, chemotherapy and radiotherapy cancer treatment this new approach is described as low-cost and its efficacy promising.

Read here. 

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Is China's Anti-Monopoly Law Used To Get Hold Of Foreign IP?

Anti-Monopoly Law to level the playing field ...
or annexing the players?
Photo: Danny Friedmann

Today, exactly three years ago (2008), China's Anti-monopoly Law went into effect. Since that time the Ministry of Commerce's Anti-Monopoly Bureau has approved seven M&As conditionally of which one is most relevant in regard to IP:

• InBev - Anheuser Busch
• GM - Delphi
• Mitsubishi Rayon - Lucite
• Pfizer - Wyeth
• Novartis AG - Alcon
• Sanyo - Panasonic
• Uralkali - Silvinit

And there was one rejection. When Coca-Cola company wanted to acquire Huiyuan Juice Group in March 2009, for around 2.4 billion US dollar, the Anti-Monopoly Bureau rejected its application, because according to Anti-Monopoly Bureau:
"If the acquisition of Huiyuan went into effect, Coca-Cola was very likely to take a dominating position in the domestic market and the consumers may have to accept the high price fixed by the company as they don't have more choices." Read here.


Since that time the Ministry of Commerce did not reject any M&A. But in some cases they did give some conditions. The title of Simon Rabinovitch' article for the FT is 'China Becomes Hurdle To Global Mergers' is provocative. Mr Rabinovitch quotes Gerry O'Brien of Mayer Brown JSM in Hong Kong: “There is some concern about the potential for such orders to be used as a mechanism to transfer important businesses or assets or intellectual property to Chinese enterprises away from foreign firms.” Read more here.

Let's explore Mr O'Brien's idea. When Pfizer wanted to take-over Wyeth on the Mainland for 64 billion US dollar, it got China's blessings only if it divested its Pfizer swine flue vaccine (mycoplasma hyopneumoniae) RespiSure and RespiSure One in China (not Hong Kong, Macau or Taiwan), so it can still sell it's Wyeth vaccine in China.

Steven Wei Su of Guo Lian PRC Lawyers reports on the Anti-Monopoly Bureau decision: "MOFCOM found that the merged entity would have a combined market share of 49.4% in the market, which is significantly higher than that of the next competitor in the market, Intervet, holding 18.35% of the market and other competitors, of which each holds less than 10%." Mr Su's analysis can be found here.

How to exactly assess market concentration remains less than transparent. Therefore Ministry of Commerce has issued a draft for comment on the 'Tentative Provisions on Assessment of the Effects of Concentrations of Business Operators on Competition', June 13, 2011. John Grobowski, Yiqiang Li and Wendy Yan of Faegre and Benson LLP in Shanghai analysed the procedures here.

Sundeep Tucker reported last May 2011 on the Pfizer-Wyeth deal for the FT, see here. Matthew Murphy of MMLC Group gives all 7 conditions of the Anti-Monopoly Bureau here.

It is hard to give a conclusive answer if the concern for IP abusive use of China's Anti-Monopoly Law is legitimate. Also in the case of Pfizer-Wyeth the intellectual property was only partly transferred away from foreign firms. The company to which Pfizer sold its intellectual property rights for the swine flue vaccine was Harbin. Harbin may well be majority owned by the provincial government, but Warburg Pincus, a US private equity fund, has a 22.5 percent stake in it. China's Anti-Monopoly Law and the Anti-Monopoly Bureau are pretty new and China's efforts to make the assessment of market concentration more transparent is laudable. So far they deserve the benefit of the doubt.  

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“A new dawn for the China health-care or… Grand theft IP?”

Guest article and picture by Mikołaj Rogowski

Back in January, Chinese government announced another one of its subsidies. This time around public health-care is the target and a sum of $128 billion is the weapon. It is no secret that it is another of Beijing’s measures of calming the nation during the year of the economic slow down, however anyone who has been in a public hospital in China will tell you that the system is indeed in need of the equipment and drugs that can be bought with such a substantial sum. Reasons aside, the dawn of new health care means that in the years to come Chinese officials will be on the medical shopping spree. Forbes (http://www.forbes.com/2009/04/08/china-health-care-markets-equity-stimulus.html) has an interesting article on that topic. As Tina Wang points out, it is more than likely that most of the promised sum will go to the Chinese companies. However, in many fields of medicine there are simply no Chinese-made substitutes for the western made, high-end equipment and drugs. That leaves the government with no other choice than to contract with foreign producers. Seems that non-Chinese firms have much to gain, however it might turn out that there is even more to lose. Most if not all of the companies working in the aforementioned fields are IP-based. Without their patents and know-how their products would simply stand no chance of competing with their cheaper Chinese rivals.

The optimistic scenario: some of the items from the no doubt massive order list will not end up as targets of a disappearing act performances, only to later magically ‘reappear’ as certain solutions in ‘new’ Chinese made products.

The pessimistic picture? Remember how Russian military industry was always eager to sell their arms to the ever-expanding, ever-modernized People’s Liberation Army (People's Republic of China armed forces)? Seems that lately they have had a change of heart. After long negotiations concerning the sale of Sukhoi Su-33 Flanker-D carrier-borne fighters Russian party decided to scrap the deal because of the… Fear of the IP theft. Russians claim that China has already copied most of the equipment they have sold them. (More on this topic here: http://en.rian.ru/analysis/20090313/120554173.html). A month after the fiasco of that deal China Association for Science and Technology publishes an article in which it stated that "In some areas, Chinese weapons have either achieved or are very close to achieving international advanced standards,". (The China Post: http://www.chinapost.com.tw/china/national-news/2009/04/13/204090/China-says.htm) The question that just begs to be asked, assuming the report is trustworthy, is how did the Chinese industry reach such levels of standards and if the theft of the IP was one of the main factors that led to this achievement, what would stop the Chinese medical industry from doing the same thing?

It certainly would not be the first time. Thanks to a friend of mine I had an opportunity to talk to a executive at Optopol ( http://optopol.com/en/), a renowned Polish firm specializing in manufacturing of diagnostics equipment in ophthalmology. They have sold a few units of their devices in China and they were met with a disturbing pattern. Most of the equipment was returned shortly, labeled as nonfunctioning. After a brief inspection it turned out that all of the returned machines bared signs of disassembly and whoever did the dismantling had a much harder time putting the machines back together – hence the returns of the “faulty” equipment. Now why would anyone want to take these machines apart, I wonder? What is even more disturbing is that this practice seems not be local - different copies of their products were sent to various locations in china, with the same results.

What do you think? Have any of the readers had any similar experience with products that were sold in China?

For more on the reform check: http://online.wsj.com/article/SB123982492165322167.html

Text and picture Mikołaj Rogowski

Mikolaj Rogowski, law student at Jagiellonian University, author of several IP articles and Polish-English translations, specializes in Polish, European, Chinese and American IP law,
China assistant to MEP Jan Olbrycht.

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First Coordinated EU Customs Campaign Catches 34 Million Counterfeit Medicines

Reuters reports that the customs officials of the 27 EU members worked together to intercept counterfeit antibiotics, anti-cancer, anti-malaria and anti-cholesterol medicines, painkillers and Viagra.

"The main countries of origin for the illegal products were China, India and Pakistan, a [European] Commission official said."

Read the Reuters article here.

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Origin Fake Malaria Medicine Traced By Scientific Effort

Every year about 500 million people become ill of malaria. Every year 1 million people die, because of one version of malaria called Plasmodium falciparum. One major problem is that not all malaria medicines are genuine and some have only a low dose of the active ingredient, so that the malaria parasite becomes resistent. Jeremy Laurance of The Independent wrote the article entitled 'Scientists trace fake anti-malaria pills to dealer in southern China', read here.

The Public Library of Science (PLoS) Medicine gives the full report about this extraordinary scientific effort:

"Since 1998 the serious public health problem in South East Asia of counterfeit artesunate, containing no or subtherapeutic amounts of the active antimalarial ingredient, has led to deaths from untreated malaria, reduced confidence in this vital drug, large economic losses for the legitimate manufacturers, and concerns that artemisinin resistance might be engendered."
The methods were taking samples, assessing physical appearance, chemical and biological investigations and intelligence.

"The results were crucial in helping the authorities establish the origin of the fake artesunate. For example, the authors identified two regional clusters where the counterfeit tablets appeared to be coming from, thus flagging a potential manufacturing site or distribution network. The presence of wrong active pharmaceutical ingredients (such as the older antimalarial drugs) suggested the counterfeiters had access to a variety of active pharmaceutical ingredients. The presence of safrole, a precursor to the illicit drug ecstasy, suggested the counterfeits may be coming from factories that manufacture ecstasy. And the identification of minerals indigenous to certain regions also helped identify the counterfeits' origin. The researchers concluded that at least some of the counterfeit artesunate was coming from southern China. The Secretary General of INTERPOL presented the findings to the Chinese government, which then carried out a criminal investigation and arrested individuals alleged to have produced and distributed the counterfeit artesunate."

Read about this impressive WHO-Interpol project here.

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Preferring Price Discrimination Over Sidestepping Patents?

Andrew Jack of the Financial Times wrote an article about discussions between 500 representatives of government, industry and NGO's about patents at the World Health Organisation.

The article, which is named 'Pressure over patents forces pharma on to the back foot' mentions a possible and intriguing solution to tackle the tension between accessibility of medicines in poor countries and return on investment by using patents.

"The trade-off is whether richer patients in poorer but fast-growing countries such as India, China and Brazil should not contribute more to the overall costs of medical innovation, rather than simply paying the marginal production cost of drugs.
Companies such as GlaxoSmithKline and Pfizer have been studying whether they can introduce more differential pricing within developing countries, charging less to poorer patients while preventing richer ones from getting those drugs as cheaply."

Price discrimination between rich and poor patients. Unemployment benefits, if any, could include medicines for example. Read Mr Jack's article here. Hat tip to Jeff Roberts of McGill's great CIPP "IP News This Week". See also the CIPP Blog here, by IP scholars from McGill University.

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TRIPs Amendment; China's Medicine For A New Pandemic?

It is good to be prepared for the worst. Zhu Zhe of the China Daily reports that last Sunday, during the 30th session of the National People's Congress (NPC) Standing Committee, China's legislature accepted an amendment to the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) to enhance access to medicines when dealing with public health emergencies, such as SARS and bird flu. Read Zhu Zhe's article here.

Xinhua wrote: "The Chinese government hopes that approving the bill will help China tackle public health emergencies like SARS and bird flu more effectively." Read the Xinhua article here. This legislation might help, but one could say that there is probably no alternative for transparency in case of pandemics or epidemics.

Agreement on the 'Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health of Decision of the General Council' was made August 2003, see here. This agreement was incorporated as an amendment to the WTO TRIPS Agreement on the eve the Hong Kong Ministerial Conference in December 2005, see here.

The amendment will be formally built into the TRIPS Agreement when two thirds of the WTO members have ratified it. The WTO said members have set themselves until Dec. 1, 2007 to do this. The waiver remains in force until then.

So how will TRIPs look like if the amendment is incorporated?

• "Five paragraphs come under Article 31 “bis” (i.e. an additional article after Article 31). The first allows pharmaceutical products made under compulsory licences to be exported to countries lacking production capacity.Other paragraphs deal with avoiding double remuneration to the patent-owner, regional trade agreements involving least-developed countries, “non-violation” and retaining all existing flexibilities under the TRIPS Agreement.


• A further seven paragraphs are in a new annex to the TRIPS Agreement. These set out terms for using the system, and cover such issues as definitions, notification, avoiding the pharmaceuticals being diverted to the wrong markets, developing regional systems to allow economies of scale, and annual reviews in the TRIPS Council.


• An “appendix” to the annex deals with assessing lack of manufacturing capability in the importing country. This was originally an annex to the 2003 decision.The new Article 31 “bis” and annex of the TRIPS Agreement are attached to a protocol of amendment. This in turn is attached to a General Council decision, which adopts the Protocol and opens it for members to accept it by 1 December 2007."

Source: WTO's article 'Members OK amendment to make health flexibility permanent' see here.

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