Prof Potter about China's Health Care Reform: "Do Not Forget Cost of Patent Protection"

December 10 and 11, 2009, IP Dragon attended interesting seminar called 'The Development of the Chinese Legal System: Change & Challenges' organised by the Centre for Chinese Law of the University of Hong Kong.

Law Professor Pitman Potter of the University of British Columbia was talking about his upcoming paper "China's Health Care Policy". It's about how the National Human Rights Action Plan of China and China's Health Care Reform Guidelines fail to take into account the rising costs of drugs and the descending level of access to medicines in China, because of patent protection and enforcement. In the paper the role of the Doha Declaration, as an interpretation on the flexibilities of the Agreement on Trade and Intellectual Property Rights, will come to the fore. So stay tuned for Professor Potter's paper.

UPDATE May 19, 2010: Professor Potter's paper is 'Dilemmas of Access to Healthcare in China', published in China: an International Journal 8, 1, March 2010, pp 164-179.

Another interesting presentation was given by Law Professor Donald Clarke, who is connected to the George Washington University Law School. His presentation was about "The Concept of the Extra-Legal in Chinese Law and Its Significance". Professor Clarke was making the point that scholars who were either focusing on the differences or the similarities between China and the rest of the world, might miss the point. Professor Clarke said that the discussion about whether China's legal system is mature or immature is a bit ridiculous, because nobody knows what the end stage is going to look like. And of course it is not strange that China, given its different background, comes up with a different legal system. His main point was that China's legal system has different layers, which could each be observed:

1. the factual claim, if a norm is violated;

2. the norm, which is saying that it is illegal to violate a norm;

3. this layer is the meta-layer and is about the legal system game itself.

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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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