Qilu files lawsuit against Sihuan in China’s first SEP antitrust case in pharma sector

21 March 2017. By MLex Staff.

Qilu Pharmaceutical has filed a lawsuit at the Beijing Intellectual Property Court against Beijing Sihuan Pharmaceutical, alleging that it engaged in monopoly behavior and unfair competition, in China's first antitrust lawsuit in the pharmaceutical sector, MLex has learned.

In January, Qilu Pharmaceutical, a leading pharmaceutical company based in Shandong Province, filed the lawsuit at the Beijing court, claiming Sihuan Pharmaceutical violated the Antimonopoly Law. It is seeking compensation of 4 million yuan ($580,000), it is understood.

Qilu Pharmaceutical claimed that Sihuan Pharmaceutical, which is the owner of standard-essential patents, or SEPs, used to make drugs containing cinepazide maleate, refused to license patent rights to the plaintiff when it sought to make generic drugs. Instead, Sihuan Pharmaceutical filed a patent infringement lawsuit at a court in Mongolia.

The lawsuit between the two parties has attracted widespread attention in the pharmaceutical and legal communities in China, because it raises the contentious issue of whether the mandatory licensing of intellectual property rights should be applied in the pharmaceutical sector.

As reported by MLex last month, Hohhot Intermediate People's Court in Inner Mongolia ruled in January that Qilu Pharmaceutical infringed two patents held by Sihuan Pharmaceutical, and that pharmaceutical companies that own products based on SEPs do not have the obligation to license their products on a fair, reasonable and non-discriminatory, or Frand, basis, and that infringement of their patents are subject to patent-tort liabilities.

In that case, Qilu Pharmaceutical argued that the patents involved are SEPs, and therefore Sihuan Pharmaceutical has an obligation to disclose the patents and license them on Frand terms. Qilu Pharmaceutical further argued that Sihuan Pharmaceutical can't seek injunctions.

However, the Inner Mongolia court ruled that the patents involved are national standards for drugs, which are mandatory standards issued by China's National Food and Drug Administration. Moreover, no national standards organizations in the drug sector currently require patent holders to make Frand commitments, the court said.

China's antitrust law is becoming an increasingly important weapon for companies looking to slug it out in such intellectual property-rights disputes, with global patent-heavy firms taking aggressive action in Chinese courtrooms to protect their IPR.

In August 2015, China's antitrust watchdog, the State Administration for Industry and Commerce, or SAIC, officially introduced its regulations on antitrust enforcement in the intellectual property sphere. Despite some objections, SAIC introduced a tough compulsory licensing requirement on essential facilities that requires patent owners with market dominance to license their IP rights mandatorily when the intellectual property is an essential facility.

	Eliot Gao