Table of Contents
Introduction
1. Background
1.1 Pharmaceutical Product Regulation Act ("Yakuji-Ho")
1.2 The 1994 Amendment of the Patent Law
1.3 R & D Exception of Patent Infingement
2. Development of Case Law
2.1 Early Ruling by the Tokyo District Court
2.2 Early Ruling on the Patent Law Amendment by the Nagoya District Court
2.3 Lower Courts' Decisions Changing the Stream
2.4 The Supreme Court Decision
Conclusion
Development of new drugs takes a long time. In addition, commercial production
and sale of new drugs require administrative approval in many countries,
and a broad scope of clinical testing, which also takes a long time, is
necessary to get them approved. Japan is not an exception.
New drugs are usually patented. However, the term of a patent is limited
to twenty years from its application. Considering the fact that a long
approval process could deprive the patentee of a significant portion of
the limited term, we have provisions in the Patent Law that allow extension
of the patent term up to five years depending on the circumstances.
Pharmaceutical companies often find such provisions unsatisfactory. Therefore,
they tried to take advantage of the very fact that commercial production
and sale of drugs required administrative approval. They asserted that
production of drugs for getting administrative approval was commercial
within the context of patent infringement, and generic drug manufacturers
must wait until the patent expired before they started production. If that
was the law, it would virtually extend the patent term for the period necessary
for the approval process.
In late nineties, they started filing lawsuits against generic drug manufacturers
based on the above assertion. For a short period of time, they were successful
because some lower courts sided with them. Those early decisions were supported
by a still earlier decision of the Tokyo District Court that had ruled
that production of a patented herbicide was patent infringement. Many commentaries
written by law professors also supported this Tokyo District Court ruling.
However, lower courts changed their attitude toward the question, and many
decisions were rendered in favor of generic drug manufacturers. Finally,
the Supreme Court affirmed a lower court's decision dismissing a patentee's
petition for an injunctive order to stop manufacture of the patented drug.
Commercial production and sale of pharmaceutical products require administrative
approval under Yakuji-Ho, which is enforced by the Ministry of Health,
Welfare and Labor. The law applies not only to new drugs but also to generic
drugs. However, the level of information to be submitted to obtain approval
is different.
When a new drug is approved, a broad range of information is required to
ensure that it is safe and effective. To collect such information, drug
manufacturers usually ask medical institutions such as large hospitals
to use it on a trial basis. It can be a long and expensive process for
the manufacturers.
On the other hand, approval for a generic drug is not so complicated. The
information required by the ministry is as follows:
- Testing procedure of the drug to show its chemical and physical properties
of the product;
- Accelerated test to show stability of the drug; and
- Test for showing biological equivalency of the drug to the original one.
The underlying policy of the above difference is deregulation. The ministry
would like to have more competition among drug manufacturers, which could
reduce the social health insurance cost.
In 1994, the Patent Law was amended to stipulate that the patent term would
be twenty years from the filing of the application regardless of the time
spent on examination. Before the amendment, it was fifteen years from the
post-examination publication if the examination was completed within five
years from the filing of the application.
The amendment was retroactive for patents that were valid when it came
into effect. Therefore, the patent term was actually extended for some
patents. To protect the interest of the public having acted under the assumption
that they would expire under the old law, the amendment had a grandfather
clause. It granted a statutory non-exclusive license to those who had started
preparation for, but not been engaged in, a business involving practice
of the patented invention. It was not applicable to those who had actually
practiced the patented invention for commercial purposes within the original
patent term under the old law since they were infringers even under the
old law, and should not enjoy special protection provided by the grandfather
clause.
Paragraph 1, Article 69 of the Patent Law reads as follows:
"The effects of the patent right shall not extend to the practice of the
patented invention for the purpose of experiment and research."
The underlying policy of this R & D exception is to promote development
of new technologies. Manufacturing a patented chemical substance could
lead to its new ause, which itself could be patentable. Prohibiting such
experimental use of the patented invention would be against the raison
d'etre of the patent system.
On July 10, 1987, in Monsanto v. Stoffer Japan, the Tokyo District Court rendered a decision issuing an injunctive order
to stop the defendant from manufacturing a patented herbicide. It also
prohibited the defendant from carrying out experiments and filing an application
for obtaining administrative approval for it. In this case, the court said
that the testing for obtaining administrative approval would not promote
new technologies and did not qualify as "experiments and research" within
the meaning of Paragraph 1, Article 69 of the Patent Law.
On March 6, 1996, in Synthelabo v. Hotta, Maruko and Taiyo, the Nagoya District Court issued provisional injunctive orders to stop
the defendants from manufacturing a patented drug. The orders remained
effective until March 26, 1996, on which the patent expired.
In the above case, the term of the patent was extended by the 1994 Patent
Law Amendment, and the plaintiff sought injunction during the extended
term. The defendants asserted that they had the statutory non-exclusive
license under the grandfather clause of the amendment because they had
started the approval process under the Yakuji-Ho before the original term
of the patent had expired.
Synthelabo, the patentee, argued that practicing the patented invention
for obtaining the administrative approval was not preparation of business,
but it was part of the business itself. Since the protection under the
grandfather clause would not extend to infringers, the defendants should
not enjoy its effect. Siding with the plaintiff, the court issued provisional
injunctive orders.
Encouraged by the Nagoya District Court ruling, many pharmaceutical companies
filed lawsuits. However, they were unsuccessful. Other lower courts, including
Tokyo and Osaka, ruled against the patentees.
In Daiichi v. Shiono Chemical, et al., for example, the patentee tried to stop the defendants from selling the
drug covered by an expired patent. It argued that the defendants started
the approval process before the patent expired, and, therefore, they should
not take advantage of the benefit of the test results. It also argued that
the defendants misappropriated its trade secrets by relying on the information
that it had submitted to the Ministry of Health and Welfare (now called
Ministry of Health, Welfare and Labor) to obtain its own approval. Under
these theories, it sought both injunction and damages.
In the decision rendered on October 6, 1997, the Tokyo District Court said
that testing for obtaining administrative approval qualified as experiments
and research under Paragraph 1, Article 69 of the Patent Law. It added
that interpreting the law otherwise would give the patentee an unreasonable
extension of the patent term by virtue of Yakuji-Ho, which is not relevant
to the purpose of the Patent Law. As to the trade secret misappropriation,
the court said that Yakuji-Ho and its related rules and regulations presumed
that the ministry should take advantage of the information submitted by
the original drug manufacturer to examine the application filed by the
generic drug manufacturers, and the defendants did not misappropriate it.
On April 16, 1999, the Supreme Court rendered a decision that production
of a patented drug only for the purpose of doing necessary tests for getting
approval under Yakuji-Ho did not infringe the patent, affirming an Osaka
High Court decision, which had affirmed a Kyoto District Court decision.
The Supreme Court said that the Patent Law gave monopoly to the patentee
only for the term of the patent. If testing required by Yakuji-Ho is prohibited,
the monopoly would be extended for the time necessary to do the testing.
The court said that such extension would be against the policy of the Patent
Law, which gave the patentee monopoly only for the term of the patent.
Since the Supreme Court did not say a word about development of new technologies,
it seems that the rationale of the R & D exception of patent infringement
usually given in patent law textbooks must be deleted. It also seems probable
that the Supreme Court decision will apply not only to drugs but also to
herbicides and other chemical products that require administrative approval.
It has been now settled that producing a patented drug for administrative
approval does not infringe the patent in Japan.