New Rule on the Social Use of Patented Invention

On January 27, 2010, the Korean Patent Act was amended to facilitate social use of patented invention. Two changes were brought by the amendment.

First, the government may use a patented invention in public interest. This means that the government use is no longer limited to national defense or other circumstances of emergency. But the government use must meet a controversial requirement of “non-commercial use.” This is controversial because the government may allow a third party (mainly for-profit businesses) to use the patented invention. This rule on the government use goes into effect on July 28, 2010.

Second, it is made clear that an experimental use exemption encompasses any activities for getting an approval of pharmaceutical products or agricultural chemicals. This change took effect as of January 27, 2010.

English translation of the Amendment:

Article 106bis (Government Use of Patented Invention)
(1) If a patented invention is necessary for national emergency, other extreme urgency or non-commercial use in public interest, the government may use the patented invention or allow a person other than the government to use the patented invention.
(2) When the government or the person other than the government knows or has demonstrable grounds to know the existence of a valid patent right, the patentee, the exclusive licensee or the registered non-exclusive licensee of the patent right shall be informed promptly of the fact that the patented invention is used according to Paragraph 1.
(3) The government or the person other than the government, when a patented invention is used pursuant to Paragraph 1, shall pay a reasonable compensation to the patentee, the exclusive licensee or the registered non-exclusive licensee of the patent.
(4) Matters necessary for the government use and the payment of the reasonable compensation are prescribed by Presidential Decree.

Article 96 (Limitations on a Patent Right)
(1) The effect of a patent right does not extend to any of the following subparagraphs.
(i) Working a patented invention for research or experimental purposes (including research or experiment for the purpose of getting an approval or reporting a pharmaceutical product pursuant to the Pharmaceutical Affairs Act or for registering agricultural chemical pursuant to the Agricultural Chemicals Regulation Act.

Glivec price cut by Government was revoked by Court

The court applied a rule (Ministerial Decree) which was revised on December 29, 2006. According to the rule, adjustment of the ceiling price can be rendered by the Minister of Health when the ceiling price is "highly unreasonable."

http://www.tradingmarkets.com/news/stock-alert/nvs_south-korean-court-oks-pricing-of-novartis-anti-leukemia-drug-720347.html

SEOUL, Jan 22, 2010 (AsiaPulse via COMTEX) --

A Seoul court on Friday said the price of Gleevec, an anti-leukemia drug developed by Swiss pharmaceutical firm Novartis, is not "unreasonable," ruling in favor of the drugmaker in a years-long battle with the local government over the cost of the medicine.

Last September, the Ministry for Health, Welfare and Family Affairs notified Novartis of its decision to reduce the price of Gleevec to 19,818 won (US$17.3) per capsule from 23,045 won, the initial price agreed to by the government and Novartis under a deal reached in January 2003. The move came one year after a group of civic activists and patients appealed to the ministry, complaining that leukemia patients were forced to pay up to 2 million won per month for the medicine.

Following the ministry's notification, the Swiss pharmaceutical giant filed a suit with the Seoul Administrative Court, seeking to nullify the government's move to lower the price.

"As Gleevec's upper-ceiling price was set as the average price of the drug in the seven most advanced countries, including the United States, it is hard to conclude the price was considerably unreasonable," the court said in its ruling.

Gleevec is used to treat patients with chronic myelogenous leukemia (CML), a form of blood cancer in which the body produces too many abnormal white blood cells. The deadly disease afflicts about 500 people in Korea each year, according to the ministry.

Major foreign pharmaceutical firms and the Korean government have battled over the pricing of several other essential drugs. Civic groups say that charging the same price in Korea as in the world's richest countries is unfair considering that per capita GDP is a lot higher in those countries.

The health ministry said it will review the ruling and decide whether to appeal the case or not in two weeks.

"This ruling is a regrettable decision as it could set a bad precedent in nullifying the ministry's administrative order," a health official said.

Novartis said it respects the court's decision, declining to elaborate further.

Generic Tamiflu Approved

According to some local news stories, the Korea FDA approved, on December 9, a generic drug of Tamiflu (Tamivir Capsule manufactured by Chong Gun Dang) for the first time in Korea. For instance, see http://www.arirang.co.kr/Player/Player_Script.asp?vSeq=51913&code=News or http://www.ytn.co.kr/_ln/0103_200912091015149083.

Around 10 additional local pharmaceutical companies have applied for an approval for their generic drugs and are likely to be approved soon. However the approval does not mean actual distribution of the off-patent drugs. Without getting a license from Gilead Science (a patent holder of Tamiflu), the local companies can not put their products on the market.

Duke University and Trimeris in Compulsory License Case of Fuzeon

Today took place a meeting of the Dispute Settlement Committee within the Korea Patent Office to hear opinions of parties involved in a case of compulsory license of Fuzeon patent. I did not attend the meeting but obtained the material presented by Duke University and Trimeris through their Korean attorney, Kim & Chang.

Duke University and Trimeris, resting on four grounds, insisted the CL request to be dismissed. First they argued that IPLeft and KANOS who initiated this case lack the standing to request a CL because they have neither ability to manufacture nor import a pharmaceutical product covered by the Fuzeon patents. The Patent Act does not allow a licensee under the CL to be assigned to a third party. Therefore IPLeft and KANOS are not "person who intends to work the patented invention" within the meaning of Article 107.

Second, Duke University and Trimeris argued that the statutory condition of a prior negotiation was not met. Under Article 107, the condition of a prior negotiation is exempted only when the intended working of a patented invention is of non-commercial use. IPLeft and KANOS failed to establish the non-commercial working as they indicated to sell a product under the CL at a price set by government (25,746
KW).

Third ground relates to the statutory requirement of "the particular necessity for the public interest". Duke University and Trimeris took a position that granting a compulsory license is exceptional and should be subject to a strict interpretation of the statutory requirement as it imposes a restriction on property right protected under the Constitution and the Patent Act. They argued the requirement of particular necessity for the public interest can be met when there is no substitutional measure in an emergent situation. Further, the determination of the particular necessity for the public interest should be made by balance striking between "the interests of the
general public and a patentee" through the protection of a patent right and "the interests of the general public" through the exceptional limitation of patent protection.

Duke University and Trimeris went further to argue that the authorization of a CL should be considered on its individual merits according to Article 31(a) of TRIPS: individual situation of relevant state. Such factors as economic status of Korea (OECD member state, world top 14th in GDP, world top 4th in R&D investment per GDP) and technology strength of Korea (world top 4th in PCT patent applications, world top 3rd in the number of US patent applications, and R&D activities in 488 items by 45 domestic pharmaceutical companies) should be taken into account for the "individual merits" of TRIPS Art. 31(a).

According to Duke University and Trimeris, very small group of patients who needs Fuzeon indicates no emergency. IPLeft and KANOS estimated the patients being approximately 150. In contrast, Roche Korea approximated 68 patients and only two patients have called for Fuzeon which has been provided free of charge through the Korea Orphan Drug Center.

Concerning the substitutional measure and access to medicine, Duke University and Trimeris maintained that the patients can be treated by other product such as Prezista sold by Jansen and Fuzeon has been provided free of charge by Korea Orphan Drug Center since February 25, 2009.

Fourth, Duke University and Trimeris insisted that the CL is ineffective because there is no generic and manufacturing Fuzeon is technologically too difficult. Further, granting a CL on the Fuzeon patent would only produce a harmful impact: reducing incentive to develop new pharmaceutical products and in turn hampering innovation and industrial progress.

* Relevant provisions of Patent Act:

Article 107 Adjudication for the Grant of a Nonexclusive License (1) Where a patented invention falls under any of the following subparagraphs, a person who intends to work the patented invention may request the Commissioner of the Korean Intellectual Property Office to make an adjudication (referred to as "an adjudication") for the establishment of a nonexclusive license, provided no agreement is reached despite having a consultation (referred to as "a consultation" in this Article) under reasonable conditions with the patentee or exclusive licensee on the grant of a nonexclusive license for the patented invention or a consultation is impossible to arrange; however, the person may request an adjudication even in the absence of a consultation if the patented invention is to be worked noncommercially for the public interest or in any case that falls under subparagraph (iv):
(i) where the patented invention has not been worked for more than three consecutive years in the Republic of Korea, except for natural disasters, unavoidable circumstances or other justifiable reasons prescribed by Presidential Decree;
(ii) where the patented invention has not continuously been worked commercially or industrially in the Republic of Korea on a substantial scale during a period of three years or more without justification, or where the domestic demand for the patented invention has not been satisfied to an appropriate extent and under reasonable conditions;
(iii) where working the patented invention noncommercially is necessary for the interests of the public; or
(iv) where working the patented invention is necessary to remedy a practice determined to be unfair after the judicial or administrative process
(v) where working the patented invention is necessary for the export of medicine to a country (referred to as "an importing country") that intends to import the medicine (including effective ingredients that are necessary for the production of the medicine and diagnostic kits necessary for the use of the medicine) in order to treat diseases that threaten the health of the majority of its citizens.
(2) Paragraph (1)(i) and (ii) of this Article does not apply unless a period of four years has elapsed after the filing date of the application for the patented invention.
(3) In adjudicating the authorization of a nonexclusive license, the Commissioner of the Korean Intellectual Property Office shall consider the necessity of each request.
(4) When the Commissioner of the Korean Intellectual Property Office makes an adjudication under subparagraphs (i) to (iii) or (v) of paragraph (1), the following conditions apply to the person for whom the adjudication was made:
(i) where the adjudication is made under subparagraphs (i) to (iii) of paragraph (1), the nonexclusive license must be implemented for the primary purpose of meeting domestic demand; and
(ii) where the adjudication is made under subparagraph (v) of paragraph (1), all the medicine produced under the terms of the adjudication must be exported to importing countries.
(5) The Commissioner of the Korean Intellectual Property Office shall ensure that reasonable consideration is given to every adjudication. When making an adjudication under subparagraph (iv) or (v) of paragraph (1), the Commissioner of the Korean Intellectual Property Office may consider the factors in each of the following subparagraphs:
(i) where an adjudication is made under subparagraph (iv) of paragraph (1), the need to rectify unfair transactions; and
(ii) where an adjudication is made under subparagraph (v) of paragraph (1), the economic value generated in importing countries by the working of the patented invention.
(6) For semiconductor technology, a request for adjudication may be made only in the
cases set forth in subparagraph (1)(iii) (where the noncommercial working of the patented invention is permitted in a limited way for the interests of the public) and (1)(iv).

Article 109 Solicitation of Opinion from the Intellectual Property Rights Dispute
Committee and the Heads of Relevant Authorities Before adjudicating, the Commissioner of the Korean Intellectual Property Office may solicit an opinion from the Intellectual Property Rights Dispute Committee established under Article 41 of the Invention Promotion Act and the heads of relevant authorities and seek assistance from relevant administrative authorities or interested parties.

Korean Government on the Production of Tamiflu and Relenza through Compulsory license

According to a report of Yunhap News, an official in the Minister of Health and Welfare said yesterday "when Tamiflu and Relenza runs short of domestic supply, a compulsory license of patents will be issued to make possible domestic production." He added, reportedly, that upon the request of civil society groups asking to amend a compulsory license provisions of the Patent Act, they reviewed the relevant provisions and concluded that the domestic production of necessary medicines is possible by the decision of Patent Office to issue a compulsory license. In this case, 3% of sales price would be given to the patentees as a royalty.

I'm not sure this is an official position of Korean government. For the original text which is in Korean, refer to http://news.naver.com/main/read.nhn?mode=3DLSD&mid=3Dsec&sid1=3D101&oid=3D0=01&aid=3D0002636646.

Another news report on the same date, also in Korean, says that the scenario of issuing a compulsory license is just a principle story and Korean government has not specifically considered it. See http://news.naver.com/main/read.nhn?mode=3DLSD&mid=3Dsec&sid1=3D100&oid=3D2=77&aid=3D0002149279.

At the moment, the stockpile of Tamiflu and Relenza in Korea covers only 5% of population. Government plans to increase the stock to 10% by the end of this year. On the other hand, more than ten Korean pharmaceutical companies announced they had a sfficient ability to produce pharmaceutical products equivalent to Tamiflu and Relenza. It was 2005. So far only one company, Yuhan Corporation, is chosen by Roche Holdings AG, a sole and exclusive licensee of Tamiflu patent which is owned by Gilead Science, Inc. as one of the producers of Tamiflu. In reality, however, Yuhan is simply allowed to take part a portion of production of Tamiflu, which means that Yuhan has no contractual power to produce Tamiflu for the domestic supply.

Compulsory License of Tamiflu (from Gilead Report of February 2009)

http://www.secinfo.com/d14D5a.s17Qe.htm

Compulsory Licenses

In a number of developing countries, government officials and other interested groups have suggested that pharmaceutical companies should make drugs for HIV infection available at low cost. Alternatively, governments in those developing countries could require that we grant compulsory licenses to allow competitors to manufacture and sell their own versions of our products, thereby reducing our product sales. For example, in the past, certain offices of the government of Brazil have expressed concern over the affordability of our HIV products and declared that they were considering issuing compulsory licenses to permit the manufacture of otherwise patented products for HIV infection, including Viread. As a result of discussions with the Brazilian government, we reached agreement with the Brazilian Health Ministry in May 2006 to reduce the price of Viread in Brazil by approximately 50%. In addition, concerns over the cost and availability of Tamiflu related to a potential avian flu pandemic have generated international discussions over compulsory licensing of our Tamiflu patents. For example, the Canadian government may allow Canadian manufacturers to manufacture and export the active ingredient in Tamiflu to eligible developing and least developed countries under Canada=92s Access to Medicines Regime. Furthermore, Roche has issued voluntary licenses to permit third party manufacturing of Tamiflu. For example, Roche has granted a sublicense to Shanghai Pharmaceutical (Group) Co., Ltd. for China and a sublicense to India=92s Hetero Drugs Limited for India and certain developing countries. Should one or more compulsory licenses be issued permitting generic manufacturing to override our Tamiflu patents, or should Roche issue additional voluntary licenses to permit third party manufacturing of Tamiflu, those developments could reduce royalties we receive from Roche's sales of Tamiflu. Certain countries do not permit enforcement of our patents, and manufacturers are able to sell generic versions of our products in those countries. Compulsory licenses or sales of generic versions of our products could significantly reduce our sales and adversely affect our results of operations, particularly if generic versions of our products are imported into territories where we have existing commercial sales.

Entangled Web of Patents on Fuzeon

Some argue that, unlike in IT industries, patent thickets are not problematic in pharmaceutical industry because the number of patents on a particular medicinal product is low. However, Fuzeon (enfuvirtide) shows an entangled web of patents, which may lead to high information costs in searching patents and getting licenses from patentees.

1. Orange Book

US FDA's Orange Book shows only three patents that cover Fuzeon:

(1) USP 5,464,933 "Synthetic peptide inhibitors of HIV transmission" (filing/priority date June 7, 1993);
(2) USP 6,133,418 "Synthetic peptide inhibitors of HIV transmission" (This is a division of application of '933 patent); and
(3) USP 6,475,491 "Treatment of HIV and other viral infections using combinatorial therapy" (This application is the US national phase of international application No. PCT/US96/09499, filed June 6, 1996 which is a continuation-in-part of US application No. 08/481,957 filed June 7, 1995 now abandoned.)

First two patents ('933 and '418) were granted to Duke University and the third one ('491) is owned by Trimeris. For the first '933 patent, US Federal Government has certain rights. However, there is no indication of US government interest for its division patent '418.

2. EPO INPADOC

European patent database retrieves at least nineteen (19) US patents/applications as family patents of the '933 patent. Some of them are child continuity patents/applications of '933 patent. The family patents are owned by Trimeris or Duke University or jointly. One patent ('395) is owned by individual inventors.

(1) USP 6,013,263 Measles virus peptides with antifusogenic and antiviral activities (Trimeris)
(2) USP 6,017,536 Simian immunodeficiency virus peptides with antifusogenic and antiviral activities (Trimeris)
(3) USP 6,054,265 Screening assays for compounds that inhibit membrane fusion-associated events (Trimeris)
(4) USP 6,060,065 Compositions for inhibition of membrane fusion-associated events, including influenza virus transmission (Trimeris & Duke)
(5) USP 6,068,973 Methods for inhibition of membrane fusion-associated events, including influenza virus (Trimeris)
(6) USP 6,093,794 Isolated peptides derived from the Epstein-Barr virus containing fusion inhibitory domains (Trimeris)
(7) USP 6,228,983 Human respiratory syncytial virus peptides with antifusogenic and antiviral activities (Trimeris)
(8) USP 6,333,395 Compositions for inhibition of membrane fusion-associated events, including human parainfluenza virus transmission (BARNEY SHAWN (US); LAMBERT DENNIS (US))
(9) USP 6,440,656 Methods for the inhibition of respiratory syncytial virus transmission (Trimeris)
(10) USP 6,479,055 Methods for inhibition of membrane fusion-associated events, including respiratory syncytial virus transmission (Trimeris)
(11) USP 6,518,013 Methods for the inhibition of epstein-barr virus transmission employing anti-viral peptides capable of abrogating viral fusion and transmission (Trimeris)
(12) USP 6,824,783 Methods for inhibition of membrane fusion-associated events, including HIV transmission (Duke)
(13) USP 6,951,717 Methods and compositions for inhibition of membrane fusion-associated events, including HIV transmission
(14) US 2004052820 A1 Fusion proteins comprising DP-178 and other viral fusion inhibitor peptides useful for treating aids (Duke & Trimeris)
(15) US7273614 B2 Nucleic acids encoding DP-178 and other viral fusion inhibitor peptides useful for treating aids (Duke)
(16) US2004033235 A1 Nucleic acids encoding DP-178 and other viral fusion inhibitor peptides useful for treating aids (Duke)
(17) US2007037141 A1 Methods and compositions for inhibition of membrane fusion-associated events, including HIV transmission (Trimeris)
(18) US2007202123 A1 Fusion proteins comprising DP-178 and other viral fusion inhibitor peptides useful for treating aids (Duke)
(19) US2007202127 A1 Nucleic acids encoding DP-178 and other viral fusion inhibitor peptides useful for treating aids (Trimeris)

3. License Agreement between Duke University and Trimeris

According to the license agreement of February 3, 1993 (http://www.secinfo.com/dsVsn.81Py.d.htm, of which the licensee SL-1 Pharmaceuticals, Inc is an original corporation of Trimeris), Duke University granted a worldwide exclusive license to Trimeris. Trimeris issued to the Duke University 820,000 shares of stocks in lieu of any royalty (Art. 3.01).

The license agreement specifies one invention - a US patent application No. 07/916,540 entitled "compounds which inhibit HIV replication" and filed on 20 July 1992. This application was abandoned but its continuation application was granted USP 5,656,480 and USP 6,573,078, which are neither contained in Orange Book nor retrieved from family patents of EPO INPADOC.

4. License Agreement between Trimeris and Roche

In 1999 and 2000, Trimeris reached an agreement to grant to Roche an exclusive, worldwide license for FUZEON and certain other peptide compounds in the field of HIV. Under the license agreements, Trimeris agreed to share development expenses and profits for FUZEON and certain other compounds, in the United States and Canada equally with Roche. Outside of the United States and Canada, Roche agreed to fund all development costs and pay Trimeris royalties on net sales of FUZEON and the other compounds. Through a series of amendments to the license agreements, Roche became responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain.

The agreements between Trimeris and Roche are kept confidential and patent information involved is unknown.

5. License Agreement between Trimeris and New York Blood Center

New York Blood Center (NYBC) granted to Trimeris an exclusive, worldwide, royalty-bearing license for patents relating to certain HIV peptides. Under this license, Trimeris is required to pay the NYBC a royalty of 0.5% of net sales of FUZEON until $100 million of net sales is attained, after which the royalty reduces to 0.25%. The obligation to pay royalties to the NYBC ends on August 22, 2012.

According to NYBC, "in early 1990s, Dr. Jiang and colleagues discovered the first anti-HIV peptide derived from the HIV-1 gp41 C-terminal heptad repeat region. The patents on this discovery were licensed to Trimeris Inc., a pharmaceutical company which, in partnership with F. Hoffmann-La Roche Ltd., has developed a peptidic anti-HIV drug, Fuzeon." See http://www.nybloodcenter.org/research/index.do?sid0=7&sid1=32&page_id=31&content_id=91.

USPTO's database reveals ten patents of which Dr. Jiang is one of the inventors and NYBC is an assignee.

7,241,803 Compounds for inhibition of HIV infection by blocking HIV entry
6,727,240 Methods for preventing HIV-1 or HIV-2 infection
6,596,497 Screening of antiviral compounds targeted to the HIV-1 gp41 core structure
6,165,493 "Methods and compositions for decreasing the frequency of HIV, herpesvirus and sexually transmitted bacterial infections"
5,985,313 Method for decreasing the frequency of transmission of viral infections using cellulose acetate phthalate or hydroxypropyl methylcellulose phthalate excipients
5,985,275 .beta.-Lactoglobulin modified with aromatic anhydride compound for preventing HIV infection
5,952,009 Methods for preventing the transmission of or treating patients infected with herpesvirus
5,840,843 Synthetic polypeptides as inhibitors of HIV-1
5,798,206 Methods for screening of test compounds for inhibiting binding of a CD4-HIV 1 complex to a chemokine receptor
5,444,044 Synthetic polypeptides as inhibitors of HIV-1

6. Dispute between Novartis (Novartis Vaccines and Diagnostics, Inc.) and Trimeris/Roche

On November 2007, Novartis filed a patent infringement suit against Trimeris and Roche. Complaint of Novartis is based on its US Patent 7,285,271. See http://www.patentdocs.typepad.com/patent_docs/files/novartis_v_roche.pdf.

The '271 patent has a long history of continuation applications. The USPTO's Patent Application Information Retrieval system shows the '271 patent "is a Continuation of 08/083,391 06-28-1993 Patented 6,458,527; is a continuation of 07/931,191 08-17-1992 Abandoned; is a Division of 07/138,894 12-24-1987 Patented 5,156,949; is a Continuation-in-part of 06/773,447 09-06-1985 Abandoned; is a Continuation-in-part of
06/696,534 01-30-1985 Abandoned; is a Continuation-in-part of 06/667,501 10-31-1984 Abandoned." [Unfortunately, published document of the '271 patent contains incorrect information on the related US patent documents.]

Surprisingly enough, the first parent application of '271 patent was filed twenty-four years ago.