News June
Pfizer's Long March Through China's Courts
Pfizer (PFE) executives had reason to be in a celebratory mood
in early June. The pharmaceutical giant won an appeal in Beijing
on June 2 that overturned a 2004 decision to invalidate the patent
Pfizer obtained five years ago to produce the anti-impotency drug
Viagra in China. The decision was hailed as a landmark victory
for intellectual property rights in the Middle Kingdom, where
all too often the odds are stacked against foreign companies.
Yet it looks like the blue-pill wars between the New York-based
drug company and a dozen Chinese drug outfits that have challenged
its claim to exclusive rights to make pills using sildenafil citrate
and designed to improve sexual performance is far from over.
They hope the high court will uphold the 2004 decision by the
country's patent-reexamination board to invalidate Pfizer's patent
on the Viagra brand—a move that opened the door to a flood
of generic versions of Viagra and sent a disturbing signal about
China's intention to live up to its commitments as a member of
the World Trade Organization.
A FAIR SHAKE. Lawyers for Pfizer said they had not yet received
formal notification of the appeal, which could take up to six
months, and the drug company declined to comment on this latest
development. Whatever the outcome of this long-running legal battle,
this much is clear: Foreign companies that turn to China's courts
to protect their brands from piracy had better be ready to play
this game for the long haul.
About one-third of the patent challenges are successful, notes
says Anthony Chen, an intellectual-property lawyer with Jones
Day in Shanghai. On the mainland, the success rate on challenges
(the lion's share involving Chinese parties on both sides of the
dispute) is somewhat higher, about 50%.
Chen is actually encouraged by the fact that Pfizer seems to
have gotten a fair shake in the Chinese judicial system, so far
at least. "This well-known case sends a strong message to
other international companies," he says. "If you try
to help yourself and take the issue to court, you could get redress."
A POTENT ARGUMENT. Even so, Pfizer's decision to work through
the Chinese courts to protect its $1.6 billion a year global Viagra
franchise is a daring one. Inside China, Pfizer is not always
portrayed in a favorable light. A big chunk of China's pharmaceutical
industry initiated the battle earlier in the decade by arguing
that it should be free to make a less expensive version of the
drug.
Given the economic stakes in such a vast market as China (the
market for pharmaceuticals in general could be as big as $12.5
billion a year, according to Chinese news service Xinhua) it was
probably inevitable that local drug companies would try every
method imaginable to prevent Pfizer from getting a dominant share
of the anti-impotency market.
Pfizer has faced patent challenges in other markets (and it hasn't
always prevailed) but what makes the China case novel is that
Chinese "companies are ganging up and working together,"
says Joseph Simone, an intellectual property rights expert at
Baker & McKenzie law firm in Hong Kong.
BIG FAKER. But even if Pfizer does win the final legal battle,
there's little evidence foreign companies are winning the war
against intellectual property rights infringements in China, experts
say. Piracy of films and music are rampant, counterfeiting, both
within China and for export, is growing steadily more pervasive,
and trademark rip-offs are everywhere.
"China continues to be the single biggest source of counterfeit
products worldwide and the steps taken by the Chinese government
and judiciary to reduce counterfeiting and piracy have not yet
achieved significant and necessary reductions," the International
Anti-Counterfeiting Coalition said in a February paper submitted
to the Trade Representative.
Simone is even more pessimistic. "Arguably, it's getting
worse," he says. The two biggest problems hampering the fight
against counterfeiters are the lack of police resources, and insufficient
provisions within the criminal code, making it nearly impossible
for successful prosecutions to take place. Last year only 300
cases out of the 50,000 known violations handled by the Administration
for Industry and Commerce were referred to the police, says Simone.
Fines, which in most cases average about $650, are just considered
part of the cost of doing business, he says.
Source http://www.businessweek.com/globalbiz/content/jun2006/gb20060621_884369.htm |
