Day three of the visit to the United States

(By You Yunting) Beginning at the end of this March, on the invitation of the US government, I visited America with the goal of understanding its IPR system. On my third day in the US, I visited the Pharmaceutical Research and Manufacturers of America (“PhRMA”), the United States-China Business Council (“USCBC”), the United States Patent and Trademark Office (“USPTO”), and the East Asia Bureau of the US Department of State. The following is the brief record of my meetings on that day.

I. PhRMA

PhRMA is an association of numerous US pharmaceutical companies, and the purpose of our meeting was to discuss American pharmaceutical development, the approval process, and the necessity of IPR protection. During the introduction, the association noted that, in 2011 alone, its member companies invested $ 49.5 billion in new medicine development. Because many of these medicines did not pass the clinical testing phase or administrative approval, the average research and development cost of each drug was $ 1.3 billion dollars. The main ingredient of the medicines can be discovered through chemical analysis, so the drug companies are all concerned about generic drugs.

Although new medicines can receive patent protection, the protection period for an invention is only twenty years, and clinical testing and administrative approval can take more than ten years. Although the protection period can sometimes be extended in consideration of administrative approval, in general, the patent’s protection term is not long enough. Currently, Amercian Pharmecuetical manufacturers only enjoy two to three years of exclusive operation after their product hits the market, and, after that period, other manufacturers can copy their product. The IPR issue that companies are most concerned about is that part of their new medicines are not put on sale when the patent is publicized, but generic medicines can use the ingredients of their product on an unfair basis, which is not fair to the manufacturers who have invested much on their research and development (The minutes of the meeting with PhRMA were recorded by listening, and I also found that the record was not as complete as I expected it to be. For this reason, the content of the above summary may not be entirely accurate.)

I then asked the representatives how they viewed the following problem: since the research and development and development costs for new medicine is so high, it means that small sized manufacturer have no way to produce such medicine, but small and medium sized companies are the main impetus of the social innovation. A PhRMA representative acknowledged that this is a problem but also stated that there are many small or medium sized medical labs throughout the US. Although they cannot manufacture new medicines alone, they have developed new medicines in cooperation with big companies.

II. USCBC

At USCBC, there was a discussion on IPR issues in China with the senior legal officers of more than twenty big companies, such as Disney and Emersson. In the meeting the officers were frank and outspoken and stated the problems of inadequate IP protection that their companies have faced operating in China. The following are the issues that most concerned the American senior legal officers :

1. Trade secret protection

The US corporate officers stated that the existing laws and regulations to protect trade secret in China are not complete, civil compensation is not high enough, and it is difficult to seek criminal rights protection. They hope to be able to prevent or reduce trade secrets being released by their former employees after they have left the company. They also mentioned that in the US, employers will put together employees’ information, so that the new employer can investigate their staff’s working records to see whether they have released any of the former employer’s trade secrets. This has a strong deterrent effect on bad faith employees.

2. Different law enforcement standards and less predictability

The US corporate officers also stated that law enforcement standards are not uniform; regions are different and handling of cases is different. For this reason, most of the time, they have no way to predict what to do as facing the similar problems. For example, should the cost of the product or the market price be used as the basis for determining compensation in IPR infringement cases? Currently, China has no unified standard. Because predictability of the law is poor, these companies have faced great difficulty.

3. The utility model patent

The utility model patent does not require administrative examination, and, for this reason, a high proportion the technologies in China using the utility model patent are invalid or lack novelty. Some of the US companies complain about this and hope that China will be able to carry out substantial examination over utility model patent applications.

4. Difficulty initiating criminal investigation against IPR infringement

The US representatives stated that Chinese government departments coordinate poorly between administrative and criminal punishment over infringement. Therefore, it is difficult to initiate criminal procedure for many cases that involve criminal IPR infringement.

The Chinese visitors provided some explanations to these questions, but the meeting was less than one hour, so there was not enough time for a full discussion.

III. USPTO

The USPTO department that received us was the foreign affairs office. The USPTO has officials in Beijing, Shanghai, and Guangzhou to coordinate with local departments to protect the IPR of US companies. Currently, they have eight thousand patent examiners, and three to four hundred trademark examiners. The period required for patent examination is twenty four months on average, so they plan to hire seven hundred more examiners to shorten the days required for the examination.

I asked whether foreign companies in the US directly apply for trademarks directly more often or use the Madrid application more often. Although they did not give me exact figures, but stated that direct application has been used more frequently, but recently more and more applicants are choosing the Madrid procedure.

IV. The East Asia Bureau of the US Department of State

The Bureau is an institute that coordinates and contacts US government departments concerned with IPR issues, and their officials showed us their media concerning IPR in China and other parts in the world, which was very well done. Because security officials were security officials participating, I asked the following question about internet security: Bloomberg and US media outlets have recently reported that Chinese hackers have broken into the networks of US companies and stolen data—do you think this is a decision authorized by Chinese authorities?

The US officials did not reply directly, but said that the problems of hackers is very influential in the US. Therefore, it is necessary to carry out the bilateral meeting with China to solve the problem. Both the US and China need discussion; otherwise, it could lead to misunderstanding. According to the US officials, the hacker problem did not exist five to ten years ago, but it is here today. The key to it is to set a bottom line for handling the issue—some things can be done, but other cannot.

In closing, in my experience, there were some things that were incomplete and not fully accurate. I decided to put them on our website primarily to share with our readers, and any opinions or corrections are warmly welcomed. Since the US authorities highlight the protection of personal information, unless the other party agrees, we will not publicize the names of any of the involved parties on the Internet; thank you for your understanding.

Lawyer Contacts

You Yunting：86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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