Eli Lilly v. Jiangsu Hansoh Pharmaceutical Co. Ltd.

 

Eli Lilly & Co. v. Jiangsu Haosen Yaoye Gufen Youxian Gongsi

[Eli Lilly & Co. v. Jiangsu Hansoh Pharmaceutical Co. Ltd.]

(Supreme People’s Court, December 3, 2010)

 

In Eli Lilly & Co. v. Jiangsu Hansoh Pharmaceutical Co. Ltd’s, the Supreme People’s Court resolved a decade long pharmaceutical patent dispute in favor of a Chinese generics drug maker.[1]  The case stemmed from Jiangsu Hansoh Pharmaceutical Co. Ltd’s (江苏豪森药业股份有限公司) manufacture and sale of a generic version of Eli Lilly's blockbuster cancer drug Gemzar.  In December 2010, the Supreme People’s Court resolved the dispute in favor of Hansoh.

Facts and Procedural History

In 2000, Eli Lilly asserted three patents describing the synthetic process for gemcitabine, the active ingredient in Gemzar: CN93109045.8 is directed to a method for stereoselective glycosylation (Patent I); CN95196272.8 is directed to a method for purification and separation of a stereospecific β-anomer intermediate from a β-anomer rich mixture (Patent II); and CN95196272.8 is directed to a method for preparing gemcitabine from the intermediate (Patent III). 

The Jiangsu High Peoples Court initially decided the case in favor of Hansoh.  On appeal, the SPC remanded the case primarily because the test result of the independent expert report was not subjected to cross-examination.  The Jiangsu HPC sought a new expert report from the Science and Technology Department of the Jiangsu provincial government and, based on the new report, again ruled in favor of Hansoh in 2003.  Patent II were not infringed because Hansoh’s process did not begin with a β-anomer rich mixture, and Patent III was not infringed because Hansoh used a previously known process and not the patented process.[2]

Eli Lilly raised two issues during the remand.  Procedurally, Eli Lilly challenged the credibility of the new test report because the Jiangsu HPC did not provide reason to create the new report, the experts engaged in ex officio contact with Hansoh, the testing agency failed to make all experts available for cross-examination by Eli Lilly; and that Hansoh failed to prove the authenticity of the manufacturing process it provided to the experts.  The Jiangsu HPC gave short shrift to Eli Lilly’s argument.  The new report was created to replace the earlier report that Eli Lilly itself challenged in the earlier round of appeal, and the creation of independent expert report necessarily required the experts to contact and collect information from the parties.  There was no requirement that all experts to the report must testify and those who did testified on behalf of the group.  Finally, the data appeared to be based on previously provided data and Eli Lilly failed to provide evidence that the data may not be authentic. 

On the substantive issues, Eli Lilly disagree with the finding of non-infringement.  With respect to Patent II, Eli Lilly argues that the mixture was in fact β-anomer rich and pointed out that the defendants never provided the α-β anomer ratio to meet its burden of showing that its process was non-infringing.  Again the Jiangsu HPC disagreed.  The expert test result showed that the starting mixture was α-anomer rich which Eli Lilly was not able to discredit.  Therefore, Hansoh’s process did not meet the β-anomer rich limitation.  With respect to Patent III, Eli Lilly argues that the process was covered by the patent under the doctrine of equivalents but the Jiangsu HPC refused to apply the doctrine of equivalents to cover a previously known process.

Issues on Appeal

On appeal, the SPC upheld all of Jiangsu HPC’s findings.  But its discussion of three issues should be instructive to litigants.  First, it noted that although the Hansoh never provided the ratio of α-β anomer directly, the inference that the mixture was α anomer rich was based on Hansoh’s synthetic methods and the ratio of α-β anomer in the product.  Hansoh need not prove the ratio by direct evidence.  Second, SPC clarified when the “reverse burden of proof” applies.  Under Chinese patent law, when a patentee alleges the infringement of a process patent for manufacturing a new product, the burden of production lies on the defendant to demonstrate the use of a non-infringing process.  Gemcitabine is clearly a new product—however it is a product of Patent III, not Patent II which merely describes the process for purifying an intermediate.  The “product” in this case is a β-anomer rich mixture, not gembitabine.  Because Eli Lilly failed to prove that Hansoh’s intermediate was the same β-anomer rich mixture, the burden never shifted.  Nonetheless the SPC found that Hansoh met its burden regardless.  Third, Eli Lilly commission an independent laboratory to test Hansoh’s synthetic process.  The laboratory reports that the starting mixture was β-anomer rich contrary to the official expert report.  However, the SPC notes that the quantity and testing procedure differed from Hansoh’s process and refused to admit the commissioned study into evidence (不予采纳). 

Notes

At first glance, the Lilly/Hansoh dispute highlights the interplay between the rule of evidence and patent law, but its broader implication speaks to patent strategy in the pharmaceutical business.  There are often several synthetic routes to a small organic molecule.  Here, Eli Lilly’s patents protect a particularly efficient and cost-effective path.  Hansoh’s method appears to leave out a crucial purification step but it is unclear what method it actually practices in its factory.  Short of an unannounced factory inspection (a discovery tool rarely permitted in China), patentees will not have access to the information necessary to establish process infringement.  This is especially true if the patentee suffered the same fate as Eli Lilly for failing to reverse the burden of proof.  In the final analysis, familiar patent parlance such as “process patents”, “reverse burden”, or “doctrine of equivalents” belies the unfamiliar procedural and institutional environment that continues to confound process patents.



[1] Eli Lilly v. Jiangsu Haosen Yaoye Gufen Youxian Gongsi, Zhong guo zhi shi chan quan cai pan wen shu wang, April 22, 2011, available at http://ipr.court.gov.cn/sdjdws/201104/t20110422_141610.html

[2] In 2007 the State Intellectual Property Office invalidated Patent I and it was not an issue on appeal.

 

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