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When the Chinese State Intellectual Property office invalidated Pfizer Inc.’s Viagra patent in July, commentators were quick to criticize China. The invalidation, they argued, signified China’s continuous failure to offer adequate protection for IP rights. Some suggested that the ruling violated China’s IP-related obligations under the World Trade Organization, which the country joined in 2001. What these critics failed to realize is that the Viagra decision was exactly what IP rightsholders should expect in a country making the transition to full compliance with the WTO agreements. It was the first time Chinese companies took the legal route to challenge a patent owned by a major foreign company. In the old days, local companies ignored the law and manufactured their own counterfeit versions. (Many still do today.) This time, however, local companies went to the patent office first, asking it to cancel Pfizer’s patent for its failure to satisfy the novelty requirement. That was a great improvement, thanks largely to legal reforms introduced in the wake of China’s accession to the WTO. Although the Chinese patent office has yet to release its decision, an official indicated that the patent had been revoked — not because of the novelty requirement — but because of Pfizer’s failure to adequately describe the “technological” uses of sildenafil citrate, a key Viagra ingredient. Immediately after the decision, 17 Chinese drug companies joined together to explore how they could use their combined manufacturing and marketing capabilities to produce a version of Viagra domestically. Pfizer is not particularly worried about the Chinese market — Viagra is listed as a controlled substance there, and its use is restricted to only a few hospitals. However, Chinese generics could be imported into other markets where they would compete directly against Viagra. Ultimately, such competition would drive down prices and cut into Pfizer’s profits. Even worse, from the standpoint of the U.S. and European pharmaceutical industries, the decision might set a bad precedent, or spark a new trend of systematic revocation of foreign pharmaceutical patents. Indeed, because of the Viagra decision, GlaxoSmithKline plc recently decided to abandon its patent for rosiglitazone — a major ingredient of its popular diabetes drug Avandia. (Like Pfizer, Glaxo’s patent was recently challenged by local pharmaceutical manufacturers.) If this trend continues, China may violate its WTO obligations, which require all member countries to protect patents regardless of “the place of invention, the field of technology, and whether products are imported or locally produced in all forms of technologies.” Still, it remains unclear whether the Viagra decision was an isolated incident. After all, inventors challenge patents all the time, all over the world. Sometimes, patents are upheld; sometimes not. Viagra is an exceptional case with a complicated history. The treatment Pfizer received from the Chinese patent office might not reflect how the office will handle other drugs. When Pfizer applied for the patent in the early 1990s, Viagra was conceived as a potential drug for heart problems. Pfizer soon discovered that the drug had a better use for treating male erectile dysfunction and filed a second patent. Although the U.S. allowed Pfizer to patent this new and unintended use, not every country did. Indeed, the patent for Viagra was invalidated in the United Kingdom for its failure to satisfy the novelty requirement. It is unrealistic to assume that patent offices and courts in other countries will uphold a patent merely because it is valid in the U.S. Due to philosophical differences and diverging local conditions, decisionmakers sometimes come to different conclusions despite applying identical laws to identical facts. Some commentators suggested that the Chinese patent office made the decision mainly to benefit local companies, focusing on the fact that the patent challenge was brought by leading local pharmaceutical manufacturers, such as Tonghua Hongtaomao Pharmaceutical and Lianxiang Pharmaceutical. However, the decision also benefits foreign pharmaceutical companies, which until now have been unable to manufacture their versions of Viagra. If they want to compete directly with Chinese companies, there is no guarantee that local companies will prevail. In the years to come, local industries are likely to grow, and more companies will become accustomed to using the legal process to protect their rights and resolve disputes. As a result, patent challenges by local companies will increase substantially. A decade ago, the Chinese didn’t know what patent rights were. The Viagra decision signals a transition to a new regime that will provide a brighter future for IP rightsholders. Peter K. Yu is an associate professor of law at Michigan State University College of Law. Web site: peteryu.com.

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