Toshio Nakamura, Ph.D.

Sakamoto & Partners

A Review of the Current and Changing Practices in Japan

October 2016

Contents

2

1. Patent Term ExtensionJPO v. Genentech (Supreme Court judgment, 17/11/2015)

Debiopharm International v. Towa Pharmaceutical (Tokyo District Court judgment, 30/3/2016)

2. Doctrine of EquivalentsDKSH Japan et al v. Chugai Pharmaceutical (IP High Court Grand-Panel judgment, 25/3/2016)

3. Japanese Pharmaceutical Regulations

3

Japan is the world’s second biggest market

for pharmaceuticals,

with approximately 10% of global sales

Source: Wikimedia Commons

4

1. Patent Term Extension

Japan Europe U.S.A.

Established day 1987 2/7/1992 & 23/7/1996 24/9/1984

Law Article 67 (2) of Japan Patent Law Regulation Nos.469/2009＆1610/96 35 USC 156

Subject Medicine, Plant protection drug Medicine, Plant protection drug Medicine, Medical device, Food additive

Eligible patentA patent unable to be worked

because authorization was necessary

A patent which protects an activeingredient etc., a method of production

or an application thereof

A patent which claims an activeingredient etc., a method of use or a

method of manufacture thereof

Time limit forapplication

within 3 monthsfrom authorization

within 6 monthsfrom authorization etc.

within 60 daysfrom authorization

Requirements

[Ground of rejection of PTE](1) the authorization was notnecessary to work patent invention;(2) the patentee etc. did not obtainthe authorization;(3) the requested period exceeds theperiod when patnet invention wasunable to be worked;(4) the applicant is not the patentee;(5) the application does not meetrequirement of Art. 67-2(4)

An SPC shall be granted if:(a) the active ingredient etc. isprotected by a basic patent;(b) a valid authorization has beengranted in accordance with Directive2001/83 or 2001/82;(c) the active ingredient etc. has notalready been the subject of an SPC;(d) the authorization in (b) is the firstauthorization.

Patent term shall be extended, if(1) the patent term has not expiredbefore application of PTE;(2) the patent term has never beenextended;(3) PTE application is submitted by thepatent owner etc.;(4) active ingredient etc. has beensubject to regulatory review period;(5)(A) the authorization is the firstauthorization; (B) ... or (c) ...

Multipleapplications

Multiple PTE availablefor each authorization

One SPC for one patent owned by eachpatentee per an active ingredient

One PTE for one patentper an active ingredient

Additional useapproved

New PTE applications availableFormer SPC covers the additional use

(New SPC availablefor the second medical use patent）

Former PTE covers the additional use

Extended term Max. 5 years Max. 5 years + 0.5 year (Pediatric) Max. 5 years

Scope ofprotection

Authorized productfor authorized use

Authorized active ingredient etc.for any medicinal uses authorized before

its expiry

Any use authorizedfor the active ingredient etc.

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(a) Ambiguity of PTE requirement (§ 67-3(1)(i))

Multiple PTEs are available by § 67-3(1)(i).

(1) Ambiguities in Japanese PTE

§ 67-3(1)(i) is not defined by “first authorization” in US and SPC

systems.

§ 67-3(1)(i): A PTE application is refused where the marketing

authorization was not necessary to obtain for working the patented

invention.

§ 68-2 is defined by “product”, and not “active ingredient”.

§ 68-2: Scope of the extended patent right is restricted to the authorized

product and usage in relation to the corresponding PTE.

These ambiguities cause big confusion as shown in the followings.

(b) Ambiguity of PTE scope (§ 68-2)

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(a) Confusions in PTE requirement (§ 67-3(1)(i))

§ 67-3(1)(i) has been disputed in around 30 court judgments including recent two Supreme Court judgments:

JPO v. Takeda (Supreme Court judgment, 28/4/2011)

JPO v. Genentech (Supreme Court judgment, 17/11/2015).

(2) Confusions in Japanese PTE

(b) Confusions in PTE scope (§ 68-2)

There is only one infringement court judgement:

Debiopharm International v. Towa Pharmaceutical

(Tokyo District Court, No. 2015(wa)12414, 30/3/2016),

deciding that the patent is NOT infringed by its generic version.

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(a) Previous JPO’s practice

“Active ingredient” or “indication” should be newly authorized for grant in

conformity with the PTE’s scope under § 68-2.

(b) Supreme Court judgment (No. 2009(gyo hi)326, 28/4/2011)

Patent in suit is directed to a controlled-release preparation.

The PTE application was rejected under the previous JPO’s practice.

(3) PTE Requirement (§ 67-3(1)(i))

P resent M A (S eptem ber 2005) Form er M A (M arch 2003)

Active

ingredientM orphine H C l ←

Indication and

U sage

Analgesia for m oderate or

severe cancer pain←

Form ulation C ontrolled-release capsule Internal liquid

Supreme Court denied the JPO’s practice to allow the PTE.

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(c) Supreme Court judgment (No. 2014(gyo hi)356, 17/11/2015)

Patent in suit is directed to a monoclonal antibody.

The PTE application was rejected under the JPO’s practice.

Supreme Court denied the JPO’s practice to allow the PTE.

P resent M A (S eptem ber 2009) Form er M A (A pril 2007)

Active

ingredientBevacizum ab ←

Indication and

U sage

U nresectable, advanced or recurrent

colon or rectum cancer←

D osage and

Adm inistration

5 m g/kg or 10 m g/kg of bevacizum ab to an

adult i.v . every 2 w eeks or m ore in

association w ith another antineoplastic agent

7.5 m g/kg of bevacizum ab to an adult i.v.

every 3 w eeks or m ore in association w ith

another antineoplastic agent

5 m g/kg or 10 m g/kg of bevacizum ab to an

adult i.v . every 2 w eeks or m ore in

association w ith another antineoplastic agent

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Debiopharm International v. Towa Pharmaceutical(Tokyo District Court, No. 2015(wa)12414, 30/3/2016)

(a) JP 3547755

Claim: A pharmaceutically stable preparation of oxaliplatinum.

Expired on 7/8/2015, but extended 3 times for about 4.5 years, etc.

(b) Ingredients in medicines

Towa product is a generic version of Debiopharm product.

(4) PTE Scope (§ 68-2)

D ebiopharm Tow a

A ctive ingredient O xaliplatinum ←

O ther ingredients w ater for injectionw ater for injection

concentrated glycerin

( Indication and usage are the sam e)

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(c) Decision

In examination for a MA, the following items are examined:name, ingredients, quantity, dosage, administration, indication, usage,

side effects, other matters including quality, efficacy and safety.

Thus, “Product” and “Usage” in § 68-2 mean as follows:

“Product” : ingredients, quantity

“Usage” : dosage, administration, indication, usage

Towa product further includes glycerin as an ingredient, and thereby

Towa product has much more stability.

Thus, the patent is NOT infringed by Towa product literally or under

doctrine of equivalents.

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The ambiguities have not been removed.Thus, revision of Patent Law is currently discussed.

(5) ConsiderationUnder the present Examination Guidelines revised on 1/4/2016,

many PTEs are allowable.

But, on the contrary, every PTE’s scope may be very narrow, and

many PTEs are necessary for satisfactory coverage against

generic invasion.

Tim e

Cla

im s

cope

5 years

PTE 2

PTE 3

Scope of the same active ingredient & usage

PTE 1

13Tokyo SKYTREE

2. Doctrine of Equivalents

Japanese doctrine of equivalents (DoE) was formulated by Ball Spline Supreme Court judgement in 1998, indicating 5 requirements for DoE.

However, infringements under DoE were affirmed in only a few cases, and in no chemical cases, for almost 20 years after Ball Spline judgement.

Finally, IP High Court Grand-Panel determined infringement under DoE for the first time in chemical field:

http://www.ip.courts.go.jp/eng/hanrei/g_panel/index.html

DKSH Japan, et. al. vs Chugai Pharmaceuticals(IP High Court Grand-Panel, No. 2015(ne)10014, 25/3/2016)

14Tokyo SKYTREE

Ball Spline judgment (Supreme Court, No.1994(o)1083, 24/2/1998)

<Five requirements for DoE>

Even if a part of the patented invention is different from the product at issue, the product falls within the scope of the patented invention, if

(1) the different part is not the “essential part” of the patented invention,

(2) the problem of the patented invention can be solved by replacing this part with the part of the product, to give the same function and effect,

(3) a person skilled in the art could easily come up with the idea of such replacement at the time of manufacturing the product,

(4) the product is not identical to the technology in the public domain at the time of filing the patent application, and could not have been easily conceived at that time by a person skilled in the art, and

(5) there were no “special circumstances” such as the fact that the product had been intentionally excluded from the scope of the patent claim during the prosecution.

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(1) Chugai’s patent: JP 3310301

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It is the following method shown by red arrows.Patent method : “cis form” DKSH’s method : “trans form”

(2) DKSH’s maxacalcitol manufacturing method

17Tokyo SKYTREE

(i) “Essential part” (1st requirement)

“Essential part” should be recognized by determining a characteristic part in the patented invention constituting a unique technical idea not found in prior arts, based on the problem and its solution. Namely, “essential part” should be recognized by the description of the claims and specification, and in particular comparison with the prior art, because substantial value of the patented invention is evaluated from the degree of contribution to prior arts.

(i) In case of high contribution, a part of the patented invention is recognized broadly, and (ii) in case of low contribution, the part is understood narrowly as the literal description of the claim.

(3) Decision

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In light of the problem, its solution and effect of the patented invention, the essential part is introduction of the maxacalcitol’s side chain to the OH group at 20 position in the vitamin D structure or steroid ring structure. The difference between “cis form” and “trans form” in the substituent “Z” is not an essential part.

The difference in DKSH’s method does NOT comprise the essential part.

(ii) “Special circumstances” e.g. intentional exclusion (5th requirement)

When the product or method was intentionally excluded from the claims during prosecution, the patentee cannot later assert arguments contrary to this in light of estoppel.

The patentee cannot assert DoE, if the patentee acknowledged objectively and externally the other embodiment as an alternative to thepatented invention at filing the application.

Such situations are (i) that the patentee described the other embodiment in the specification; and (ii) that the patentee described the other embodiment in a scientific paper published around the filing date.

In spite of defendant arguments, the court decided that there are no evidence sufficient to recognize that the patentee acknowledged objectively and externally “trans form” of vitamin D structure as an alternative to its“cis form” as a starting material of the patented manufacturing method at filing the application.

“Special circumstances” are NOT admitted.

(iii) ConclusionThe patent was infringed under DoE, and is valid. (The case appealed)

20Tokyo SKYTREE

(4) Other countries’ judgements

(i) USAJonson & Johnston v. R. E. Service, 285 F.3d 1046 (Fed. Cir. 2002)

“When a patent drafter discloses but declines to claim subject matter, this action dedicates that unclaimed subject matter to the public.”

Pfizer, Inc. v. Teva Pharmaceuticals, 429 F.3d 1364 (Fed. Cir. 2005)“Before unclaimed subject matter is deemed to have been dedicated to the public, that unclaimed subject matter must have been identified by the patentee as an alternative to a claim limitation.”

These decisions were followed by Sandisc Corp. v. Kingston Tech. (Fed. Cir. 2012).

(ii) GermanyOkklusionsvorrichtung (BGH, X ZR 16/09, 10/5/2011)

Where a number of alternatives which are equally effective at solving the problem are disclosed in the description, but only one of the alternatives is claimed, patent protection is limited to the claimed alternative.

Pemetrexed (BGH, X ZR 29/15, 14/6/2016)This decision essentially limits the applicability of Okklusionsvorrichtung to cases where the substitute means is explicitly mentioned in the patent.

Tokyo SKYTREE

3. Pharmaceutical Regulations

Source: MHLW’s website

Ratio

per N

ational In

com

e &

Ratio p

er

GD

P

Ratio per National Income

Nationa l Health

¥1 trillion

National H

ealth E

xpenditure

Ratio per GDP

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2013

National Health Expenditure \ 40.6 trillion in 2014.

(Euro1=\115)ca. 25% cover drug costs.

Ministry of Health, Labour and Welfare (MHLW) wants to stop this increase of the national health expenditure.

For this purpose they are running a campaign for the use of generic drugs.

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< Generic share in Japan >

The generic share by volume is greatly increasing under the MHLW campaign.

> 70 %by June 2017

> 80 %by 2018-2020

Source: MHLW’s website

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(a) Pharmaceutical Affairs Law (Currently ”The Law on Securing Quality, Efficacy and Safety of Products including Pharmaceuticals and Medical Devices”)

[Objectives] to improve public health by assuring quality, efficacy and safety of drugs, etc. by measures to promote R&D of drugs, etc.

[Controlling] Clinical studies, Approvals, Sales, etc.

(b) Health Insurance LawHealth insurance covers the entire population.Every citizen is required to join either: i) One of the various industry-managed health insurance programs;

or ii) the National Health Insurance.

<Reference>“Information on Japanese Regulatory Affairs 2015” by JPMAhttp://www.jpma.or.jp/english/parj/pdf/2015.pdf

(1) Major laws controlling medicines

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< Universal Health Insurance >

“Insurance charge” is determined depending on salary, and is taken monthly. National Health Insurance has a large deficit.So, the government pays assistance payment, and the insurance charge rate is increasing.

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(i) Determination of drug prices when approved

Almost all prescription drugs are covered by Health Insurance.MHLW determines such drugs’ prices under a reference system.

<Drugs similar to other drugs in the market>Prices are determined starting from the similar drug’s price, and arranged by several factors:

✓ Innovativeness (70-120%),✓ Effectiveness (35-60% or 5-30%),✓ Marketability (10-20% or 5%),✓ Pediatric use (5-20%),✓ First approval in Japan (10%)✓ Average of its foreign prices (plus or minus).

<Drugs not having similar drugs in the market>Prices are determined by “cost calculation method”.

(a) Prescription drug price

(2) Drug pricing system

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(ii) Re-evaluation (Reduction) of drug prices

Normally every two years, MHLW reevaluates the price. They reduce the price if there is a big difference between the MHLW-determined price and the market price.

<Exceptional reduction in 2010 and 2012>Prices of patent-expired drugs were reduced.

<Exceptional reduction in 2014>Prices were reduced for the drugs whose generic drugs had been sold for more than 5 years, but its generic shares were less than 60%, depending on its generic shares: 60% or less (1.5% down); 40% or less (1.75% down); 20% or less (2% down).

<Exceptional reduction in 2016>Max. 25% down: 100 to 150 billion yen annual sales, and

>1.5 more than expectationMax. 50% down: More than 150 billion yen annual sales,

and >1.3 more than expectationSovaldi & Harvoni (Gilead Sciences): 31.7% down

Source: MHLW’s website

<Average reductionof drug prices>

1990 -9.20%

1992 -8.10%

1994 -6.60%

1996 -6.80%

1997 -3.00%

1998 -9.70%

2000 -7.00%

2002 -6.30%

2004 -4.20%

2006 -6.70%

2008 -5.20%

2010 -5.75%

2012 -6.40%

2014 -2.65%

2016 -1.22%

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[Price of the first approved generic drug]60% of its brand drug price in principle.When more than 10 generic drugs are approved at the same time, then it is 50%.

[Price of the later approved generic drug]The cheapest price in the existing generic drugs’ prices.

(b) Generic drug price

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(3) Approval procedure

(i) Timing4 times per year (March, June, September & December), brand name drugs are approved, and their prices are listed normally within 2 months after their approvals.

(ii) Patent listList of substance patents & use patents must be described in the application for approval.(Partially similar to “Orange Book”)

(a) Brand name drugs

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(b) Generic Drugs

(i) TimingTwice per year, generic drugs are approved, and their prices are listed (June & December).

(ii) Relation with patents<Substance patents>

Generic drugs are not approved.

<Use patents>In the case an indication is partially covered by a use patent, generic drugs can be approved by excluding the indication covered by the use patent.

(changed by MHLW’s Notice on 5/6/2009)

<Crystal patents>Generic drugs containing the ingredient in another crystal form can be approved.

(changed by MHLW’s Notice on 16/6/2011)

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(4) Drug re-examination systemCorresponding to “Data Exclusivity”

Under the drug re-examination system, the brand company must continue to collect efficacies and side-effects data during a certain period after launch. Application for generic drugs can not be filed during such period.

10 years: Orphan drugs, Drugs requiring longer re-examination period.

8 years: Drug containing a new chemical ingredient.

6 years: New combination drug, Drug by new administration route.

4 years: Drug for new indication, Drug with new dosage/administration.

The re-examination period may be extended up to 10 years,if clinical studies for pediatric use are planned.

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Thank you for your attention.

Please contact me if you have any questions.

E-mail: nakamura@sakamotopat.com

http://www.sakamotopat.com