[Ip-health] WSJ:Beijing Court Backs Patent Protection for Viagra

[Amy Nunn]

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Beijing Court Backs Patent Protection for Viagra

Pfizer's Win May Mark Turn
In International Struggle
Over Intellectual Property

By NICHOLAS ZAMISKA
June 3, 2006; Page A3

HONG KONG -- A Chinese court backed patent protection for Pfizer
<http://online.wsj.com/quotes/main.html?type=djn&symbol=pfe>  Inc.'s
blockbuster drug Viagra, a potentially landmark case for foreign companies
seeking greater protection of intellectual property against the flood of
fakes and knock-offs in one of the world's fastest-growing markets.

The verdict, announced by a Beijing court Friday afternoon, overturns a
ruling by the country's patent review board. In July 2004, the board sided
with a group of about a dozen Chinese generic-drug makers that had banded
together to challenge New York-based Pfizer's patent on sildenafil citrate,
the main ingredient in the popular impotence drug.

The Beijing court's decision vindicates Pfizer, the world's largest drug
company, and its costly legal effort to protect its Chinese patent on
Viagra, sales of which totaled about $1.6 billion world-wide last year. The
verdict sends a positive signal to other foreign pharmaceutical companies
that feared the government's decision to challenge Pfizer's patent would
open up other drugs to attack on similar grounds.

At the same time, a court ruling that defends a foreign company's
intellectual property could prove politically useful for China at a time
when runaway piracy of products from Gucci handbags to Microsoft software
has provoked exasperation among the country's trading partners. It also
helps Beijing amass political points in its favor as tensions mount over
other sensitive trade issues such as the massive U.S. trade deficit and
China's currency policy, given U.S. frustration over a rash of low-priced
knock-off products flooding China's marketplace.

"We welcome the court's decision," said Paul Fitzhenry, a spokesman for
Pfizer. "It reflects China's commitment to creating an effective
patent-protection environment and boosts the confidence of the business
community in China as an investment location."

In response to the verdict, Wang Wei, a lawyer for the Chinese drug
companies that challenged the patent said: "Of course, I'm upset, but it's
reasonable." He said some companies may choose again to challenge the
patent, though he wasn't sure. "If I were them, I would not appeal," he
added. "It's too difficult to predict the consequences of the appeal." A
spokesperson for China's patent re-examination board, which defended
Pfizer's appeal, wasn't available to comment.

The court victory won't be a panacea for Pfizer. Enforcement of the patent
could still prove tricky in a country where central government edicts and
court rulings sometimes go ignored when they run up against local commercial
and political interests. And Pfizer still struggles to battle widespread
availability of counterfeit Viagra with the same active ingredients as the
original that sells for a fraction of what the real thing costs.

It's unclear whether political considerations influenced the outcome of the
Beijing court's decision. However, Friday's verdict follows several signs of
Chinese determination to improve its track record for intellectual property
protection. Last December, a judge in Shanghai ruled against a Chinese
company that had adopted the Chinese name of U.S. coffee chain Starbucks and
a similar logo.

Then earlier this year, China announced measures requiring top computer
makers to ship their products with legitimate copies of operating system
software. Previously, computers often shipped without software installed,
allowing many Chinese consumers to purchase pirated copies of Microsoft
<http://online.wsj.com/quotes/main.html?type=djn&symbol=msft>  Corp.'s
Windows program to install themselves. In April, Chinese President Hu Jintao
reiterated Beijing's pledges to improve protection of intellectual property
rights during a U.S. visit.

A reversal such as the one Pfizer won is rare in China. When companies tried
to appeal a ruling by the country's patent review board at the Beijing court
where Pfizer's case was heard, for example, roughly only one in ten
succeeded, according to government data released last year.

"From the very beginning, when Pfizer applied for the patent, their
application had shortcomings," said Li Shunde, deputy director of the
intellectual property center at the Chinese Academy of Social Sciences,
prior to the verdict Friday. He had said that the application didn't include
sufficient data and clinical examples, and referred to Pfizer's case as
"quite vulnerable and weak."

Following Pfizer's victory, the case will now be handed back to the patent
review board at China's State Intellectual Property Office for review,
according to a person familiar with the matter. The board will have 15 days
to decide whether to appeal the decision to a higher court. Pfizer's patent
has and will remain in effect until the appeal process is finished.

Selling Viagra in China has never been easy for Pfizer, which introduced its
drug to the country in 2000. It had difficulty obtaining a trademark for the
drug's Chinese name, which literally translates as "strong brother." In
addition, relatively few doctors are even allowed to prescribe the drug
legally in hospitals, so legitimate sales of the drug are relatively small.

Then senior executives from 12 of China's leading drug companies banded
together against Pfizer and successfully challenged the company's patent --
resulting in the government's overturning the patent on the grounds that
Pfizer had failed to provide sufficient evidence prior to making its
application, and perhaps other technical grounds. Their move to produce
generic versions of Viagra came against the backdrop of robust growth in
China's pharmaceutical market, as rising incomes allow people to spend more
on drugs. Pharmaceutical sales in China leapt 20% to $11.7 billion last
year, according to IMS Health, a pharmaceuticals information-and-consulting
firm based in Fairfield, Conn.

Pfizer decided to fight back, launching an appeal. In China, large
multinational companies are often reluctant to file a lawsuit challenging
the judgment of a regulatory agency that they will have to go back to for
approvals down the road. GlaxoSmithKline
<http://online.wsj.com/quotes/main.html?type=djn&symbol=gsk>  PLC, the
British drug giant, opted not to defend a similar challenge against Glaxo's
formulation patent on rosiglitazone, a key ingredient in Avandia, a diabetes
medication.



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