COVID-19 Patent Controversy

INTRODUCTION

Against the backdrop of the surging Wuhan coronavirus (aka COVID-19) that has been spreading across China and dozens of other countries around the world, a patent controversy has emerged involving Gilead Sciences, Inc. (“GSI”, stock symbol GILD, traded on NASDAQ), the US-based original inventor and patent holder of an unapproved experimental drug named remdesivir and the Wuhan Institute of Virology (“WIV”), a part of the Chinese Academy of Sciences of the People’s Republic of China, which on January 21, 2020, with Institute of Military Science, Military Medical Research Institute, State Emergency Disease Control Medical Control Engineering Technology Development Center, claimed to have filed a Chinese patent application entitled “The usage of anti-2019 novel coronavirus”. The Chinese organizations indicated also that they will file an application under the Patent Co-operation Treaty (“PCT”).

This controversy is significant not only on medical and patent grounds, but raises legal and commercial issues. It also touches on whether the Chinese parties’ action violates the letter or spirit of the recently concluded Phase 1 of the US-China trade deal (“Trade Deal”).

In view of the importance of this matter and the fact that the public and to some extent even some legal practitioners find international patent issues unfamiliar and not easily fathomable, we thought it worthwhile to sort out the facts and review certain patent and legal issues surrounding the controversy.

THE BACKDROP

The story about COVID-19, unfolding since early December, 2019, has been widely reported by the press worldwide. We highlight a few aspects pertinent to our discussion here.

The first few reported cases occurred in Wuhan, a metropolis in central China with a population of some 15 million. While a large percentage of the early infection cases arising in December may be traceable to a seafood market in Wuhan, a few could not be so traceable, and to date it remains a mystery as to the true origin of the virus. 

The early infections continued their growth paths in Wuhan and the surrounding areas in Hubei Province, apparently without early and effective intervention efforts at the local and provincial levels. Eventually, when the viral spread had reached such a proportion that it could no longer be ignored, the National Health Commission finally publicly acknowledged the epidemic and its severity on January 22, 2020.    

Coronavirus disease 2019 (COVID-19), previously also called 2019-nCoV acute respiratory disease, is an infectious disease caused by SARS-CoV-2 (2019 novel coronavirus), a virus closely related to the SARS virus.  The disease was discovered in December 2019 and is the cause of the current coronavirus outbreak. It was officially named by the World Health Organization as COVID-19 on February 12, 2020.

The primary mode of infection is human-to-human transmission, which generally occurs via respiratory droplets from infected individuals when they cough, sneeze or otherwise release droplets. It has a typical incubation period of between 2 and 14 days, but there was a reported case suggesting an incubation period of up to 27 days.

As the outbreak spread internationally, a frantic search for cure ensued. The first US case involving a person of 35 was reported in Seattle on Jan 21, 2020. The patient was treated with remdesivir and symptoms improved the next day. He was released from the hospital on Feb 3, 2020.

GSI HOLDS PATENT ON REMDESIVIR

GSI is a research-based biopharmaceutical company in California. They developed a drug known as remdesivir (also called GS-5734) to address public health threats such as Ebola and MERS, a coronavirus. In September and October 2015, GSI filed two provisional patent applications in the United States. In September 2016, GSI filed a standard application with the United States Patent and Trademark Office and one under the PCT with the World Intellectual Property Organization. The PCT is an international treaty with more than 150 members. It provides a mechanism that allows an inventor to file a single application which may then be used for filing in the other member states. Since patents are granted by individual jurisdictions and granted patents are only valid in such jurisdictions, the PCT makes it very convenient for an inventor to file applications in multiple jurisdictions by using only one application. In its PCT application, GSI designated more than 100 jurisdictions, including China, where it intended to file patent applications. An application based on its PCT application was filed in China and one in Hong Kong as well. On April 9, 2019, US patent number 10,251,904 was granted to GSI for “Methods for treating arenaviridae and coronaviridae virus infection”. As of the date of this paper, the remdesivir applications pending in other jurisdictions, including China, have not yet been granted. Likewise, the Hong Kong application is still pending.

GSI’s patent provides for method for treating arenavirus infections by administering remdesivir, either alone or with other compounds. Although its claims are directed specifically for treating arenavirus infections, the patent also indicates that remdesivir may also be used to treat coronavirus infections.

Remdesivir is an experimental drug and has been undergoing clinical trials for treatment of Ebola. As of the date of this paper, it has not received any regulatory approval as a medication for treatment of any disease or illness by any regulatory agency in any jurisdiction, including the United States and China. However, a research paper published in Science Translational Medicine on June 28, 2017, suggests that remdesivir shows promise as a treatment of coronavirus. WIV also reported recently in a letter to Cell Research Journal published January 28, 2020, that remdesivir, in combination with chloroquine, a decades-old malaria drug, is highly effective in controlling COVID-19 infections. Clinical trials are now starting in China on hundreds of patients testing the efficacy of remdesivir in fighting COVID-19 infections.

WIV FILES PATENT APPLICATION

Despite acknowledging intellectual property right barriers to remdesivir, WIV stated on its website that on January 21, 2020, it had applied for a Chinese patent for treating COVID-19. WIV stated that its application is in line with international practice from the perspective of protection of Chinese national interest. WIV offered that “if relevant foreign companies intend to contribute to China's epidemic prevention and control, and to the extent both sides agree, in answering any national needs, to temporarily suspend implementing the rights claimed by the patent, [we] wish to work with foreign pharmaceutical companies to control the epidemic using our modest effort.” The statement in Chinese states: “如果国外相关企业有意向为我国疫情防控做出贡献,我们双方一致同意在国家需要的情况下,暂不要求实施专利所主张的权利,希望和国外制药公司共同协作为疫情防控尽绵薄之力.”

Without being able to review the actual patent application, we cannot know what WIV is actually claiming. However, the title of its application suggests that the scope of the invention is fairly narrow as it seems to be aimed specifically at treating COVID-19 infections. Notwithstanding the title, WIV may also assert claims beyond COVID-19. Even without owning remdesivir, WIV may claim that combining remdesivir and chloroquine or different combinations of drugs may be effective in treating COVID-19 infections. Then again, it is also possible that WIV is claiming a different way of treating COVID-19 infections. The answer will be known when its application is published in about 18 months.

REQUIREMENTS FOR FILING PATENTS

Patent law principles and requirements are largely similar across most jurisdictions with slight local variations in practice. For an invention to be eligible for patenting, it must be novel, non-obvious and useful.  Novelty refers to originality, that the gist of the invention has not been published or otherwise made known to the public prior to the filing of the patent application. Non-obviousness (also called inventive step) means that for a practitioner of ordinary skills in the field of the invention, the invention is not obvious or apparent, such a practitioner would not have easily come up with the invention based on publicly available information (prior art).  Finally, usefulness (or industrial application) requires that the invention must be capable of purposeful or practical use.

WHAT WIV MAY BE CLAIMING?

As mentioned above, until WIV’s patent application is published, its actual claims will not be disclosed to the public. If WIV merely claims that remdesivir is effective for treating COVID-19, then it will not succeed since the effectiveness of remdesivir in treating coronavirus is already known before WIV’s patent application. This is so even though GSI did not specifically claim remdesivir as a treatment of coronavirus infections in its patent claims. However, in GSI’s application patent application and subsequent papers, all of which were published before the filing of the WIV patent application in January, 2020, the use of remdesivir to treat coronavirus has been disclosed so that it is ‘prior art’ – information already known to the industry and the public at large. Thus, it is unlikely that the novelty requirement is satisfied. WIV is an experienced patent filer so it is unlikely that they would have made such a fundamental mistake as claiming remdesivir as its own invention.

More likely, WIV will seek some variation of GSI’s patent in order to satisfy the novelty and non-obviousness requirements. Their letter to Cell Research, submitted a few days after they filed their patent application, they suggest that their invention may involve combining remdesivir and chloroquine in treating CORVID-19 infections. WIV cannot claim invention of either remdesivir or chloroquine, so it is likely that they made changes such as creating a new compound or a new method of producing the active substances of remdesivir and chloroquine as a new compound or new combination. It is also possible that they may claim different ways of treating coronavirus. By claiming such changes, they may try to satisfy the novelty requirement. It is questionable if such arguments will succeed if patent laws and principles are strictly applied, but this may be the strategy employed by WIV.

WIV will have to satisfy the non-obvious or inventive step requirement. Assuming that its invention involves a combination of compounds, it has to show that it would not have occurred to a skilled practitioner (such as a pharmaceutical researcher or physician) to combine compounds or medication in treating coronavirus or COVID-19 infections. If WIV is unable to establish this, it will fail the non-obviousness requirement. This would be a difficult hurdle to overcome. There is currently no effective antiviral treatment for coronavirus so medical researchers have been trying different combinations or cocktails of medication in treating infections caused by SARS and MERS. Since this approach is already used, it would be obvious to an ordinary and skilled practitioner.

Despite recognizing these obstacles, WIV seems confident that it will be able to satisfy all patenting requirements needed for the grant of a patent. If successfully granted based on strict patent principles, it could be a great contribution to fighting coronaviruses.

COMPULSORY LICENSING OF REMDESIVIR?

GSI has received its U.S. patent in April 2019 but its patent applications in China and other jurisdictions are still pending. While it is anticipated that those applications, including its Chinese application, likely will be granted in due course, it is still possible that in applying Chinese patent law, CNIPA, China’s National Intellectual Property Administration, China’s patent granting authority, may not approve GSI’s remdesivir patent application. (Even in the unlikely situation where CNIPA rejects GSI’s patent application, it does not mean that WIV will be granted a patent on remdesivir. WIV will still have to satisfy patentability requirements of novelty and non-obviousness, which as suggested above, will not be an easy task under Chinese patent law.)

Although patent law will recognize GSI as the holder of the remdesivir patent, the patent laws of many jurisdictions include compulsory licensing provisions where a patent holder must license its patent in the interest of public health or in national emergencies. Compulsory licensing is permitted under TRIPS by the WTO and has been used about two dozen times in various nations. Most of the compulsory licenses involve drugs for treating HIV/AIDS. Some involved other communicable diseases.

Chapter VI of China’s patent law covers compulsory licensing.  Potentially relevant to GSI are Articles 49 -51 of Chapter VI.

Article 49 allows CNIPA to grant a compulsory license during occurrences of national emergency, extraordinary state of affairs or if public interests so requires. The current COVID-19 situation arguably fits the requirement covered by Article 49.  Thus, it is possibly that after granting GSI its remdesivir patent, CNIPA may then exercise its power of compulsory licensing to require GSI to grant a license to WIV or other entities to use remdesivir in China.

Similarly, Article 50 allows CNIPA to grant a compulsory license for manufacture of a patented drug for the benefit of public health. Likewise, this is also arguably the situation in China.

More interestingly, Article 51 states that where an invention represents a major technological advancement of remarkable economic significance compared with an earlier invention, and exploitation of such new invention relies on the exploitation of the earlier invention, CNIPA may, upon application of the newer patent holder, grant a compulsory license to exploit the earlier invention. Article 51 applies where two patents are granted but the second patent cannot be used independently without also using the first patent. This may be triggered if CNIPA grants patents to GSI for remdesivir and WIV for combining remdesivir with other medications for treating COVID-19 since WIV’s treatment will require the use of remdesivir.

WIV’s treatment method cannot be independently applied. It requires the use of remdesivir. To use remdesivir, they would need authorization from GSI. If GSI does not give its authorization, then VIW’s treatment method cannot be used. Article 51 allows CNIPA to declare that WIV’s treatment is such an advancement of remarkable economic significance that GSI cannot withhold the use of remdesivir. GSI must allow WIV (or anyone using WIV’s treatment method) to use remdesivir.

Applying Article 51, WIV’s patent may be deemed a later patent that relies on remdesivir, the earlier patent, to achieve significant results in treating COVID-19 but WIV cannot use its patent without using remdesivir. CNIPA has the sovereign power to interpret Chinese patent law as it deems appropriate. It has the power to declare that WIV’s patent is a technological advancement of remarkable economic significance under Article 51 and compel licensing of remdesivir to WIV so that the WIV patent may be practiced.

Under this scenario, CNIPA grants GSI its patent on remdesivir and WIV its patent on a combination. CNIPA then declares the WIV invention as a remarkable achievement and compel GSI to license remdesivir to WIV.

In any case, Article 56 provides that such compulsory licensing shall be on a non-exclusive basis so GSI may license remdesivir to others in China and Article 57 requires the payment of reasonable royalties which may ultimately be decided by CNIPA if the parties do not agree on what is reasonable. Further, Article 31 of the WTO TRIPS Agreement, to which China has assented, expressly allows such granting of compulsory licenses.

CUSTOMARY PATENTING PRACTICE?

WIV did not explain what customary international patent practice it referred to in its online statement quoted above. It is customary international practice initially to file domestic and then international patent applications under the PCT upon creation of a new invention. In the pharmaceutical industry, it is also not unusual for pharmaceutical firms to make new medicinal use of existing compounds and seeks additional patents for such new use. However, under customary international practices, such new use applications are made by the creators of the compounds and not third party researchers. Thus, if WIV is claiming new uses for remdesivir, it is not in line with customary international patent practice.

Is WIV referring to compulsory licensing when it refers to customary international patent practice? While there are provisions for compulsory licensing for pharmaceutical products are in the patent laws of many jurisdictions and are allowed by the WTO, and have been used mostly for drugs for treating HIV/AIDS, compulsory licensing are used where the costs of lifesaving drugs are prohibitively expensive for patients in those nations and are applied after negotiations with drug makers have broken down. Compulsory licensing is allowed but is not customary practice. It interferes with ownership rights of drugmakers and forces transactions which drug makers may consider to not be in their interest. In practice, it sets the rate of royalty at such a low level to make it affordable to poorer nations, and which drug makers find unacceptable low. China prides itself as a major economic power fully capable of paying prevailing royalty rates. It would be of concern if CNIPA decides to apply compulsory licensing to skirt fair and equitable royalty payments to GSI.    

It is suggested that most pharmaceutical patents owned by Chinese companies involve improvements of known medications such as improvement in manufacturing methods or uses of such medication, in line with the aim of the Chinese government to develop the domestic pharmaceutical companies to narrow the gap with international pharmaceutical firms. However, concerns about this practice are raised in Section C of the Trade Deal. Article 1.11 of Section C deals with Chinese applicants seeking approval to market their pharmaceutical products in China. Instead of providing their own research and evidence, some applicants rely on evidence and information concerning the safety and efficacy submitted by the original drug makers in the original application process in China or in another jurisdiction. Article 1.11(1)(b) and (c) require that if China allows this practice of using other parties’ work product, then China must provide “adequate time and opportunity for such a patent holder to seek, prior to the marketing of an allegedly infringing product, available remedies” to seek “judicial or administrative proceedings and expeditious remedies, such as preliminary injunctions or equivalent effective provisional measures, for the timely resolution of disputes concerning the validity or infringement of an applicable patent claiming an approved pharmaceutical product or its approved method of use”. This hijacking of other people’s efforts appear to be so prevalent that it is included as part of the Trade Deal.

While it is plausible that WIV’s patent claims may include significant new advances that are not yet publicly disclosed, publicly available information suggests that its application seems to be wide of customary patenting practice. WIV is part of the Chinese Academy of Sciences. It is the world’s largest research organization and is fully supported by the Chinese central government. As such, part of its mission is to further the interest of the Chinese government. Unless additional information is released by WIV, its actions raise further concerns that the Chinese government’s respect of intellectual property law and commitments under the Trade Deal may fall by the wayside if it can selectively apply and interpret intellectual property laws in its national interest when confronted with critical problems such as the current COVID-19 public health crisis. In its handling of COVID-19 patent issues, will CNIPA ensure “fair, adequate, and effective protection and enforcement” of GSI’s intellectual property rights? Will the applications of both GSI and WIV be subject to the same vigorous process or will one application sail through while the other receives intense scrutiny?

WAIT AND SEE

WIV’s statement raises intriguing questions about its patenting strategies. Is the application, which may incorporate GSI’s remdesivir, customary international practice? Or is WIV merely applying customary Chinese practice to protect Chinese national interest because of the COVID-19 epidemic?  If it is the latter, is it an affront to the Trade Deal? It is premature to make conclusions at this stage. The patent community and interested parties worldwide will closely follow this situation given the wide-ranging implications.

Consultant, Nixon Peabody CWL

 

Kenneth Choy is a consultant and head of Technology Transactions practice of Nixon Peabody CWL in Hong Kong. His practice combines traditional IP, transactional and emerging company practices to help clients succeed in their core businesses. His clients include startups, emerging companies, publicly traded companies to family offices and funds.

Before moving to Hong Kong in 1999, Kenneth was in private practice in the US where he represented clients in cross-border transactions. He is admitted to practice law in New York, California (inactive) and Hong Kong.

Partner, Nixon Peabody CWL

John Lo is a partner and head of Emerging Company practice at Nixon Peabody CWL in Hong Kong. John started his legal career in California and has represented startups and investors in Hong Kong. He has also worked on China direct investment since mid-1990s

Mr. Lo’s primary areas of professional focus are emerging companies, VC and private equity, international business transactions and investments, mergers and acquisitions, and PRC inbound and outbound investments. He is the author of an angel investment book, various articles and book chapters.