Regulation of Compulsory Licensing of Biotech Pharmaceuticals in China

1. Introduction

Compulsory licensing is a legal mechanism through which a government permits a third party to use a patented invention without the patent holder’s consent, subject to statutory conditions and appropriate remuneration. In biotechnology and pharmaceutical industries, it can help address public-health emergencies, unaffordable medicines, shortages of essential drugs, and barriers to access to patented vaccines, biologics, and gene therapies.

China recognises compulsory licensing under its Patent Law, particularly Articles 48–58. The framework seeks to balance patent holders’ exclusive rights with public health, competition, and national economic interests. However, a compulsory licence does not automatically authorise the manufacture or sale of a pharmaceutical product: applicable drug registration, clinical research, manufacturing, quality, and biosafety requirements must also be satisfied.

2. Legal Framework

A. Patent Law of the People’s Republic of China

China’s Patent Law, as amended in 2020 and effective from 1 June 2021, provides the principal legal basis for compulsory licensing.

Article 48: Failure to exploit a patent

Where a patent holder, without a legitimate reason, has failed to exploit the patent or has insufficiently exploited it for three years after the patent grant and four years after the patent application, an eligible entity may seek a compulsory licence under the statutory conditions.

In biotechnology, this provision could become relevant where a patent holder fails to make a patented medicine available in China despite a genuine market need. However, limited production alone does not automatically establish insufficient exploitation; the competent authority must assess the circumstances and applicable legal requirements.

Article 49: Public-interest grounds

Where a national emergency, extraordinary circumstance, or public-interest requirement arises, the patent administration department under the State Council may grant a compulsory licence to exploit a patent.

This provision is especially significant for patented vaccines, antiviral medicines, therapeutic antibodies, and other biologic products during serious public-health emergencies. The existence of a public-health problem does not, by itself, mean that a licence will automatically be issued.

Article 50: Public-health compulsory licensing

Article 50 permits compulsory licensing of patented medicines for the purpose of providing them to countries or regions recognised under relevant international treaties as having the required public-health needs.

This provision is particularly relevant to the international supply of generic or biosimilar medicines to eligible countries with insufficient pharmaceutical manufacturing capacity. Its application must be understood alongside China’s international obligations and implementing procedures.

Article 51: Competition-related grounds

Where a patented invention constitutes a practice determined to be monopolistic, a compulsory licence may be granted to eliminate or reduce the adverse effects of that practice.

For biotechnology, this could potentially concern anti-competitive conduct involving essential pharmaceutical patents or restrictions that unlawfully obstruct competition. Nevertheless, high prices, market dominance, or refusal to license do not independently establish the legal grounds; the statutory requirements must be met.

B. Article 56: Dependent patents

A compulsory licence may be granted where a later patented invention represents a major technological advance of significant economic importance but depends on an earlier patent. This can be relevant to biotechnology, where a new biologic formulation, delivery platform, or therapeutic method depends on protected technology.

The provision facilitates technological development while preserving the legal interests of the earlier patent holder. It does not, however, automatically resolve other patent or regulatory obstacles associated with commercialising a biologic medicine.

C. Implementing Regulations and administrative measures

The Implementing Regulations of the Patent Law and the Measures for Compulsory Licensing of Patent Implementation provide procedural rules for applications, examination, royalty disputes, and termination. The China National Intellectual Property Administration (CNIPA), acting under the competent State Council department, administers the compulsory-licensing process.

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3. Procedure for obtaining a compulsory licence

The principal stages are:

Establish legal grounds: The applicant must identify the relevant patent and demonstrate the applicable statutory basis, such as insufficient exploitation, public interest, or legally established monopolistic conduct.

Submit an application: The applicant must file a written application, ordinarily in Chinese, with supporting evidence and relevant documentation.

Demonstrate practical capability: The applicant should establish its ability to exploit the patented invention. For a biologic, this may require evidence of manufacturing capacity, quality systems, technical expertise, and regulatory readiness.

Administrative examination: CNIPA examines the application and supporting materials, including the justification for granting the licence.

Determine remuneration: The patent holder is entitled to appropriate remuneration. If the parties cannot agree on the amount, the competent authority may determine the licence fee under the applicable rules.

Challenge the decision where permitted: The relevant statutory procedures allow challenges to compulsory-licensing decisions and disputes concerning remuneration.

A licence is limited by its legal purpose and applicable conditions. It does not transfer ownership of the patent to the licensee. Nor does it confer unrestricted permission to exploit every patent associated with a particular pharmaceutical product.

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4. Special issues concerning biotechnology pharmaceuticals

Compulsory licensing has particular implications for biotechnology because biologic medicines are often protected by several layers of intellectual property.

Biologic drugs and therapeutic antibodies: A licence may address a patent covering a therapeutic molecule, but additional patents covering formulations, manufacturing processes, or delivery systems may remain relevant.

Vaccines: A public-health emergency may support consideration of a compulsory licence, but practical production can depend on access to technical information, biological materials, validated processes, and specialised facilities.

Gene and cell therapies: Patent permission alone does not establish that a manufacturer can safely reproduce a complex therapy. Clinical evidence, product consistency, and regulatory oversight remain essential.

Biosimilars: A compulsory licence may remove a particular patent obstacle, but it does not establish biosimilarity or replace the applicable marketing-authorisation process.

China's Drug Administration Law and relevant rules on drug registration and manufacturing continue to apply independently of patent licensing. Consequently, compulsory licensing is an intellectual-property mechanism, not a substitute for pharmaceutical regulation.

5. Relevant cases and practical examples

A significant distinction must be made between judicial precedents and administrative examples. China’s compulsory-licensing framework has historically had very limited practical use, and the following examples should not be misrepresented as court judgments granting compulsory licences.

A. Guangzhou Baiyunshan and Roche’s Tamiflu (2005–2006)

During concerns about avian influenza, Guangzhou Baiyunshan Pharmaceutical reportedly sought permission to produce a generic version of Roche’s antiviral drug Tamiflu (oseltamivir). The application did not result in a compulsory licence. Roche subsequently granted voluntary licences to Shanghai Pharmaceutical Group and HEC Group.

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Legal significance: This example illustrates the distinction between voluntary and compulsory licensing. A voluntary licence depends on the patent holder’s agreement, whereas a compulsory licence is authorised by the competent authority under statutory grounds. It also demonstrates that negotiations may provide a practical route to expanded production without a compulsory-licensing decision.

B. Qilu Pharmaceutical Co. v. Beijing Sihuan Pharmaceutical Co.

In this pharmaceutical patent dispute, the Supreme People’s Court considered whether a pharmaceutical patent holder was required to make fair, reasonable and non-discriminatory licensing commitments when cooperating in the formulation of national pharmaceutical standards. The Court held that the relevant legal framework did not impose such an obligation in the circumstances before it.

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Legal significance: This case concerns pharmaceutical patent licensing principles rather than a compulsory licence. It demonstrates why public-health objectives alone do not automatically impose a general obligation on patent owners to license their inventions.

C. Ericsson v. TCL Group Corp.

In an appeal involving an objection to jurisdiction in a market-dominance dispute, the Supreme People’s Court addressed the territorial application of China’s Anti-Monopoly Law to conduct occurring outside China that affects competition within China.

WIPO

Legal significance: Although not a pharmaceutical compulsory-licensing case, it provides context for the competition-law principles potentially relevant to Article 53(2) of the current Patent Law. A compulsory licence on competition grounds nevertheless requires the applicable legal findings; this case did not grant one.

6. International obligations under TRIPS

China is a member of the World Trade Organization and is bound by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Articles 31 and 31bis of TRIPS establish conditions for using patented inventions without authorisation and provide a framework for pharmaceutical exports to eligible countries with insufficient manufacturing capacity.

Relevant safeguards include consideration of individual circumstances, appropriate remuneration, limits on the scope and duration of authorised use, and review procedures. Article 31bis is particularly relevant to public-health exports under China’s statutory pharmaceutical licensing provision.

7. Conclusion

China’s compulsory-licensing system provides a statutory route for addressing inadequate exploitation of patents, public-health emergencies, competition concerns, and certain dependent-patent situations. Its significance for biotechnology lies in the possibility of improving access to patented vaccines, biologics, and other essential therapies.

However, legal availability does not mean routine practical use. The reported Tamiflu episode illustrates the importance of voluntary negotiations, while pharmaceutical patent disputes demonstrate that ordinary patent licensing and infringement litigation must be distinguished from compulsory licensing. Any licence granted would also operate alongside independent pharmaceutical approval and manufacturing requirements.

The principal challenge for China is therefore to maintain incentives for expensive biotechnology innovation while ensuring that patent rights do not unnecessarily obstruct access to essential medicines.