Lilly Company

v.

WATSON Pharmaceuticals (Changzhou) Co., Ltd.,

A Dispute over Infringement of an Invention Patent

Guiding Case No. 84

(Discussed and Passed by the Adjudication Committee of the Supreme People’s Court

Released on March 6, 2017)

CHINA GUIDING CASES PROJECT

English Guiding Case (EGC84)

September 22, 2017 Edition

The citation of this translation of this Guiding Case is: 《礼来公司诉常州华生制药有限公司侵害发明专

利权纠纷案》 (Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., A Dispute over Infringement of

an Invention Patent), STANFORD LAW SCHOOL CHINA GUIDING CASES PROJECT, English Guiding Case (EGC84),

Sept. 22, 2017 Edition, http://cgc.law.stanford.edu/guiding-cases/guiding-case-84. The original, Chinese version of

this case is available at 《 中 国 法 院 网 》 (WWW.CHINACOURT.ORG),

http://www.chinacourt.org/article/detail/2017/03/id/2574916.shtml. See also 《最高人民法院关于发布第 16 批指导

性案例的通知》 (The Supreme People’s Court’s Notice Concerning the Release of the 16th

Batch of Guiding Cases),

issued on and effective as of Mar. 6, 2017, http://www.chinacourt.org/law/detail/2017/03/id/149260.shtml.

This document was primarily prepared by Nathan Harpainter, Lisha Huang, Joseph Incalcaterra, Sean Webb,

Peter Witherington, and Dr. Mei Gechlik; it was finalized by Sean Webb, Peter Witherington, Dimitri Phillips, and Dr.

Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and

boldfacing the headings, was done to make the piece more comprehensible to readers; all footnotes, unless otherwise

noted, have been added by the China Guiding Cases Project. The following text is otherwise a direct translation of the

original text released by the Supreme People’s Court.

Keywords

Civil Infringement of an Invention Patent

Invention Patent for a Drug Preparation Method Scope of Protection

Technical Investigator

Ascertaining the Technical Process for the Preparation of an Allegedly Infringing Drug

Main Points of the Adjudication

1. In a patent infringement dispute [involving] a drug preparation method, [a people’s

court] should, in the absence of other, contrary evidence, presume that the allegedly infringing

drug’s technical process filed with drug supervision departments is the actual technical process for

the preparation [of the drug]. Where there is evidence to prove that the filed technical process of

the allegedly infringing drug is not authentic, [a people’s court] should fully review evidence,

including technical sources, production procedures, batch production records, filed documents, etc.

of the allegedly infringing drug, to determine, in accordance with law, the actual technical process

for the preparation of the allegedly infringing drug.

2. [A people’s court] may ascertain complex technical facts, including the technical

process for the preparation of the allegedly infringing drug, by comprehensively using multiple

means, including consultations with technical investigators, expert auxiliaries, and judicial

appraisal as well as technology experts.

Related Legal Rule(s)

1. Article 59 Paragraph 1, Article 61, and Article 68 Paragraph 1 of the Patent Law of the

People’s Republic of China (amended in 2008)1 ([the equivalent provisions] applicable to this case

were Article 56 Paragraph 1, Article 57 Paragraph 2, and Article 62 Paragraph 1 of the Patent Law

of the People’s Republic of China (amended in 2000))

2. Article 78 and Article 79 of the Civil Procedure Law of the People’s Republic of China2

1 《中华人民共和国专利法》(Patent Law of the People’s Republic of China), passed and issued on Mar. 12,

1984, effective as of Apr. 1, 1985, amended three times, most recently on Dec. 27, 2008, effective as of Oct. 1, 2009,

http://www.sipo.gov.cn/zcfg/flfg/zl/fl/201509/t20150902_1169595.html. 2 《中华人民共和国民事诉讼法》 (Civil Procedure Law of the People’s Republic of China), passed on,

issued on, and effective as of Apr. 9, 1991, amended three times, most recently on June 27, 2017, effective as of July 1,

2017, http://www.npc.gov.cn/npc/xinwen/2017-06/29/content_2024892.htm. The 2017 amendment did not change

the numbering of the provisions cited from the legislation.

Basic Facts of the Case

On July 25, 2013, Lilly Company (also known as “Eli Lilly and Company”)3 claimed to

the Higher People’s Court of Jiangsu Province (hereinafter referred to as the “Jiangsu Higher

Court”)[: during the alleged infringement,] Lilly Company held the invention patent (No.

91103346.7; [regarding] a method) involved in the case, and Olanzapine,4 a drug prepared by

[using] the patented method involved in the case, was a new product. WATSON Pharmaceuticals

(Changzhou) Co., Ltd.5 (hereinafter referred to as “Watson Company”) used a preparation method

that was within the scope of protection of the patent involved in the case to produce Olanzapine

drugs and sold them to the market, infringing upon Lilly Company’s method-invention patent

involved in the case. Because of this, Lilly Company brought suit in the [present] case, requesting

that the court order:

1. Watson Company to pay Lilly Company RMB 151,060,000 as compensation for

economic losses and [to pay] Lilly Company RMB 28,800 as compensation [for

amounts paid] for the purpose of stopping the infringement, including the fees paid for

the investigation and collection of evidence and for other reasonable expenses incurred.

2. Watson Company to publish a statement on its website and in the Medicine Economic

Reporter6 to eliminate the adverse effects on Lilly Company caused by [Watson

Company’s] infringing acts.

3. Watson Company to bear lawyers’ fees of RMB 1,500,000 which Lilly Company [had

to pay] because of the occurrence of this case.

4. Watson Company to bear all the litigation costs of the case.

The Jiangsu Higher Court, during the first-instance adjudication, ascertained:

The patent involved in the case is named “Method for the Preparation of a Thieno-

Benzodiazepine Compound”,7 with China’s invention patent application number 91103346.7. It

3 The name “伊莱利利公司” is translated herein as “Eli Lilly and Company” in accordance with the English

name appearing on the company’s website, at http://www.lillychina.com/cn/contact-us.aspx. 4 The term “奥氮平” is translated herein as “Olanzapine” in accordance with the English term appearing on

the website of WATSON Pharmaceuticals (Changzhou) Co., Ltd., at

http://www.watsonpharma.com.cn/page/?pageID=21. 5 The name “常州华生制药有限公司” is translated herein as “WATSON Pharmaceuticals (Changzhou) Co.,

Ltd.” in accordance with the English name appearing on the company’s website, at

http://www.watsonpharma.com.cn/page/Default.asp?pageID=1. 6 The name “《医药经济报》” is translated here as “Medicine Economic Reporter” in accordance with the

name appearing on the publication as shown in images on its website, http://www.yyjjb.com.cn. 7 The original text reads “制备一种噻吩并苯二氮杂化合物的方法”, which is likely meant to be “制备一种

噻吩并苯并二氮杂草化合物的方法”, the name appearing in the Chinese patent involved in the case (No.

91103346.7), available at https://docs.google.com/viewer?url=patentimages.storage.googleapis.com/pdfs/92963b3ed2

869f0ed93f/CN1028429C.pdf

was applied for on April 24, 1991, by Lilly Industries Limited,8 a British [company], and the

announcement date of the grant [of the patent] was February 19, 1995. On April 24, 2011, the

patent involved in the case expired. On March 17, 1998, the patentee of the patent involved in the

case was changed to Eli Lilly and Company Limited,9 a British [company], and on February 28,

2002, the patentee was changed to Eli Lilly and Company.

The claim in the grant announcement of the patent involved in the case is:

1. a method for preparing 2-methyl-10-(4-methyl-1-piperazinyl)-4H-thieno[2,3-

b][1,5]benzodiazepine, or an acid addition salt thereof,10

said method including:

(a) making N-methylpiperazine react with a compound of the following formula,

in [which] formula, Q is a radical capable of being split off, or

8 The name “利利工业公司” is translated here as “Lilly Industries Limited” in accordance with the name

appearing in a U.S. patent which appears to correspond to the Chinese patent involved in the case; the U.S. patent is

available at https://www.google.com/patents/US5229382. 9 The name “伊莱利利有限公司” is translated here as “Eli Lilly and Company Limited” in accordance with

the English name found on the company’s website, at http://www.lilly.co.uk/en/contact/index.aspx. 10

The original text reads “一种制备 2-甲基-10-(4-甲基-1-哌嗪基)-4H-噻吩并［2,3,-b］［1,5］苯并二氮杂，

或其酸加成盐的方法”, which is likely meant to be “一种制备 2-甲基-10-(4-甲基-1-哌嗪基)-4H-噻吩并［2,3-b］

［1,5］苯并二氮杂草，或其酸加成盐的方法”, the phrase appearing in the Chinese patent, supra note 7, and is

translated here in accordance with a corresponding phrase appearing in the apparently corresponding U.S. patent,

supra note 8.

(b) making a compound of the following formula carry out a ring-closing reaction

In July 2001,11

the Institute of Materia Medica of the Chinese Academy of Medical

Sciences12

([hereinafter] referred to as “IMM-CAMS”) and Watson Company applied to the State

Drug Administration13

([hereinafter] referred to as the “SDA”) for a new drug certificate for

Olanzapine and its tablets. On May 9, 2003, IMM-CAMS and Watson Company obtained a New

Drug Certificate issued by the SDA for the active pharmaceutical ingredients (“APIs”)14

of

Olanzapine and Olanzapine tablets, while Watson Company [also] obtained an Approval

Document for Drug Registration for Olanzapine and Olanzapine tablets.

In the application materials for the new drug, the Research Materials and Literature on the

Production Technical Process of the APIs recorded the technical process for the preparation [of

the drug], viz., 4-amino-2-methyl-10-benzyl-thienobenzodiazepine, hydrochloride,

11

The original text reads “2001 年 7 月” (“July 2001”) although this date is given as June 2001 further below in

this Guiding Case and in the second-instance judgment, 《礼来公司与常州华生制药有限公司侵害发明专利权纠

纷二审民事判决书》 (Lilly Company v. WATSON Pharmaceuticals (Changzhou) Co., Ltd., The Second-Instance

Civil Judgment of a Dispute over Infringement of an Invention Patent) （2015）民三终字第 1 号民事判决 ((2015)

Min San Zhong Zi No. 1 Civil Judgment), rendered by the Supreme People’s Court on May 31, 2016, full text

available on the Stanford Law School China Guiding Cases Project’s website, at

https://cgc.law.stanford.edu/judgments/spc-2015-min-san-zhong-zi-1-civil-judgment. 12

The original text reads “中国医学科学院药物研究所” and is translated here as “Institute of Materia Medica

of the Chinese Academy of Medical Sciences” based on the names used on the institute’s website,

http://www.imm.ac.cn/en/index.asp. 13

The original text reads “国家药品监督管理局” (“State Drug Administration”, a.k.a. “SDA”). In 2003, this

entity underwent institutional reforms and was renamed “国家食品药品监督管理局” (“State Food and Drug

Administration”, a.k.a. “SFDA”); in 2013, it was renamed as “国家食品药品监督管理总局” (“China Food and Drug

Administration”, a.k.a. “CFDA”), with a website at http://www.sfda.gov.cn/WS01/CL0001. See, e.g.,

http://www.gov.cn/zhengce/content/2005-08/12/content_8161.htm and

http://www.zj.xinhuanet.com/2012market/spypjd/2013-03/25/c_115150403.htm. 14

The original text reads “原料药” and is translated herein as “active pharmaceutical ingredients” (“APIs”) in

accordance with the translation used in a documented titled “美国药品注册技术要求” (“Technical Requirements for

Drug Registration in the United States”) prepared by China’s Ministry of Commerce, available at

http://policy.mofcom.gov.cn/export/ckyp/c4.action.

methylpiperazine, and dimethylformamide are added and stirred, giving a crude product with a

yield of 94.5%; [three substances, namely,] 2-methyl-10-benzyl-(4-methyl-1-piperazinyl)-4H-

thienobenzodiazepine, glacial acetic acid, and hydrochloric acid, are added and stirred, and then

[the result is] neutralized with sodium hydroxide to give a crude product with a yield of 73.2%;

after being refined twice, the total yield is 39.1%.

From an analysis of the reaction formula, [one can see that] this process is to have a

formula (IV) compound react with methylpiperazine to produce a formula (V) compound and the

formula (V) compound is then debenzylated to give a formula (I) compound.15

In August 2003,

Watson Company marketed “Watson-Olanzapine” 5mg-new antipsychotics,16

which it produced,

to Qingdao Seventh People’s Hospital.17

[As] recorded in [Watson Company’s] product publicity

materials, the main ingredient of Olanzapine tablets was Olanzapine, whose chemical name is 2-

methyl-10-(4-methyl-1-piperazine)-4H-thienobenzodiazepine.

In the handling of another case, Shanghai Science and Technology Consulting Services

Center,18

having been entrusted by the Jiangsu Higher Court [with an appraisal task], issued the

(2010) Jian Zi No. 19 Technical Appraisal Report on August 25, 2011. The appraisal report stated:

[one] cannot obtain Olanzapine APIs by following the technical process recorded in the Research

Materials and Literature on the Production Technical Process of the APIs filed by Watson

Company to carry out experiments. The conclusion of the appraisal was: the key reaction steps for

producing Olanzapine APIs as recorded in materials filed by Watson Company lack authenticity

and the filed production technical process is not feasible.

After the appraisal report was cross-examined, Eli Lilly and Company agreed with it.

Watson Company also did not have objections to the appraisal report, but insisted that a two-step

method could be used to produce Olanzapine. It was merely because some content involving

business secrets was not written in the filed materials that experts could not produce [Olanzapine]

by following the filed materials.

Watson Company argued that it had not infringed upon the patent involved in the case and

the reasons were: from 2003 to date,19

Watson Company used the technical process for the

production of Olanzapine which [the company] reported for approval in its supplemental filing

15

The terms “formula (IV)” (“式四”), “formula (V)” (“式五”), and “formula (I)” (“式一”) refer to structural

formulas provided and labelled as such in the Chinese patent involved in this case and the apparently corresponding

U.S. patent, supra notes 7 and 8. 16

The original text reads ““华生 -奥氮平”5mg-新型抗精神病药” (“‘Watson-Olanzapine’ 5mg-new

antipsychotics”). 17

The name “青岛市第七人民医院” is translated here as “Qingdao Seventh People’s Hospital” in accordance

with the English name appearing on the hospital’s website, http://www.qdjwzx.com. 18

The name “上海市科技咨询服务中心” is translated here literally as “Shanghai Science and Technology

Consulting Services Center”. 19

The original text has “至今” (“to date”) here. It is not clear from the context which date this refers to, e.g.,

the patent’s expiration date or a date during the legal proceedings of the case.

[submitted] in 2008. That filed document was approved by the SDA on September 8, 2010, and

[the filed technical process] was feasible. Given that Lilly Company did not provide any evidence

to prove [what] Watson Company’s technical process for the production [of Olanzapine was], [the

people’s court] should use the technical process for Olanzapine that Watson Company filed in

2008 as the technical process for comparison to determine whether or not there was infringement.

In the SDA’s Approval Document for a Supplementary Application for a Drug of

September 8, 2010, submitted by Watson Company, the “Application Content” column stated:

(1) to change the production technical process that has affected the quality of the drug;

(2) to revise the registered standards of the drug.

The “Conclusion of the Review for Approval” column stated:

After review, [the SDA] agrees [to Watson Company’s] change of the production

technical process of this drug and revision of the quality standards [of the drug]. On

the basis that the original synthetic route is not changed, [Watson Company] merely

adjusts, in the changed production technical process, the solvents and reagents used in

the technical process for the preparation [of the drug]. The quality standards are

attached for implementation and are effective for a period of 24 months.

In the Registration Materials for the Supplementary Application for Olanzapine, which

was attached to the aforementioned 2010 Approval Document for a Supplementary Application for

a Drug, the explanatory content of 5.1.1 of Section 5.1 Research Materials and Literature on the

Production Technical Process of the APIs was:

According to our company’s actual production of Olanzapine APIs and on the basis

that the route of the production technical process reported in the original [filing] is not

changed, [the company] has made some adjustments and changes to the technical

process for the preparation of Olanzapine and has optimized the technical process to

further enhance and guarantee the quality of the intermediates of Olanzapine and to

effectively control the related impurities in the preparation process of Olanzapine.[….]

Since the route of the technical process has not changed [and] the crystallization

solvent in the final step has not changed, the structure and crystal form of the

compound will also not change.

In the course of handling the second-instance adjudication, the Supreme People’s Court, in

order to accurately ascertain the technical facts involved in this case[:]

approved, according to Article 79 of the Civil Procedure Law [of the People’s Republic

of China] and Article 122 of the Interpretation of the Supreme People’s Court

Concerning the Application of the “Civil Procedure Law of the People’s Republic of

China” (hereinafter referred to as the “Interpretation of the Civil Procedure Law”),20

Lilly Company’s application to have an expert auxiliary appear in court;

approved, according to Article 117 of the Interpretation of the Civil Procedure Law,

Watson Company’s application to have witnesses appear in court;

notified, according to Article 78 of the Civil Procedure Law [of the People’s Republic

of China] and Article 227 of the Interpretation of the Civil Procedure Law, the

personnel of the Jiangsu Science and Technology Consulting Center,21

which issued the

(2014) Si Jian Ding No. 0222

Technical Appraisal Report, to appear in court; [and]

designated for the first time, according to Articles 2 and 10 of the Interim Provisions of

the Supreme People’s Court on Several Issues Concerning the Participation in

Litigation Activities of Technical Investigators of Intellectual Property Courts,23

technical investigators to appear in court, who, together with all parties, asked the

expert auxiliary, witnesses, and appraisers about related technical issues.

The Supreme People’s Court, during the second-instance adjudication, also ascertained:

On October 28, 1999, Watson Company and IMM-CAMS signed a Technology [Transfer]

Contract,24

stipulating that IMM-CAMS transferred Olanzapine, an anti-schizophrenia drug

researched and developed [by IMM-CAMS], and its formulations to Watson Company and that

IMM-CAMS would be responsible for completing preclinical information for reporting and

approval and [would be responsible for] reporting clinical [information] in Beijing. As for the

standards and methods for inspection and acceptance [of Olanzapine and its formulations], [the

standards] would be in accordance with the standards for approving new drugs and the inspection

and acceptance would be [done] by methods used for obtaining approval documents for clinical

[research] and new drug certificates. In other clauses [of the contract], both sides had stipulations

20

《最高人民法院关于适用〈中华人民共和国民事诉讼法〉的解释》 (Interpretation of the Supreme

People’s Court Concerning the Application of the “Civil Procedure Law of the People’s Republic of China”), passed

by the Adjudication Committee of the Supreme People’s Court on Dec. 18, 2014, issued on Jan. 30, 2015, effective as

of Feb. 4, 2015, http://www.chinacourt.org/law/detail/2015/01/id/148091.shtml. 21

The name “江苏省科技咨询中心” is translated herein literally as “Jiangsu Science and Technology

Consulting Center”. 22

The original text reads “（2014）司鉴定第 02 号” (“((2014) Si Jian Ding No. 02)”) although a “Technical

Appraisal Report” (“《技术鉴定报告》”) designated “（2014）司鉴字第 02 号” (“((2014) Si Jian Zi No. 02)”)

appears twice further below in this Guiding Case. 23

《最高人民法院关于知识产权法院技术调查官参与诉讼活动若干问题的暂行规定》 (Interim

Provisions of the Supreme People’s Court on Several Issues Concerning the Participation in Litigation Activities of

Technical Investigators of Intellectual Property Courts), passed by the Adjudication Committee of the Supreme

People’s Court on Dec. 30, 2014, issued on and effective as of Dec. 31, 2014,

http://www.gipc.gov.cn/showu/big_content.jsp?id=bb02e8e6f8164bb2864ea71639424a75. 24

The original text reads “《技术合同书》” (“Technology Contract”), which is likely meant to be “《技术转

让合同》” (“Technology Transfer Contract”), appearing twice further below in this Guiding Case.

regarding the new drug certificate and the reporting of the production [of Olanzapine and its

formulations] for approval.

In the (Jing 99) Yao Shen Lin Zi No. 82 Application Form for Clinical Research of a New

Drug completed by IMM-CAMS in October 1999, the reaction route drawn in the “Technical

Process for the Preparation [of the Drug]” column was as follows:

On November 9, 1999, with respect to IMM-CAMS’s application for clinical research for a

new drug, the Health Bureau of Beijing Municipality issued a Form to Report an Assessment of a

Site for the Development of a New Drug. The “Conclusion of the Assessment of the Site” column

[of the form] recorded: “The institute has conditions to develop this raw material. Original records

and experiment data are basically complete and the content is authentic.”

In June 2001, IMM-CAMS and Watson Company jointly submitted to the SDA the New

Drug Certificate and Production Application ((2001) Jing Shen Chan Zi No. 019). With respect

to that application, the Drug Administration of Jiangsu Province issued a Form to Report an

Assessment of a Site for the Development of a New Drug on October 22, 2001. The “Conclusion

of the Assessment of the Site” column [of the form] recorded: “After the assessment of the site, [it

is concluded that] the original records about the preparation and inspection of the [drug] samples

are basically complete and the inspection equipment basically has the condition [for its proper

operation]. The development unit does not currently have a workshop for producing APIs and is

now applying for a new drug certificate for this drug.”

Based on Watson Company’s application, the Drug Administration of Jiangsu [Province],

on May 21, 2009, issued a letter to entrust the Drug Safety Supervision Division of the Food and

Drug Administration of Changzhou Municipality, Jiangsu [Province], with examining Watson

Company’s Olanzapine production site and [with testing] product samples. With respect to the

examination and [testing of product] samples, the Drug Administration of Jiangsu [Province]

issued the Drug Registration Report on the Examination of a Production Site (Acceptance No.

CXHB0800159), the “Results of the Examination” column of which recorded:

In accordance with relevant drug registration requirements for the examination of

[production] sites, the first examination of the production site of the drug was carried

out on July 7, 2009. The company’s institution and personnel as well as production

and inspection facilities can meet the production requirements of the drug. The raw

and auxiliary materials can be traced, the primary raw materials are added in

accordance with the prescribed amounts, and the production process is carried out in

accordance with the reported technical process. On August 25, 2009, in accordance

with relevant drug registration requirements regarding the examination of [production]

sites, [we] examined various records of the three batches of products [numbered]

70309001, 70309002, and 70309003, including batch production records, inspection

records, and records showing the use and inventory of raw materials. [Testing of]

samples was carried out in accordance with the requirements for [testing] samples.

The “Conclusion of the Comprehensive Assessment” column recorded: “Based on the

comprehensive assessment, the conclusion of the examination of the [production] site is: pass”.

In the Registration Materials for the Supplementary Application for Olanzapine attached to

the Approval Document for a Supplementary Application for a Drug issued by the SDA to Watson

Company on September 8, 2010, the following reaction route was drawn in 5.1.2 “The Route of

the Technical Process” of [Section] 5.1 Research Materials and Literature on the Production

Technical Process of the APIs:

On March 5, 2015, the Jiangsu Science and Technology Consulting Center, having been

entrusted by the Shanghai office of (Beijing) Fangda Partners25

[with an appraisal task], issued the

(2014) Si Jian Zi No. 02 Technical Appraisal Report, the “Conclusion of the Appraisal” section of

which recorded:

1. The technical process for the preparation of Olanzapine that Watson Company filed

with the SDA in 2008 is feasible.

2. The technical process for the preparation of Olanzapine that Watson Company filed

with the SDA in 2008 was compared with Lilly Company’s patented method (No.

91103346.7). The starting materials of both are secondary amines, but the routes of

their technical processes for the preparation of [the drug] are different, as specifically

shown in [the following observations]:

(1) The key intermediates produced in the reactions are different;

(2) The reaction steps are different: Watson Company [uses] a four-step method,

whereas Lilly Company [uses] a two-step method;

(3) The reaction conditions are different: in the substitution reaction, Watson

Company uses dimethyl formamide as the solvent, whereas Lilly Company

uses a mixed solvent of dimethyl sulfoxide and toluene as the solvent.

During the second-instance trial, Lilly Company clarified that, in the [present] case, it

demanded protection for method (a) in Claim 1 of the patent involved in the case.

Results of the Adjudication

On October 14, 2014, the Higher People’s Court of Jiangsu Province rendered the (2013)

Su Min Chu Zi No. 0002 Civil Judgment:26

1. [the court orders] WATSON Pharmaceuticals (Changzhou) Co., Ltd. to pay Lilly

Company RMB 3.5 million as compensation for economic losses and reasonable fees

paid for the purpose of stopping the infringement.

2. [the court] rejects Lilly Company’s other litigation requests.

[The court also ordered that] the acceptance fee of the case was to be RMB 809,744, RMB

161,950 of which was to be borne by Lilly Company and RMB 647,794 by WATSON

Pharmaceuticals (Changzhou) Co., Ltd.

25

The name “方达（北京）律师事务所” is translated here as “Fangda Partners (Beijing)” in accordance with

the English naming appearing on the law firm’s English website, http://www.fangdalaw.com/?lang=en, with the

addition of a literal translation of “北京” (“Beijing”). 26

The first-instance judgment has not been found and may have been excluded from publication.

Unconvinced, both Lilly Company and WATSON Pharmaceuticals (Changzhou) Co., Ltd.

appealed. On May 31, 2016, the Supreme People’s Court rendered the (2015) Min San Zhong Zi

No. 1 Civil Judgment:27

1. [The court] revokes the (2013) Su Min Chu Zi No. 0002 Civil Judgment [rendered by]

the Higher People’s Court of Jiangsu Province.

2. [The court] rejects Lilly Company’s litigation requests.

[The court also ordered that] the acceptance fees of the first-instance and second-instance [cases]

were to be RMB 809,744 each, RMB 323,897 of which was to be borne by Lilly Company and

RMB 1,295,591 by WATSON Pharmaceuticals (Changzhou) Co., Ltd.

Reasons for the Adjudication

In the effective judgment, the court opined:28

Article 7 of the Interpretation of the Supreme People’s Court on Several Issues

Concerning the Application of Law in the Handling of Disputes over Patent Infringement

provides:29

When determining whether an allegedly infringing technical solution falls within the

scope of protection of a patent, [a people’s court] should review all of the technical

features recorded in the claims asserted by the right-holder.

Where the allegedly infringing technical solution includes technical features that

are the same as or equivalent to all of the technical features recorded in the claims, the

people’s court should determine that [the allegedly infringing technical solution] falls

within the scope of protection of the patent. Where, compared with all of the technical

features recorded in the claims, the technical features of the allegedly infringing

technical solution lack more than one technical feature recorded in the claims or have

more than one technical feature that is neither the same as nor equivalent [to one

27

《礼来公司与常州华生制药有限公司侵害发明专利权纠纷二审民事判决书》 (Lilly Company v.

WATSON Pharmaceuticals (Changzhou) Co., Ltd., The Second-Instance Civil Judgment of a Dispute over

Infringement of an Invention Patent) （2015）民三终字第 1 号民事判决 ((2015) Min San Zhong Zi No. 1 Civil

Judgment), rendered by the Supreme People’s Court on May 31, 2016, full text available on the Stanford Law School

China Guiding Cases Project’s website, at https://cgc.law.stanford.edu/judgments/spc-2015-min-san-zhong-zi-1-civil-

judgment. 28

The original text does not specify which court opined. Given the context, this should be the Supreme

People’s Court. 29

《最高人民法院关于审理侵犯专利权纠纷案件应用法律若干问题的解释》 (Interpretation of the

Supreme People’s Court on Several Issues Concerning the Application of Law in the Handling of Disputes over

Patent Infringement), passed by the Adjudication Committee of the Supreme People’s Court on Dec. 21, 2009, issued

on Dec. 28, 2009, effective as of Jan. 1, 2010, http://www.sdjnszfy.gov.cn/web/legal.do?me=info&id=42.

recorded in the claims], the people’s court should determine that [the allegedly

infringing technical solution] does not fall within the scope of protection of the patent.

In this case, the allegedly [infringing] drug that Watson Company produced and sold and the

product prepared by the patented method involved in the case are the same, viz., Olanzapine. The

determination of whether Watson Company’s technical process for the preparation of Olanzapine

fell within the scope of protection of the patent involved in the case involved the following three

issues:

(1) Concerning the scope of protection of the patent involved in the case

Article 56 Paragraph 1 of the Patent Law provides:30

The scope of protection of an invention or a utility model patent is [determined] in

accordance with the content of the claims. The specification and attached figures may

be used to explain the claims.

In this case, Lilly Company demanded protection for method (a) in Claim 1 of the patent involved

in the case. The claim adopts an open writing style. [The claim] sets only [two] limitsthe

participation of tricyclic reductants and N-methylpiperazine in the substitution reaction and the

[type of] radical in which substitution takes place. The scope of protection [of the claim] covers

all the preparation methods for the production of Olanzapine in which the aforementioned tricyclic

reductants and N-methylpiperazine are used to have substitution reactions in Q radicals.

Regardless of what kind of reaction starting materials, solvents, or reaction conditions are used,

[the preparation methods] are [still] within the scope of protection [of the claim]. Based on this,

the key to the determination of whether Watson Company’s technical process for the preparation

of Olanzapine fell within the scope of protection of the patent involved in the case was the

comparison between the reaction routes of the two technical solutions. Specific reaction starting

materials, solvents, reaction conditions, etc. are not included in the scope of comparison for

[determining] infringement; otherwise, this would improperly reduce the scope of protection of the

patent involved in the case, harming Lilly Company’s legal rights and interests.

(2) Concerning the technical process for the preparation of Olanzapine actually used by

Watson Company

Article 57 Paragraph 2 of the Patent Law provides:31

30

Article 56 Paragraph 1 of the Patent Law as amended in 2000 corresponds to Article 59 Paragraph 1 of the

Patent Law currently in affect. 《中华人民共和国专利法》(Patent Law of the People’s Republic of China), supra

note 1.

Where a patent infringement dispute involves an invention patent for the

manufacturing method of a new product, an entity or individual that manufactures an

identical product should provide proof [to show] that the manufacturing method of its

or his32

product is different from the patented method.

In this case, neither party had objections to [the fact that] Olanzapine was the [“]new product[”]

referred to in the Patent Law. Watson Company should, with respect to [the assertion] that its

technical process for the preparation of Olanzapine was different from the patented method

involved in the case, bear the burden of proof. Specifically, Watson Company should provide

evidence to prove that the reaction route of the technical process for the preparation of Olanzapine

that it actually used did not fall within the scope of protection of the patent involved in the case;

otherwise, [Watson Company] would bear the legal consequences of failing to adduce

evidencethe presumption that Lilly Company’s allegation of infringement was established.

In this case, Watson Company asserted that from 2003 to date,33

it had continuously used

the filed technical process that it [reported], as a supplement, to the SDA in 2008 to produce

Olanzapine. It also submitted evidence to prove the technical process for the preparation of

Olanzapine that it actually used, including its 2003 and 2008 batch production records for

Olanzapine (First-Instance Supplementary Evidence 6), the production procedures [used] in 2003,

2007, and 2013 (First-Instance Supplementary Evidence 7), and the Approval Document for a

Supplementary Application for a Drug (First-Instance Supplementary Evidence 12).

As mentioned above, the key to the determination of [whether there was] infringement in

this case was the comparison between the reaction routes of the two technical solutions. The

reaction route of the filed technical process as supplemented by Watson Company in 2008 can be

found in the Registration Materials for the Supplementary Application for Olanzapine that it

submitted to the SDA. In [that document], the figure of 5.1.2 “Technical Process Routes” under

[Section] 5.1 Research Materials and Literature on the Production Technical Process of the APIs

shows the reaction route as: the secondary amino group in the “secondary amines” is first

protected with benzyl to prepare a “benzylate” (benzylation) and then a ring-closing reaction is

carried out to produce “benzyl-substituted thienobenzodiazepine”, a tricyclic compound

(reductant). The amino group in the “reductant” is substituted with N-methylpiperazine to form a

“condensate” and then the benzyl is removed to produce Olanzapine.

This court opined that the existing evidence on file could form a complete chain of

evidence to prove that Watson Company, from 2003 to the date when the patent involved in the

31

Article 57 Paragraph 2 of the Patent Law as amended in 2000 corresponds to Article 61 Paragraph 1 of the

Patent Law currently in affect. 《中华人民共和国专利法》(Patent Law of the People’s Republic of China), supra

note 1. 32

The term “his” as used here is a gender-neutral term that may refer to “her”. 33

The original text has “至今” (“to date”) here. It is not clear from the context which date this refers to, e.g.,

the patent’s expiration date or a date during the legal proceedings of the case.

case expired, continuously used the reaction route of its filed technical process, as supplemented in

2008, to produce Olanzapine. [The court’s] main reasons were as follows:

First, in 2008, when Watson Company put forward, to the SDA, a supplementary

application for the registration of the drug Olanzapine, [it] clearly recorded the reaction route of its

technical process for the preparation of Olanzapine in the Registration Materials for the

Supplementary Application for Olanzapine that it submitted. With respect to that supplementary

application, the drug supervision departments of Jiangsu Province carried out an examination of

Watson Company’s production site and tested product samples on July 7 and August 25, 2009,

and [thereafter] issued the Drug Registration Report on the Examination of a Production Site

(Acceptance No. CXHB0800159). The report showed that Watson Company’s “production

process is carried out in accordance with the reported technical process” and that testing of

samples of three batches “was carried out in accordance with the requirements for testing samples”.

The conclusion of the examination of the site was: “pass”. In other words, the filed technical

process as supplemented by Watson Company in 2008 was examined by the drug supervision

departments at the [production] site and [the process] was feasible. Based on this, on September 8,

2010, the SDA issued the Approval Document for a Supplementary Application for a Drug to

Watson Company, agreeing to Watson Company’s “change of the production technical process

and revision of the quality standards” of Olanzapine.

During the second-instance trial, Lilly Company’s expert auxiliary agreed that the filed

technical process that Watson Company supplemented in 2008 is feasible. The Jiangsu Science

and Technology Consulting Center issued the (2014) Si Jian Zi No. 02 Technical Appraisal Report,

the “Conclusion of the Appraisal” section of which also agreed that “[t]he technical process for the

preparation of Olanzapine that Watson Company filed with the SDA in 2008 is feasible.”

Therefore, [a people’s court] should, in the absence of other, contrary evidence, presume that the

filed technical process as supplemented by Watson Company in 2008 was the technical process for

the preparation of Olanzapine that it actually used after it had obtained the Approval Document for

a Supplementary Application for a Drug.

Second, generally speaking, a technical process for the preparation of a drug that is

applicable to large-scale industrial production [of drugs] has cumbersome steps and complex

operations, and its formation cannot be accomplished easily. From the research and development

stage to the actual production stage, the long-term technology accumulation [of a technical process

for the preparation of a drug] is usually [carried out] under the circumstances that the basic

reaction route remains stable while adjustments of reaction conditions and operational details are

continuously optimized to address defects found in the actual production.

Watson Company’s technical process for the preparation of Olanzapine was assigned from

IMM-CAMS. The two parties signed a Technology Transfer Contract on October 28, 1999.

According to the stipulations in the contract, IMM-CAMS was responsible for completing

preclinical information for reporting and approval and [was responsible for] reporting clinical

[information] in Beijing.

In the (Jing 99) Yao Shen Lin Zi No. 82 Application Form for Clinical Research of a New

Drug, which IMM-CAMS completed in October 1999, the reaction route drawn in the “Technical

Process for the Preparation [of a Drug]” column showed that [IMM-CAMS] used a reaction route

that was the same as the reaction route of the filed technical process as supplemented by Watson

Company in 2008. With respect to that application for clinical research of a new drug, the Health

Bureau of Beijing Municipality issued the Form to Report an Assessment of a Site for the

Development of a New Drug on November 9, 1999, confirming that “[o]riginal records and

experiment data are basically complete and the content is authentic.” On this basis, IMM-CAMS

and Watson Company, in accordance with the stipulations in the Technology Transfer Contract,

jointly submitted to the SDA the New Drug Certificate and Production Application ((2001) Jing

Shen Chan Zi No. 019). With respect to that application, the Drug Administration of Jiangsu

Province issued on October 22, 2001, the Form to Report an Assessment of a Site for the

Development of a New Drug, confirming that “the original records about the preparation and

inspection of the [drug] samples are basically complete”. Through a series of reviews, including

the aforementioned examinations for approval, IMM-CAMS and Watson Company, on May 9,

2003, obtained a New Drug Certificate, issued by the SDA, for Olanzapine APIs and Olanzapine

tablets.

It could be seen from this that from 1999, Watson Company had a technical process for the

preparation of Olanzapine whose reaction route is the same as that of its filed technical process as

supplemented in 2008 and that [the company] used this to report the registration of the new drug

for which a new drug certificate was obtained. Therefore, the probability that Watson Company

used, prior to 2008, when the technical process was filed as a supplement, another preparation

technical process whose reaction route is completely different to produce Olanzapine was not

[deemed to be] high.

Finally, in the Approval Document for a Supplementary Application for a Drug that the

SDA issued to Watson Company on September 8, 2010, the “Conclusion of the Review for

Approval” column stated: “On the basis that the original synthetic route is not changed, the

changed production technical process merely adjusts the solvents and reagents used in the

technical process for the preparation [of the drug].” [In other words,] the SDA confirmed that the

reaction route of the filed technical process as supplemented by Watson Company in 2008 and that

of its earlier technical process for the preparation [of the drug] were the same. During the first-

instance adjudication, Watson Company submitted its production procedures [used] in 2003, 2007,

and 2013 as well as [its] 2003 and 2008 batch production records of Olanzapine. Watson

Company asserted that the above-mentioned evidence involved its business secrets and the first-

instance court organized the two parties to carry out cross-examination, for ascertaining the

authenticity and relevance [of the evidence], that was not open to the public.

This court, after review, [found that] Watson Company’s 2003 and 2008 batch production

records of Olanzapine were records made during the actual productions carried out in accordance

with the production procedures [used] in 2003 and 2007, respectively. The above-mentioned

production procedures and batch production records both showed that the basic reaction route

[actually used in] Watson Company’s technical process for the preparation of Olanzapine and the

reaction route of the filed technical process that it supplemented in 2008 were the same. [Watson

Company], on the basis that [its] basic reaction route remained unchanged, merely adjusted and

constantly optimized the reaction conditions, solvents, and other production details. Such a

technology accumulation process was in line with actual production rules and routines.

In conclusion, this court opined that the filed technical process that Watson Company

supplemented in 2008 was authentic and feasible. From 2003 to the date when the patent involved

in the case expired, Watson Company continuously used the reaction route of its filed technical

process, as supplemented in 2008, to produce Olanzapine.

(3) Concerning whether Lilly Company’s allegation of infringement was established

Comparing the reaction route of Watson Company’s technical process for the preparation

of Olanzapine and that of the patented method involved in the case, [the court found that] the

differences between the two are different reaction steps and different key intermediates.

Specifically, the [amino] group34

in the tricyclic reductant used in Watson Company’s technical

process for the preparation of Olanzapine is protected by benzyl. Thus, a benzylation reaction step

is necessarily present before the substitution reaction to produce a benzylated tricyclic reductant,

and a corresponding debenzylation reaction step is necessarily present after the substitution

reaction to obtain Olanzapine. However, in the reaction route of the patent involved in the case,

the [amino] group in the tricyclic reductant is not protected by benzyl, and thus the corresponding

benzylation reaction step and debenzylation reaction step do not exist.

Article 17 Paragraph 2 of Several Provisions of the Supreme People’s Court on Issues

Concerning the Application of Law in the Handling of Patent Disputes provides:35

Equivalent features mean the features that use basically the same means as those of the

recorded technical features to realize basically the same functions and achieve

basically the same effects, and, when an allegedly infringing act occurs, ordinary

technicians of the field can think of these features without the need for creative work.

In this case, in terms of the differences between the reaction route of Watson Company’s technical

process for the preparation of Olanzapine and that of the patented method involved in the case,

first, the tricyclic reductant intermediate that is protected by benzyl and the tricyclic reductant

34

The original text has “胺基” here and in the following paragraphs, whereas “氨基” (“amino group”) is likely

meant throughout. 35

《最高人民法院关于审理专利纠纷案件适用法律问题的若干规定》 (Several Provisions of the Supreme

People’s Court on Issues Concerning the Application of Law in the Handling of Patent Disputes), passed by the

Adjudication Committee of the Supreme People’s Court on June 19, 2001, issued on June 22, 2001, effective as of

July 1, 2001, amended two times, most recently on Jan. 19, 2015, effective as of Feb. 1, 2015,

http://www.chinacourt.org/law/detail/2015/01/id/148090.shtml.

intermediate that is not protected by benzyl are different compounds. They have different

chemical reaction characteristics. That is, in the tricyclic reductant intermediate that is not

protected by benzyl, both the Q radical that is capable of being split off and the [amino] group can

react with N-methylpiperazine, whereas in the tricyclic reductant intermediate that is protected by

benzyl, because the [amino] group is protected by benzyl, it cannot have an unexpected

substitution reaction with N-methylpiperazine and the substitution reaction can only happen in the

Q radical. In the method of the patent involved in the case, benzylation and debenzylation

reaction steps do not exist before and after the substitution reaction. Therefore, the two technical

solutions are quite different in [their] reaction intermediates and reaction steps.

Second, due to the addition of benzylation and debenzylation steps, Watson Company’s

technical process for the preparation of Olanzapine is detrimental to the yield of the final product.

Because of the absence of benzylation and debenzylation steps, the yield of the patented [method]

involved in the case will not be reduced. Therefore, the two technical solutions are quite different

in [their] technical effects, such as the level of yield and other aspects.

Finally, although benzylation of the [amino] groups in the above-mentioned tricyclic

reductants to reduce side reactions is common knowledge in the field of chemical synthesis, this

type of change is substantive. The reaction characteristics of the tricyclic reductant intermediate

protected by benzyl have changed and the increase in reaction steps has also reduced the yield

rates. In addition, the common knowledge about protection by benzylation merely explains that,

compared with the patented method involved in the case, Watson Company’s technical process for

the preparation of Olanzapine has made limited improvements. It does not suggest that the

technical means used by the two [methods] are basically the same.

In summary, Watson Company’s technical process for the preparation of Olanzapine and

the patented method involved in the case are different, [as reflected in] whether the tricyclic

reductant intermediates are benzylated intermediates and the resulting addition of benzylation

reaction steps and debenzylation reaction steps. The corresponding technical features are also not

technical means that are basically the same and the technical effects achieved are quite different.

[Thus, the features] did not constitute equivalent features. Consequently, Watson Company’s

technical process for the preparation of Olanzapine did not fall within the scope of protection of

the patent involved in the case.

To summarize the above, Watson Company’s technical process for the preparation of

Olanzapine did not fall within the scope of protection of the patent involved in the case owned by

Lilly Company. The first-instance judgment [was based on] erroneous determinations of facts and

applications of law, which were corrected by this court.

(Adjudication personnel of the effective judgment: ZHOU Xiang, WU Rong, and SONG

Shuhua)