Page 62 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Unit 4: Legal Issues for Entrepreneur

Notes
Analysts saw these incidents as some of the successes achieved by Pfizer in its efforts to
thwart the challenge posed by manufacturers of generic and fake drugs in a country that
was known to offer weak Intellectual Property Rights (IPR) protection.
Many also saw these rulings as an indication of China’s increasing commitment to provide
adequate IPR protection in order to conform to the Trade Related Intellectual-Property
Rights (TRIPS) agreements.

Viagra is a widely popular drug and was considered as a great success story in marketing.
It has raked in billions of dollars worldwide for Pfizer. Its success also made Viagra the
most counterfeited drug in the world. However, its performance in China had been far
below par. Ever since its launch in China in 2000, sales of Viagra had failed to take off in
the world’s most populated country. This was despite the fact that China had a huge
market for drugs that enhanced sexual performance.
In late 2001, Pfizer was granted a patent for Viagra in China. But Pfizer soon became
engaged in numerous patent litigations. An alliance of Chinese pharmaceutical companies
petitioned the State Intellectual Property Office’s (SIPO) Patent Re-examination Board
(PRB) to invalidate the patent. They contended that Viagra should not be provided a
patent as it failed to fulfill the “novelty” requirement under China’s patent law. In July 4,
2004, PRB invalidated Pfizer’s patent for Viagra citing that it had failed to accurately
explain the uses of the Viagra’s key ingredient, Sildenafil citrate (Sildenafil). Pfizer argued
that at the time of filing of the patent application, there was no requirement for that data,
and to invalidate the patent on that basis was a flawed, “retroactive” judgement.

The invalidation of the patent led to a huge international outcry. Free trade supporters
viewed this as an attack on IPRs of foreign companies and an indicator of China’s reluctance
to provide adequate protection to IPRs.
Critics lambasted China for failing to properly enforce IPR laws and called for political
pressure to make China conform to TRIPS.

Roger Pilon (Pilon), vice president for legal affairs at the Cato Institute, explained the
reason for the outcry: “On average, from the time a company first applies for a patent, it
takes 12 to 15 years and $800 million before the first pill reaches the market. Obviously, if
others were free to copy and sell that pill, having incurred none of those costs, there would
be no incentive to make that kind of investment – and none of the modern “miracle” drugs
that investment produces. No one grows crops if others are free to harvest them.”
However, some analysts felt that there were significant positives relating to the litigation.
It showed that Chinese companies had begun to appreciate the importance of IPRs. The
decision of these companies to take legal recourse rather than infringing on the IPRs was
appreciated. It indicated that China was keen to project its transition to become fully
compliant with the WTO agreements.

Background Note
Pfizer, the largest pharmaceutical company in the world, sold its products in more than
150 countries (Refer to Exhibit I for a brief note on Pfizer). In the early 1990s, Pfizer’s
scientists realized that a drug being developed by it to control hypertension was a potential
drug to treat male impotence.

On May 13, 1994, Pfizer submitted an application for a patent called
“Pyrazolopyrimidinones for the treatment of impotence” with China’s SIPO. The same
day, Pfizer submitted similar patent applications in the US Patent and Trademark Office
and the European Patent Office.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 57