December 2015

Revision of the “Examination Guidelines for Patents and Utility Models in Japan”

As announced on 16 September 2015, the revised ‘Examination Guidelines for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Guidelines’) and the revised ‘Examination Handbook for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Handbook’) has been be applied to the examination of patents and utility models on or after 1st October 2015.

 

The ‘Revised Examination Guidelines’ are explained in more detail in this article in our info center.

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Sonderhoff & Einsel News Update, December 2015

Please find below a news update of our IP and Law practice groups. In this issue, we are covering a recent Supreme Court decision regarding the extension of patent terms for pharmaceutical products and the potential impact of changes to the Worker’s Dispatch Law on companies.

Please feel free to contact us if you have any questions with regards to the topics covered in this news update.

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Supreme Court’s Opinion in Genentech v. JPO

Insight on Potential  Extension of Patent Term for Pharmaceutical Products

On 17 November, 2015, the Supreme Court of Japan released a key decision that highlighted certain criteria which would allow an owner of a pharmaceutical patent to extend the term of its patent based on the time taken to obtain approvals from the Ministry of Health, Labour and Welfare under the Pharmaceuticals and Medical Devices Act (formerly known as the Pharmaceutical Affairs Act) (“PMDA”).

Background:

A patent term under the Patent Act (“Act”) of Japan is maximum twenty years from the date of the patent application.  However, a patentee may request the Japan Patent Office (“JPO”) to extend such term for up to five years if the patentee is not working the patented invention for a certain period during the twenty-year term, because it needs to obtain government approval to work the patented invention (the JPO may reject such request if it finds that it is not necessary to obtain such approval to work such patented invention).

For pharmaceutical products, if a company intends to manufacture and sell them, it is required to obtain approval for the manufacture and sale of the product under the PMDA.  Such approval focuses on items concerning the product’s quality, effectiveness and safety such as the ingredients, quantity, dosage, administration, effects, and side effects.  Further, if the company intends to change these items, it is required to obtain additional approval for such change of the product.

In Genentech v. JPO, a U.S.-based pharmaceutical company (“Plaintiff”) applied for a patent (“Patent”) on 28 October, 1992 for a pharmaceutical product (genetic name: bevacizumab) (“Product”) and such Patent was registered on 14 February, 2003.  On 18 April, 2007, the Plaintiff obtained the manufacture and sales approval of the Product under the PMDA (“Prior Approval”).  In the Prior Approval, the Product’s dosage and administration for adults was to give an intravenous drip of 5 mg/kg of a patient’s body weight or 10 mg/kg of body weight and its dosage interval was two weeks or more.  Based on the Prior Approval, the JPO, upon the Plaintiff’s request, extended the term of the Patent by four years, two months, and three days – i.e., the time it took to obtain approval from MHLW after the patent was registered.

On 18 September, 2009, the Plaintiff obtained subsequent approval (the “Subsequent Approval”) from MHLW to add a new dosage and administration of the Product.  The new dosage and administration for adults was to give an intravenous drip of 7.5 mg/kg of patient and the amended dosage interval was three weeks or more.

On 17 December, 2009, the Plaintiff again applied to the JPO for an extension of the term of the Patent.  The Plaintiff asserted that they had not utilized the Patent to manufacture and sell the Product under the dosage and administration stated in the Subsequent Approval for a certain period.  The JPO, however, rejected the Plaintiff’s request on 6 January, 2011 on the ground that it was not necessary for the Plaintiff to obtain such Subsequent Approval since although the dosage and administration of the Prior Approval was different from that of the Subsequent Approval, the active ingredients and effects were identical, and therefore, the Plaintiff was able to use the Patent.  On 18 April, 2011, the Plaintiff made an objection to the JPO, but the JPO did not change its position.  The Plaintiff then appealed the JPO’s rejection to the Intellectual Property High Court (“IPHC”).

Intellectual Property High Court’s Decision:

On 30 May, 2014, the IPHC held in favor of the Plaintiff and determined that the purpose of the extension of a patent term under the Act is to prevent a patentee from suffering any disadvantages (e.g., the patentee would not likely be able to recoup any R&D expenses if the patent term was shortened due to the need of obtaining government approval).  Also, since the dosage and administration of the Prior Approval were different from that of the Subsequent Approval, the Plaintiff could not manufacture and sell the Product under the dosage and administration written in the Subsequent Approval until the Subsequent Approval was obtained, and therefore, the JPO should have extended the term of the Patent based on the Subsequent Approval.

Supreme Court’s Decision:

On 17 November, 2015, the Supreme Court affirmed the IPHC’s decision and focused on: 1) comparing the substantial identity of a pharmaceutical product in a prior approval versus the identity of the product in a subsequent approval, and if the substantial identity was different; 2) whether the manufacture and sale of a pharmaceutical product under a prior approval would cover the manufacture and sale of the product under a subsequent approval.

Here, the Supreme Court ruled that with respect to a product invention which focuses on a pharmaceutical ingredient, the substantial identity of such pharmaceutical product should be determined by its ingredients, quantity, dosage, administration, and efficacy.  The Supreme Court also found that the Product’s substantial identity was different (based on its dosage and administration) in the Prior Approval and Subsequent Approval, and since based on such difference the Product was not manufactured or sold during the period of trying to obtain the Subsequent Approval, the Supreme Court concluded that the request for extending the term of the Patent for the Subsequent Approval should be permitted.

In response to the Supreme Court decision, the JPO has announced that by spring 2016, it will consider revising their guidelines for the extension of a patent term.

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Amendment of Workers Dispatch Act Now in Effect

Impact on Companies

In 2012, the Workers Dispatch Act (“Act”) was amended to impose a new obligation on companies to directly hire dispatched workers under certain conditions when using temporary employment agencies (“Agency”).  The amendment provided a three year period to allow for companies to adjust their HR policies and infrastructure to comply with the future restrictions.

This amendment recently became effective on October 1, 2015.  The Act was also amended on September 11, 2015 (and enforced on September 30, 2015) to implement other new rules for the worker dispatch business, but this newsletter focuses on the issue of “fictitious” labor contracts (i.e., services agreements or gizou ukeoi) and its potential impact on firms which outsource services and the employers which receive them.

Newly Effective Amendment of the Act

Previous to the amendment of the Act, the Ministry of Health, Labour and Welfare (“MHLW”) had issued guidelines regarding classifications of the worker dispatch business (“Guidelines”) to help companies distinguish between legitimate outsourcing labor contracts and fictitious ones.  If the local labor bureau finds a fictitious labor contract due to non-compliance with the Guidelines (i.e., a company conducted the worker dispatch business without a license), the service provider can be sentenced up to one year in prison or be fined up to JPY1,000,000.  In addition, the client company can also be sentenced up to one year in prison or be fined up to JPY 1,000,000 under the Employment Security Law since it received illegal labor outsourcing services.  However, despite these penalties, there was criticism that the Act still could not ensure a stable working environment for dispatched workers.  Client companies could freely terminate the service provider’s services which would often result in the dispatched workers losing their jobs.  With the newly effective amendment of the Act, the client company could be obligated to hire the dispatched workers under certain circumstances in order to secure their employment.

Risks For Firms Which Outsource Services and For Their Company Clients

The potential risk of violating the newly amended Act arises from the fact that an Agency is required to comply with strict regulations under the Act and obtain a business license from the MHLW to be able to dispatch workers to employers.  As a licensed Agency, the Agency can dispatch its employees to companies and such companies can directly instruct and control the dispatched workers.  However, potential issues arise when a firm (which is not a licensed Agency) dispatches its employees to a client and the client directly instructs the dispatched worker on how to perform his work – e.g., where the dispatched worker cannot act in his discretion in performing the work set forth in the labor contract.

For example, when developing a company’s IT infrastructure, a company will often outsource the development portion of the project to a consulting firm, and the firm will dispatch its consultants to the client’s office to learn its needs and business flow and develop the IT system on site.  A common occurrence in these types of projects is that the company actively instructs and controls these consultants so that the IT system is customized for the company’s operations.  Unfortunately, however, such actions could cause the contract with the consulting firm to be deemed a “fictitious” contract if it is determined that the company is controlling the dispatched worker.  As a result, the consulting firm would have violated the Act as it would not have the required business license to dispatch temporary workers, and the client may be forced to hire the dispatched consultant should the consultant request such action from the client.

As these new regulations were enforced on October 1, 2015, we believe that the MHLW will strengthen their inspection and supervision of companies in relation to fictitious labor contracts, and therefore, firms which outsource services (e.g., consulting, accounting, architect, engineering, and of course, law firms) and their client companies face an increased risk of violating the Act.

What To Do?

While it is unclear how strictly the MHLW will enforce the newly effective amendment, it will be prudent for firms to conduct employee training for employees who work at the client’s site or have close contact with the client’s employees.  The MHLW’s Guidelines provides a few key practical pointers as to how a firm (that is not a licensed Agency) should conduct the provision of its employees to a client which include:

1) instructing the dispatched employee on how to proceed with his work duties;

2) managing the employee’s work hours (including overtime), break time, holidays, and days of leave;

3) providing evaluation of the employee’s performance; and

4) assuming responsibility to discipline the employee for any improper behavior.

The Guidelines also note that the services provided by a non-licensed firm should involve specialized skill and experience and suggest that dispatching workers who perform physical labor type work may run afoul of the Act.

 

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