Patent approval linkage system – one year later

Status of generic patent challenges
Status of sales stays under patent linkage system
Questions regarding first generic exclusivity

Pursuant to the South Korea-US Free Trade Agreement, a pharmaceutical patent regulatory approval linkage system (similar to the Hatch-Waxman system in the United States) was fully implemented in South Korea in March 2015. Since then, there have been a number of developments in the pharmaceutical drug market and the patent and judicial systems in South Korea. This update summarises some of the major developments in the past year.

Status of generic patent challenges

As previously reported, a vastly increased number of cases were filed at the South Korean Intellectual Property Office (KIPO) immediately after the full system came into force in March 2015 (for further details please see "Patent approval linkage system – initial statistics"). This increase was largely attributed to South Korea's first generic exclusivity rules, which grant exclusivity to the first generic to challenge a listed patent at the KIPO (which includes any generic that files a challenge within 14 days of the actual first-filed action).

However, as the following table shows, the number of filings greatly decreased since shortly after generic exclusivity became available under the linkage system in March 2015.

In addition, compared to the initial months of the new system, generics are now filing more negative scope confirmation actions (in which the generic manufacturer seeks confirmation from KIPO that its planned generic is not within the scope of the challenged patent) than invalidation actions. This trend indicates not only that generics are becoming more selective and filing challenges only where it is consistent with their business plans, but also that generics are seeing less value in the first generic exclusivity system (which in practice may not be very exclusive) and are therefore seeking rulings specifically carving out their particular generic product from patent enforcement rather than trying to invalidate listed patents (and thus potentially open the market to all generic competitors).

Another potentially interesting piece of data is that positive scope confirmation actions are now being filed in connection with listed patents (where KIPO is asked to confirm that an accused product is within the scope of the patent). Since positive scope actions are rare and always filed by the patentee, not the potential infringer, this may indicate that in some cases patentees are using positive scope actions rather than infringement litigation as the basis for requesting stays of generic product sales, perhaps due in part to the fact that an invalidation action against a patent already asserted in a co-pending infringement action can be expedited by KIPO.

An indication that generics are adjusting their litigation strategy in view of their actual business plans is seen in the extremely high percentage of KIPO actions that have been terminated through withdrawal or nullification (due to a failure to submit required fees or formality documents).

As the table indicates, approximately 42% of the actions initially filed against listed patents (946 out of 2,233) have either been withdrawn or nullified. This may in part be due to the fact that many of these cases were likely filed simply to preserve generic exclusivity rights and thus certain generics seem to have lost interest in actually bringing the relevant generic products to market.

In addition, it was generally expected that, due to the huge number of filings, after the early months of the rollout of the patent linkage system KIPO would seek to consolidate invalidation cases filed against the same patent to try to reduce its workload. However, as it became evident that a substantial number of generics were making basic filings without detailed arguments or evidence, apparently hoping that they would be consolidated with other more substantial petitions and thus allowed to free ride on the litigation efforts of generics with an actual market interest in the relevant product, KIPO announced that cases would be consolidated only after carefully reviewing whether the presented arguments and evidence warranted consolidation. As a result, generics have been forced to consider whether their market interests really warrant the effort of litigating a particular listed patent.

Status of sales stays under patent linkage system

On the patentee side, while there have been relatively few requests for stays of generic sales to date, they have been granted in the vast majority of cases (eight out of 10 requests so far), although several have subsequently been lifted after negative decisions in corresponding KIPO actions were issued against the asserted patent.

However, tension between pharmaceutical regulations and patent law may discourage broader use of stays for generic sales in South Korea. Under the relevant statutes, a stay request must be made against all of the "same generics" seeking to enter the market. Two generics are the same for drug approval purposes if they have the same:

• type and amount of active ingredient;
• dosage form;
• usage and dosage; and
• indications.

However, even if two generics are the same for approval purposes, only one may actually infringe a listed patent (eg, if they have different crystalline forms). Under existing Ministry of Food and Drug Safety rules, a patentee seeking a stay must sue both generics for infringement, forcing the patentee to choose between risking antitrust scrutiny for knowingly suing a non-infringing party or losing any right to stay the sale by not suing either generic (even though one is actually infringing). Original drug manufacturers have increasingly expressed concern regarding the ministry's interpretation of the law regarding this point, and the issue seems likely to be disputed in the future.

Questions regarding first generic exclusivity

In contrast with the US system, determining which generics are entitled to generic exclusivity in South Korea is relatively complicated. In particular, a generic must be the 'first' to file a qualifying KIPO action against the listed patent and the 'first' to apply for generic approval for a particular product in order to qualify for exclusivity. However, the Ministry of Food and Drug Safety has now clarified that the first generic approval application requirement means the first application for a particular generic formulation. Thus, generics filing on different dates for generic approval with respect to the same original drug may still all qualify for exclusivity as long as each generic's product is different. However, all such generics must still file a 'first' qualifying KIPO action against the listed patent for the original drug.

The larger question now being asked by some generics is whether the first generic exclusivity provisions as written actually provide any meaningful benefit to qualifying generics, given that there is theoretically no limit to the number of generics that can obtain exclusivity rights. Further, while multiple generics may eventually qualify for exclusivity under the South Korean system, only one nine-month exclusivity period is granted, which begins as soon as the first generic qualifies for exclusivity (thus, any later-qualifying generics would enjoy only the benefit of the remainder of the exclusivity period). At this point, it remains to be seen whether and how generics will seek to introduce changes to the patent linkage system to address this exclusivity issue.

For further information on this topic please contact Mee Sung Shim, Inchan Andrew Kwon or Garam Baek at Kim & Chang by telephone (+822 3703 1114) or email ([email protected], [email protected] or [email protected]). The Kim & Chang website can be accessed at www.kimchang.com.