Client Alert Draft Circular Guiding Compulsory Patent Licensing and Patent Use on Behalf of The State in The Pharmaceutical Sector On 13 May 2016, the Ministry of Health (“MOH”) published a Draft Circular (“Draft”) implementing a compulsory license regime for the use of pharmaceutical patents (“Pharma Patent”) in Vietnam. The legislative authorization for the State to issue compulsory licenses for patents upon consultation with the Ministry of Science and Technology (the “MOST”) already existed under the Law on Intellectual Property (“IP Law”).1 However, this is the first time that compulsory pharmaceutical patent licenses have been detailed in a separate regulation. Scope The Draft defines drugs subject to Pharma Patents pursuant to Article 2.2 of the Law on Pharmaceuticals, specifically: a substance or mixture used to prevent, treat, diagnose or adjust the physiological functions of the human body which includes finished products, raw materials for the production of medicine, vaccines and biologicals, but does not include food supplements.2 The Draft applies to Pharma Patents protected in Vietnam and owned by Vietnamese and foreign entities involved in activities related to the use of Pharma Patents, i.e., pharmaceutical companies, universities and research institutes.3 The Draft implements the State’s compulsory Pharma Patents licensing regime for public, non-commercial, national defense and security, public disease prevention and treatment and public nutrition purposes, or to meet the urgent demands of the Vietnamese public.4 1 Conditions The MOH ultimately determines if a compulsory license for a Pharma Patent shall be issued, which would arise if: 1 Art. 147.1 of the Law on Intellectual Property 2 Art. 3.1; Draft. 3 Art. 2; Draft. 4 Art. 1.1; Draft. Healthcare/Intellectual Property Vietnam Baker & McKenzie (Vietnam) Ltd. 12th Floor, Saigon Tower 29 Le Duan Blvd District 1 Ho Chi Minh City Socialist Republic of Vietnam Tel: +84 8 3829 5585 Fax: +84 8 3829 5618 Baker & McKenzie (Vietnam) Ltd. Hanoi Branch Office Unit 1001, 10th Floor Indochina Plaza Hanoi 241 Xuan Thuy Street Cau Giay District, Hanoi Socialist Republic of Vietnam Tel: +84 4 3825 1428 Fax: +84 4 3825 1432 September 2016 www.bakermckenzie.com 2 Vietnam | September 2016 • A drug is deemed necessary to address a serious public health issue, including an urgent situation on a national level such as the outbreak of a disease, epidemic or pandemic, a disease with high contraction rates, to save a human life or other events as determined by the MOH; or • A drug is not readily available, is unaffordable for patient communities and the health insurance industry or because of other reasons.5 2 The process to request a compulsory patent license Any entity that has the ability, responsibility or need for the use of a Pharma Patent may file a request with the Drug Administration of Vietnam (“DAV”) under the MOH. The MOH shall determine whether to license a Pharma Patent under the compulsory license regime (“MOH Decision”). Within one (1) month after such a document request is received, the DAV will organize a preliminary appraisal of the document for validity. Within 15 days after a request document is appraised and deemed valid, the DAV shall consult with the relevant stakeholders about the need and justification of such a request. Within one month after the preliminary appraisal is conducted and the request is deemed valid, the DAV shall conduct an assessment for a decision. Upon consideration of a DAV recommendation, the MOH will decide whether or not to issue a compulsory license. 3 Issuance of compulsory patent license The licensee’s right to use the licensed Pharma Patent is non-exclusive. However, the licensee may sub-license the Pharma Patent only when permitted to do so by the MOH.6 The scope and terms of a Pharma Patent’s use must be sufficiently limited to achieve the purpose of the licensee’s objective and to mainly supply the domestic market, both of which will be indicated in the MOH Decision.7 The MOH decision will also identify an alternative entity authorized to use the Pharma Patent under the compulsory license if such a process is not executed by the MOH or an MOH entity.8 Compensation due to the licensee (either from the MOH or upon agreement between the authorized entity executing use of the licensed 5 Arts. 4.1,2; Draft. 6 Arts. 13.2, 17.2; Draft. 7 Art. 13.3; Draft. 8 Art. 13.1; Draft. Vietnam | September 2016 3 Should you wish to obtain further information or want to discuss any issues raised in this alert with us, please contact: Pharma and Regulatory Team Seck Yee Chung +84 8 3520 2633 email@example.com Vu Minh Ha +84 8 3520 2664 firstname.lastname@example.org Patent Team Tran Manh Hung +84 4 3936 9398 email@example.com Le Viet Hung +84 4 3936 9353 firstname.lastname@example.org Do Van +84 4 3936 2200 email@example.com www.bakermckenzie.com This client alert provided by Baker & McKenzie (Vietnam) Ltd. is intended to provide our clients, and other interested parties, with an overview of the recent legal changes in the relevant area for information purposes only. The information contained in this client alert does not constitute legal advice or legal opinion, and should not be regarded as a substitute for detailed advice in individual cases. 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Pharma Patent and the MOH) will be indicated in the MOH Decision as will the method and time of such compensation.9 4 Compensation for the patent holder Compensation to the patent holder shall not exceed 2% of the total sales of generics manufactured or imported into Vietnam.10 Compensation to the patent holder is calculated based on consideration of the following factors: • Voluntary patent license royalties in Vietnam (if any); • Funds invested to create the patent, among which the funds from the state budget (if any) must be taken into account; • Profits gained from using the patent in Vietnam; • Remaining validity term of the patent; • The necessary level of the compulsory license of patent; • The treatment value of the drug, including its advanced level compared to other available types of products; • People’s ability to pay for the drug; • The importance of the patent for final products; • The necessity to cope with medical emergency situations; and • Other relevant factors determined by the Minister of Health.11 Patent holders have the right to file a complaint or appeal against a decision for a compulsory Pharma Patent license under administrative procedure laws.12 Patent holders must collaborate with the MOH and any organization or individual who is the compulsory licensee in related issues throughout the entire process of enforcing the compulsory license.13 The Draft is expected to take effect on 1 January 2017.14 9 Arts. 13.5; 14.1(a) (b). 10 Art. 14.2; Draft. 11 Art. 14.3 of Draft. 12 Art. 16.1. of Draft. 13 Art. 16.2 of Draft. 14 Art. 18 of Draft.