While Shanghai Techwell Biopharmaceutical Co Ltd saw a sharp drop in its market share in Japan due to a patent dispute, winning the legal case helped the previously little-known company to increase its industry influence in the export destination.
"We've learned important lessons regarding intellectual property from the case," said Ji Xiaoming, general manager of the company.
Techwell was founded in 2001, after it was spun off from an industrial research institute into a separate biotechnological research and development center in 1993.
With more than 20 years of biomedicine R&D experience, the company has long focused on providing active pharmaceutical ingredients, also known as APIs, for biomedicines and chemical compounds to drugmakers, said Xie Ying, IP manager of the company.
The turnaround took place in 2008, when Teva Pharmaceutical Industries Ltd, a pharmaceutical giant headquartered in Israel, filed a patent complaint against one of Techwell's clients in Japan, asserting the pravastatin sodium products made by the Chinese company violated its patent rights.
Pravastatin sodium, a medicine developed by a leading Japanese pharmaceutical company for reducing lipid levels in the bloodstream, enjoyed high popularity in Japan.
After the original patent expired, Techwell entered the Japanese market right away as a generic drugmaker and enjoyed brisk growth. Its profits rose from millions of yuan in annual sales in 2003 to tens of millions in 2008. The proceeds from the medicine alone accounted for half of the company's total sales, Ji said.
The case caught the attention of local media at that time because it involved a popular drug, an industrial giant and a controversial issue in the patent sphere, Ji said.
The key issue in the case was whether the method to produce the medicine or the medicine itself needed to be covered in Teva's patent claims, he noted.
If the medicine itself was covered, it means whatever methods taken would infringe on the patent. Otherwise, a different production approach can avoid infringing on the patent, he explained.
"We had confidence in our own microbial fermentation production method, which is different from our rival's," he said. The only concern was the judgment criteria.
The court ruled in favor of Techwell and the court of appeal upheld the decision in 2012, after it organized a special expert panel for discussing the issue.
The case set a rule in Japan that a substance with an unclear chemical structure needs to be defined by its production method. Thus any other method to make it will face infringement risks.
Yet if its chemical structure is clear, as in this case, the method is separated from the substance in the protection coverage.
Despite the favorable result at court, Ji said his company was affected in the market. During the litigation period, many of its clients steered away to avert potential risks.
But after the case, Techwell reestablished its reputation in the industry and increased its influence in the export destination.
"Traditionally, many Chinese businesses tended to keep their treasured technologies as secret as a hidden jewel, which is what we did. Yet the clandestine practice generally leaves them up the creek without a patent," Ji said.
Since then, Techwell has increased its patent filings to more than 240 in China and abroad, with 59 of them granted across eight countries and regions, including the United States, Japan, South Korea and Europe, according to the company.
"Our growing patent stockpile positions us better against international competition. It also helps us to gain more business opportunities, improve our company's image, shield us from infringement risks and expand abroad," Ji said.
With more than 120 staff, the company estimates its sales generation at 368 million yuan ($53.27 million) this year.
"We are extending our product portfolio from APIs to finished pharmaceutical products, facing more challenges in commercial operations," Ji said.