IP transactions in life sciences: data transfer, sharing and exclusivity in China and Canada
Data and technology transfer play a vital role in many IP transactions, especially in life sciences. That said, very little time is usually spent on the details of operational provisions in this area, as well as on territorial legal/regulatory provisions concerning data sharing among regulatory authorities. Knowing how one’s data and technology is handled is key to maintaining and enforcing one’s IP rights, especially when dealing with trade secrets.
Transferring data out of China
In recent years, China has passed several laws with regard to the cross-border transfer of data, in particular the export of data abroad, where IP transactions in life sciences may trigger supervision from various authorities.
In any IP transactional deal, particularly in life sciences, the technical dossiers or other documents are frequently shared between foreign and Chinese entities for further research via the license-out (in) mode.
Taking drug manufacturers as an example, it is common for technical dossiers to contain personal information for patients that have participated in clinical trials. Some information collected (ie, pathological information, test reports, surgical and anaesthesia records) may even qualify as sensitive personal information. This information shall be de-identified in accordance with personal data protection laws. Further, the de-identified information would still be regarded as personal information as it can be re-identified together with other details. As such, personal data protection laws would apply unless this information is anonymised, that is, it cannot be re-identified again.
When transferring personal information to an entity outside of China, the data handler should agree with the recipient about how to process and handle the information based on a standard contract (similar to the standard contractual clauses under the General Data Protection Regulation (GDPR), but still being drafted by the authorities). The contract should:
- require each party to conduct a personal information protection impact assessment before handling, and keep a record of handling;
- obtain separate consent from the data subject; and
- inform the data subject of the necessity of processing such sensitive personal information, alongside the impact on the individual's rights and interests.
China's Personal Information Protection Law, similar to the European Union's GDPR, has extraterritorial effects.
Mandatory IP ownership and sharing
China has specific legislation on the collection, preservation, utilisation and export of human genetic resources.
Although China encourages international cooperation in scientific research involving human genetic resources, there are restrictions on IP sharing when the research uses Chinese human genetic resources.
Patents arising from research cannot exclusively belong to a party, but shall be jointly owned by the parties whether they are generated within or outside of China. However, the law does not require a patent application to be submitted in China first. Neither does it specify whether there is a restriction on:
- assigning the patents to a third party;
- any entity to be the assignee; or
- the business terms other than patent ownership.
Yet, when assigning the patent to a third party, it must be subject to both parties’ consent, as the patent will not be proportionally owned by the parties on a percentage basis.
If the parties do not want to protect the results of their research through patents, the law stipulates that they may freely agree on how to share them, but the relevant arrangement must be reasonable and proportionate to each party's contribution to the research.
A ‘foreign entity’ under the relevant legislation is open to broad interpretation. An entity registered in China with foreign shareholding is regarded as a foreign entity, regardless of the proportion of the relevant shareholding. Moreover, a Chinese entity controlled by foreign organisations or individuals could also be regarded as a foreign entity.
The R&D contracts dealing with human genetic resources shall be filed with, or approved by, the Human Genetic Recourse Administration of China.
Although China has stipulated a high-level data exclusivity system for drug trials since its accession to the Agreement on Trade-Related Aspects of Intellectual Property Rights, the relevant supporting regulations have never been formally introduced. As a result, the system has not really been implemented.
In 2018, the draft regulation, Implementing Measures for the Protection of Trial Data of Drugs (for Interim Implementation), was released for public comment, but no valid laws or regulations have been raised since. This draft regulation stipulates that innovative drugs approved to enter the domestic market will be entitled to a data exclusivity period of six years, which will be doubled to 12 years for innovative biological products for curative uses.
Transferring data out of Canada
There are three main aspects of data export controls in Canada:
- national security and economic sanctions, and what type of information and R&D can be transferred cross-border and where;
- privacy (transfer of personal information, especially for personal health); and
- sharing of data among regulatory authorities.
A principal objective of Canada’s export regime is to ensure that the export and import of goods, technology and software are consistent with the country’s military and national security policies, as well as its international obligations. The regime also applies to dual-purpose goods (information/technology). To date, it has been rare for these provisions to apply to life science transactions. This may change, however, as laws and technologies and world politics evolve. Before entering into any relationship with cross-border implications, it is important to consider whether data, including technical data and technical training assistance, is subject to the export regime. In such a case, all of the required undertakings must be completed, including registrations and obtaining the necessary export or import licence(s) and other government approval, prior to transferring such data in or out of Canada.
Canada maintains an export control list under the Export and Import Permits Act that is administered by the Controlled Goods Program. Additionally, there may be economic sanctions pursuant to the Special Economic Measures Act. Generally, sanctions prohibit all transactions with specifically listed entities and individuals or those acting on their behalf. The most onerous aspect of this involves the application of US law, which applies extraterritorially to Canada. The United States currently has many restrictions against China that affect research (eg, based on US funding of a research project the involvement of US persons or US-origin data/tech/materials or based on stipulations from financiers or insurance companies). Naturally, it is crucial to identify the parties and the jurisdictions that may apply, and to note that proper due diligence should resolve any such issues.
If life sciences data includes personal identifiable information (or if it can be re-identified with other information), including for personal health, the complex legal and regulatory frameworks that govern privacy in Canada should be considered. Most do not prohibit transfer outside of the country, so long as the individual is notified of the transfer, that different privacy laws may apply (including government access and use) and appropriate consents are obtained, However, it is important to be aware that Government contracts often involve more onerous restrictions. The primary legislation is the federal Personal Information Protection and Electronic Documents Act, along with a number of other provincial and federal laws deemed substantially similar. Aside from the notification and consent requirements, Canada does not require any regulatory approval for cross-border transactions involving life sciences personal data.
The privacy landscape in Canada is quickly evolving. For example, Quebec is modernising its privacy laws to impose new cross-border transfer requirements, which will come into force in 2023. These would require a prior impact assessment, along with a sense of whether the information will receive adequate protection in the jurisdiction to which it is being transferred. Parties would also have to enter into agreements to mitigate identified risks.
Finally, parties should be aware that information submitted to regulatory authorities in Canada may be subject to freedom of information requests, or to the sharing of dossiers under international agreements. Canada is a member of a number of mutual recognition agreements that may involve the exchange of information, especially with regard to good manufacturing practice. Those marketing a drug in Canada are required to submit information to Health Canada, along with known actions taken in foreign countries (Section C.01.050 of the Food and Drug Regulations). Further, Health Canada will accept foreign assessments and status reports in support of a manufacturer’s submissions for regulatory approval; agreements often provide for this.
IP ownership and sharing
A cross-border transaction often gives rise to important IP concerns. Unlike in China, Canada does not have mandatory IP ownership and sharing provisions, for example, regarding human genetic resources. Ownership in Canada derives from inventorship and the relationship that inventors have with third parties. Joint inventors of a patent, absent an express agreement to the contrary, will have an equal undivided interest in the patent and one cannot dilute the other’s interest without prior consent or accounting to the other inventors/owners.
Further, in general, Canada does not require Canadian inventors or inventions made in Canada to be filed domestically first, nor does Canada require prior notifications or permissions or regulatory licences. Some exemptions apply, for instance regarding inventions relating to instruments or munitions of war or nuclear energy, or where the inventor is a member of the public service. The Public Servants Inventions Act imposes certain requirements on government employees to inform the appropriate minister of the invention, obtain consent from that minister prior to filing a foreign patent application, and identify the inventor as a government employee in any application in Canada. When sharing data between jurisdictions in a collaboration, keeping track of where developments are made, where information is kept and which laws apply regarding inventorship and ownership is important and should be addressed in due diligence, and in the IP representations and warranties and operational provisions of Agreements.
Under the data protection provisions of Section C.08.004.1 of the Food and Drug Regulations (which came into force on 5 October 2006 and which apply to drugs that received market authorisation on, or after, 17 June 2006), Canada provides eight years of market exclusivity for an ‘innovative drug’. In other words, one containing a medicinal ingredient not previously approved in a drug by Health Canada, and that is not a variation of a previously approved medicinal ingredient (eg, a salt, ester, enantiomer, solvate or polymorph). The term is extended by six months to 8.5 years in cases where the innovative drug manufacturer generates data related to the drug's use in a paediatric population, prior to the fifth anniversary of the initial drug approval. Under the data protection provisions, a third party cannot file a drug submission on the basis of a direct or indirect comparison to an innovative drug, until six years after the date of first market authorisation. Canada’s provisions comply with their international obligations under the United States-Mexico-Canada Agreement, Article 39 of the TRIPs Agreement and the Canada-European Union Comprehensive Economic and Trade Agreement.
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