The "Experimental Use" Exception in Japan: How Does It Impact Pharmaceutical R&D for U.S. Companies?

Patent rights grant patentees the exclusive right to work their inventions, typically preventing others from making, using, selling, or importing the patented subject matter without authorization. However, most patent systems, including Japan's, recognize certain exceptions to this exclusivity. One of the most significant is the "experimental use" exception, which allows for the working of a patented invention for specific research or experimental purposes without constituting infringement. For U.S. life science companies and others in the pharmaceutical and biotechnology sectors, understanding the scope and application of this exception in Japan, particularly its impact on generic drug development and research activities, is of paramount importance.

The Statutory Basis and Rationale of Article 69(1)

In Japan, the experimental use exception is codified in Article 69, Paragraph 1 of the Patent Act, which states: "The effects of the patent right shall not extend to the working of the patented invention for experimental or research purposes." (「特許権の効力は、試験又は研究のためにする特許発明の実施には、及ばない。」).

The underlying rationale for this provision is twofold:

1. Fostering Technological Advancement: The patent system is designed not only to reward inventors but also to promote overall technological progress. By disclosing their inventions to the public in exchange for a limited monopoly, patentees contribute to the collective knowledge base. The experimental use exception ensures that this disclosed knowledge can be built upon. It allows researchers and scientists to study, test, and improve upon patented inventions, or to invent around them, thereby spurring further innovation. To prohibit such activities would stifle the very progress the patent system aims to encourage.
2. Enabling Patent Validity Assessment: The exception also serves a vital role in maintaining the integrity of the patent system. It permits third parties to conduct experiments and research to verify the patentability of a granted patent – for example, to assess its novelty, inventive step, or enablement. Such investigations are often necessary precursors to challenging a potentially invalid patent through opposition or invalidation trial proceedings before the Japan Patent Office (JPO).

The Traditional Scope of "Experimental or Research Purposes"

Historically, the interpretation of what constitutes permissible "experimental or research purposes" under Article 69(1) focused on activities directly related to the above rationales. Generally, this included:

• Experiments conducted to understand the patented invention, its properties, or its mode of operation.
• Research aimed at improving the patented invention or developing alternative technologies.
• Tests and studies conducted to determine if a patent meets the statutory requirements for patentability (e.g., for preparing an invalidity challenge).

Conversely, activities that were primarily commercial in nature, rather than being genuinely directed towards scientific inquiry or technological advancement, were traditionally considered to fall outside the exception. This could include, for example, using a patented invention for market surveys to predict sales, for quality control in commercial production unrelated to further R&D, or for demonstrations to solicit customers. A particularly debated area was whether tests conducted solely to amass data for commercial activities intended to commence after the patent's expiration were covered.

The Paradigm Shift: The Pancreatic Disease Treatment Drug case

The landscape of the experimental use exception in Japan, especially for the pharmaceutical industry, was profoundly reshaped by a landmark Supreme Court decision on April 16, 1999 (often referred to as the Pancreatic Disease Treatment Drug case - 膵臓疾患治療剤事件, Suizō Shikkan Chiryōzai Jiken).

The central issue in this case was whether Article 69(1) exempted the working of a patented pharmaceutical invention (such as manufacturing the drug and conducting bioequivalence studies) during the patent term, when such activities were undertaken solely for the purpose of obtaining regulatory approval under Japan's pharmaceutical laws (then the Pharmaceutical Affairs Act, now the Pharmaceutical and Medical Device Act, or Yakki-hō) to market a generic version of the drug immediately upon the expiration of the original patent.

The Supreme Court ruled in the affirmative, holding that such activities indeed fall within the scope of "experimental or research purposes" under Article 69(1) and thus do not constitute patent infringement. The Court's reasoning was primarily based on public policy considerations and the fundamental objectives of the patent system:

1. Preventing De Facto Extension of Patent Term: The Court recognized that if conducting tests necessary for generic drug approval during the patent term constituted infringement, generic manufacturers would have to wait until the patent expired before even starting these lengthy regulatory trials. This would inevitably lead to a significant delay in the market entry of generic drugs, well after the statutory patent term had ended. Such a delay would effectively grant the patentee an extended period of market exclusivity beyond what is prescribed by the Patent Act, an outcome the Court found contrary to the patent system's aim of making inventions freely available to the public once the patent expires.
2. Balancing Patentee Rights with Public Interest: The Court sought to strike a balance. It emphasized that the exception is limited to activities that are strictly necessary for obtaining regulatory approval. Any commercial manufacture (beyond quantities needed for testing), stockpiling for future sale, or actual sale of the generic drug during the original patent term (or any applicable patent term extension) would still constitute patent infringement. By allowing the exception for these specific pre-market approval tests, the Court aimed to ensure that the patentee enjoys their exclusive right to commercialize the invention during the patent term, while also facilitating the prompt availability of more affordable generic alternatives to the public once that term legitimately ends. Allowing patentees to block such tests would, in the Court's view, confer an undue additional benefit beyond the intended scope of the patent monopoly.
3. Policy Over Semantics: It is noteworthy that the Supreme Court's decision appeared to be driven more by these overarching policy considerations and the structural logic of the patent system rather than a detailed semantic analysis of the precise meaning of the words "experiment or research."

The Pancreatic Disease Treatment Drug case decision was a watershed moment, significantly broadening the practical scope of Article 69(1) in Japan. It effectively established a "Bolar-type" exception or safe harbor, similar in effect to provisions like 35 U.S.C. § 271(e)(1) in the United States (introduced by the Hatch-Waxman Act), which allows the use of patented inventions for purposes reasonably related to developing and submitting information for FDA approval.

Scope of Permitted Activities for Generic Drug Approval

Following this Supreme Court precedent, the experimental use exception in Japan generally covers activities undertaken by generic drug manufacturers during the patent term, provided they are strictly for the purpose of obtaining marketing approval, such as:

• Manufacturing the patented active pharmaceutical ingredient (API) or finished drug product in quantities necessary for conducting required tests.
• Performing bioequivalence studies, stability tests, formulation studies, and other clinical or preclinical trials mandated by the Pharmaceutical and Medical Device Act.
• Using the data generated from these activities to compile and submit an application for marketing approval of the generic drug.

However, it is crucial to emphasize the limits: the exception does not permit:

• Commercial sale or offer for sale of the generic drug before the expiry of the original patent (and any applicable Patent Term Extension).
• Stockpiling of the generic drug during the patent term in anticipation of immediate commercial launch upon expiry, if such stockpiling goes beyond what is reasonably related to the regulatory approval process.

Interaction with Patent Term Extension (PTE)

Japan also has a system for Patent Term Extension (PTE) under Article 67(2) of the Patent Act, which allows patentees of pharmaceuticals and agrochemicals to apply for an extension of up to five years to compensate for the erosion of their effective patent term due to regulatory approval delays they faced.

The Supreme Court's decision in the Pancreatic Disease Treatment Drug case should be viewed in conjunction with this PTE system. While the experimental use exception allows generic manufacturers to prepare for market entry, the PTE system provides innovator companies with a mechanism to recover some of the patent term lost during their own product's regulatory review. This creates a framework that attempts to balance the interests of both innovator and generic industries, as well as the public interest in timely access to medicines.

The Ongoing Discussion: Patented "Research Tools"

While the application of Article 69(1) to generic drug approval testing is now relatively clear, its scope concerning patented "research tools" remains a more nuanced and debated area. Research tools can include inventions such as patented gene sequences, diagnostic assays, specific cell lines, animal models, or laboratory equipment that are primarily used in the conduct of further scientific research.

The question arises: does Article 69(1) permit a researcher to use a patented research tool without a license from the patentee, if the researcher's aim is to conduct their own experiments (which may or may not be related to improving the tool itself or challenging its patent)?

• If the research is aimed at understanding the patented tool, improving it, or finding an alternative, it is more likely to fall under the exception.
• However, if the patented tool is simply being used as a means to conduct unrelated research (e.g., using a patented assay to screen for new drug candidates unrelated to the assay itself), the applicability of Article 69(1) is less certain. Some argue that using a patented tool for its intended purpose, even in a research context, might be considered a commercial-like exploitation if it directly substitutes for a licensed use. This area lacks definitive, overarching judicial guidance in Japan and often requires a case-by-case analysis considering the nature of the tool, the nature of the research being conducted, and the potential commercial implications.

Comparison with U.S. Law: Hatch-Waxman Safe Harbor

The U.S. equivalent to Japan's judicially broadened experimental use exception for pharmaceuticals is primarily found in 35 U.S.C. § 271(e)(1). This provision exempts from infringement acts that are "solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products."

While similar in purpose to the Japanese outcome for generic approval testing, the U.S. system has additional complexities. For instance, 35 U.S.C. § 271(e)(2) makes it an act of infringement to submit an Abbreviated New Drug Application (ANDA) if the purpose is to engage in commercial manufacture, use, or sale of a patented drug before patent expiry. This provision creates an "artificial" act of infringement that allows for early patent litigation (ANDA litigation) before the generic drug enters the market. Furthermore, the U.S. system involves intricate procedures related to Orange Book listings of patents, patent certifications by generic applicants, and automatic stays of FDA approval, which are not directly mirrored in the mechanics of Japan's Article 69(1) itself, though Japan has its own distinct regulatory framework for drug approvals.

Implications for U.S. Pharmaceutical Companies

The Japanese experimental use exception, as interpreted by its Supreme Court, has significant implications for U.S. pharmaceutical companies operating in or targeting the Japanese market:

• For Innovator (Patentee) Companies:
  • Be aware that generic competitors in Japan are legally entitled to conduct necessary R&D and regulatory approval activities for their versions of your patented drugs during the patent term. This means preparations for generic market entry can be well underway before your patent expires.
  • Your primary shield against premature generic competition during the patent term (and any PTE period) lies in preventing actual commercial manufacture (beyond that necessary for testing), commercial sale, or stockpiling for commercial purposes by generics.
  • Maximizing protection through the Patent Term Extension system is crucial to compensate for your own regulatory review period.
• For Generic or Biosimilar Companies:
  • Article 69(1) provides a clear legal basis for undertaking development and regulatory approval work in Japan for generic or biosimilar versions of patented drugs without incurring liability for patent infringement, enabling timely market launch after the innovator's patent and PTE rights expire.
  • It is essential to ensure that all activities strictly fall within the scope of what is necessary for obtaining regulatory approval and to avoid any actions that could be construed as commercial exploitation during the patent term.
• For Companies Dealing with Research Tools:
  • If your company provides or uses patented research tools in Japan, the applicability of Article 69(1) may require careful legal assessment, as the scope of the exception in this context is less definitively established than for generic drug approval testing.

Conclusion

Article 69(1) of the Japanese Patent Act, particularly as interpreted by the Supreme Court in the context of pharmaceutical development, plays a pivotal role in shaping the R&D landscape in Japan. It strikes a balance between the exclusive rights of patentees, the need to foster ongoing innovation, and the public interest in facilitating timely access to medicines, especially generic alternatives, once patent protection legitimately concludes. For U.S. companies in the life sciences sector, a nuanced understanding of this exception is indispensable for formulating effective patent strategies, managing R&D activities, and navigating the competitive dynamics of the Japanese market.