Case of 'Moluo Pill' finally grinds to an end

The Supreme People's Court of China in late February pronounced the final judgment on the largest case of medicine intellectual property rights in Hebei province, one that lasted more than eight years.

The court sentenced Hebei Handan Pharmaceutical Co Ltd to pay 400,000 yuan to plaintiff Li Enfu for violating the technology transfer agreement. Li had claimed compensation of more than 30 million yuan, the largest amount of money claimed in such cases in Hebei.

At the end of the 1970s, Li worked out a prescription of traditional Chinese medicine (TCM) to cure chronic atrophic gastritis while working in Hebei Provincial TCM Hospital. He named it the "Moluo Pill".

On Feb 8, 1985, Li, who was then the director of the hospital, signed a transfer agreement with Handan Pharmaceutical Factory.

According to the agreement, Li transferred the "Moluo Pill" technology to the factory for 40,000 yuan and 3 percent of product sales during the three years after production. The factory would also print "A prescription by Li Enfu" in the product package.

"Moluo Pill" was launched on the market in 1985, and soon brought rich profits and great honors to its producers. However, a feud developed between Li and the factory.

In 1994, Hebei TCM Hospital set up a "Moluo Company" and produced "Moluo" products to cure stomach disease.

In 1998, Handan Pharmaceutical Factory was reorganized into Handan Pharmaceutical Co Ltd. The new company continued to produce the "Moluo Pill" but stopped printing "A prescription by Li Enfu" in product package.

In July 2000, Handan Pharmaceutical Co Ltd sued Hebei TCM Hospital, Moluo Company and Li in Shijiazhuang Intermediate People's Court for malfeasant competition and asked that the defendants pay 3 million yuan.

In September, the three countersued the company together, asking for suspension of the agreement and requiring the latter to return the prescription and pay 3 million yuan.

After two sentences and appeals during the following six years, in December 2006 the Supreme People's Court of Hebei sentenced Hebei TCM Hospital to stop malfeasant competition against Handan Pharmaceutical Co Ltd and pay the latter 150,000 yuan, while Handan Pharmaceutical Co Ltd was ordered to pay 20,000 yuan to Li.

That sentence did not end the long-lasting case, but it did fuel the dissatisfaction of Li.

In June 2007, he sued Handan Pharmaceutical Co Ltd in Hebei Supreme Court for violating the agreement. Li requested that the latter pay 29.48 million yuan for using his technology and another 1 million yuan for failure to print "A prescription by Li Enfu" on the package.

Handan Pharmaceutical Co Ltd said it had already fulfilled its obligations according to the agreement, so there was no reason for Li to ask for more money. Besides, Li did not claim additional payment during the 22 years since the agreement was signed, which surpassed the time limit for action in China, which is usually two years.

The company said it didn't print "A prescription by Li Enfu" because of laws which demand no doctors' names or pictures on product packages.

In December 2007, Hebei Supreme Court sentenced Handan Pharmaceutical Co Ltd to continue printing "A prescription by Li Enfu" on product packages and pay 200,000 yuan to Li. The court rejected other requests by Li.

Both the company and Li appealed to the Supreme People's Court of China.

Li said the "three-year" clause was a temporary agreement, so the company should pay additional money during its 20-year production afterward. He also insisted that, no matter the reason, the company's failure to print "A prescription by Li Enfu" violated the agreement, which therefore should be suspended.

According to the final judgment of the Supreme Court of China in February 2009, the agreement did not demand that the company pay additional money after three years. In addition, it is impossible to print "A prescription by Li Enfu" on packages any longer because of the law, so the sentence by Hebei Supreme Court should be quashed. There was also no reason to suspend the agreement.

"It is right for Handan Pharmaceutical Co Ltd not to print 'A prescription by Li Enfu' in package because of the law, but it is wrong for the company to do so without communication with Li in advance," said Cao Xinming, vice director of the Research Center on Intellectual Property Rights of Zhongnan University of Economics and Law.

In addition, when Handan Pharmaceutical Factory was reorganized into Handan Pharmaceutical Co Ltd, according to Chinese laws, the latter should have signed a new agreement with Li to proceed with the previous rights and obligations, Cao said.