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5Infrastructure INSTRUMENTATION The most obvious sign of the improvement in biotechnology funding in China is the tremendous increase in the number of modern, imported instruments. Of the 19 research institutes visited during the evaluation trip, virtually every one had at least some of the following items: DNA synthesizers, amino acid analyzers, protein sequencers, high-performance liquid chromatographs, liquid scintillation counters, ultracentrifuges, computerized fermentors, ultraviolet spectrophotometers, electron microscopes, tissue culture incubators, and laser densitometers. At certain centers, particularly those financed by World Bank education and equipment loans, there were more instruments than available space. In general, these instruments are well maintained. Most Chinese scientists are more familiar with how an instrument actually works than are their American counterparts, and are able to strip parts from an abandoned or outmoded instrument to repair a new one. Furthermore, the Chinese are paying close attention to the ability of foreign suppliers to provide prompt, reliable maintenance service. The clear impression was that American suppliers are quickly being replaced by Japanese and West German competitors. Most laboratories are also well equipped with small instruments such as water baths, gel electrophoresis devices, shakers, vortex mixers, and bacterial incubators. INFRASTRUCTURE 18
Many of these items are produced in China by using Western designs. These locally manufactured instruments are inexpensive and easily repaired. PROCUREMENT SYSTEM AND SUPPLIES In contrast to the system for instrument purchases, the system for procuring chemicals, disposable laboratory supplies, and other supplies is poor. Many of the items essential for biotechnology research still must be purchased from foreign sources; this includes most restriction and DNA modification enzymes, radioisotopes, specialty chemicals, and plastic ware. These items, which must be purchased with hard currency, can only be ordered once a year. This makes it extremely difficult to do experiments efficiently because researchers are often unable to follow up on interesting leads because of a lack of reagents. The stated rationale for this system is that all orders requiring foreign exchange should be consolidated in order to increase efficiency. (Many of the scientists interviewed during the evaluation trip complained that the real reason was middle-level bureaucrats who see the control of hard currency as a way to gain power.) Recognizing the negative effect of this rationale on the advancement of research, a certain number of institutes have recently introduced more efficient systems that allow perishable supplies, such as radioisotopes, to be ordered on a more regular basis. In contrast to the bureaucratic efficiencies being pursued, these changes will demonstrate the real value of making the procurement system responsive to the research community's needs and goals. China is gradually trying to improve its own production of biotechnology supplies. Most simple chemicals (e.g., sodium chloride and sodium phosphate) are produced in China and appear to be of reasonably high quality. A fairly wide spectrum of more specialized biochemicals (e.g., adenosine triphosphate and deoxyribonucleotides) are available from biochemical factories such as the one associated with the Shanghai Institute of Biochemistry; the quality of these reagents is more variable, and several scientists complained of poor quality control. A notable recent development is the formation of the Sino-American Biotechnology Company, a joint venture between Promega Corporation, SSTC, and the Henan provincial government. Under the supervision of an American director and with the assistance of several scientists who have trained in the United States, this new company's production facility produces several of the most widely used restriction enzymes. In addition, they import, store, and offer for sale a number of enzymes and other reagents from the Promega catalog. Although these items are priced at American levels, an important advantage is that they can be purchased with yuan rather than hard currency. The headquarters INFRASTRUCTURE 19
of the Sino-American Biotechnology Company is inconveniently located in Luoyang in Henan Province, but more convenient branch offices have recently opened in Beijing and Shanghai. INTELLECTUAL PROPERTY RIGHTS China's newly instituted patent system provides for the granting of patents on inventions, utility models, and designs. Patents are granted for 15 years and may be licensed to third parties for a negotiated fee. Infringers, in principle, are subject to compensation for damages and criminal liability; such fines can be levied either by the Patent Office or the People's Court. Similar to the European system, patents must be filed prior to publication of research results. The Chinese patent system strongly emphasizes the application and spreading of patents as well as the protection of the patent right. Accordingly, if a patentee has not worked on an invention within 3 years without any justified reason, the Patent Office has the right to issue a compulsory license to a third party. Such compulsory licensing provisions are found in the patent systems of many developing countries. China has acceded to the Paris Convention for the Protection of Industrial Property, thereby allowing nationals from countries that are party to the convention (including the United States) to obtain patent rights in China. Foreigners are required to use a patent agency designated by the State Council; these include agents in Beijing, Shanghai, and Hong Kong. A foreign party may use an invention through a subsidiary in China, a Chinese-foreign joint venture, or a licensee. The Chinese patent law includes specific restrictions against the government's expropriation of foreign-owned patents. However, if progress toward production is not demonstrated within 3 years, the right to issue a compulsory license to a Chinese entity is in effect. The actual effectiveness of the new Chinese patent system is weakened by two difficulties. First, the law specifically excludes inventions in the following areas: food, beverages, and flavorings; pharmaceutical products and substances obtained by means of a chemical process; and animal and plant varieties. In principle, these exceptions cover virtually every possible product of biotechnology. The situation is somewhat alleviated by the fact that it is possible to patent the processes, including microbiological processes, leading to such products. For example, a company could patent the process used to produce a new form of tissue plasminogen activator by a genetically engineered microbe but could not patent the drug or the microbe itself. In the United States, such process patents are generally considered inferior to product patents, especially in the pharmaceutical field. A report from the Chinese Patent Office justifies the exception of chemicals and pharmaceuticals by stating that they are ''important raw materials and . . . necessities for safe-guarding the health of the people and the increase of livestock which relate to the national economy'' and "should not be granted patent until we have had enough experience." INFRASTRUCTURE 20
A second difficulty is enforcement. Given the short period that the new patent system has been in effect, together with the general disinclination of Chinese parties to litigate, it is not surprising that foreign investors are dubious about the real worth of a Chinese patent. As an anecdotal example, an American pharmaceutical firm established a joint venture factory in China and obtained a patent on their method for antibiotic production. Within a year, a virtually identical factory, producing the same product by the same method, was opened in an adjacent county. It is alleged to have taken at least half of the American company's market share. When it was explained that the people's need for antibiotics took precedence over profit making, the American company decided not to press the case. China has no copyright law. Foreign journals are routinely copied at a central facility in Beijing and then distributed to libraries at research institutes and universities. Computer software is also unprotected by law. In sum, China's new patent law provides an important first step in protecting the intellectual property rights of Chinese scientists. However, substantial improvements in the content and enforcement of the law are required to afford the level of protection needed to assure potential foreign collaborators and investors. INFRASTRUCTURE 21
