On June 10, 2019, the State Council published the Regulations of the People's Republic of China on the Management of Human Genetic Resources (the “Regulations”) which will take effect on July 1, 2019. the Regulations enhance protection of human genetic resources originated in China by regulating their collection, storage, research and export.
Compared to the Interim Measures on the Management of Human Genetic Resources formulated in 1998 (the “Interim Measures”), the Regulations’ predecessor, the Regulations give a more practical guidance to foreign investors by addressing aspects not elaborated in the Interim Measures.
In particular, highlights can be found as follows:
- foreign entities and domestic entities incorporated or controlled by foreign entities or individuals shall work with Chinese partners if they need human genetic resources in China for scientific research and IPs and profits generated shall be shared;
- the practice of clinical trials using human genetic resources in China is exempted from governmental approval if no export of human genetic materials is involved, but filing for record is still required;
- information of human genetic resources shall be filed for record with the government if it is to be provided to foreign organizations and individuals or institutions established or actually controlled by them;
- human genetic resources that may constitute State secret are subject to the Law of People’s Republic of China on the Protection of State secret; and
- violators of the Regulations, including entities, individuals and legal representatives and management personnel of companies, may face significant monetary and non-monetary penalties.
1.Researches Will Be Conducted in Form of International Cooperation
Compared to the Interim Measures which provided only high-level guidance on international cooperation, the Regulations add flesh to the law by specifying the restrictions on scientific research using human genetic resources:
- Foreign organizations and domestic institutions founded or controlled by foreign entities who wish to conduct scientific research using human genetic resources in China shall collaborate with Chinese partners to do so;
- International cooperative research activities are subject to the approval of Ministry of Science and Technology by an application submitted jointly by the Chinese and foreign partners.
- Filing for record, instead of approval, with the Ministry of Science and Technology or its local counterparts is required if human genetic resources is only used in international cooperative clinical trials for the purpose of marketing approval of drugs and medical devices and no export of human genetic substance is involved.
- Export of human genetic resources from China shall be subject to the approval by the Ministry of Science and Technology.
2.IPs and Revenue Will Be Shared in International Cooperative Researches
The Regulations is largely consistent with the Interim Measures in the arrangement of IPs generated in international cooperative researches by providing that:
- where an application for patent is created as the result of international cooperative scientific research using Chinese human genetic resources, the application shall be filed jointly by the foreign and Chinese partners and the patent right shall be jointly owned by both parties.
- for other scientific and technological achievements resulting from the research, the right to use, the right to transfer and the arrangement of profit sharing shall be agreed upon by both parties through cooperation agreements; if there is no agreement, both parties have the right to use such achievements, but the transfer to a third party must be agreed by both parties, and the profits obtained shall be shared.
Meanwhile, with a goal to promote the fair trading of human genetic materials in China and to protect the Chinese institutions’ interests, the Regulations also place limits and defines new requirements for the foreign entities who are cooperating with Chinese partners:
- Chinese partner shall be guaranteed sufficient involvement in the international cooperative research and be provided with access to all experiment records and data in relation to such research;
- A report shall be submitted to the Ministry of Science and Technology to summarize the parities’ cooperation within 6 months upon consummation of a research project.
The Regulations recognizes human genetic material as important strategic resource of China. Therefore, compared to the Interim Measures which characterized human genetic resources as “science and technology secrets” which shall be regulated by the Provisions on the Confidentiality of Science and Technology Secrets, the Regulations for the first time relates human genetic resources to “State secret” and subject those human genetic resources that may constitute state secrets to possible regulations of the Law of People’s Republic of China on the Protection of State Secrets.
In addition, the word “national security”, which was not mentioned in the Interim Measures, appears in more than a few places throughout the Regulations. It is well recognized that illegal use and transfer of human genetic information may affect the public interests and even national security of China. Therefore:
- entities and individuals should avoid collecting and using human genetic resources in a way that may harm public health and national security;
- only international cooperation that has been proven to be harmless to national security may be conducted;
- only human genetic information that has been proven to be harmless to national security may be transferred abroad.
Compared to the Interim Measures which was silent on the amount of penalties an entity or individual may face in case of violations, the Regulations significantly enhance the penalties for violations in the collection, storage, exploitation and trading of human genetic resources:
- Those who collect and store human genetic resources without approval or use them in international researches without approval may be fined from a minimum RMB500,000 to a maximum of RMB5,000,000.
- Those who collect, store, use or provide human genetic resources without ethical review or collect human genetic resources without the consent of the provider or defraud the provider into consent, may be fined from a minimum RMB500,000 to a maximum of RMB1,000,000.
- Foreign entities and individuals who collect, store, use human genetic resources in R&D activities or export human genetic resources in violation of the Regulations may face penalties from a minimum RMB1,000,000 to a maximum of RMB10,000,000.
- The Regulations bans trading human genetic resources. Offenders will be fined a minimum RMB1,000,000 to a maximum of RMB10,000,000.
Furthermore, the Regulations for the first time explicitly impose individual liabilities on management personnel of an entity in violation:
- The legal representative, person in charge, managing personnel or other responsible person may be subject to a fine up to RMB500,000 and in more severe scenarios, may be prohibited from the collection, storage, use and export of human genetic resources for a few years or lifetime.
This should be a reminder that the management team of a company has to be cautious in their research and exploitation activities to order to avoid personal liabilities under the Regulations.
It is a trend that China will tighten regulation and scrutiny on activities related to human genetic resources. It is advisable that companies should take immediate measures to comply with the Regulations, such as to review the on-going cooperation agreements and license agreements with Chinese R&D and clinical trial institutions; to formulate compliance policies regarding international cooperation researches involving human genetic information; and to provide training programs to employees regarding the collection, use and transfer of human genetic resources.