Analysis of Intellectual Property Management in Chinese Pharma

This report examines the intellectual property management practices of two prominent Chinese pharmaceutical companies, China TCM and PuraPharm. It explores the companies' approaches to trade secrets, patents, and other forms of intellectual property within the context of Chinese law and the evolving global market. The analysis highlights the differences in their strategies, with PuraPharm adopting a more open approach due to its Hong Kong base and collaborations with international firms, while China TCM focuses on the domestic market and maintains a more traditional secrecy. The report also discusses the legal frameworks governing intellectual property in China and Hong Kong, including non-disclosure agreements and company laws. Furthermore, it addresses the impact of globalization and the fourth industrial revolution on these companies' strategies, including their use of patents, trademarks, and stakeholder agreements. The report concludes by emphasizing the balance both companies are striking between secrecy and transparency in order to maintain stakeholder satisfaction and secure their market positions.

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INTRODUCTION
Secrecy and strict guarding of the pharmaceutical formulas forming the key ingredients in
most Chinese medicines and supplements by the major Chinese corporations has always been
part of the Chinese policy. The case study looks at two of the most successful pharmaceutical
companies in China, China TCM and PuraPharm, the write-up will critically assess their trade
secrets. The companies’ trade secrets are similar and also different in some ways despite the
foundational philosophy behind them being similar. The trade secrets are based on the inherent
Chinese-rooted need for protecting their national resources and on modern laws that grant
Chinese inventors monopoly for inventions.
DIFFERENCES
PuraPharm being a Hong Kong based company depicts some kind of openness in the way
they go about business. The company, by virtue of being based in Hong Kong where democracy
is more welcome and the need for cooperation with the outside world, tends to be less secretive
(Effron, 2016). Nonetheless, PuraPharm still maintains the original formulas for most of the base
pharmaceutical fundamental concoctions and will not gladly share those openly. PuraPharm
owns an online store that it has all the medicinal granules and medicine it manufactures. The
products are openly on sale and most of them have the ingredients list unlike those of China
TCM which enough indication of the openness on its part. However, unlike China TCM, the
company offers these concoctions as by-products to other pharmaceutical manufacturers with
strict secrecy undertakings and agreements on their use and applications.
The company, according to their vision statement admits that cooperation is very vital
and the goal of every pharmaceutical products manufacturer is dedicating themselves to
humanity's health (PuraPharm Corporation Limited, 2018). The company also envisions a

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situation whereby it will be a leading and one of the most admired company in global
pharmaceutical products arena through it success in modernization of traditional medicine
globally (Schuman, 2017). In attaining the goal, the company vowed to ensure that it will involve
investors, business partners and the global community in fighting some of the deadliest ailments
affecting humanity. The endeavor has therefore soften their resolve in upholding total secrecy
but instead has only left PuraPharm with only the need to protect the base trade secrets of only
restriction the base pharmaceutical concoctions (Staff and Sandeen, 2017). The partial openness
has currently led to integration and sharing of research and development data with many global
pharmaceutical giants. As of April 2019, the company had active collaborations with companies
in USA, Canada, India and Australia.
Unlike PuraPharm, China TCM tends to concentrate more on the Chinese market. Of
course the Chinese market currently holds more than a billion people. The Chinese patriotism
and policy favors Chinese medicine and makes the company virtually unopposed when it comes
to competition with foreign pharmaceutical manufacturers (Menell, 2017). In a bid to also ensure
that they fully dominate the market, China TCM has gone an extra step and acquired or managed
to form alliances with over 10 different subsidiaries scattered all over China. The mergers and
partnerships can be considered as very important and they are indicative of a very important
trade secret because they ensure a wider reach of their pharmaceutical products.
LAWS AND MEASURES
The two companies operate under the same legal framework and measures for the most
part because Hong Kong and China have a very similar set of company laws. However, the legal
system in Hong Kong is a bit more relaxed than that of the greater China. In the greater China,
China TCM grapples with a law that forbids all the shareholders, directors and all senior staff

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from disclosing confidential information. The clause if derived from article 62 of China's
company law (National People's Congress, 1993). The law therefore makes it the government's
concern when a senior staff or a key shareholder discloses information. The information in this
case could the important trade secrets that the Chinese have always vowed to protect. For
instance in the acquisition on the many subsidiaries, the information of the reasons for merger,
the goal and the finer details are never made public and that is largely due to the prohibitive
company laws and the measures of keeping the information inaccessible. Conversely, it is clear
that trade secrets are a reserve of the legal framework of China as country and the company
itself.
In Hong Kong, the law still has many restrictions and measures against the kind of
information that any stakeholders in Hong Kong based companies can share freely. The law
takes trade secrets as an important subset of the larger legal aspect - confidential information.
The legal framework in place demands for the signing of very aggressive non-disclosure
agreements between parties and companies especially they join senior management ranks of the
companies they serve. Nevertheless, the law in Hong Kong is still a bit relaxed because it
requires the company to disclose some information that would in other terms be categorized as
trade secrets. For instance from the company ordinance act of Hong Kong, it is clear that ever
company needs to disclose information about mergers, profits, and specified information on its
products. In the PuraPharm's line of work, the law also demands that the products manufactured
must be thoroughly checked by the relevant bodies as a way to ascertain that they are fit for
human consumption (Tian, Li, Cai and Kong, 2017). The laws therefore does not uphold the
strictness in maintaining trade secrecy in Hong Kong as it does in the larger China.
OTHER FORMS OF IPs

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The more the laws become clearer together with the increased globalization of the
economy on China, then keeping trade secrets is getting more difficult (Wu, 2016). On the other
hand, there are other forms of intellectual properties that are making the entire approach the
pharmaceutical companies take very difficult. Some of these include the reliance on patents,
trademarks registrations and also the use of stakeholder plus third-party confidentiality
agreements geared towards protecting the company crucial information (Qiao and Zhu, 2009).
These forms have increased the secrecy but they have been noted to increase knowledge loss and
the over-reliance on a few persons and hence diluting the technical knowledge pool greatly. It is
due to these challenges that the companies have decided to come with better and more robust
approaches that will increase the knowledge pool while maintaining and controlling the spread of
crucial information. The different forms of protection in addition to proper shelving of trade
secrets provides comprehensive protection required in guarding proprietary information.
The participation of stakeholders and Intellectual property for both the companies
Under their present status, China TCM and Purapharm hold the status of being a leading name in
the industry sector of Chinese Traditional market. Both these companies are optimistic to
maintain double-digit growth in the coming future because market conditions are favorable for
the companies that are trading in traditional Chinese medicines. Their growth rate is high in
comparison with all the chemical based medicine companies.
In the recent past, the trade of alternative medicines in China has seen the evolution of a new
market segment under the moniker of Modern CTM. The Puraphram can be considered as one of

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the representative companies in this new segment. Trade experts believe that by the year 2025
this segment will clock a steady growth in the market (China TCM (570.HK), 2018).
Image 1: Total market share of Pura Pharm in the market for Modern TCM market in China.
TCM is also all set to make it big in the global market for traditional Chinese medicine.
Currently, they are having patents of more than 60 drugs and have this approval for the
production of 500 formulas. However, these projections of the growth are dependent on certain
factors that are associated with the copyright and patent-related laws. For a better understanding,
we need to understand the markets of the future from a different point of view.
The fourth generation of Industrial reforms presents a dictum in front of all the businesses. This
dictum says that “knowledge is capital.” The definition of the secrecy and guarding the formulas
are changing. It is true that both companies have sustained well during the past two decades.
However, things are changing now because the world is heading in the era of free trade skies.
The era of secured transparency has arrived where a company or a business module can take a
resort in the copyrights and other intellectual property rights. Prior to the discussion of these two
companies in this new era of open trade skies, we would like to mention about KFC and Coca
Cola. Both these companies' claims that they have a secret formula, they have created a symbolic
fortress where this secret formula is stored safely (Braiker, 2011)

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.
However, in practical terms any company cannot claim to have any such formula, in the case of
USA, these companies are duty-bound to register each step of their formula in the office of FDA.
However, it is the responsibility of the FDA to make sure that no other company in the USA is
preparing food or cola based on the formula as long as it is under patent.
In the case of an international expansion of the business, companies like KFC and Coca Cola can
take the help of the Madrid Resolution as well. Madrid Resolution is a pact signed by more than
200 countries of the world to secure the interests of copyrights and patents of the companies at a
PAN international level.
The official website of PuraPharm gives us an idea that they are geared up for this future
arrangement of the things. They are considering customers and local authorities as an integral
stakeholder in the process of sales development and profit-making, in order to win the
confidence they are sharing their trade secrets in an open but secure environment.
Scaling up of a business is another area where a company needs more stakeholders in the form of
investors and promoters. When we have a look at the analysis of TCM’s financial performance
as it is published in Daily market watch published by Mason Securities, we find that they are
keen to share their sales figures, expansion plans and strategies in open market with an intention
to lure the investors (China TCM (570.HK), 2018).

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Image 2: An integrated Industry Chain diagram covering above the line and below the line
operations of TCM China.
TCM as a company has started promoting its all businesses under the flagship of TCM industry
chain. They are keen to share their methods and business operations in trade papers with an
intention to attract more capital from the market. The annual business report published by TCM
talks about its main and subsidiary, business models and production models in details. In order to
win the confidence of an investor from the public sector or overseas, they are keen to share
actual and certified data. They are welcoming various rating agencies to have a closer look at the
processes and the procedures in various fragments of the organizations (Daily Market Watch,
2018).

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Image 3: Global Pie for the alternative medicines in the world. TCM as a segment holds 36
percent and players like Purapharm and TCM has a big market to capture.
.
On the lines of conclusion, we can always say that both PuraPharm and TCM are geared up to
meet out the requirements posed upon them by the needs of the fourth generation of the
industrial revolution. Both these companies are enabling themselves to move in the domain of
"Copyright and patent protected open secrets." They are striking the right balance of secrecy and
integrity in order to keep their stakeholders satisfied while maintaining necessary secrets to
prevent certain unprecedented harms.

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REFERENCES
Braiker, B. (2011). Is This the Secret Coke Recipe? ABC News,
https://abcnews.go.com/Business/coca-colas-secret-formula-revealed/story?id=12914877
Effron, R. J. (2016). Trade Secrets, Extraterritoriality, and Jurisdiction. Wake Forest L.
Rev., 51, 765.
China TCM (570.HK). (2018). Institutional Equity Research,
http://research.cyberquote.com.hk/page/htm/kc/researchnews/img/181227e.pdf.
Daily Market Watch. (2018). Mason Securities,
http://www.masonsec.com/Content/Uploads/mw130818-65b0aba1-8a11-4486-8ff6-
6927e1873846.pdf.llllllllllllllllllllllllllll vvv ttt tttn
Menell, P. S. (2017). Tailoring a public policy exception to trade secret protection. Calif.
L. Rev., 105, 1.
National People's Congress (NPC). (1993). Company Law of the People's Republic of
China.

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PuraPharm Corporation Limited. (2018). Annual report 2017. Retrieved from
https://www.purapharm.com/wp-content/uploads/2018/04/EW01498_AR.pdf
Qiao, Y., and Zhu, X. (2009). Patent Protection of the Traditional Chinese Medicine and
Its Impact on the Related Industries in China. Retrieved from
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nese_Medicine_and_Its_Impact_on_the_Related_Industries_in_China
Schuman, M. (2017, August 23). How one company brought traditional Chinese
medicine to the modern world and made billions. Retrieved from
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