IP Protection of Traditional Knowledge: A Dilemma Faced by the Chinese Traditional Medicine in Global Competition

Abstract

Traditional Chinese medicine (TCM) refers to medicine extracted from natural material, such as plants, animals, and minerals. The invention of TCM follows unique principles and methods inherited from ancient China. This chapter discusses a dilemma faced by TCM in global market competition. On one hand, based on the extensive Chinese medicine literature, practices, and therapies, TCM enjoys traditional knowledge-based advantages. On the other hand, in facing underdeveloped intellectual property (IP) protection both at home and abroad, TCM suffers from institutional disadvantages in global competition. It seems difficult for TCM to maintain traditional knowledge-based advantages and to push global integration without IP protection at the same time—a dilemma that needs to be resolved for the development of TCM. Building on a case study of a famous Chinese herbal medicine, Lianhua Qingwen, we explain the nature of the dilemma and provide advice for the future of TCM in global competition.

1. Introduction

Debate on the importance and contributions of traditional Chinese medicine (TCM) to health has never stopped. However, TCM has been treated as an “informal therapy” for years, and its intellectual property (IP) has not received global recognition. Till today, exporting TCM to most developed countries is restricted through standard control due to suspicion of toxic substances, pesticide residues, and heavy metals in it. However, worldwide attention to TCM has been upsurged by its impressive treatment of COVID-19 since the breakout of pandemic in early 2020. In February 2022, the World Health Organization (WHO) held a virtual meeting of 21 international experts from six WHO regions to evaluate and understand how to effectively enhance the contribution of TCM in global pandemics [1].

TCM dates more than 2000 years ago, representing one of world’s oldest medical systems. Before the introduction of Western medicine in the Qing dynasty (1644–1911), TCM therapies played a crucial role in maintaining the Chinese people’s health and nourishing their lives so that serious diseases would not recur. The official meaning of TCM can be found in Article 2 of the TCM Law of P.R. China.¹ Accordingly, TMC is a collective term of medicine of all Chinese ethnic groups including the Han and minority ethnic groups. TCM represents the Chinese perception of life, health, and disease. TCM reflects the Chinese pharmacology system developed with a long historical tradition, unique theories, and technical methods.

The market potential of TCM is impressive due to TCM’s unique value to a large population. For example, TCM helps cancer patients recuperate from chemotherapy’s side effects. It demonstrates the effective treatment of influenza epidemics in recent decades. It also works to boost the immune system of a body. WHO ([2]: p. v) noted that TCM is “one of the most popular forms” of traditional, complementary, and integrative medicine (TCIM) worldwide. About 60% of the world’s population directly or indirectly uses TCM to treat diseases. By 2020, a total of 2711 TCM products have been included in the Chinese Pharmacopeia 2020 Edition.² The TCM market size reached USD 18.8 Billion in 2021, showing rising demand from developing economies in particular.³

However, TCM industry in China is facing seemingly doomed technical bottlenecks. Take Chinese Herbal Medicine (CHM), the main part of TCM, as an example. Its R&D development is seriously hampered by lack of defined criteria and measurement. Furthermore, poor clinical trial data often make CHM and its formulation not technically evidenced to international standards, thus not eligible to secure intellectual property (IP) protection when joining the global competition. Compared with the fast development of the Japanese Han-prescription medicine [3, 4, 5, 6], CHM is far lagged and rather detached from global innovation competition.

Starting from Shang Dynasty (1600–1046 BC), CHM has been deeply rooted and widely thrived, especially in Asian countries including China, Japan, and South Korea where people trust TCM as the mode of health care [7]. But China still stays downstream of the global herbal medicine industry⁴ for decades. Acting as a key herbal material supplier rather than a competitive herbal medicine inventor, China is seeing a shrinking growth rate in the global herbal medicine market. According to China Pharmaceutical Enterprises Association (CPEA),⁵ from 2013 to 2016, CHM showed a year-on-year growth trend; however, it began to fluctuate and decline in 2017. In 2019, the main business income reached 458.7 billion yuan, a year-on-year decrease of 1.47%.

We argue CHM is currently facing a serious dilemma that needs to be resolved in a timely manner. On one hand, CHM stands with competitive advantages because of its traditional knowledge (TK) base rooted in unique Chinese medicine culture. On the other hand, CHM’s underdeveloped innovation has been deterred by poor IP institutions both at home and abroad. This study aims to understand the formation of this dilemma and provide our suggestions.

2. The development of CHM

Although CHM and botanic medicine share some similarities, they could be fundamentally different. Both refer to drugs that are wholly or partially extracted from plant material. However, botanic medicine theories focus on how to identify a single function through plant extraction to get chemical substances. In comparison, CHM theories aim to identify multiple functions via plant extraction to create a synergized substance. In other words, CHM follows certain principles derived from the Chinese TK that are not followed in the development of botanic drug. Below we highlight the status of CHM by three segments, namely, crude herbal, herbal piece, and herbal drug market, respectively.

2.1 Crude herbal

Crude herbal refers to the raw material of herbal plants ready to be used for treatment. Over the years, herbal materials with the best clinical effect have been identified and publicly acknowledged as genuine material. As shown in Figure 1, the annual changes in planting areas of Chinese herbal medicine have been increasing steadily over the years. In 2014, the total planting area was 2638 wan mu (1 wan mu is around 6,670,000 sqm). This figure increased to 3462 wan mu in 2018, with 31% growth within 5 years.

Figure 1.

Annual changes in planting area of Chinese herbal medicines (2014–2018).

Given the increased area of planting, the annual sales of crude herbal have also increased continuously since 2016. As shown by Figure 2, in 2020, when a global pandemic occurred, the annual sales of crude herbal reached the highest of RMB 179 billion. According to WHO, 70–80% of CHM exported by China is crude herbal, indicting China is key player in the downstream of global value chain.

Figure 2.

Annual sales of Chinese crude herbal (2016–2020).

Notably, crude herbal is featured by its geographical origin, which indicates where the plant was cultivated and harvested. According to TCM theories, herbal plants grown in different geological conditions (such as soil, water, weather, and sunshine conditions) may vary dramatically in terms of their clinical effect. By distinguishing its geographical origin, one can tell the quality and authenticity of the material. However, with increased market demand, artificial cultivation of herbal plants is more adopted despite criticism of its impact on herbal quality. According to the Ministry of Agriculture and Rural Affairs (MARA)⁶ of the P.R. China, by 2018, more than 600 kinds of crude herbal materials are commonly used in China, among which more than 300 kinds are cultivated artificially rather than in natural environment.

2.2 Herbal pieces

Herbal pieces refer to those processed or refined medicinal materials that are ready to be directly used for treatment or to be mixed with other materials for treatment. At present, herbal pieces are developed into several types including: (1) ordinary herbal pieces; (2) herbal pieces without the need of stir-frying; (3) granule herbal pieces; (4) broken herbal pieces, and (5) refined herbal pieces. Nowadays, the processing or refining methods for making herbal pieces follow a combined method that incorporates traditional processing principles into modern processing technologies, such as cleaning, cutting, stir-frying, crafting, steaming, crushing, calcining, etc.

Talking about traditional processing principles, the TCM theories suggest that different parts of a plant and different ways of processing them could affect the clinical effect of herbal pieces. After plants are collected, they will undergo raw processing, including selecting, grading, washing, bleaching, slicing, hulling, steaming, boiling, scalding, sulfing, sweating, and drying of fresh medicinal materials. A plant can be processed by separating its fruit, tuber, grass, head, rhizomes, etc. Further processing include picking, washing, bleaching, slicing, desiccating, and so on. These processing methods have been formed over more than a thousand years of practices and are still believed important to ensure the CHM effect.

Like crude herbal, annual sales of herbal pieces also witnessed a continuous increase over the past years. As shown in Figure 3, the annual sales of herbal pieces reached RMB 273 billion in 2018. This figure almost doubled the annual sales of RMB 149 billion in 2014.

Figure 3.

Annual sales of herbal pieces (2014–2018).

2.3 Herbal drugs

Herbal drugs refer to a class of CHM that can be used directly for disease prevention and treatment in the forms of pills, powder, injections, etc. With the development of modern pharmaceutical technologies, the Chinese herbal drug market has been increasing. In addition, the herbal drug market is also becoming increasingly integrated into the global market, especially in developing compounds, synthesizing natural drugs, or combining the usage of drugs.

Refining is crucial to ensure drug safety and a better curative effect. CHM refining addresses the removal of impurities and nonmedicinal parts to make the material clean and pure. Herbal properties are also refined by reducing or eliminating toxicity and eliminating unwanted side effects. Refining will inevitably trigger various physical and chemical reactions, so the composition of drugs can be created. In this process, both qualitative and quantitative changes are made to achieve pharmacological reactions so that clinical effect can be achieved. Around 30% of CHM exported by China are herbal drugs.

3. The traditional knowledge-based advantages of TCM

3.1 The unique philosophical foundation of TCM

Part of TCM philosophy concerns the relationship between humans and the universe. The Chinese believe a person fells unwell and gets a disease because of the fluctuations of yin yang and the resonances of wu xing. To keep a healthy status, people should model their behaviors on the four seasons (si shi) to maintain in balance with the qi of the universe. TCM regards human body and mind as “a dynamic self-regulating interconnected whole” ([8], p. 64). Unlike the Western approach, such as Greek traditional medicine, which is more interested in material constituents, the essential concern of TCM is the constant change and transformation (bian hua) about the human-universe relationship.

We here only mention a few ancient texts here. The Yellow Emperor’s Inner Canon (Huan Di Nei Jing) compiled during the Qin and Han times (221 BC–220 AD) “defined the framework of TCM … symbolizing the transformation from the accumulation of clinical experience to the systematic summation of theories”.⁷ The Treatise on Cold Damage and Miscellaneous Disorders (Shang Han Za Bing Lun) or the Treaties, from the Eastern Han Dynasty (206 BC–220 AD) collated by Zhang Zhongjing advanced the principles and methods to treat miscellaneous illnesses caused by internal ailments. The Ben Cao Gang Mu or Materia Medica in the Ming Dynasty (1368–1644) by Li Shizhen (1518–1593) was the first book in the world that scientifically categorized medicinal herbs in terms of their main and alternative names, property, growth environment, function, and limitation in the usage.

3.2 The diagnosis principles and practices

Four diagnostic methods came from the Nan Jing—Sixty-one by Bian Que., a famous physician during the Warring States Period (770–221 BC). The four methods are inspection, auscultation and olfaction, inquiry, and palpation. Inspection refers to the method by which a doctor needs to observe the whole body, parts, and excretions of the body purposefully through vision, to understand the health status and detect the disease condition. Auscultation and olfaction mean that through distinguishing the changes of sound and smell, a doctor can judge the physiological and pathological changes of viscera, which provide a basis for the diagnosis and syndrome differentiation. Then the most important part is inquiry, by which a doctor can understand the health status and diagnose the disease through purposeful inquiry of patients or companions. The last one is palpation, by which a doctor uses touch, press, and press certain parts of patients with fingers or palms, to understand the condition and diagnose diseases.

Notably, TCM classical literature was created in ancient times, and few physicians could understand or know how to apply it. Xu Shuwei (1080–1154), a physician and scholarly official, addressed that physicians need to understand the underlying causes of disease when applying the doctrines of the Treaties. Xu compiled nighty cases drawing from his clinical experience into the 90 Discussions on Cold Damage Disorders to deal with issues concerning both theories and various facets of clinical practices. Goldschmidt [9] noted Xu’s book provided details of his diagnosis processes, including records of the most important diagnostic method, the palpated pulse, the dialog with patient’s family members, and discussions with other physicians at the scene.

3.3 The treatment principles and therapies

One of the oldest Chinese treatises is Shennong’s Classic of Materia Medica (Shen Nong Ben Cao Jing), believed written between 206 BC and 220 AD. This three-volume treatise contains almost 400 entries on medicaments and their descriptions. Shennong (a celestial farmer) was a respected national figure who risked his life tasting a hundred herbs to identify their medical properties. More pharmaceutical theories about CHM were documented, emphasizing principles such as distinguishing the main and subordinate functions of a herb, the Yin and Yang nature co-exist and must coordinate each other, to differentiate four properties and five tastes, to accommodate seven types of human emotions that they must exist in harmony. Leung, Fong ([10], p. 1) commented that TCM is based on “the complex recipes and formula derived from historical and anecdotal evidence of Chinese medicine practitioners,” which differs from Western herbal medicine.

A typical TCM recipe is a combination of several drug ingredients. We can see it as a “cabinet” according to Leung, Fong [10]. To use a metaphor,⁸ it must have “monarch” drugs, which directly deal with the disease; the “minister” drugs, which supplement the main function; the “assistant” drugs, which balance the need of other parts of the body; the “messenger” or the “servant” drugs, which induce the best function of the formula. These drugs must work together to achieve harmonized effect rather than just the targeted main effect alone. No single active constituent is responsible for the overall efficacy of the whole formula. Apparently, this principle reflects the ancient TCM philosophy mentioned earlier. Experienced physicians know how to adjust these drug components according to the specific case of the patient and the stage of that patient dynamically. This differs from the Western approach, which often applies the same treatment to patients labeled with the same disease.

4. The institutional disadvantages of TCM

4.1 The systematic challenges in protecting traditional knowledge

According to World Intellectual Property Organization (WIPO),⁹ traditional knowledge (TK) “is knowledge, know-how, skills, and practices that are developed, sustained and passed on from generation to generation within a community, often forming part of its cultural or spiritual identity.” Although as important part of TK, TCM is highly appreciated, its IP value cannot find proper protection from current IP systems. Below we recall a few key milestones in the development of the international IP system to indicate systematic challenges faced by TCM.

A more direct agenda to protect TK is seen in the Berne Convention¹⁰ [11], which for the first time, raised the issue of protecting traditional creation stories and artistic works in 1886. Although this did not trigger much action on protecting IP rights of traditional medicine, it started drawing people’s attention to protect traditional culture. Since then, international institutions such as WIPO and the United Nations Educational, Scientific and Cultural Organization (UNESCO) have launched a series of agendas regarding TK protection.

One important footprint of protecting TK can be found in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) or the TRIPS Agreement, signed in 1994. The TRIPS Agreement, for the first time, declared that its member states can have enforcement rules in IP protection and incorporate the rules in the multilateral trading system. For example, Article 27.3 (b) of the TRIPS Agreement “deals with whether plant and animal inventions should be covered by patents, and how to protect new plant varieties.” A related debate regards how disclosure of the source of TK should be practised. Especially, some developing countries “want to amend the TRIPS Agreement so that patent applicants are required to disclose the country of origin of genetic resources and traditional knowledge used in the inventions…”.¹¹

In 2000, the “WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore” or the IGC¹² was established which marked a big step to promote TK protection more systematically. IGC is a forum where WIPO member states could discuss issues regarding the protection of IP based on TK. In 2000, IGC published Matters Concerning Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore [12] which further detailed how TK should be protected.

The protection of TCM in China started in the 1980s. In China, Article 43 of the Law of TCM of P. R. China (2007) stipulates that the state shall establish a database, protection directory, and protection system to protect the TCM knowledge. The owner of TCM knowledge has the right to inherit and use the knowledge. Also, the owner has the right to know, to permit, and to share the benefits when other people want to obtain and use the TK. Owners of some classic prescriptions which contain secret composition and production techniques can apply for IP protection. Also, what is perhaps unique in China, is that the classic TCM know-how is regarded as the state treasured secrets and are exercised with special protections.

Specific to the IP protection of CHM, the Chinese IP protection system and the international system are not compatible. Also, many well-known medicinal materials have been neglected within the Chinese IP system without IP protection. For example, traditional knowledge about some famous CHM such as honeysuckle, cangshu, angelica, contains unique processing techniques but has been neither protected by the National List of Intangible Cultural Heritage nor covered by the List of World Intangible Cultural Heritage. Below we explain further why CHM is exposed with limited IP protection options.

4.2 The limited options for protecting TCM both at home and abroad

Patent: From WIPO IP Statistics Data Centre, TCM patent applications account for only 0.3% in the herbal and botanical medicines applications. This is because formulas of CHM, especially those derived from ancient recipes, are not patentable internationally. The patentable scope of CHM covers CHM extraction, extraction methods, compounds, or compositions of compounds. To obtain patent within this scope immediately exposes the competitive disadvantages of CHM due to less developed R&D or processing techniques compared with those in developed economies.

Taking Japan as an example, its domestic patenting system has been designed following international patenting system. Japan has applied for 210 patents internationally based on ancient recipes recorded by classical Chinese treaties. In comparison, it is hard for a CHM to meet the international IP application standard, mainly because the novelty cannot be fully evidenced with poor information on its chemical properties. Consequently, CHM suffers a substantial loss due to knowledge leaking to its competitors without patent protection.

Copyright: The fundamental knowledge of TCM, as manifested by classical works, texts, and treatises, could not get protection through copyright. Like TK in other fields, the innovative development of TCM has gone beyond the input of any individual person rather, it has been created by collective wisdom and then passed from generation to generation over a long history. Therefore, it is impossible to recognize and inappropriate to assign one person as the right subject of TCM knowledge.

Trademark: For decades, the naming of TCM products in China has followed its unique norm: using the herbal name to label the trademark. In compassion, the corporate trademark is less addressed. Consequently, we can see the same or similar product names available in the market but made by different CHM companies. Such a trademark system also nurtures nonfamous corporates to secretly use famous corporate brand names to promote poor quality or even fake medicines. Consequently, people trust and prioritize CHM over old and famous corporate brands such as Tong Ren Tang or Jiu Zhi Tang. When CHM makers want to compete internationally, they suddenly realize they need to register and build their corporate trademarks, and often famous corporate brand names have been preregistered by local counterparties.

Geographical indication: The geographical indication is crucial information that suggests quality differences subject to where and how the herbal material is cultivated and harvested. However, in the China context, geographical indication almost equals the authenticity nature of CHM. The two concepts are interchangeably used and heavily supported by domestic laws such as China’s Trademark Law and Chinese Medicine Law. For CHM going global, geographical indication and authenticity indication should be separated. For example, in 2020, the “EU-China Agreement on Protection of Geographical Indications”¹³ was signed, which includes a total of 275 mutually recognized geographical indication products. Still, many CHM is facing the problem of having no proper trademark, or the existing trademark is not protected.

Trade secret: Trade secrets in the field of TCM mainly include unpatented ancestral secret recipes, new drug formulas, processing methods, preparation techniques, compound matching ratios, Chinese herbal cultivation techniques, identification techniques, etc. The protection of trade secrets is the traditional and dominant protection method in China. In the survey conducted by the State Administration of Traditional Chinese Medicine on 120 key TCM enterprises and their 401 important TCM products, 61.8% of the enterprises adopted trade secret protection measures. However, for CHM going global market, trade secret protection has its limitations. In applying international IP protection or international collaborations, it is virtually very difficult to keep the secret.

5. The case study of Lianhua Qingwen

5.1 Background of Yiling Pharmaceutical Co. Ltd

Yiling Pharmaceutical Co. Ltd. (hereinafter called YL), was established in 1992 headquartered in Shijiazhuang, the capital city of Hebei province in China. YL originated as a small clinic from the Shijiazhuang Development Zone Medical Research Institute. The company was named after its founder, Professor Wu Yiling. As a pharmaceuticals and biotech company YL’s main area is TCM varieties “focusing on the core treatment fields such as cardio-cerebrovascular diseases, respiratory diseases, digestive diseases, endocrine diseases, immunological diseases, and urologic diseases.”¹⁴ In 2011, YL was publicly listed in the Shenzhen Stock Exchange. By 2023, YL will have more than 16,000 employees. It is also a multinational corporate with offices and agents located in 30 countries and regions around the world. By carrying out clinical trials in a standardized and scientific manner, it is one of the few Chinese pharmaceutical companies certified by the Global Manufacturing Practices (GMP).

YL won many national prizes with titles such as “National Key Hi-tech Enterprise,” “Top 20 Listed Pharmaceutical Company,” and “China Famous Brand,” and recently the “2020 Corporate Social Responsibility Pioneer Award”.¹⁵ But what makes YL attract international spotlight is its famous herbal drug, Lianhua Qingwen (hereinafter called LHQW). Western media [13] commented that because of LHUQ , YL’s stock price jumped more than 60% since the end of December 2022. According to Zhong Nanshan, a famous epidemiologist and head of expert group at the National Health Commission (NHC), LHQW “is effective in treating mild and moderate [Covid] symptoms. Not only domestically, we can also promote it overseas” [14]. As shown by Figure 4, the annual sales of LHQW have increased dramatically from 2016 to 2021, especially in the outbreak year of the global pandemic in 2020. The sales jumped from RMB 1.7 billion in 2019 to RMB 4.23 billion in 2020, reaching RMB 4.49 billion in 2021.

Figure 4.

Sales growth of LHQW (2016–2021).

LHQW represents a typical TCM case in China, which seems extraordinarily successful in the domestic market and is now targeting to tap more into the global market. Below we look at its TK base and IP status to explain why companies like YL may face a dilemma, as this chapter addresses.

5.2 The traditional knowledge-based advantages of LHQW

The development of LHQW was based on Chinese TK—three classic Chinese medicine remedies for infectious diseases (pestilence): “Maxing Shigan Tang” (Ma Ren Shi Gan Tang), “Yinqiao San”(Yin Qiao San) and “Shengjiang San” (Sheng Jiang San). Its ingredients include honey suckle, liquorice root, apricot seed, and forsythia, as a treatment for coronavirus. According to TCM theories, the main function of LHQW is to collect and distribute external evils, cleanse internal fires, and drive away plague and evil acts on our body. LHQW demonstrates strong TK-based advantages due to its broad spectrum of antiviral effects during several serious events [15].

The first event (SARS: 2002–2004): LHQW was developed in 2003 as a treatment for severe acute respiratory syndrome (SARS) following the outbreak of the epidemic in Guangdong, China in November 2002. Professor Wu Yiling, the founder, and an academician of the Chinese Academy of Engineering, led his team to carry out research on the SARS. After analyzing the SARS situation in Guangzhou and other places, the research team successfully launched LHQW based on the essence of ancient prescriptions of the Han, Ming, and Qing dynasties, combined with modern pharmacological research. It was the only medicine approved by the China State Food and Drug Administration (SFDA) in the treatment of SARS in 2004.

The second event (H1N1: 2009–2010): In December 2009, the H1N1 influenza or the Swaine flu was first identified in Mexico and then spread rapidly around the world, causing serious social disruption. LHQW capsule was proven to have a good therapeutic effect [16]. Not only does it have better effect than another famous drug, such as Tamiflu, but the cost of treatment is only 1/8 of Tamiflu. Therefore, LHQW was selected as the “Type A” drug to deal with H1N1 by China’s health authority in 2009.

The third event (MERS: 2012–2015): In 2012, the Middle East respiratory syndrome (MERS) a respiratory disease, was first detected in Saudi Arabia. On May 23, 2013, the WHO named the novel coronavirus infection “Middle East respiratory syndrome.” In May 2015, MERS had a large-scale outbreak in South Korea. In response to this new coronavirus, YL quickly carried out relevant research. Again, LHQW was recognized as an effective treatment for MERS. During this period, China was experienced very serious air pollution in most big cities, and LHQW was also recognized as an effective drug for dealing with diseases caused by air quality. In the first half of 2015, LHQW has sales reached to 169 million yuan.¹⁶

The fourth event (Covid-19: 2020–2023): Since the outbreak of the Covid-19 epidemic in 2020, LHQW has demonstrated its attacking power against the virus. Based on its effect, it was recognized as one of the most important front-line drugs. In 2020, LHQW was selected officially as the top “Three TCM drugs and Three Herbal Formulas”¹⁷ to deal with Covid-19. It was also listed in the 3rd and 9th edition of the New Coronavirus Diagnosis and Treatment Guide. The government endorsement of LHQW added further official affirmation of the medicinal effect of LHQW. The revenue of YL jumped since 2019. In 2021, it achieved sales revenue of 4, 060 billion yuan.¹⁸

5.3 The aggressive IP performance at home vs. zero IP protection abroad

YL presents a successful example in TCM industry. First, YL has always been proactive in following the market status and reacting responsibly, as shown from our review of its quick reaction to SARS, H1N1, MERS, PM2.5, to Covid-19. Second, YL appreciates TK and treats TK as its core knowledge based in building R&D capabilities. Long before SARS, the company started the development related TCM. Thirdly, YL has a clear IP strategy. From 2003 to 2023, YL applied for as many as 49 invention patents around LHQW products. Among the 49 patents, 2% related to the formulation of TCM, 8% related to the improvement of production methods, 11% related to the detection of active ingredients of TCM, and 79% related to medicinal uses [17].

As the core product, the LHQW series generate great market value for YL. According to the company’s annual report, LHQW’s B2B (to hospitals) market share has increased from 10.10% in 2017 to 43.50% in 2021. Its retail market share has increased from 2.44% in 2017 to 6.63 in 2021. Apar from the mainland China, Hong Kong, Macau, and other regions, it has been approved for entering into nearly other 30 countries and regions including Brazil, Canada, Thailand, and Russia, etc., and start building its global brand.

It is not totally surprising to us that LHQW has not obtained any patent internationally. Compared to its success in the domestic market, LHQW has not been promoted globally or even accepted as an effective medicine. The role of CHM in treatment is still controversial. For example, “The US Food and Drug Administration, as well as Singaporean and Australian authorities, have warned that there was no evidence that Lianhua Qingwen had any effect on the virus, and cautioned against its use” [13]. Also, some raised the concern that the counterfeit version of the remedy could be spread in the market without a clear verification of LHQW.

Acknowledged the fundamental theoretical differences between traditional and modern medicines, the therapeutic effects of TCM usually come from the synergistic action of certain ingredients that are more difficult to be evaluated for their efficacy and safety [16]. In this regard, Japan provides a different example. Its domestic patenting system has been designed following the international patenting system. In Japan, a new herbal medicine invention must meet the three core principles of any invention: to be novel, useful, and not obvious. In comparison, it is hard for companies like YL to meet the international IP application standard, mainly because the novelty cannot be fully evidenced.

6. Conclusion

This chapter uses CHM as the context and the case of LHQW to explain a dilemma faced by TCM. We argue TCM is not just China’s national treasure it is also the treasure of world civilization. With its rich TK base, TCM is creating unique medical value that are not available by normal herbal medicine. However, we find that the globalization of TCM is suffering because of incomplete IP protection systems both at home and at the global level. In 2016, China’s State Council Information Office issued a white paper on the development of TCM.¹⁹ In viewing this white paper, we provide the following dimensions to highlight our advice and directions for future research.

Advancing the national R&D capacity of TCM: One technical barrier for TCM to go global is how to enhance the accuracy of its medical ingredients. Chen, Pang [18] noted that the number and variety of medical plants could reach to more than 70,000 different species that need to be distinguished; otherwise, patients’ safety and herbal efficacy can be severely affected. Yet the traditional methods to authenticate herbal materials such as morphological, microscopic, and chemical identification are insufficient to get accurate and reliable authentication from enormous species, especially from those closed related species and plant parts that share similar morphological or chemical structures. Recently, the DNA barcoding technique has been adopted to resolve the problem. DNA barcoding information is publicly accessible through online databases, which include almost all crude herbal drugs listed in Chinese Pharmacopeia, Japanese Pharmacopeia, Korean Pharmacopeia, Indian Pharmacopeia, United States Pharmacopeia, and European Pharmacopeia. TCM should go further to advance such technologies to catch up with R&D development.

Promote international standard of TCM: China became a member of the WHO in 1978, and there is still a long way to go to make TCM globally accepted and competitive. In 2022, WHO launched a five-year project (2016–2021) to create standard terminologies on TCM in English. One important principle followed in developing the terminology book was keeping the integrity of the theoretical framework of TCM. The project aims to promote safe and effective use of TCM, TCM knowledge transfer, and TCM research at the global level. The terminologies include fundamental terminologies, terminologies on diagnosis, patterns, constitution, and treatment principles/methods and therapies. China should seize opportunities as such to promote international integration. Zou [19] reported during the 13th Five-Year Plan Period (2016–2020), the country formulated 37 international standards on TCM.

Upgrade domestic IP protection system into a “China TCM protection model”: The case LHQW shows a typical example of CHM that enjoys domestic success but could not get into global market despite of potentially great market demand. Having strong IP protection at home does not mean CHM could obtain IP protection internationally. To this point, the Japanese development model can be referred by the Chinese policymakers in terms of getting China’s domestic IP protection system integrated into the global IP protection system. However, we suggest the Chinese government should not simply replicate the Japanese model. Currently, the most widely adopted IP protection in China is trade secret method. However, trade secret protection is not ideal because in practice it does not prevent knowledge leaking to international collaborators. In our view, the Chinese government really needs to form the “China TCM protection model,” which allows TCM to go global in exchange for technology advancement, but not at the cost of IP assets, especially IP assets derived from China’s TK.