Wenwen DU, Patent Attorney, Panawell & Partners

 

On October 17, 2020, the Decision of the Standing Committee of National People's Congress on Amending the Patent Law of the People's Republic of China was adopted at the 22nd Meeting of the Standing Committee, and the amended Patent Law will enter into force as of June 1, 2021.

The current Patent Law, effective as of April 1, 1985 and amended three times respectively in 1992, 2000 and 2008, has been playing a vital role in encouraging and protecting invention-creations and in boosting innovation. The recently adopted Amendment is the fourth one to the Patent Law.

To date, China is in a critical period of changing its development mode, optimizing its economic structure, and transforming its growth dynamics. Strengthened protection of intellectual property and improved ability to make proprietary innovations are required for accelerating the economic growth and making China a stronger nation through proprietary innovation. In order to cope with the new situation, new requirements, new problems, and new challenges, China has amended, for the fourth time, the Patent Law in 2020, with amendments made to the Patent Law mainly in the following three aspects: 1) strengthening the protection of legitimate rights and interests of patentees, including increased amount of damages for patent infringement, better worked-out burden of proof, amplified pre-litigation preservation measures, enhanced administrative protection of patents, added principle of good faith, and newly-introduced provisions concerning the system compensating for the term of patents, and the procedure for early resolution of drug patent disputes; 2) boosting exploitation and utilization of patents, including further improved service invention system, incorporated open patent license system, and reinforced patent transfer services; and 3) improving the patent grant system, including the further improved design protection system, extended novelty grace period applicability, and improved patent evaluation report system. Following are an overview and analysis of the amendments to the Patent Law:

I. Infringement Costs Increased and Patentees’ Legitimate Rights and Interests Protected

1. System for Punitive Damages for Serious Willful Infringement Incorporated

This involves Article 71 of the amended Patent Law: "In the case of willful infringement of the patent right, with serious circumstances, the damages may be determined at an amount between one and five times that as determined using the above method."

To date, what basically governs the damages award or determination in the civil law is the "fill in" doctrine. However, considering the difficulty in evidence adduction in the field of intellectual Property and the innovation-encouraging mechanism, the "punitive damages" system has been incorporated in the amended Patent Law. Now, the "five times" as now adopted in China is the highest multiple globally, which indirectly demonstrates China's resolve to strengthen the protection of intellectual property, and to fight infringements.

2. Amount of Statutory Damages Increased

This involves Article 71 of the amended Patent Law, with the original amount of damages "between 10,000 yuan and less than 1 million yuan" changed into "more than 30,000 yuan and less than 5 million yuan".

Both the minimum and maximum of the awarded amounts of damages have been revised, which once again shows China's determination to increase the infringement costs and strengthen the protection. In particular, more severe punishment would be imposed on acts with legitimate sources of products difficult to prove or on acts of willful infringements.

3. Burden-of-Proof System Better Worked out to Address Difficulty in Evidence Adduction

This again involves Article 71 of the amended Patent Law: "In order to determine the amount of damages, the people's court may order the infringer to provide account books and information related to the infringement when the right holder has adduced evidence with due diligence and the account books and related information are mainly in the hands of the infringer; where the infringer refuses to provide or provides false accounting books, the people's court may determine the amount of damages with reference made to the claims by, and based on the evidence from, the right holder."

4. Term of Design Patent Extended

Article 42 of the amended Patent Law reads: The term of the patent right for design is changed into 15 years.

This amendment creates conditions for China to accede to the Hague Agreement on the International Registration of Industrial Designs, and meets the needs of innovators for filing international applications. China's accession to the Hague Agreement would make it possible for domestic applicants to file their design patent applications directly with the International Bureau of the World Intellectual Property Organization or in a specific form for the China National Intellectual Property Administration CNIPA to transfer them thereto. The applicants only need to file one application, which is equivalent to filing multiple applications in the designated member states at the same time. This will greatly simplifies the procedural requirements for one applicant to seek protection of his designs in multiple nations.

5. Patent Term Compensation System Introduced

This involves Article 42 of the amended Patent Law, with addition of this paragraph: "Where the invention patent is granted 4 years after the date of filing for a patent for invention and 3 years after the date of request made for substantive examination, the Patent Administration Department under the State Council shall, at the request of the patentee, compensate for the term of the patent to offset the unreasonable delay caused in the patent grant procedure, unless the unreasonable delay was caused for reasons on the part of the applicant. In order to compensate for the time used for the regulatory review and approval of a new drug for marketing purposes, the Patent Administration Department under the State Council shall, at the request of the patentee, grant compensation for the term of the patent for the new drug-related invention that has been approved for marketing in China. The compensated term shall not exceed 5 years, and the entire term of the patent shall not exceed 14 years after the new drug is approved for marketing."

Since the term of a patent is calculated from the date of filing, especially for the invention patent, the prolonged time for examination indirectly shortens the term of the patent. For this reason, it is necessary to put in place a system to compensate for the patent term. In addition, the amendment also specifically provides for compensating for the term of drug patents. On the one hand, a drug is usually developed in prolonged time and at high cost, so it is highly dependent on the patent protection; and on the other, drugs are closely related to public health. As far as the general public are concerned, too long a term would delay their access to low-cost drugs. To strike a balance, the principles relating to the types of the compensable drugs, and the compensable time, and compensation upon request are specified in the amended provisions.

6. Procedure for Early Resolution of Drug Patent Disputes Added

This involves Article 76 of the amended Patent Law, with the first paragraph added, which reads: "Where, in the process of regulatory review and approval of a drug for marketing purposes, the drug marketing authorization applicant and the relevant patentee or interested party run into dispute over the patent right relating to the drug applied for registration, the relevant parties can sue in the people’s court for a ruling on whether the drug-related technical solution applied for registration falls within the scope of protection of another person’s drug patent. The drug regulator under the State Council may decide whether to suspend the review of the related drug for marketing in accordance with an effective ruling made by the people’s court within the prescribed time limit.” Also added to Article 76 are paragraphs 2 and 3.

Drugs, on the one hand, require patent protection, and, on the other, are required to go through the regulatory review and approval for marketing purposes under the varied standards. Examination of a drug for patenting purposes, for example, assesses its novelty, inventive step, etc., while regulatory review and approval of a drug for marketing purposes mainly scrutinizes its safety. However, for example, for a generic drug, in theory, it is marketable upon approval by the drug regulator, but infringement risks are still likely. For this reason, the added paragraph is meant to solve disputes of the nature in advance, that is, to allow the drug to be judged as to whether it is infringing or not before it is put into production.

7. Administrative Patent Protection System Improved

This involves Article 68 of the amended Patent Law: "Anyone who counterfeits a patent shall, besides civilly liable under the law, be ordered by the patent enforcement agency to make corrections and the patent enforcement agency shall publicize the act, confiscate illicit income, and may impose a fine of less than five times the illicit income; where there is no illicit income or the illicit income is less than 50,000 yuan, a fine of less than 250,000 yuan may be imposed; and where a crime is constituted, criminal liabilities shall be imposed under the law." The paragraph added to Article 71 of the Patent Law is also relevant.

This amendment has increased the multiple of penalty for counterfeiting patent. At the same time, it is further specified that infringement cases fall within the jurisdiction of the patent administrative department within the intellectual property regime, and cases of counterfeiting patents of a joint law enforcement team, with the two types of cases different in nature handled by different authorities.

8.  Principles concerning Good Faith and Right Abuse Prohibition Specified

This concerns Article 20 of the amended Patent Law: "Patents shall be applied for and the patent right exercised or enforced by following the principles of good faith. The patent right shall not be abused in jeopardy of the public interests or the legitimate rights and interests of others. Where abuse of the patent right to exclude or restrict competition constitutes a monopolistic act, it shall be dealt with under the Anti-Monopoly Law of the People's Republic of China."

Patent protection involves two stages: the patent application stage and patent enforcement stage. In the former, there sometimes arise acts of application for improper purposes and acts of filing applications by improper means, which not only wastes social resources, but also lowers the quality of patent applications in China. The amendments made along the line highlight that the principle of good faith should also be observed in the patent application stage with a view to prohibiting acts of improper application.

II. Patent Exploitation and Utilization Promoted and Patent Public Services Enhanced

1. Service Inventions-creations Improved and Employers’ Service Invention-creation Disposal Right Clarified

This involves Article 6 of the amended Patent Law: "An employer can dispose of the right to apply for patent and the patent right for service invention-creations under the law to promote the exploitation and utilization of related invention-creations. Article 15 of the Patent Law is also relevant here.

The current Patent Law does not clearly specify how employers should dispose of the patent right, but some employers are restricted by other laws, such as those concerning supervision of the state-owned assets. It is possible to deem the above amendment to be a reaffirmation, that is, the Patent Law further clarifies that employers can dispose of it under the law. The way to do so depends on particular employers under specific circumstances. Amendments made in this regard are meant to further stimulate inventors' enthusiasm to create and motivate them to innovate.

2. Open Patent License System Launched

Articles 50, 51 and 52 of the amended Patent Law are involved here. “Where a patentee voluntarily declares in writing to the Patent Administration Department under the State Council that he is willing to license any entity or individual to exploit his patent, and specifies the methods and standards of royalties payment, the Patent Administration Department under the State Council shall make an announcement for the open license. Where an open licensing statement is made for a utility model patent or design patent, the patent right evaluation report shall be provided. During the execution of an open license, the patentee’s patent annuity shall be reduced or exempted accordingly.”

Open license, as one important legal system, is designed to promote patent transfer and exploitation. The core function of the system is to encourage patentees to make their patents accessible to the society, linking supply with demand, promoting patent exploitation, and delivering the value of patents. Based on the national conditions in China and the mature international experience, the amendments have provided for the open license declaration, the procedural elements for such licenses to take effect, the procedures through which licensees can obtain open licenses, their rights and obligations, and the corresponding dispute resolution roadmap, and in this way the information asymmetry between the suppliers and the customers of patented technologies is to be addressed through government’s public service provision, so that all entities and individuals have easy access to patent licenses at lower transaction costs and higher patent transfer efficiency. To date, the open license system (or known as the of-course license system) has been introduced and implemented in such developed countries as, the United Kingdom, France and Germany, and in some developing countries like Thailand, Brazil, and India.

3. Patent-related Public Services Enhanced

This involves Article 21 of the amended Patent Law: “The Patent Administration Department under the State Council shall enhance construction of public patent information service system, publishing patent information in a complete, accurate and timely manner, providing the basic patent data, publishing patent gazettes on a regular basis, and promoting the dissemination and utilization of patent information". Article 48 of the amended Patent Law is also relevant here.

The above-mentioned amendments will make it possible for more nationwide attention to be attached to the relevant public and social service provisions.

III. Patent Grant System Amplified and Patent Examination Quality Improved

1. Partial Designs Protected

This involves paragraph 4 of Article 2 of the amended Patent Law, which provides that “the design refers to a new design of the overall or partial shape, pattern or their combination, and the combination of the color, shape, and pattern of a product, which is aesthetically pleasing and suitable for industrial applications“.

This amendment will meet the needs of innovators, and address the limited protection of design as a whole. It also keeps in line with the trend of international developments in the intellectual property protection, and helps Chinese businesses "go international“. To date, partial designs are protected in such major countries and regions as the United States, Japan, Europe, and the Republic of Korea.

2. Novelty Grace Period Granted under More Circumstances

To Article 24 of the amended Patent Law has been added the paragraph "where it is disclosed for the first time for public interest in case of national emergency or under extraordinary circumstances".

The amendment adds the circumstance of "the first disclosure for public interest in case of national emergency or under extraordinary circumstances" as a case of novelty-loss exception. The addition not only meets the practical needs of the ongoing COVID-19 pandemic fight, but also facilitates future application in other emergency or extraordinary situations.

3. Patent Evaluation Report System Improved

This involves Article 66 of the amended Patent Law. With more interested parties eligible for requesting evaluation reports on utility model and design patents, patentees, stakeholders or alleged infringers may also produce, on their own, the patent evaluation reports.

4. Design Patent Application Domestic Priority System Put in Place

This involves Article 29 of the amended Patent Law, under which the system of domestic priority for design patent applications has been put in place. It is clearly provided that where an applicant files a patent application relating to the same subject matter within 6 months from the date when he filed an application for a patent for design for the first time in China, the applicant may enjoy priority, thus reducing the application costs and giving design applicants an opportunity to  further improve their designs and adjust the scope of protection claimed.

5. Priority Texts Filing Procedure Optimized

This involves Article 30 of the amended Patent Law, under which the time limit for filing priority documents of patent applications for invention and utility model shall be changed from 3 months from the date of filing under the current Patent Law to 16 months from the earliest priority date, allowing applicants longer time to file their priority documents.

By the end of this year or early next year, the CNIPA will have subsequently released the Implementing Regulations of the Patent Law and the Patent Examination Guidelines adaptively revised, and issue the transitional measures worked out, under the amended Patent Law.

 

 

Author:

Ms. Wenwen DU

Ms. Du, graduated from Beijing University of Technology in 2016 with a master's degree in material forming and control engineering, joined Panawell in 2017, and has been engaging ever since in drafting and prosecuting Chinese and international patent applications, conducting patent search, and offering consultation in the field of mechanics.

 

 

 

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