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Summary on 4th Revisions of China Patent Law and Related Revised Articles

10

NOV

2020

Chinese Patent Law is established in 1985 and has been revised three times before 2020. After nearly ten years' discussions on the fourth revision of the Patent Law, it has finally settled recently. On October 17, 2020, at the 22nd meeting of the Standing Committee of the National People's Congress, the fourth revision of the Patent Law is passed and will come into effect on June 1, 2021.

On the one hand, this revision of the Patent Law is to summarize the conclusions and shortcomings of the patent system over the past 30 years. On the other hand, it is to implement the Phase I Sino-US Economic and Trade Agreement. Overall, the revised version is updated and supplemented from the following aspects:

I. Upgrading of Design system

1. Enhancing partial design protection. The call for protection of the partial appearance of the product has always been high. The introduction of partial design in this Patent Law amendment version can realize the protection of partial innovations of objects that cannot be produced separately, such as the partial design of shoe uppers. This can also realize the protection of the appearance of the graphical user interface GUI, so that it is no longer restricted by its carrier

2. The domestic priority of design patents has been added for a period of 6 months. As a result, the designer can make improvements on the basis of the application submitted for the first time and submit an improved design within a 6-month period, which increases the flexibility of the design.

3. The extension of the patent term of designs from 10 years to 15 years will lay the foundation for our country's future accession to the Hague Agreement Concerning the International Registration of Industrial Designs. How to implement the extension of the protection period and whether it will cover the design that is currently in effect still needs to be discussed.

Although there are not many amendments for design, the introduction of "partial appearance" is actually a major change to the current Chinese design system. Further issues such as how to apply for a partial appearance, how to evaluate the novelty and inventiveness of the partial design, and how to determine the infringement of the partial design, etc., can be expected to be revised in the future Implementation Rules and Guidelines for Examination of the Patent Law.

II. Facilitating patent implementation

1. It is clarified that the right to use the patent applications and patents of service inventions is owned by the entity, and the entity is allowed to use the patent applications or patents in accordance with the law, for example, by licensing or assignment, for the purpose of facilitating the exploitation of the patent application or patent;

2. The entity is encouraged to provide certain incentives besides bonus and reward, e.g., stock shares, stock options, dividends, etc, to motivate the inventors for innovation.

3. The patent holders are encouraged for open licensing, and the terms need to be made public. During the period of open licensing, the annual fee could be reduced or exempted, and the license is limited to non-exclusive license, whilst a sole license or exclusive license will not be available.

The introduction of the above provisions further releases the constraints from the entities or employees on the service inventions. The provisions clarify that the right to use the service invention belongs to the entity, and enable the entity or the employee to exploit the patent more flexibly. It is also reflected on the incentives (e.g., stock options, stock shares, dividends, etc) to encourage the inventors of the service inventions for innovation. In addition, by encouraging patent holders to open up their licenses, it will facilitate the operation and implementation of patents.

III. Provisions of patent term compensation

1. The patent term could be compensated for the unreasonable delay by the patent office (similar to the patent term adjustment in US);

2. A patent term extension up to five years will be allowed for the delay due to the drug approval process, provided that the maximum patent term remaining after the regulatory approval does not exceed 14 years (similar to the patent term extension in US).

These provisions are set forth for the purpose of implementing the commitment made in the Phase I Sino-US Trade Agreement. Through the patent term compensation, the patent holders would better benefit from the patent protection, which is of great significance to innovative drugs. The details still need to be clarified in the follow-up implementation rules and revision of the guidelines for patent examination.

IV. Clarifying the scope and jurisdiction of administrative enforcement

1. It is clarified that the administrative enforcement apartment is allowed to have certain law enforcement authorities against those suspected of counterfeiting patents or patent infringements, including: inquiring the parties of concern, investigating the circumstances related to the suspected illegal acts; conducting on-site inspections on the parties suspected of illegal acts; conducting inspections on the products related to suspected illegal acts, etc. Since administrative enforcement department cannot make administrative decisions on the amount of infringement compensation, it does not stipulate that the enforcement on patent infringement includes inspecting and copying contracts, invoices, account books and other relevant materials related to the suspected illegal acts, or the seizing and sealing acts. However, when conducting investigations on patent counterfeiting acts, the above-mentioned materials can be consulted and copied, and relevant products can be seized and sealed.

2. The jurisdiction of local patent enforcement departments is clarified. And the patent administration department of the State Council is confirmed to be eligible to handle patent infringement disputes and cross-regional patent disputes that have a significant national influence.

3. The penalties for counterfeiting patents are increased. The illegal incomes should be confiscated, and a penalty of less than five times of the illegal incomes can be imposed. If there is no illegal income or the illegal incomes are less than 50,000 yuan, a penalty of less than 250,000 yuan can be imposed. Those who conduct a crime will be prosecuted for criminal liability in accordance with the law.

These articles further stipulate the measures, scope and jurisdiction of administrative enforcement, and adapt to the current trend of diversified law enforcement.

V. Increasing penalties for patent infringement

1. Placing the actual loss suffered by the right holder or the profit gained by the right holder in the same order, so that the right holder can make choices freely depending on actual circumstances.

2. Introducing punitive damages, for intentional infringement of patent rights, with serious circumstances, the damages can be determined based on 1-5 times

3. Increasing statutory damages to RMB 30 thousand - 5 million, so that the upper limit of statutory damages for patent infringement is consistent with other intellectual property laws such as the Trademark Law and the Anti-Unfair Competition Law.

4. Formally incorporating Evidence Sanction System as established in the Judicial Interpretation of Patent Infringement into the Patent Law, and amending the previous "preliminary evidence" to "make every effort to provide evidence" to avoid disputes over what constitutes "preliminary evidence"

5. The scope of application of property preservation and preliminary injunctions is clarified, and the “behavior that prevents patentee from implementing their rights” is added as a parallel condition for the establishment of infringement, thereby enhancing the obligation of proof of preliminary injunctions and property preservation.

The revision of the punitive damages system is a more controversial and influential revision. The compensation for damages for patent infringement has always followed the principle of "gap-filling" in the upper level "Tort Liability Law". However, in recent years, the calls for strict and strong protection in China have risen, and with the introduction of the punitive damages system in the "Trademark Law", the punitive damages system of the Patent Law has also been put on the agenda. The punitive damages for patent infringement have actually been revealed in the previous guidelines issued by the courts at all levels and the Supreme People’s Court and also in some precedent cases. The amendment to the Patent Law finally defines this system at the law level. However, how to judge the intentional infringement and the seriousness of the circumstances, and how to determine the statutory compensation more accurately, still needs further guidance in judicial practice. At the same time, the cooperation of the "Evidence Sanction System" is also needed, so that more evidence from the infringer can be used as the basis for calculating damages.

VI. Establishing the patent linkage system for drugs

The patent linkage system for drugs refers to the “linkage” between the regulatory approval of generic drugs and the patent protection of the relevant innovative drugs. When a generic drug is applied for marketing authorization, the drug regulatory department would work together with the patent administration department on the patent issue. If there are relevant patent disputes, the drug approval process will be withheld until the disputes are resolved.

In the Sino-US Trade Agreement, China agrees to establish its own patent linkage system. Consequently, Article 76 is incorporated in the recent revision of the Patent Law as a principled provision for the drug patent linkage system. It is clarified that, the patent holders or the parties of interest are allowed to file a lawsuit or apply for an administrative ruling on the patent disputes related to the drugs applied for marketing authorization. The details of the implementation still need to be clarified in the regulations to be issued later.

It is worth mentioning that CNIPA and CFDA recently issued a draft for comments on the implementation measures for the early resolution of drug patent disputes, setting forth specific rules on the patent linkage system. For example, a 45-day-timeline from the publication date of the generic drug application information is proposed for filing a suit, and the waiting period initiated by the lawsuit or administrative ruling is set to be 9 months, during which CFDA will not approve the generic drug unless the generic drug company succeeds the patent challenge. Moreover, in addition to chemical entities, biosimilars and traditional Chinese medicines are also included into the patent linkage system.

VII. Articles to control the abuse of patent right

1. It is clarified that patent prosecution should follow the "Good-faith" principle. The "Good-faith" principle, as the "imperial clause" of the Civil Law, is regulated in the Patent Law for the first time. This article can be seen as a response to low-quality patent applications such as "abnormal patent applications" in recent years.

2. For the exercise of patent rights, the principle of good faith must also be followed, and patent rights must not be abused to damage public interests or the legitimate rights and interests of others. This is to clarify the legitimacy of the patent enforcement actions of the patentee after the patent is granted, so as to curb certain malicious infringement litigation activities that affect the normal business order.

3. Abusing patent rights to exclude or restrict competition and constitute a monopoly behavior will be included in the scope of regulation of the Anti-Monopoly Law. The main possible application of this article is on those patent infringement lawsuits initiated by SEP holders

4. For patent infringement lawsuits filed on the basis of utility model and design patents, the defendant is newly allowed to provide Patent Evaluation Report. Since utility models and designs are not subjective to substantive examination, they may be unstable. If a lawsuit is filed based on such unstable patent rights, the efficient relief for the defendant is to submit the PER to the court. However, this also requires specific supporting provisions in the Guidelines for Examination to allow the defendant to apply for such PER.

Although this clause is a rather high level principle, it is still possible to directly quote this clause in specific cases to fight against abuse of patent rights in the future.

VIII. Other revisions

1. Another type of non-prejudicial disclosure is added as the disclosure for public interest purposes when a state of emergency or extraordinary circumstances occurs. This article is tailored specifically to the pandemic outbreak in 2020.

2. It is clarified that the nuclear transformation method cannot be granted a patent. This can be seen as the protection of national security interests.

3. The deadline for submitting a copy of the priority document is set to 16 months from the filing date, which previously was 3 months from the filing date of the Chinese application. In the case that the copy of the priority document is generated abroad, it takes longer and is more complicated to obtain and complete the procedures. This relaxation of time limit will help the applicant prepare the copy of the priority document in a more secure way.

Compared with the previous revisions, the recently revised patent law has made great changes, adding several principles for new systems. How these systems would operate and how their effects would be still need to be inspected in practice. The focus of the next step will be the specific implementation of these principles. We will be expecting to see what will happen in the recent future.

About the Firm

Liu Shen & Associates
Address 10/F, Building 1, 10 Caihefang Road, Haidian District, Beijing 100080, China.
Tel 86-10-6268 1616
Fax 86-10-6268 1818
Email mail@liu-shen.com
Link www.liu-shen.com

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