The New Patent Law Brings Great Changes to Improve the Business Environment in China
Highlights of the amendments
China's Patent Law has just undergone the fourth revision in 2020 to improve the patent protection system and improve the business environment that respects innovation, thereby safeguarding the legitimate rights and interests of patent owners and enhancing the confidence of innovation entities in patent protection.
The new Patent Law came into effect on June 1, 2021, and the amendments mainly include:
- The new Patent Law increases the intensity of compensation for patent infringement, and the amount of compensation can be determined within 1-5 times of the calculated amount for intentional infringement of patent rights. In addition, the statutory compensation amount has been increased, the upper limit of the statutory compensation amount has been raised from 1 to 5 million CNY (from around 156,400 USD to around 782,000 USD), and the lower limit has been raised from 10,000 to 30,000 CNY (from around 1,564 USD to around 7,820 USD).
- The new Patent Law incorporates partial design into design patent protection, expanding the scope of design patent protection. The protection period of designs has been increased from 10 to 15 years. In addition, domestic priority for design patents is added, which is beneficial to applicants for design patents.
- In order to make up for the loss of the patent protection period caused by the unreasonable delay in the substantive examination process of the invention patent, the patent right period compensation system has been added in this revision. In addition, compensation for the loss of the patent right period due to the time occupied by the approval of the new drug’s marketing also has been added.
- The new Patent Law also adds a patent open license system, and stipulates the open license statement and its effective procedures, rights and obligations for obtaining an open license by the licensee, and the corresponding dispute resolution path. This allows any entity or individual to easily obtain a patent license, which is conducive to reducing transaction costs and improving the efficiency of patent conversion.
In addition, the new Patent Law also includes several aspects such as increasing the applicable circumstances without loss of novelty, and adding special protection regulations for drug patents.
Punitive damages and the burden of proof for patent infringement
The new Patent Law has added a punitive damages system and increased the amount of statutory damages. The cost of infringement has been increased due to the implementation of strict intellectual property protection, which reflects the orientation of increasing patent protection and encouraging innovation.
At the same time, the new Patent Law improves the provisions on the burden of proof. When the right holder has tried his best to provide evidence, and the account books and materials related to the infringement are mainly in the hands of the infringer, the people’s court can order the infringer to provide it, thereby reducing the right holder’s burden of proof.
The Supreme People's Court has issued the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights" (hereinafter referred to as the "Interpretation"), which provides uniform and clear judgment standards for punitive damages. The "Interpretation" also stipulates the rules for the calculation of punitive damages. Article 5 clarifies that the calculation base of punitive damages is the actual loss amount of the plaintiff, the amount of the defendant’s illegal gains or the interest obtained due to infringement, or the multiple of the royalties of rights.
According to the new Patent Law and the Supreme Court’s judicial interpretation, it can be seen that China’s IP environment has undergone major changes, which are more conducive to rights holders to safeguard their legitimate rights and interests, especially in obtaining compensation.
China’s intellectual property environment is increasingly conducive to rights holders to protect their legitimate rights and interests, such as the following cases 1-3. The new Patent Law has brought about major changes in judicial practice. As we can see in the case 3, the right holder received a very high amount of compensation.
Dyson technology limited sued Ningbo Hongju Electric Appliance Technology Co., Ltd. for infringement of its patent. The Patent Number is ZL201010130001.x and the Patent Name is "fan assembly".
The court of first instance ruled that Hongju company immediately stopped infringing the invention patent right of Dyson company, that is, immediately stopped manufacturing, selling and offering to sell the infringing fan products falling within the protection scope of the patent right, and Hongju company compensated Dyson company for the economic loss of 1 million CNY.
Hongju company appealed to the court, saying that the alleged infringing technical solution lacked multiple technical features of claim 1 and did not fall within the protection scope of the invention patent right of Dyson company, and its behavior involved did not constitute an infringement of the patent right. Therefore, Hongju company requested the court of second instance to revoke the original judgment and reject the lawsuit request of Dyson company.
The court of second instance ruled that the technical comparison objection raised by Hongju company could not be established, and the alleged infringing product possessed all the technical features recorded in claim 1 of the patent involved and fell into the protection scope of the patent. Hongju company's sued acts constitute patent infringement and should bear corresponding tort liability.
Dyson technology limited finally got a compensation of 1 million CNY.
Panasonic Corporation sued Zhuhai Jindao Electric Co., Ltd. and Beijing Likang Fuya Trading Co., Ltd. for infringement of the Design patent. The Design Patent Number is 201130151611.3, and the Patent Name is "Beauty Apparatus".
The court of first instance ruled that Jindao Company immediately stopped manufacturing, selling, and offering to sell infringing products, and Likang Company immediately stopped selling and promising to sell infringing products; Jindao Company and Likang Company deleted all promotional materials of infringing products and deleted relevant information from the websites of the content of infringing products; and Jindao Company compensated a total of 3 million CNY for compensation and a total of 200,000 CNY for reasonable expenses.
Jindao Company appealed arguing that Jindao Company only produced and sold the alleged infringing products with handles, but did not sell the alleged infringing products without handles. Compared with the patents of Panasonic Corporation, the overall visual effects of the infringing products are not similar. And the court of first instance ruled that the compensation of 3 million CNY was inappropriate based on the online sales volume and average price provided by Panasonic Corporation.
The court of second instance held that the shape and the handle are independent design elements in the appearance design, and the addition of the handle design on the basis of the body shape design did not have a significant visual impact on the product shape itself. In the case that the two shapes and designs are similar, it should still be determined that the alleged infringing product with a handle falls within the scope of protection of the patent right in the case. The court of first instance determined that Jindao Company had manufacturing and sales activities and Likang Company had sales activities based on the manufacturer's information displayed on the products. In addition, according to the total sales volume of the alleged infringing products and the average selling price of the products claimed by Panasonic Corporation, even if the reasonable profit of each infringing product is considered from the low amount, the calculated result is still far higher than 3 million CNY. Therefore, with the support of the above evidence, Panasonic Corporation claims that the compensation of 3 million CNY is highly reasonable.
On November 3, 2021, the Intellectual Property Tribunal of the Supreme People's Court issued a public judgment on a dispute over infringement of patent rights for inventions, and fully supported the foreign rights holder’s claims of 20 million CNY (312,8000 USD) for damages and 100,000 CNY (15,640 USD) for reasonable expenses.
The court of first instance ruled that the Chinese infringer should stop the infringement, and the statutory compensation judgment was applied to the Chinese infringer to compensate the foreign rights holder a total of 1 million CNY (156,400 USD) for losses and reasonable expenses.
Both the Chinese infringer and the foreign rights holder appealed to the Supreme People's Court. After the court required the Chinese infringer to provide the sales data of the infringing product, the Chinese infringer only provided a self-made printout of the 2014 sales data for the court's reference, citing that the sales bill could not be found, and only four sales invoices were provided in the original trial.
The Supreme People’s Court held that when the rights holder has tried his best to provide evidence, and the evidence and the calculation method of the claim can prove that the amount of the claim is more likely to be established, the infringer refuses to provide evidence in his possession, and the court can presume that the amount claimed by the rights holder is established. In this case, the Chinese infringer's infringement profit can be determined based on the calculation method claimed by the foreign rights holder and the evidence provided. The Supreme People's Court fully supported the 20 million CNY damages claimed by the foreign rights holder.
The judgment in this case demonstrates the people's court's determination to increase intellectual property protection, and also reflects the judicial attitude of Chinese courts to equally protect domestic and foreign rights holders.
The continuous improvement of China’s Patent Law and legal practice has played a substantial role in protecting the legitimate rights and interests of patent holders, making infringers feel the deterrent of the law, and China’s intellectual property business environment has also improved a lot, which has strengthened foreign investors’ confidence. The new Patent Law has further promoted technological development and economic prosperity.