In recent times China has become a very important and lucrative jurisdiction in which to commercialise products. As such, use of the patent system in China has also grown significantly in a short period of time, and in ways that may surprise.

The amount of IP litigation in China is staggering and there have been in recent years more than thirty thousand active IP proceedings at any given time. The conventional understanding from those in the Western world is that these proceedings involve Western companies attempting to enforce patent and other IP rights against Chinese companies. However, that view is somewhat outdated as, increasingly, Chinese companies are looking to enforce their own IP rights against both Western companies and other Chinese companies. This rapid evolution of Chinese companies from contract manufacturing to original equipment manufacturer (OEM) status – accompanied by the building of large patent portfolios in China by Chinese companies – together with the changes to the IP enforcement system, has caught many Western companies off guard. It is certainly challenging the often held view amongst those in the Western world that IP rights in China are not enforceable.

Even for the more sceptical amongst us who do not see the cost/benefit analysis stack-up for filing an invention patent in China (akin to a standard Australian patent), there is another option. This option is also very popular with Chinese companies seeking patent protection in China, and involves filing for a utility model patent for the technology. For example, during the period of January 2014 to September 2014, Chinese applicants filed 544,300 utility model patent applications. Japanese applicants have been the most active foreign filer of Chinese utility model patents, and have filed 2,301 utility models during the same 2014 period. The number of Japanese originating filings of utility models is around double the next highest country of overseas filers, the US, and about 60 times more than Australian filers.

These utility model patents provide a relatively quick and easy way to gain enforceable patent protection for the functionality of a product. The application process is relatively fast, the cost modest, and the granted patent is typically able to be enforced quickly using an administrative procedure rather than the court system. A popular strategy for filers of utility model patents tends to be to file a greater number due to the low cost, while only 'using' the likely small number of those that they wish to enforce.

The essentials

  • Utility model patents have a term of 10 years, as opposed to a 20 year term for an invention patent.
  • There is no substantive examination of utility model patent. Instead, the Patent Office undertakes a 'preliminary examination' which includes a formalities check and a check of obvious deficiencies.
  • Utility model patents have a lower threshold of patentability, specifically a lower inventiveness threshold requiring a claim to include "substantive features showing progress".
  • Only product and apparatus claims are allowed, not method claims.

The process

A utility model application is filed in the same fashion as a standard invention patent application. Preliminary examination will then be performed on the application and, once the Patent Office is satisfied, the application will progress to grant of a patent. The usual timing from filing to grant is about 4 to 8 months for a typical straightforward case.

Pros and Cons

There are a number of reasons for and against filing a utility model application as opposed to an invention patent application. You may wish to consider the following pros and cons.

Pros:

  • Overall, the application process for a utility model patent is much less costly than an invention patent. This is mainly due to the lack of substantive examination, but also due to official fees being generally lower for utility model patent.
  • A Chinese utility model can be filed as a PCT national phase application. Alternatively, the national phase can be entered by filing an invention application and then the invention patent application can be converted to a utility model patent application.
  • Ideal for products with a short life cycle and little notable technical effect but a valuable commercial effect.
  • The lower threshold for patentability is advantageous, making it easier to have valid protection and harder for a third party to invalidate. If, for example, you have had trouble with inventiveness issues in other jurisdictions, you may wish to consider filing a utility model patent application to take advantage of the lower threshold for patentability.

Cons:

  • A utility model patent has a shorter term as compared to an invention patent.
  • The type of invention that can be claimed is limited due to methods not being patentable subject matter for utility model applications.
  • Renewal fees will likely need to be paid from an earlier date as utility model applications will likely grant earlier than invention patent applications.
  • Any amendments to the claims after grant of a utility model application are very limited and, as such, you have much less time in which to finalise your claim set for grant.

The Chinese intellectual property market is equal part potential and challenge and it is critical to obtain the right advice from the outset. Shelston IP has a specialist China Team that brings together cultural, commercial and IP expertise that when combined, can help enhance your competitive edge in this critical market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.