Earlier this month, the State Intellectual Property Office ("SIPO") of the People's Republic of China released a proposed amendment to the Chinese Patent Law and is now accepting comments.  The proposed amendment will be the fourth amendment to the Chinese Patent Law since its initial adoption in 1984. 

The two key components of the proposed amendment include: (1) giving SIPO more power to administratively enforce the patent laws (as compared to using more conventional judicial enforcement); and (2) increasing the amount of damages available in patent infringement cases. 

Currently, China has a dual enforcement mechanism for IP infringement: judicial (via the courts) and administrative (via SIPO).  Administrative enforcement for IP, especially for patents, is often disfavored because, while SIPO can issue injunctions, it cannot award damages.  And because SIPO cannot enforce its own injunctions, enforcement efforts were greatly hindered.  Instead, one needed to ask a court to enforce a SIPO-issued injunction.

To address those issues, the proposed amendment enables the administrative authority to award damages for "losses suffered."  But, the amendment does not define what these losses are, how they are to be calculated or whose losses should be compensated (e.g., only the patentee or anyone with standing to initiate an administrative action).  Presumably, a definition (e.g., lost profits, infringer's earnings, etc.) and method for calculation will be defined in a later-issued regulation that will be based on the solicited comments to the amendment. 

The proposed amendments further grant the administrative authority "the right to investigate and punish the alleged patent infringer disrupting the market order in accordance with the law; the patent administration department under the State Council shall organize the investigation of suspected patent infringement activity which has significant impact on the country."  This implies that the administrative authority can initiate its own investigations when disruptions of the market order occur,  thus granting SIPO tremendous power.  Under the current draft amendments, when SIPO finds that infringement has occurred, it could issue injunctions, seize illegal earnings, and seize and destroy any infringing products and equipment used in the infringement.  In addition, SIPO could issue fines up to four times the illegal earnings or 200,000 RMB, if there are no illegal earnings or the earning are difficult to calculate.  But, the phrases "disruptions of market order," "illegal earnings" and "difficult to calculate" are not defined in the proposed amendments. 

In addition, the proposed amendments increase the likelihood of collecting increased damage awards above the statutory maximum of 1 million RMB.  Specifically, amended Article 65 allows damages for willful infringement and awards of the patentee's reasonable expenses.  But again, the terms "willful infringement" and "reasonable expenses" are not defined. 

While the proposed amendments will significantly increase the value of Chinese patents due to better enforcement and the availability of higher damages awards, without more clarity and safeguards, the law may not reach its full potential and could be open to abuse.  The proposed amendments may be a step in the right direction, but interested parties should provide SIPO with comments to help further clarify and improve the Chinese Patent Law.

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