By Lirong Dai (Ms.)

How to handle annuities with security and efficiency is always an important and complicated issue for patentees. All patentees are looking for a reliable, precise and efficient way to handle the large portfolio of their patents. As we know, many giant international companies always prefer to have an annuity vendor to monitor and manage its worldwide patent rights, which may save them time and hassle of administration.

However, as the Local Law varies from each other extensively, a competent associate as local agent of the annuity vendor is also very important for the patentee. For the sake of security, the applicant shall designate a reliable local agent in specific important countries while working with the annuity vendor.

The following practical tips shall be given priority when managing the annuities in China.

Duration of patent right

Duration of patent right for inventions is 20 years counting from the actual filing date (not priority date). Duration of patent right for a utility model and for a design is 10 years counting from the actual filing date (not priority date). However, this duration is calculated differently from other terms under Chinese Patent Law. According to the Guidelines for Patent Examination, the filing date is counted into the duration of the patent right. Therefore, the duration of the patent right will be counted until one day ahead of the anniversary of the filing date. For example: with the filing date of Sep. 6, 2000 for an invention patent, the duration of the patent right will be from Sep. 6, 2000 to Sep. 5, 2020, and the date of the termination of the patent right for invention is Sep. 6, 2020 (the date can NOT be postponed in case of statutory holidays.).

For royalty counted on days in any agreement regarding patent acquisition or granting license, each party shall pay close attention to the specific terms of patent rights in China.

Calculation of the annuity fee due with payment of registration fee for the grant of the patent

The SIPO will indicate the annuity fee and year in the By Lirong Dai (Ms.) Notification to Go through Formalities of Registration (issued out concurrently with the Notice of Allowance). In practice, the SIPO determines the initial annuity to be paid together with the certificate fee in the said notification, by making use of a supposed grant date, i.e. 5 months from the issuance date of the notification. Therefore, the next annuity due date will be occasionally in the same calendar year as that of granting.

For instance, for an application with the filing date of December 1, 2010, the SIPO might issue the Notice of Allowance on April 1, 2014, requesting payment of the 4th annuity together with certificate fee, as the SIPO practically supposed the grant date as Sep. 1, 2014 (April 1, 2014 + 5 months). Then the next annuity of the 5th year should be due on December 1, 2014, in the same calendar year as that of granting.

Amended filing date by incorporation by reference upon PCT Chinese national phase entry

According to the provisions of the PCT regulations, where some elements or parts are missing when the applicant files the international application, they may be incorporated by reference of the corresponding parts in the earlier application, and the original filing date shall be retained. Nevertheless, China, as the Selected Office, makes reservation to the above provisions, and only accepts such provisions as the Receiving Office. That is, when the international application enters the Chinese national phase, the examiner shall re-determine the filing date in China based on the records in the Notification on Decision of Confirmation of Incorporation by Reference of Element or Part (form PCT/ RO/114) delivered by the International Bureau and then issue the Notification of Re-determination of the Filing Date. Then the annual year should be counted from the amended filing date which is then different from that of many other countries. It certainly may cause substantial risk or difficulty in monitoring the annuity deadlines, to which the patentees should pay closer attention.

Termination of the patent right for utility model in favor of the patent for invention filed on the same day

According to Chinese Patent Law, for any identical inventioncreation, only one patent right shall be granted. The only exception to the provision is that, where an applicant files, on the same day, applications for both utility model (UM) patent and invention patent relating to the identical inventioncreation, and the applicant then declares to abandon the UM patent which has already been granted but not yet terminated, the patent for invention may still be granted without contravening double-patenting regulations. In practice, for avoidance of double-patenting deficiency, as the first step the examiner shall request the applicant to abandon the granted UM patent during the prosecution of invention patent application. In order to allow the invention application to be granted, the applicant shall then submit the request for abandoning UM patent. However, the date of submitting the request for abandoning UM patent right is not the official date of termination thereof. Instead, the official termination date of the UM patent right should be the same date with the issuance date of patent right for invention. Therefore the applicant shall keep the UM patent right in good situation of being valid till the invention patent is issued, in order to satisfy the Laws' prerequisite that the UM patent has not yet terminated. To sum up, the patentee shall attend to the due payment of annuities for the utility model patent until the date of announcement of grant of invention patent right.

Even though the patent right for invention is unreasonably granted for the neglect of the Examiner, and the applicant does not attend to the due payment of annuity fee for utility model patent by the issuance date of patent right for invention, the patent right for invention would run the substantial risk of being invalided by any third party through a potential invalidation proceeding, based on the incorrect termination of the utility model patent before the announcement date of invention patent right.

Double Notifications the patentee may receive

Non-Payment Notification

Where the patentee fails to pay the annual fee in time (not including the annual fee of the year in which the patent was granted), or where the fee has not been paid in full in time, the SIPO shall issue a Non-Payment Notification to the patentee. Please note that SIPO would not send out any reminder for this purpose in advance of the due date. The patentee may then pay the fee or make up the insufficiency within six months from the expiration of the due date, but with the possible surcharge already incurred.

Notification of Termination of Patent Right

Where, at the expiration of 6-month surcharge period, the patentee still fails to pay or pay in full the annual fee or even the surcharge, the patentee would receive a Notification of Termination of Patent Right. The patentee may then file a request for restoration together with the full annuity fee, surcharge and restoration fee. It is important to keep in the top of mind that this is the last chance for the patentee to revive its patent right. The revived right is retroactive. That is to say, there will be no defect or gap to the continuity or integrity of the patent right upon restoration.

Based on the above, in case that the patentee decides to allow any patent to go abandoned by non-payment of the next annuity, the patentee would still receive the above double notifications, but could simply disregard the same. However, if the patentee fails to attend to the annuity payment unintentionally, with the issuance of the above two notifications it has double chances correspondingly to make up for the neglect.

After the return of the sovereignty of Hong Kong in 1997 and Macau in 1999, many Chinese agents have extended their annuity services to HK SAR and MC SAR. On the other side, domestic clients can also monitor their worldwide patent rights through Chinese agents' collaboration with professional associates worldwide.

With all the above interpretation taken into consideration, it is clear that the annuity practice in China is not just counting years and amounts, but much more. A sophisticated local agent, such as CCPIT Patent & Trademark Law Office which has an experience of over 30 years in the annuity management in China, is necessary for delicate guidance under various situations to safeguard your valuable assets.

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.