China: Administrative Enforcement Of Patents In China

New Norms To Make It More Effective But With No Impact For Foreign Patentees
Last Updated: 10 February 2015
Article by Paolo Beconcini

On January 27, 2015 State Intellectual Property Office (SIPO) published a new draft of an improved set of rules concerning administrative enforcement of patents for public comments. China has in fact a unique system of IPR enforcement, in that a right holder can chose to have his patent rights enforced by a civil court or by a special administrative body under SIPO's supervision. The administrative enforcement system is generally faster and less expensive than civil proceedings; however, it cannot issue injunctions and grant damage compensation claims. It is evident that SIPO's administrative enforcement of patents has been conceived to reduce the burden of court workload by freeing them of lesser kinds of patent infringements, i.e. infringements of utility models and design patents or infringements with low monetary value. One major downside of administrative enforcement of patents is the low deterring force of its decisions. In fact, the only remedy that can bring an infringement of a conclusive stop is damage compensation and this is not available in patent administrative enforcement proceedings.

SIPO has now taken the pen again to redraft its procedural regulations to improve timing and effectiveness of patent administrative enforcement, while major cities like Beijing Shanghai, Guangzhou and Shenzhen are implementing for the first time in China IP history, specialized IP courts also aiming at offering more flexible, faster and less expensive patent enforcement.

So, how good is administrative enforcement of patent? What in the subject draft can make such tool more appealing to foreign patent right holders?

I. Some Data about Administrative Enforcement of Patents in 2014

According to the data published early this year, Chinese patent administration authorities in 2014 dealt with 24,479 patent administrative cases. The overwhelmingly vast majority of such cases involved Utility Model and Design Patent dispute (respectively 43.8% and 41.9% of all cases). If we consider that the vast majority of such patents in China, and especially so for Utility Models are filed by Chinese companies only, it is not surprising to know that barely 6% of the over 24,000 cases in 2014 involved a foreign patent! In spite of slight percentage increases, this remains a dismal figure. It is obvious that administrative enforcement of patents is not a viable option for foreign right holders.

We must remember that even in case of design patents, administrative enforcement may be unsuitable. In fact foreign designs are often of high quality and their infringement is costly. The fact that administrative enforcement does not provide damage compensation is definitely a turn off for a design patent holder. Also, seen from the side of the infringer, if a design infringement is lucrative, it will not be an administrative fine to stop him from continuing the infringement. This will force the right holder to ultimately resort to judicial enforcement with injunctions and damage compensation. Then why wasting time with a soft enforcement when a court can provide better and more durable reliefs?

From the point of view of foreign right holder the actual set of provisions concerning administrative enforcement of patent seems to be of no appeal. Does the draft of the new administrative regulations contain any new norm that may render such recourse more appealing to foreign patent holders?

II. Major Features of the Draft of Rules on Patent Administrative Enforcement

On Jan 27, 2015, SIPO published the Draft on Patent Administrative Enforcement Rules. The Draft introduces several revisions in favor of Right Holders, especially regarding timing of proceedings and especially enforcement of patent rights against infringers using e-Commerce platforms such as Alibaba, hc360, madeinchina.com etc.

2.1 Following Current National Policies

According to the current Draft on Patent Administrative Enforcement Rules (the Rules), patent administrative authority (the authority) is requested to set up a specialized body or assign full-time enforcement personnel to carry out patent administrative enforcement. In the draft, the authority is required to put more efforts in building up the patent administrative enforcement teams. Based on the current major government policy requiring authorities to abide by the "rule of law", patent administrative officers are now more stringently required to enforce according to the law rather than other discretional factors, as it was in the past. This general change in the government policies should have a positive reflection on such proceedings. On the other hand the same change is affecting the decision making process of courts as well.

2.2 Focusing on e-commerce

More interesting and surely new appears the attempt of SIPO at protecting patent rights also in the Net. In particular, SIPO's rules drafters are trying to extend the use of legislative tools already in use for copyright infringements in the Net for some years, to patent rights.

In particular, several provisions of the Draft provide a legal frame for right holders and administrative enforcement bodies to stop the counterfeit of patent rights via internet and in particular, the sale and offer for sale of patent counterfeits in e-commerce platforms. The Draft adopts a series of norms to strengthen administrative enforcement in e-commerce field, to timely handle patent infringement dispute which occurred on e-commerce platforms as well as to timely examine and investigate cases of patent counterfeiting.

In particular, where patent infringement is determined by the administrative authority, the latter shall notify the involved e-commerce platforms and order them to adopt measures such as deleting or blocking webpages that contain products suspected of infringement, thus promptly stopping the infringing acts. Also, in case a punishment decision is made by the enforcing authority confirming a patent infringement the relevant enforcement information such as the amount of the penalty, shall be timely published through the internet. In this respect the administrative provisions are pairing with the civil procedural rules requesting civil courts to publish all their IP judgments in the internet as well.

Since shopping/trading through e-commerce platforms has become extremely popular here in China, more and more relevant patent infringements and patent counterfeiting are coming to patentee's attention. However, in practical terms, only design patents, or at most simple utility models may be the object of such type of infringements, thus limiting the norm to such cases. On the other hand, the norm is a welcome change and provides at least an immediate relief also from misuse of the internet in simple design or utility model infringement cases. It is also evident that such remedies have no practical impact on complex patent cases, which are those normally involving foreign companies in China.

2.3 More Efficiently in Case Handling

In the draft, it is clearly stated that patent infringement dispute cases regarding "invention patent" and "utility model" shall be closed within 3 months after the case was put on record; patent infringement dispute cases regarding "design patent" shall be closed within 2 months. One extra month extension can be granted upon approval of department chief. The Draft gives therefore acceleration to the current duration of administrative proceedings. In fact, in the current Rules, both "invention patent", "utility model" and "design patent" infringement dispute case shall be closed within 4 months, with a one month possible extension.

Furthermore, the draft also shortened timeframe from 15 days to 10 days on submission of defense statement and statement of opinion when being reported or filling a complaint for patent infringement dispute.

Whether by shortening the time for a decision, more working efficiency will be achieved, it is indeed questionable. Such time frames are indeed unrealistic in complex patent litigation cases. Although a timely resolution of a dispute is desirable, over-speeding is not necessarily favorable to patent holders. The risk of over-speeding and time pressure may lead to mistakes and misunderstandings and leave no space to expert explanations.

Similar provisions are dictated for the set-up of a case and its proceedings, which are now strictly provided:

  1. In case the authority finds patent counterfeiting activity during daily inspection, it shall put the case on file within 5 days.
  2. In case the authority receives report or complaint on patent counterfeiting activity, it shall put the case on file within 10 days.
  3. For both conditions, at least 2 patent administrative enforcers shall be assigned to investigate into the case.

In the current Rules, no specified time frame for putting the case on file is set. The Rules only request the authority to put the case on file "timely".

III. Conclusion

If setting a time frame for accepting a case is indeed important to avoid discretional mishandlings of filings (the Civil Procedure establishes also a very strict time frame for a court to accept a case), the duration time frames expected for such procedures are not suitable for proper patent enforcement, unless we are in front of an infringement of very basic inventions, such a very simple Utility models and Design. Overall, the impression is that of a set of norm directed at reducing the court workload by attracting to the administrative enforcements the low value and low inventive content patents of minor Chinese companies, which form indeed 80% or more of the daily patent litigation in China. None of these provisions appear to make administrative enforcement suitable for the typical foreign patents and design patents and their complex litigation schemes.

The only real new tool that could make administrative enforcement more appealing for foreign patentees could be the use of the administrative enforcement against patent counterfeiting via e-commerce web sites. Whether it will be usable also for complex patents, and not for visually easily recognizable design infringements, will have to be seen by testing these new provisions once in force.

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.

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Paolo Beconcini
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