China: Enforcing Your Patent Right In China

Last Updated: 9 March 2016
Article by Gary G. Wu

Most Read Contributor in China, September 2016

With the fourth amendment of the Chinese Patent Law nearing completion, China will have moved ahead in perfecting its intellectual property protection system and improving patent protection enforcement. The amendment is aimed at solving the problems "difficulties in proving, long cycle, high cost, low compensation, and ineffectiveness", which patentees complain of occurring when enforcing their patent rights. A number of measures are added in the drafted amendments, which include strengthening patent protection, increasing law enforcement efforts, establishing sound long-term mechanisms to combat against patent infringement, promoting the combination of patent administrative enforcement and judicial protection, boosting law enforcement efficiency, and reducing the costs of protecting patent rights, which will guarantee the patentees' interests.

However, during patent judicial practices, patentees, especially foreign patentees, enforcing their patent rights should consider the characteristics of the Chinese Patent Law system, in particular the following.

1. Establishing a patent protection monitoring system to ensure quick discovery of violations

Due to China's vast territory, large population, and highly developed production and manufacturing market, it usually takes foreign patent holders a long time to find and investigate patent infringements. In the instances when foreign patentees have established a manufacturing plant in China, or have signed an exclusive patent license contract with a Chinese company, the patentees can entrust the manufacturing plant, the Chinese company, or a local IP law firm to oversee such patent protection and monitoring work.

Proper patent protection monitoring includes both keeping an eye on competitor patent applications and watching for suspected infringing products being sold through network platforms or by business entities. Through patent protection monitoring, a target company suspected of infringing patent rights can be detected in time. Sometimes, once a patent application similar to a granted patent owned by a foreign patentee is filed, a preliminary judgment can be made that someone is very likely to be copying the patented product of the foreign patentee. In such a case, the foreign patentee should take appropriate measures such as filing public comments or initiating the patent invalidating process against the competitor's patent in a timely manner to avoid the copied patent being granted to the competitor. Meanwhile, an investigation of the target company's production and sales can be made to discover if there is an infringement of the foreign patentee's patent rights.

Furthermore, real-time monitoring of the competitor's suspected infringement enables the foreign patentee to initiate a patent licensing negotiation.

2. Valuing the collection and notarization of evidence before taking any legal action

As a professional law firm that provides intellectual property protection services to domestic and international clients, Kangxin Partners frequently receives instructions from foreign clients to send warning letters to alleged Chinese patent infringers. However, in many cases, it is not favorable for foreign clients to send warning letters directly to the target person or company that infringes their patent rights. If their purpose is to stop the infringement, and the suspected target is a small-scale patent infringer, the patentee might consider sending a warning letter through a Chinese IP law firm to handle this issue. But for more serious cases of patent infringement, especially those cases in which patentees are expecting compensation from the infringing party for the economic losses caused by the infringement, the general steps to take include investigating the infringement behaviors and products of the infringement party first, and then notarizing the infringement evidences and facts including notarizing the webpages of the sales, notarizing the purchase of the products, etc., to collect infringement evidence for use as legal basis for identifying the infringement and claiming compensation for it during patent infringement litigation.

In order to resolve the patent enforcement "low compensation" issue, the fourth revision of the draft amendments to the Chinese Patent Law have added a punitive compensation system and compensation for willful patent infringement. This will increase the compensation awarded by two to three times of the original amount. The upper limit of statutory compensation of patent infringement also has increased up to RMB 5 million. However, according to the actual patent infringement cases heard by the People's Court, the key reason why the low level of Chinese patent infringement compensation exists is that the patentees often are not able to provide sufficient evidence to support the claimed amount of compensation. Therefore, before taking any legal action against patent infringement, in addition to evidence collection and notarization, by applying for preservation of the evidence before filing a patent infringement lawsuit, patentees should also obtain enough information and evidence of the infringement through the power of the court, which will support the claims of infringement indemnification.

3. Keeping the implementation of two-track system in China's patent protection in mind

China's patent protection is offered through judicial protection and administrative action enforcement protection, or a "parallel system". That is, besides the commonly used practices that are used to solve patent right disputes through civil action process, patentees could choose to request the local Intellectual Property Office to handle disputes or perform mediation without claiming for compensation. The local Intellectual Property Office, being fast, low cost and, efficient, is usually more proactive, flexible, and direct in patent protection than judicial protection. But with the increase of patent infringement cases in China year-by-year, the speed of some local Intellectual Property Offices in certain areas in handling patent disputes has been reduced by the lack of manpower, thus extending the case closing time to 2 or 3 years. Therefore, even if patentees want to stop competitors from infringing against their patents in time, the patentees are suggested to determine what the local Intellectual Property Office case processing cycle may be first and then determine whether or not to utilize patent administrative action enforcement protection. If a large backlog in the local Intellectual Property Office is discovered, it is recommended that patentees should abandon the administrative action protection and reach out directly to the People's Court and ask for judicial protection.

4. Making good use of the patent right evaluation report to reduce the time and cost of patent enforcement

The Chinese utility model and design patent system is similar to other countries' patent registration systems, which do not go through substantive examination of patent applications to grant the patent rights. This led to the poor stability of utility model and design patent rights. Correspondingly, the Chinese Patent Law provides patent evaluation through a reporting system. Patentees or interested parties can request the State Intellectual Property Office to issue a patent evaluation report after the search, analysis and evaluation of a utility model or design patent in cases of patent infringement dispute. The People's Court or the local Intellectual Property Office may also ask the parties in the patent infringement dispute to show a patent evaluation report.

Some patentees tend to start their process of patent litigation with a large amount of money and effort without knowing the stability of their own patents, and then realize that their patents lack novelty or inventiveness. The People's Court will also cease the trial when the other party presents a negative patent evaluation report and files a patent invalidation before the Patent Reexamination Board. Thus, it is very necessary for the patentees to assess the stability of their patents before taking any legal actions. It can be done either by obtaining an unofficial stability retrieval through a Chinese IP law firm or by applying directly to the State Intellectual Property Office to issue a patent evaluation report.

5. Taking full advantage of the Customs recordal mechanisms to protect the innovative products' own intellectual property rights

For foreign patentees who have already acquired Chinese patent rights, they may apply to China's State General Administration of Customs for Customs recordal protection of IPR. With the Customs recordal, the patentees will be sent a written notice immediately by Customs when any suspicious patent infringement import and export goods are found that match the records. Patentees may also request to detain suspected infringing goods after being informed of the relevant information. Customs recordal measures are especially beneficial to those patentees whose competitors' products are sold in countries other than China.

It is worth noting that China's State General Administration of Customs has suspended the official fees for keeping IPR records at Customs from Nov. 1st, 2015. For the cost of having Customs take actions and relief measures, patentees may add it alongside the losses they incurred for Customs warehousing, storage and disposal when calculating the reasonable expenses paid to stop the infringement after the identification during litigation and compensation claims against infringers.

6. Authorizing the right of Chinese IP law firms to safeguard their legitimate rights and interests

Since the implementation of China's basic national policy of reform and opening up, China has become one of the most popular investment opportunities for developed countries. The economic co-operations and exchanges between China and other countries in the world have also increased throughout the years. When patent infringement occurs, the foreign patentee can easily choose an appropriate IP law firm during their investigations in China. The following factors are very important when choosing a Chinese IP law firm: reputation, service quality and reasonable expenses. By selecting an appropriate Chinese IP law firm, foreign patentees will have access to real-time monitoring of the trends of competitors and have their legal rights and interests safeguarded through timely investigation, reliable infringement analysis, and trusted representation in patent infringem

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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