China: Chinese Government Determined to Strengthen Patent Protection

Last Updated: 25 July 2016
Article by Zunxia Li and Ying Zhang

The current trend of patent protection in China seen from the Draft Amendment to the Patent Law (Draft for Approval) and Draft of Guidelines for Determination of Patent Infringement

State Intellectual Property Office (SIPO) of China submitted the Draft Amendment to the Chinese Patent Law (hereinafter referred simply to as "Draft for Approval") to the State Council for approval in December, 2015.  The Draft for Approval is the fourth amendment to the Patent Law, which is more comprehensive and in particular highlights the amendment in terms of patent protection than any previous amendment to the Patent Law and brings much interest and heated debate among the public.

SIPO took further action to publish the Guidelines for Determination of Patent Infringement (hereinafter referred simply to as "Exposure Draft") in March, 2016, seeking public consultation.  The Exposure Draft mainly provides detailed rules for the determination of patent infringement, with an aim of providing practical standard guidelines for patent enforcement authorities.

The determination of the Chinese government in improving the patent protection environment in China so as to promote innovation in China can be clearly seen from the two documents.

I. Strengthening of patent protection in China seen from the Draft Amendment to the Patent Law (Draft for Approval)

Currently, when enforcing patent rights in China, patentees generally face the following problems: high cost in asserting rights, low compensation, and difficulty in evidence collection. As a result, many patentees are unwilling or inactive in enforcing their rights, which poses much difficulty in encouraging people to make innovation. The Draft for Approval considerably extends and strengthens the patent protection from perspectives of patentable subject matter, term of protection, type of infringement, liability for infringement, law enforcement in statutory bodies, etc., thereby providing a powerful legal basis for protection of patent rights.

1. Protection of a partial design

The current patent law provides that only the entire design of a product is patentable, while the Draft for Approval clearly adds that a "partial design of a product" is also patentable, thus the subject matter that can be protected by design patents is extended.

2. Extension of the term of protection of design patents

The current patent law provides that "the term of protection of design patents shall be ten years, counted from the date of filing", while the Draft for Approval extends the duration to "fifteen years" so that the term of protection of design patents is greatly extended.

3. Determination of contributory infringement and liability thereof

There is no provision regarding contributory infringement and the relevant liability thereof in the current patent law.  Although the act of contributory infringement occurs and relevant judgment is already made in judicial practice, courts at different levels in different areas have different practices and make different judgments, as no clear legal guidance is available.

In the Draft for Approval, contributory infringement and relevant liability thereof is defined. Specifically, the Draft for Approval provides that "if a party knows that relevant products are raw materials, intermediate materials, parts or equipment specially used to exploit a patent, but still—without the authorization of the patentee and for production or business purposes—provides such a product to another party that conducts patent infringing acts, the party shall be held liable for contributory infringement. If a party knows relevant products or methods are patented products or methods but still, without the authorization of the patentee and for production or business purposes, induces another party to conduct patent infringing acts, the party shall be held liable for abetting others to conduct infringement."

According to this provision, those who do not perform acts of direct infringement but aid or induce other persons to perform acts of direct infringement shall be liable for infringement jointly with the direct infringers. Thus, the patentee can fight against the above act based on this provision, and the patentees are protected more comprehensively.

4. Addition of liability of internet service providers

Currently, many patent infringement disputes occur with the rapid development of on-line transactions on internet platforms.  In order to prevent on-line infringement, the Draft for Approval newly adds the supervisory responsibility of internet service providers and the liability of the internet service providers after being notified of infringement. Specifically, the Draft for Approval provides that "Any internet service provider, who knows or should know the existence of an internet service infringing a patent right but does not take necessary measures such as deletion, blocking, and removing the link to the infringement product to stop the infringement in time, shall be liable jointly with the internet user" and that "If a patentee or interested party has evidence to prove/the patent administration department determines the existence of an internet service infringing a patent right and notifies an internet service provider of the infringement, but the internet service provider does not take necessary measures to stop the infringement in time, the internet service provider shall be liable jointly with the internet user for the extension of loss".

This provision further strengthens the patent protection from the point of view of internet transaction by further reinforcing the supervisory responsibility and liability of internet service providers.

5. Strengthening punishment of willful infringement, increasing infringement cost, and increasing the burden of proof on an infringer and increasing the liability and consequence of the infringer when he fails to provide evidence

the Draft for Approval adds punitive damage compensation to willful infringement and provides that "Whoever willfully infringes a patent right shall be fined one to three times of the amount of compensation determined by a method of calculation of infringement loss, infringement profit or times of patent royalty depending on the factors such as the circumstance, scale, and damage consequence of the infringement".

In addition, the Draft for Approval further increases the standard of statutory damages from "10,000 RMB to 1,000,000 RMB" stipulated in the current patent law to "100,000 RMB to 5,000,000 RMB, thereby greatly increasing the infringement cost of infringers, and forming a strong deterrent force to the infringer for preventing from infringement effectively.

Moreover, under the current patent law system, it is very difficult for patentees to collect evidences, especially when the evidences are held by the infringers. Thus, the Draft for Approval further increases the burden of proof on an infringer and provides that "In a case where the court has considered an act of patent infringement to be constituted, the patentee has tried his best to cite evidence, but account books and materials relating to the infringement are mainly held by the infringer, the court may order the infringer to provide the account books and materials relating to the infringement; and if the infringer does not provide the account books and materials or provides false account books and materials, the court may determine the damage compensation with reference to the statement and evidence provided by the patentee. Therefore, the current situation that it is difficult for the patentee to provide evidence and low compensation may be solved.

6. Strengthening patent enforcement from administrative approach

As described above in Part 4 relating to the liability of internet service providers, the Draft for Approval provides that the patent administration authorities has the responsibility of notifying the internet service provider when internet infringement is considered to be constituted.

In addition, under the current patent law system, the patent administration authorities have the right of investigation and evidence collection only for passing-off patent, but not for suspected patent infringement. The Draft for Approval clearly provides the patent administration authorities have the right of investigation and evidence collection for suspected patent infringement, including but not limited to, on-site inspection, review and copy of materials such as contracts, invoices and account books, and sealing up and distrainment of a product of intentional infringement that disturbs market order, etc.

Further, in the current patent law system, the patent administration authorities have the right of ex-officio to take administrative action only on the passing-off patent, and deal with the suspected patent infringement depending mainly on complaints from patentees.  The Draft for Approval clearly provides the patent administration authorities have the right of ex-officio to take administrative action on the willful patent infringement that disturbs market order such as repeated infringement and group infringement. Wherein, the patent administration authorities can order the infringer to stop infringement immediately, confiscate the infringement product and elements, tools, molds, devices, etc. applied specially for manufacturing the infringement product or using the infringement method and also can impose a certain fine on the repeated infringement.

The Draft for Approval further provides that "the patent administration department shall establish archives of credit information on patent protection and bring the same into the National Credit Information Share and Exchange Platform".  With the establishment of the archives of credit information, a strong data platform can be created for the patent administration department to determine repeated infringement, thereby providing strong support for reinforcement of patent administrative protection.

II. Strengthening of patent protection in China seen from the Guidelines for Determination of Patent Infringement (Exposure Draft)

As compared to the Draft for Approval, the Exposure Draft is a departmental document issued by the State Intellectual Property Office(SIPO).  In view of the complexity of determination of patent infringement cases, the Chinese Patent Office further issued the Exposure Draft on the basis of the Draft for Approval, for the main purpose of guiding the patent administration authorities at different levels to operate specifically.  The Exposure Draft mainly states and describes the determination of acts of patent infringement including acts such as making, using, selling, offering for sale, and importing, from the points of view of the meaning of legislation, typical act modes in practice, specific cases, etc., and the Exposure Draft provides specific and detailed standard guidelines and reference for law enforcement in the patent administration department, and therefore provides strong support for the patent administration department to strengthen the administrative law enforcement.

III. Conclusion

In conclusion, only suitable protection can motivate innovation.  With the rapid development of economics in China, the Chinese government is attaching more and more importance to protection of intellectual properties including patents while greatly encouraging innovation of industries.  The sequential issuance of the Draft for Approval and the Exposure Draft reflects that the Chinese government and functional departments thereof are now strengthening patent protection step by step and attempting to create a good patent protection legal environment for innovators so as to form a virtuous cycle mechanism of patent protection and innovation.

(This article was originally published in the WIPR World IP Review Order 2016)

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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