China: Proposed Revisions To The Chinese Patent Law

Last Updated: 30 May 2018
Article by Toby Mak

The proposed revisions to strengthen the Chinese Patent (and designs) Law (December 2015) are significant and provide an interesting checklist of issues in relation to patents and design law worldwide. By Toby Mak, Tee & Howe Intellectual Property Attorneys,

In December 2015, the State Intellectual Property Office (SIPO) published its final draft of the proposed revisions to the Chinese Patent Law (the Law) in order to seek public opinion. Compared to the draft in April 2015 (see May [2015] CIPA 22), there are many significant changes in this draft, although many of the changes proposed in April 2015 have been retained. This article reports these proposed revisions in the final draft, together with my comments. As this article closely relates to the May 2015 article, I have used the same numbering scheme for various. To start with, let us have a look at the changes that have been retained and remain unchanged.

Remain unchanged

1. Changes to Chinese design patent

  1. Introduction of protection to partial design: introducing analogous protection to that in, for example Europe.
  2. Allowing priority to be claimed for domestic design patent applications.
  3. Extending maximum term of a design patent from 10 to 15 years.

3. Changes to duty invention

(i.e. inventions which belong to the "employer")

  1. A duty invention will no longer cover those made using the employers' material or technology: so that duty inventions are those made in the course of duties assigned to the employee.

5. Inventor's remuneration

That inventor's remuneration will only apply where the employer is also the grantee of the patent.

7. Allowing restoration and/or correction of priority claim

Reflecting the international changes to permit late priority claims.

10. Changes in damages

  1. Adducing evidence for damages: permitting the Court to order disclosure of accounts.
  2. Introduction of punitive damages: providing for punitive damages of between two and three times the compensatory damages (which are usually low).

11. Handling of online infringement

Introducing a notice and take down procedure for online infringements, probably similar to the trade mark notice and take down provisions.

12. Regulating patent attorneys

Proposing punishments for unqualified patent agents.

13. Introduction of "license as of right" mechanism

Making provision for the proprietor to declare a patent open for licences of right, and similar provisions as in the UK.

The wordings of the above topics in the Law remain largely unchanged (most remain the same, some with minor modifications and/or movement to a new article). Please see May [2015] CIPA 22. For simplicity, I will only focus on changes that in my view are significant as follows.

Changes

2. PARTLY CHANGED – Patent administrative enforcement

This would be the biggest change to the Law compared to the April 2015 draft. The following changes were proposed:

a. Specifying duties of SIPO:

The following duties of SIPO in Beijing remain the same as in the April 2015 version:

  • Market supervision and management involving patent: this included issues such as transactions in and management of patents.
  • Investigating and handling patent infringement and counterfeit patent acts with profound affect: provisions paving he way for strengthening the powers of SIPO to take administrative action.
  • Constructing patent information public service system, facilitating the transmission and utilization of patent information.
  • Offering qualification of patent attorney, examining and approving patent agency in accordance with the law.

The following has been changed:

  • Deleted – Local intellectual property offices are no longer proposed to be responsible for investigation on patent infringement..

Comment: This may be due to concerns from all sides, local and foreign, criticizing this measure. This is a big relief. SIPO does not have direct control over local IP offices (see August [2015] CIPA 19), and this may lead to doubts on the capability and neutrality of these local IP offices to carry out the function of investigation on patent infringement. These may result in the removal of this measure from the proposed final draft. Therefore, with respect to this aspect of the revision to the Law, things now remain unchanged.

b. REMAINS UNCHANGED – Specifying compulsory enforcement of administrative mediation: the proposal permitted (and permits) enforcement or agreements reached in administrative mediation.1

c. DELETED – Expansion of administrative actions on infringement

Comment: The proposed final draft removed the power of confiscation and delivery up of infringing products and relevant tools from local administration, which could be considered as changes echoing removal of duty of local IP offices on patent infringement investigation. However, this deletion means the enforcement of patents goes back to the original toothless situation, i.e. it can only determine infringement, and an "order to stop infringement" will be difficult to enforce.

d. REMAINS UNCHANGED – Additional administrative punishment on repeated and/or group infringement: so that administrative punishment can include fines of between one and five times turnover.

3. PARTLY CHANGED – Changes to duty invention

  1. REMAINS UNCHANGED – Re-defining "duty invention" to exclude inventions devised mainly using material and technological conditions of the employer
  2. DELETED – Allowing inventor(s) to exploit if state-owned institutes being employer does not

Comment: I am glad that this has been removed. I was against this change as this might have introduced uncertainties that would reduce collaboration with outside parties (see May [2015] CIPA 22.

4. PARTLY CHANGED – Principles on enforcing patent rights

The proposal was to take account of issues such as harm to public interest and whether enforcement results in unfair elimination or restriction of competition (similar to threats legislation in the UK). In comparison to the April 2015 versions, the relevant article now also covers patent application rights.2

Comment: The reason for this addition is not clear. Would it be possible to target default assignment of ownership of IP rights developed during contract manufacturing, and/or influence by the anti-monopoly guidelines? Specifically, it is not unusual that Chinese and Hong Kong contract manufacturers are required in their contracts to assign any IP rights developed by these manufacturers to their customers through contractual obligation, without any compensation, or they will not get the manufacturing contract in the first place. I have seen these contracts with my own eyes in my clients' offices, and the above practice was what they told me. According to my understanding, this is against the anti- competition regulations in Europe (but I would be grateful for any clarification). This addition may be due to the influence of the Chinese anti-monopoly law, which is modeled from the US and European counterparts.

6. DELETED – Allowing methods of diagnosis and/ or treatment for breeding animals

Comment: I have to say that this deletion is very disappointing. This dashes the hope of opening up the possibility of allowing methods of diagnosis and/or treatment for humans. As now, even patents for diagnosis or treatment of breeding animals are not allowed, allowance of methods of diagnosis and/or treatment for humans may not be seen in China in the next 20 years (it is unlikely to happen before my retirement... I hope that I am wrong on this point).

8. PARTLY CHANGED – Changes to re-examination of rejected patent application, and handling of invalidation request

The April draft proposed full examination rather than only examination on the issues identified in an application for rejection or invalidation. The only change is the removal of the requirement to timely publish re-examination and invalidation decisions.

Comment: I have absolutely no idea of the reason for this change. On the one hand the revision of the Law promises ease of access to patent information, on the other hand removing the requirement for timely publication. Would this mean that the Chinese Patent Re-examination Board will go back to the current practice, i.e. re-examination/invalidation decisions are only published after any possible appeals (when it is not unusual for the publication of the decision to be delayed by one or two years)?

9. PARTLY CHANGED – Patentability evaluation report for utility model and design patent

The changes are as below:

  1. Reverted to old version, such that submission of such report to the People's Courts and/or administration is not compulsory.
  2. However, defendant in an infringement case can request this report from SIPO. In the current Law and the previous proposed revision, it was restricted so that only the patentee and a licensee who had rights to sue could obtain this report from SIPO.

Comment: The first change is disappointing, although in practice almost all courts require submission of this report. However, this would mean that problematic decision may result if a court decided not to require submission of this report for whatever reason.

The second change is welcome and considered as making sense – why should the defendant, who got so heavily involved with the utility model or design, not be allowed to obtain this report? However, I hope this restriction could be lifted further to allow everyone to obtain such a report, which would be useful in many cases, for example for a potential licensee. It would be even more helpful if these reports could be published once established.

14. PARTLY CHANGED – Default licensing of standard-essential patents

The only change is relieving local IP offices from ruling on licence fees, but SIPO in Beijing can still determine the licence fee. The remainder of the proposal, that a patentee involved in the national standards making process automatically licenses users. A royalty is payable, by agreement or determined now by SIPO

Comment: The reason of this change may be similar to those of relieving local IP offices from the investigation of patent infringement and counterfeit patents – please see my comments above. Again, I believe companies having standard-essential patents would welcome this change.

15. PARTLY CHANGED – Clarifying rights to patent mortgages

The only change is the deletion of the provision that the mortgagee could ask for additional security from the mortgager if the value of mortgaged patent depreciates.

Comment: It is not clear why this has been removed; maybe due to technical and financial difficulties in enforcement. In order to ask for additional security, the mortgagee has to show that the mortgaged patent depreciates. But who is going to do this and who is going to pay? The mortgagee would not be keen to do this. Further, there will be arguments on the extent of depreciation, and it could be expected that the mortgagor will always fight against this claim. Finally, the additional security obtained based on the proven depreciated value may not cover the costs of the whole exercise.

16. NEW – Indirect infringement article

This is a new article, explained below:

"Without the consent of the patentee, the parties whom knowingly supply product that is raw material, intermediate, component, and equipment specifically designed for implementing the patent to other parties infringing the patent, in the course of business, shall be jointly liable with the infringer; and without the consent of the patentee, the parties who know the relevant products or methods are patented, in the course of business, induce other parties to infringe the patent, shall be jointly liable with the infringer."

Comment: Although the wordings are very different from the equivalent in Europe, readers will recognise the efforts of the law makers to introduce contributory infringement into the Law. However, the idea of contributory infringement has long existed in the Chinese legal system, for example in Beijing Higher People's Court's guiding opinions in 2001. The new article merely codifies the Court's practice into the Law, which is a good move, as this clarifies rights under a patent. How this will be put into effect we will have to wait and see, but as in other jurisdictions, I believe the keywords would be "knowingly" and "specifically". However, with the high evidence requirements in China, I would not get too excited as it may be difficult to enforce. Nevertheless, having one more gun (well, although the gunpowder may be quite damp) is always a good thing.

Conclusions

Although many good changes remain (like the changes to design patents and handling of online infringement, and so on) and there are also many good changes in the proposed final draft (like changes to patent administrative enforcement and default licensing of standard-essential patents), the reason of some changes remain uncertain. Some changes are a step backwards, and the most disappointing one is the removal of the allowance of methods of diagnosis and/or treatment for breeding animals.

However, this shows that the revision to the Chinese Patent Law is the result of striking a balance between various parties with conflicting interests, which in my view is the most interesting thing. This is because with the one-party-ruling system, I would not expect such a balance to surface. I hope this could mean that the Chinese system is becoming more modern.

Footnotes

1. Ed: it is odd to think that such agreements would not have been enforceable, but Toby Mak's last article made it clear that there was uncertainty about their position and parties ignored agreements!

2. Ed: and interesting addition bearing in mind the position in relation to threats in the UK following Brain v Ingledew Brown ([1996] FSR 341) and very recent the decision by HHJ Hacon in Global Flood Defence Systems Limited v Johan Van Den Noort Beheer BV [2016] EWHC 99 (IPEC).

This article was published in the March 2016 (Note: this should be changed for future publications) issue of the UK Chartered Institute of Patent Attorneys (CIPA) Journal, and are re-posted here with the kind permission from the UK CIPA. The UK CIPA Journal covers updates, articles and case law reviews on IP in the UK, Europe, and around the world. The Journal is available for subscription at GBP130 per year, and for free by becoming a foreign member at GBP405 per year. For more information on the CIPA Journal please email editor@cipa.org.uk.

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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