Highlights of the amendments

China's Patent Law has just undergone  the fourth revision in 2020 to improve the  patent protection system and improve  the business environment that respects  innovation, thereby safeguarding the  legitimate rights and interests of patent  owners and enhancing the confidence of  innovation entities in patent protection.

The new Patent Law came into effect  on June 1, 2021, and the amendments  mainly include:

  • The new Patent Law increases the intensity of compensation for patent  infringement, and the amount of  compensation can be determined  within 1-5 times of the calculated  amount for intentional infringement  of patent rights. In addition, the  statutory compensation amount has  been increased, the upper limit of  the statutory compensation amount  has been raised from 1 to 5 million  CNY (from around 156,400 USD to  around 782,000 USD), and the lower  limit has been raised from 10,000 to  30,000 CNY (from around 1,564 USD  to around 7,820 USD).
  • The new Patent Law incorporates partial design into design patent  protection, expanding the scope  of design patent protection. The  protection period of designs has  been increased from 10 to 15 years.

In addition, domestic priority for  design patents is added, which is  beneficial to applicants for design  patents.

  • In order to make up for the loss of the patent protection period caused  by the unreasonable delay in the  substantive examination process of  the invention patent, the patent right  period compensation system has been  added in this revision. In addition,  compensation for the loss of the  patent right period due to the time  occupied by the approval of the new  drug's marketing also has been added.
  • The new Patent Law also adds a patent open license system, and  stipulates the open license statement  and its effective procedures, rights  and obligations for obtaining an  open license by the licensee, and the  corresponding dispute resolution path.  This allows any entity or individual to  easily obtain a patent license, which  is conducive to reducing transaction  costs and improving the efficiency of  patent conversion.

In addition, the new Patent Law also  includes several aspects such as  increasing the applicable circumstances  without loss of novelty, and adding  special protection regulations for drug  patents.

Punitive damages and the burden of  proof for patent infringement The new Patent Law has added a punitive  damages system and increased the  amount of statutory damages. The cost of  infringement has been increased due to  the implementation of strict intellectual  property protection, which reflects  the orientation of increasing patent  protection and encouraging innovation.

At the same time, the new Patent Law  improves the provisions on the burden  of proof. When the right holder has tried  his best to provide evidence, and the  account books and materials related to  the infringement are mainly in the hands  of the infringer, the people's court can  order the infringer to provide it, thereby  reducing the right holder's burden of  proof.

 The Supreme People's Court has issued  the "Interpretation of the Supreme  People's Court on the Application of  Punitive Damages in the Trial of Civil  Cases of Infringement of Intellectual  Property Rights" (hereinafter referred to  as the "Interpretation"), which provides  uniform and clear judgment standards for  punitive damages. The "Interpretation"  also stipulates the rules for the calculation  of punitive damages. Article 5 clarifies  that the calculation base of punitive  damages is the actual loss amount of the  plaintiff, the amount of the defendant's  illegal gains or the interest obtained due  to infringement, or the multiple of the  royalties of rights.

According to the new Patent Law and the  Supreme Court's judicial interpretation, it  can be seen that China's IP environment  has undergone major changes, which  are more conducive to rights holders  to safeguard their legitimate rights  and interests, especially in obtaining  compensation.

Case Study

China's intellectual property environment  is increasingly conducive to rights holders  to protect their legitimate rights and  interests, such as the following cases  1-3. The new Patent Law has brought  about major changes in judicial practice.  As we can see in the case 3, the right  holder received a very high amount of  compensation.

Case 1

Dyson technology limited sued Ningbo  Hongju Electric Appliance Technology  Co., Ltd. for infringement of its patent.  The Patent Number is ZL201010130001.x  and the Patent Name is "fan assembly".

The court of first instance ruled that  Hongju company immediately stopped  infringing the invention patent right of  Dyson company, that is, immediately  stopped manufacturing, selling and  offering to sell the infringing fan products  falling within the protection scope of  the patent right, and Hongju company  compensated Dyson company for the  economic loss of 1 million CNY.

Hongju company appealed to the  court, saying that the alleged infringing  technical solution lacked multiple  technical features of claim 1 and did  not fall within the protection scope  of the invention patent right of Dyson  company, and its behavior involved did  not constitute an infringement of the  patent right. Therefore, Hongju company  requested the court of second instance to  revoke the original judgment and reject  the lawsuit request of Dyson company.

The court of second instance ruled that  the technical comparison objection  raised by Hongju company could not be  established, and the alleged infringing  product possessed all the technical  features recorded in claim 1 of the patent  involved and fell into the protection scope  of the patent. Hongju company's sued  acts constitute patent infringement and  should bear corresponding tort liability.  Dyson technology limited finally got a  compensation of 1 million CNY.

Case 2

Panasonic Corporation sued Zhuhai  Jindao Electric Co., Ltd. and Beijing Likang  Fuya Trading Co., Ltd. for infringement  of the Design patent. The Design Patent  Number is 201130151611.3, and the  Patent Name is "Beauty Apparatus".

The court of first instance ruled that  Jindao Company immediately stopped  manufacturing, selling, and offering  to sell infringing products, and Likang  Company immediately stopped selling  and promising to sell infringing products;  Jindao Company and Likang Company  deleted all promotional materials of  infringing products and deleted relevant  information from the websites of the  content of infringing products; and Jindao  Company compensated a total of 3  million CNY for compensation and a total  of 200,000 CNY for reasonable expenses.

Jindao Company appealed arguing that  Jindao Company only produced and  sold the alleged infringing products with  handles, but did not sell the alleged  infringing products without handles.  Compared with the patents of Panasonic  Corporation, the overall visual effects of  the infringing products are not similar.  And the court of first instance ruled that  the compensation of 3 million CNY was  inappropriate based on the online sales  volume and average price provided by  Panasonic Corporation.

The court of second instance held that the  shape and the handle are independent  design elements in the appearance  design, and the addition of the handle  design on the basis of the body shape  design did not have a significant visual  impact on the product shape itself. In the  case that the two shapes and designs  are similar, it should still be determined  that the alleged infringing product with a  handle falls within the scope of protection  of the patent right in the case. The court  of first instance determined that Jindao  Company had manufacturing and sales  activities and Likang Company had sales  activities based on the manufacturer's  information displayed on the products.  In addition, according to the total  sales volume of the alleged infringing  products and the average selling price  of the products claimed by Panasonic  Corporation, even if the reasonable profit  of each infringing product is considered  from the low amount, the calculated  result is still far higher than 3 million CNY.  Therefore, with the support of the above  evidence, Panasonic Corporation claims  that the compensation of 3 million CNY is  highly reasonable.

Case 3

On November 3, 2021, the Intellectual  Property Tribunal of the Supreme  People's Court issued a public judgment  on a dispute over infringement of patent  rights for inventions, and fully supported  the foreign rights holder's claims of 20  million CNY (312,8000 USD) for damages  and 100,000 CNY (15,640 USD) for  reasonable expenses.

The court of first instance ruled that  the Chinese infringer should stop  the infringement, and the statutory  compensation judgment was applied  to the Chinese infringer to compensate  the foreign rights holder a total of 1  million CNY (156,400 USD) for losses and  reasonable expenses.

Both the Chinese infringer and the foreign  rights holder appealed to the Supreme  People's Court. After the court required  the Chinese infringer to provide the  sales data of the infringing product, the  Chinese infringer only provided a selfmade printout of the 2014 sales data for  the court's reference, citing that the sales  bill could not be found, and only four sales  invoices were provided in the original trial.

The Supreme People's Court held that  when the rights holder has tried his best  to provide evidence, and the evidence  and the calculation method of the claim  can prove that the amount of the claim is  more likely to be established, the infringer  refuses to provide evidence in his  possession, and the court can presume  that the amount claimed by the rights  holder is established. In this case, the  Chinese infringer's infringement profit can  be determined based on the calculation  method claimed by the foreign rights  holder and the evidence provided. The  Supreme People's Court fully supported  the 20 million CNY damages claimed by  the foreign rights holder.

The judgment in this case demonstrates  the people's court's determination to  increase intellectual property protection,  and also reflects the judicial attitude  of Chinese courts to equally protect  domestic and foreign rights holders.

Conclusion

The continuous improvement of China's  Patent Law and legal practice has  played a substantial role in protecting  the legitimate rights and interests  of patent holders, making infringers  feel the deterrent of the law, and  China's intellectual property business  environment has also improved a  lot, which has strengthened foreign  investors' confidence. The new Patent  Law has further promoted technological  development and economic prosperity.

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.