On October 17, 2020, the third draft of the 4th revision of the Chinese Patent Law was approved by the Standing Committee of the National People's Congress and will come into force on June 1, 2021. According to this revision, there are many big changes in the Chinese Patent Law, which will have a significant influence on patent protection. Hereunder we list the points most noteworthy for enterprises.
1. Introduction of a punitive damage up to five times the amount determined, increase of the upper limit of statutory damage to RMB 5,000,000 Yuan, further clarification of the burden of proof for infringement, and prolongation of the limitation of action for infringement to three years (Articles 71 and 74).
For intentional patent infringement, if the circumstances are serious, the amount of compensation for damage may be determined from no less than one time and no more than five times of the amount determined according to the aforementioned methods.
Where it is difficult to determine the losses suffered by the right holder, the profits the infringer has earned and the exploitation fee of that patent under a contractual license, the people's court may award the damages of not less than RMB 30,000 Yuan and not more than RMB 5,000,000 Yuan in light of such factors, as the type of the patent right, the nature and the circumstances of the infringement act.
When the right holder has made every attempt to provide evidence yet the account books and materials related to infringement are mainly in the infringer's grasp, the people's court may, in order to determine the amount of compensation for the damage, order the infringer to provide account books and materials related to the infringement; where the infringer refuses to provide or provides false account books and materials, the people's court may refer to the claims and evidences provided by the right holder to determine the amount of compensation for damage.
The problems of repeated and intentional infringements being difficult to cease and infringement compensation being low have always been criticized by enterprises. Here, the introduction of punitive damages has a great deterrent effect.
At present, most patent infringement cases in China apply to statutory damages in determining the amount of compensation. This time, the upper limit of statutory damages is increased from RMB 1,000,000 Yuan to RMB 5,000,000 Yuan, and the lower limit thereof is increased from RMB 10,000 Yuan to RMB 30,000 Yuan. This means that in future, for a large number of cases applied to statutory damages, the amount of damages is expected to increase substantially.
In addition, the burden of proof when determining the amount of compensation is further clarified, and it is expected to solve the problems of a "low compensation amount" and being "difficult to prove".
The limitation of action for patent infringement has been prolonged to three years, so as to align with the provisions of the Civil Code.
2. Protection of design patent (Articles 2.4, 29.2 and 42.1)
- (Article 2.4) The protection for design of part is added. Design of part has already been regarded as an object of protection in countries such as the United States and Japan, and is now taken as an object of protection in China, which is also to adapt to the protection of GUI designs.
- (Article 42.1) The effective duration of a design patent is prolonged to 15 years, in preparation for China's accession to the Hague Agreement concerning the International Deposit of Industrial Designs.
- (Article 29.2) The domestic priority of design is introduced, encouraging domestic enterprises to carry out continuous innovation. Where, within six months from the date on which any applicant first filed an application for a design patent in China, the applicant files with the patent administrative department under the State Council an application for a patent for the same subject matter, the applicant may enjoy the right to priority.
3. Patent effective duration compensation for the unreasonable delay due to patent examination, and patent effective duration compensation for drugs (Article 42)
The prolonging of patent effective duration can be requested in the following two cases:
- Where the patent right was granted for an invention after the expiration of four years from the date of filing and three years from the date of requesting substantive examination, the patent administration department of the State Council shall, at the request of the patentee, compensate for the duration of the patent right for the unreasonable delay during the granting process of the invention patent, except where the unreasonable delay was caused by the applicant.
- In order to compensate for the time occupied by the marketing review and approval of new drugs, for the invention patents of new drugs which have obtained marketing authorization in China, the patent administration department under the State Council may, upon the request of the patentee, grant a compensation period for the duration of the patent right. The compensation period shall not exceed five years, and the total effective duration of the patent right after the marketing of the new drugs shall not exceed 14 years.
In the future, it still needs to be clarified in the Implementing Regulations of the Patent Law and guidelines for patent examination, how to implement the patent effective duration compensation system and how to identify "unreasonable delay" of patent examination.
It can be predicted that eventually, the patent effective duration will not be calculated simply by adding ten, fifteen or twenty years from the filing date, but by checking individual cases, which puts forward new requirements on patent time limit management.
4. Early resolution mechanism of drug disputes (Article 76)
In the process of the marketing review and approval of new drugs, where a dispute arises, due to the right of the patent concerning the drug in the application for registration, between the applicant for the drug marketing authorization and the concerned patentee or interested party, any of the parties may institute legal proceedings in the people's court, requesting for a judgment on whether the technical solutions related to the drug applying for registration fall within the protection scope of the other party's drug-related patent right. Within the stipulated time limit, the drug administration department under the State Council may make a decision on whether to suspend the approval of marketing of the concerned drug according to the effective judgment made by the people's court.
The applicant for drug marketing authorization and the related patentee or interested party may also request the patent administrative department under the State Council for administrative adjudications as to the dispute arisen due to the right of patent concerning the drug in the application for drug registration.
The drug administration department under the State Council, jointly with the patent administrative department under the State Council, shall formulate specific measures for the connection between the approval of drug marketing authorization and the resolution of disputes of the patent right arisen during the application stage for drug marketing authorization, which shall be implemented upon approval of the State Council.
The modifications above are called China's "pharmaceutical patent linkage system", being of great significance to manufacturers of original drugs. On September 11, 2020, the General Office of the National Medical Products Administration and the Office of the China National Intellectual Property Administration requested comments on the "Implementation Measures for the Early Resolution Mechanism for Medicine Patent Disputes (Trial) (Exposure Draft)".
5. Addition of patent open license system, reduction and exemption of annual patent fees for patentees providing open licenses (Articles 50 and 51)
Where a patentee states in a written manner to the patent administrative department under the State Council that he is willing to license any entity or individual to exploit its patent, and clearly indicates the payment methods and standards of the license fee, the patent administrative department under the State Council shall publish an announcement for open license. Where an open license statement is filed for a utility model or design patent, an evaluation report of patent shall be provided.
During the period of exploitation of open license, the annuity fee paid by the patentee shall be reduced or exempted.
The purpose of the modifications above is to promote the licensing and application of patents and "wake up" sleeping patents. More detailed rules for the implementation of the patent open license need to be further clarified. In addition, for enterprises owning a large number of patents, the annual fees for maintaining the patents will be a huge expense. After the new Patent Law comes into force, enterprises can choose certain patents to provide open licenses, so as to save costs and even generate revenue by licensing.
6. Strengthened administrative protection of patents (Article 68, 69 and 70)
China adopts a dual-system for patent protection. In other words, for a patent infringement dispute, the patentee can bring a lawsuit to the people's court or request the patent administrative department to handle it. Although there has been a lot of controversy about whether judicial protection or administrative protection should be strengthened, the revision of the Patent Law has determined in Articles 70 and 60 that the patent administrative department of the State Council (i.e. the China National Intellectual Property Administration) have been empowered to handle patent infringement disputes that have a significant influence in the whole country, and the patent administrative departments (the Local Intellectual Property Administrations) have been empowered to query the parties, conduct on-site inspections and check relevant products.
In the future, enterprises will be able to choose judicial or administrative means to cease the infringement act according to their own needs. Here, administrative investigation has advantages in terms of timeliness.
7. Addition of the request subject of the patent assessment report of a utility model and design (Article 66)
Before this revision of the Patent Law, only the patentee could request a patent assessment report for a utility model or design patent. After this revision, the patentee, interested parties and the accused infringer can all present a patent assessment report on their own initiative, rendering the patent assessment report system more complete and neutral in procedure, and also providing additional means for the accused infringer to cope with the patentee.
8. More time to submit a copy of the priority document (Article 30)
Any applicant who claims the right to priority of a patent for invention or utility model shall make a written declaration when the application is filed, and submit a copy of the patent application document which was first filed within sixteen months from the date on which the patent applicant for invention or utility model was first filed. Any applicant who claims the right to priority of a patent for design shall make a written declaration when the application is filed, and submit, within three months, a copy of the patent application document which was first filed.
According to the current Patent Law, a copy of the priority document of the patent application document shall be submitted within three months from the date of filing the new application. According to the new Patent Law, it can be determined that more time has been allowed for when submitting a copy of the priority document.
9. Addition of the application of grace period for novelty (Article 24)
According to the current Patent Law, an invention for which a patent is applied for can request a grace period for novelty where, within six months before the date of application, one of the following events has occurred: where it was first exhibited at an international exhibition; where it was first made public at a prescribed meeting; or where it was disclosed without the consent of the applicant. In the revision of the Patent Law a further event is added, i.e. where it was first disclosed for the purpose of public interest when a national emergency or extraordinary state of affairs occurs, it will not be deemed to have lost novelty.
It has been 12 years since the last revision of the Chinese Patent Law. This revision has responded to the demands of enterprises accumulated in recent years. Therefore, we look forward to the follow-up implementation to promote patent protection and technology development. The main contents of this revision are summarized above and we expect this to be helpful to readers.
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.