China: 4th Amendments To The Chinese Patent Law

Major improvements are on design patent, and patent infringement compensation.

Shortly after my article on the 2nd deliberation draft on the 4th amendments to the Chinese Patent Law (4th amendments to the Law) was published in the Oct 2020 issue of the UK CIPA Journal, these 4th amendments to the Law was passed by the Chinese National People's Congress (NPC) on 17 October 2020. The new Law will come into force on 1 June 2021.

My article mentioned above is available at the link below, which is a summary of the changes in proposed amendments in the last five years:

http://www.teehowe.com/download/CIPA%202020-10%20DD2%20of%20CN%20patent%20law%20amendments.pdf

My previous reports on the 1st and 2nd drafts from the CNIPA were published in the May 2015 and March 2016 issues of the CIPA Journal.

The current Chinese Patent was first passed in 1984. The 1st amendment was passed in 1992, while the 2nd and 3rd amendments were passed in 2000 and 2008, respectively. The previous amendments each took 8 years to be passed, while the current 4th amendment took 12 years. The current 4th amendments took 50% more time to pass. In addition to that issues on patent are becoming more complex and controversial, another factor contributing to this increase may be the willingness of the Chinese authorities to allow and respond to submission of comments to the law amendment, which are reflected in the previous four drafts reported in my articles above.

My own personal comments are in italics within square brackets.

Changes that are different from those in the 2nd deliberation draft

Comparing to the 2nd deliberation draft, the changes are as below:

• While maintaining the introduction of the patent term extension for patents of innovative drugs, and the addition of the US style patent term extension due to unreasonable delay at prosecution (Article 42), the change in the final version comparing with the 2nd deliberation draft is that for patent term extension due to unreasonable delay at prosecution, the final version specifies that the patentee could only apply for patents granted after four years from the application date, and after three years from the date of filing the request for substantive examination.
• Changing statutory damages from at a cap of RMB5,000,000, to from RMB30,000 to RMB5,000,000 (Article 71). [This lower limit was even lower than the proposed RMB100,000 in the previous drafts. While this may be disappointing, it should be noted that the US-CN Trade Agreement requires that when statutory damage is to be rewarded, it should be close to the cap. Therefore, the introduction of a lower limit may not be too damaging. Further, if the courts would indeed award statutory damages close to the cap as required, this may "force" the alleged infringers to produce evidence to avoid this.]
• For the addition of the US style patent linkage system for drug approval (Article 76)the change in the final version comparing with the 2nd deliberation draft is that instead of specifying the detailed mechanism in the Law, the final version throws the ball to the National Medical Products Administration to determine the detailed mechanism. The final version of the Law only specifies that the patentee could ask a court or the CNIPA to determine whether a generic drug falls within the scope of the subject patent.

[First, please refer to my LinkedIn article on the NMPA proposed measures

https://www.linkedin.com/pulse/chinas-draft-patent-linkage-implementation-method-public-toby-mak/?trackingId=ctqr7nETQzVgjeUuLJvvew%3D%3D

I welcome this change, which is in line with my suggestion mentioned in my CIPA article and submitted with the AIPLA comments. In addition that, in my view, the proposed mechanism in the 2nd deliberation draft was not well considered (see my article above for details), another point I used to convince my AIPLA fellows is that if the detailed mechanism was included in the Law, it would take a long time to change it (at least 12 years I believe) if any issues arises (which is likely). Therefore, it is advisable to leave the detailed mechanism to be specified in an administration measures, which could be revised more easily and quickly. I am glad that the NPC accepted this suggestion.]

• There are also many proposals existed in the previous drafts that have been removed, including expanding the CNIPA's role on patent infringement enforcement [I am relieved], requiring online service providers (like Taobao) to take down links after receiving a court decision, regulating patent attorneys, provisions on pre-trial actions, and so on, which appear to be redundant in light of other regulations and laws. Please refer to my previous articles for the mind-challenging game of finding out the removed proposals.

Changes that are the same as in the 2nd deliberation draft

Other than the above, most of the changes in the 4th amendments to the Law remain the same as in the 2nd deliberation draft, which I have categorized into different sections for ease of reading (in my own view)

Design patent related

• Adding "partial design" to the definition of design (Article 2).
• Allowing domestic priority claim for design patent application. i.e. a later filed Chinese design patent application can claim priority from an earlier filed Chinese design patent application. (Article 29)
• Extending the maximum term of a Chinese design patent from 10 years to 15 years from the application date. (Article 42)

Inventor's rights related

• Specifying that an employer is entitled to dispose patent rights arising due to employment. (Article 6)
• Remuneration to employee inventor could be in the form of equity, option and dividend. (Article 15)

Patentability related

• Adding "first publication for public interest in state emergency or abnormal situation" as an exclusion of non-prejudice disclosure (Article 24).
• Including method of nuclear transformation as a non-patentable subject matter. (Article 25)

Open license (similar to the UK license as of right) related

• Introducing the UK-style "license as of right" mechanism. (Article 50).
• Adding that even the patent is subject to "license as of right", the patentee could negotiate on license fees and grant a license of different license fees, but not an non-exclusive or sole license (Article 51).
• When there are disputes on the terms on the "license as of right", instead of mediation by the CNIPA as the only option, the dispute should be resolved by negotiation, and if failed, could be settled at a court (Article 52).

Infringement related

• In addition to the patentee, the defendant in a utility model or design patent infringement case can provide a patentability evaluation report to a Chinese court. (Article 66)
• Increasing fines for patent false marking, i.e. maximum five times of relevant income, or maximum RMB250,000 for relevant income of RMB50,000 or below. (Article 68)
• The CNIPA could only handle patent infringement cases with significant nationwide influence. (Article 70)
• Allowing the CNIPA to take certain actions (specifically, questioning the relevant parties, carrying out on-site investigation, and examining infringing goods) when handling patent infringement case (Article 69).
• Introducing when determining compensation for patent infringement, if the accused infringer failed to provide account books and materials or provides fake account books and materials subject to a court's order, the court may determine the compensation amount by referencing to the patentee's compensation claims and evidence. (Article 71)
• Raising punitive damage for severe wilful infringement from more than 1 to maximum 3 times, to more than 1 to maximum 5 times. (Article 71)
• Increasing time limit for suing patent infringement from two years to three years. (Article 74)

Others

• Introduction of the good faith principle, i.e. patent applications shall be filed in good faith, and patent rights shall not be used to jeopardize public interest or restrict competitions. (Article 20)
• Adding if abusive use of patent rights results in monopoly, such abusive use shall be handled according to the Chinese Anti-monopoly Law (Article 20).
• Requiring the CNIPA to disseminate patent information in a timely manner. (Article 21)

Observations

Most of the changes would be welcomed by patent right holders, and are heading to a good direction. These include strengthening design protection (allowing partial design and extend term), making proof of damages easier and increasing infringement damage awards.

The introduction of the UK style license as of right system is interesting. We have to wait and see the effectiveness, but the UK experience is not very encouraging.

On the other hand, the introduction of the new exclusion of non-prejudice disclosure would create uncertainties on freedom-to-operate.

The revision of the Implementation Rules of the Chinese Patent Law (particularly for the patent term extension), and the Patent Examination Guidelines will be up and coming. I can foresee that the coming two years will be very busy for submitting comments to these upcoming revisions.

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.