Since the first Chinese patent law was promulgated 25 years ago it has been amended twice to move China’s patent regime towards international standards. This year will see a third amendment that continues the process of bringing China’s patent laws into line with those of other major industrial countries. The amendments will make managing patent matters in China more like that in other countries, reducing the need for special, China-specific policies and practices for IP owners looking to get the best from the international patent system.
Some of the changes represent a significant departure from the current law and will affect the acquisition of patent rights, patent litigation, and the exploitation of patent rights in China.
Patentability
Absolute novelty
China’s current law provides for a relative novelty standard for patents. Written publications from anywhere in the world can be taken into account in determining the novelty of an invention. However, only evidence of use, or disclosure other than in publications (eg at trade fairs) from within China, can be considered as prior art. Thus, for example, prior use in the US will not invalidate a Chinese patent.
The amendments adopt an absolute novelty standard for patentability, so that publications and evidence of use or disclosure by other means from any part of the world, will constitute prior art.
One particular benefit of this change is that it provides an absolute standard that can be used to invalidate a bad-faith filing of a patent application by a party who has seen an invention displayed by someone else outside China but for which no other disclosure has been made. While such bad-faith filings can be considered by addressing the person who created the invention, and is therefore the rightful owner, the introduction of the absolute novelty standard means that such applications are inherently not novel and no investigation of entitlement is necessary.
US applicants need to be aware that this amendment moves China’s patent system further away from that of the US. The opportunity for any prior disclosure to invalidate the patent has increased.
Double patenting
There are two types of patent protection under Chinese patent law: invention patents and utility model patents. Invention patents can be directed to chemical and non-chemical products and processes, and last for 20 years from the date of filing. Utility model patents are available only for non-chemical products and last for ten years. Both types of patents, however, give the patent holder essential, identical and exclusive rights to make, use, offer to sell, sell, or import the patented technology.
Both invention patent applications and utility model patent applications undergo preliminary examination on filing, but only the invention patent application undergoes substantive examination on patentability before the patent issues. A utility model patent is only subject to formal examination without the consideration of matters affecting patentability and so will issue much earlier than the invention patent. For this reason, applicants looking to secure early rights for inventions in China will sometimes apply for both an invention patent and utility model patent directed towards the same invention. This has sometimes led to double patenting of the same invention.
Double patenting was limited by the State Intellectual Property Office (SIPO) through its amended Guidelines for Examination. These require an applicant who files applications for both an invention patent and a utility model patent for an identical invention on the same day to abandon any granted utility model patent for the invention patent to be granted. If the applications are filed on different days, the senior application is prior art against the later application. Article 9 of the amended patent law now codifies this practice as law.
Genetic Resources
An applicant for a patent must now indicate the original source of any genetic resources necessary for the completion of an invention. This must be completed in accordance with Articles 5 and 26 of the amended law, and the amended implementing regulations.
If the source of the genetic resources cannot be indicated, the applicant must explain why not. A party that fails to mention the source and original source of the genetic resources, and is unable to provide a reason for that failure, may be denied a patent in China.
As a practical matter, it is not clear what this amendment will achieve. In many cases the original source of materials is not known, so the simple enabling disclosure of the non-original source may have to suffice.
First-filing requirements
Article 20 of the current law provides that if patent protection is sought by a Chinese entity or individual for an invention created in China, an application must first be filed in China, before any application is filed in a foreign jurisdiction.
Under the amended law, any applicant seeking patent protection for an invention created in China can either file first in China or they can file first outside China if they obtain security clearance from the SIPO. The amended law will cover all persons or entities and failure to comply will result in the loss of the patent right in China.
The draft implementing regulations require SIPO to inform the applicant within two months from the date of filing of any request for security clearance whether a national security review is necessary, and if it is, to provide a decision within four months from the date of the request. Failure by SIPO to comply with either deadline will be deemed as approval of the application.
The effect should be more first filings in China for inventions created in China. As a practical matter, if the applicant decides to file abroad first, it will have to wait at least two months to go through the security clearance procedure. The applicant would face the danger that during that time, a public disclosure of the invention could be made, or that a competitor would file a patent application for similar technology ahead of the party seeking security clearance. That could be detrimental to its ability to secure any patent rights for the invention, whether in China or elsewhere.
Since the parties most likely to be affected are those seeking international protection, we may see a rise in first filings of Patent Cooperation Treaty (PCT) applications in China, particularly as these can be validly filed in English.
Joint Ownership
The current patent law does not make it clear what rights joint owners of patents have in those patents. The new law contains specific provisions that define these rights.
Under the new law, all the joint owners of a patent must agree to its assignment or to the grant of any exclusive licence under it. Furthermore, Article 15 of the amended law provides that if there is no agreement between the joint owners as to how the patent can be exploited, each joint owner may exploit the patent itself, and grant third parties a non-exclusive licence to exploit it. However, all the joint owners must share any licensing fees they receive.
Infringement
Prior art defence
In China a patent’s validity and its infringement are decided in separate proceedings. Validity is determined by the Patent Re-examination Bureau (PRB) within the SIPO and infringement is determined by the courts.
Under the current law, if a defendant in infringement proceedings wishes to challenge the validity of a patent, a request for invalidation must be made with the PRB and the court has discretion to decide whether or not to stay the infringement proceedings pending the results of the invalidation hearing. On several occasions where the courts have refused to stay infringement hearings, the defendants have been found liable for infringing patents that were later held to be invalid.
To avoid this problem, the amended law will allow a defendant to assert that a patent they are alleged to have infringed is invalid by referencing prior art. However, the change in the law only provides a defence to the infringement claim. It does not allow the defendant to counter-claim for invalidity within the infringement proceedings. Therefore, the court will only make a ruling of non-infringement where this defence is raised; it will not rule on the validity of the patent (which is still the domain of the PRB).
Thus alleged infringers may, and probably should, still seek to invalidate the patent before the PRB in cases involving complicated patents, due to the greater expertise and technical sophistication of the PRB. This change potentially makes life significantly easier for a non-Chinese company entering the Chinese market. In the past the newcomer faced the danger of a finding that it infringed a patent, ignoring the fact that the patent was invalid.
Bolar-type exemption
The amendment will introduce several exemptions to infringement not found under the current law. Of particular interest to the pharmaceutical industry will be the introduction of a Bolar-type exemption under Article 74 of the amended law.
This amendment will permit the manufacture of patented medications or patented medical apparatus for the purposes of obtaining regulatory approval in China. Unlike the US Bolar exemption, the amendment to China’s patent law lacks pharmaceutical patent linkage and does not provide for any extension of the patent term.
The State Food and Drug Administration can accept an application by a third party for registration of a pharmaceutical product during the two years before the date on which any patent relating to that product expires. A generic manufacturer may therefore receive approval of their generic version of a patented drug within this two-year period and be able to sell their generic version immediately on expiry of the patent. For this reason, the exemption will be likely to favour the Chinese generic pharmaceutical industry.
International Exhaustion of Patent Rights
Under Article 11 of the current patent law, only the patentee, or a party authorised by the patentee, can use, offer to sell, sell or import a patented product or a product directly obtained from a patented process. The amendments will permit any person to do any of these acts in relation to a product that has been sold by the patentee or with the patentee’s authorisation, without infringing the patent. This exemption specifically covers acts of importation and so introduces an international element to Chinese patent law. It allows patented technology or products that were acquired legally overseas to be imported into China.
If a patentee wishes to restrict the parallel importation of its patented technology into China, it may want to impose contractual restrictions on its non-Chinese licensees, to limit the territories into which they can sell the licensed technology. However, patentees should make sure these clauses do not violate antitrust laws or the recent Chinese anti-monopoly law, which prohibits the abuse of IP rights.
Increased Statutory Damages
Under current Chinese practice, it is possible to claim statutory damages if the patentee:
- cannot prove damages suffered as a result of the infringement;
- cannot determine the profits of the infringer arising from the infringement; or
- cannot refer to a licence agreement executed for China before the date of the infringement, to allow the court to calculate what fees the licensor would have been owed if the infringer had licensed the patentee’s technology.
The current right to statutory damages does not come directly from the current patent law, but from a judicial interpretation by the Supreme People’s Court.
Article 65 of the amended law codifies the availability of statutory damages and increases the maximum statutory damages to 1m RMB from the current 500,000 RMB. As with many statutory awards, this level is unlikely to reflect the true value of infringement in many cases. However, it will certainly go a long way to cover the costs of litigation in China, and will cause many smaller infringers considerable financial distress.
Conclusion
Many of the changes introduced by this amendment bring Chinese patent laws closer to those found in other countries. This should reduce the number of occasions in which a special, China-specific strategy is required for the protection of IP that differs significantly from that used in other countries. While certain differences do remain, adopting a general approach to international patent protection that can be tailored to Chinese requirements is likely to become much easier.
By Martin Hyden, international service head for patents (Oxford), and George Chan, consultant (Beijing), Rouse.
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .