A. Introduction
On October 17th, 2020, the 22nd meeting of the Standing Committee of the 13th National People’s Congress of China passed the Decision on Revising the Patent Law of the People’s Republic of China. The newly revised Patent Law of China will come into force on June 1st, 2021. It took about 8 years to fulfill this fourth revision of Patent Law. The fourth amendment to the Patent Law has 29 articles.
Many of these changes were already in the proposed draft amendments that came out in 2019 and 2020, though there have also been some adjustments. The current Patent Law of China came into force in 1985 and was revised three times in 1992, 2000 and 2008, respectively.
B. Patent term extension
By signature of the US-China Phase I Agreement of January 15, 2020, China committed to provide patent term extensions to compensate for unreasonable delays that occur in granting the patent or during pharmaceutical product marketing approval.
If patent examination is unreasonably delayed now, the patentee can request patent term compensation. According Article 42.2 of the draft Patent Law an invention patent application, which has been pending for more than 4 years since the filing date, or more than 3 years since the request for substantive examination, the applicant is entitled to request patent term compensation due to the delay in patent examination, except where the delay has been caused by the applicant itself.
According to Article 42.3 draft Patent Law for pharmaceutical patents, the total compensation period is a maximum of 5 years. For new drugs being granted regulatory approval to be put on the market, the total patent term shall not exceed 14 years.
C. Open license system
According to the Articles 50 to 52 the patentee can declare and record its intention to “open license” its patents to any entity or individual with the China Patent Office, and set the license fees and terms for public records. During the open license period, the patent annuities can be waived.
According to Article 51, anyone that is willing to exploit the patent which is open licensed gets the license to exploit the patent after it informs the patentee in writing, and pay the license fee according to the open license announcement. In other words, anyone that complies with the above provision automatically gets a license. In addition, the same article specifies that the patentee that offers the open license and potential licensees can still negotiate on license fees. However, the patentee that offers the open license may only grant ordinary licenses and shall not grant a sole or exclusive license for the patent concerned. Moreover, if any dispute arises with respect to the open license, the relevant parties may either request mediation from CNIPA or launch a lawsuit in people’s court.
The provisions will help to further commercialize Chinese patents.
D. Abusing patent right
According to Article 20.2 excluding or restricting competition, if constituting monopolistic conduct, shall be treated according to Chinese Anti-Monopoly Law.
Specifically, it provides that the application for and the use of patent rights should follow the principle of good faith. Patent right should not be abused to damage public interest and other’s legitimate rights. Abuse of patent rights to exclude or restrict competition, which constitutes monopolistic behavior, shall be dealt with in accordance with the Anti‐Monopoly Law of China.
The first paragraph of this Article mainly concerns abuse of patent right, and the second paragraph relates to anti-monopoly remedies for the consequences of the abuse of patent rights to eliminate or suppress competition.
The earliest provision regarding a relationship between technology and anti-monopoly can be found in Article 329 of the Contract Law of China regarding technology contract, and Article 10 of the China’s Supreme Court Interpretation on Several Issues concerning the Application of Law in Trial of Technology Contract Disputes gave details on illegally monopolizing technology and hindering technological progress. Some of that provisions regarding the abuse of patent right have been added into Article 20 and 22 of the revised Patent Law. They don’t have substantially new content.
E. Public interest
A new feature is the clause providing for a grace period for inventions in which there is a public interest. An invention should not lose novelty if the first disclosure is made in a state of emergency or under exceptional circumstances of the State and for purposes of public interest. This first disclosure should not be made more than 6 months before the application. This would allow a new medical product, such as against Corona, to be put on the market before the patent application is filed.
F. Patent infringements
At the request of patentee or interested party, CNIPA may handle patent infringement disputes that have significant nationwide, Article 70.1.
Also new are the future rules for the court levels at which patent infringement actions must be brought. The division of labour between the patent authorities at different levels will be newly regulated; national patent authorities will thus be empowered to handle nationwide serious patent infringement disputes. Regional patent authorities, will be authorised to handle infringement cases against the same patent in combination, and patent authorities will also be authorised to handle imitation patent cases and, under new rules, normal infringement cases. This will further fragment the already extensive court system in China.
G. Compensation for patent infringement
The new Chinese patent law provides higher damages in case of patent infringement. In all cases where the damages to the right holder, the profit of the infringer or the royalties of the infringed patents are difficult to determine or calculate, the Chinese court can fix damages between 30,000 RMB and 5 Mio. RMB. This is an increase by a factor of 3 or 5.
According to Article 71.1 Patentee's loss and infringer's gain are treated equally as basis for determining damage amounts.
Under the current patent law, the concepts of willful infringement and associated punitive damages are not available. These are included in Article 71 now. Specifically, for willful infringement on a patent right, if the circumstance is serious, the amount of damages may be increased up to five times of the calculated damages. The amount of damages for patent right infringement shall be determined by trying the following methods in the following order.
First, the amount of damages may be determined according to the patentee's actual losses caused by the infringement or the benefits acquired by the infringer through the infringement. Where it is difficult to determine the losses of the patentee or the benefits acquired by the infringer, the amount of damages may be determined according to the reasonably multiples of the royalties of that patent. It is to be noted that compared with the current provisions, Article 71 slightly revised the order of the methods for calculating damages that should be used. Either the patentee’s actual losses or the benefits acquired by the infringer can be used first, whereas the current law requires that the actual losses must be tried first.
If it is difficult to determine the losses of the patentee, benefits of the infringer, or royalties of the patent, the people's court may, on the basis of the factors such as the type of patent right, nature of the infringement, and seriousness of the case, determine the amount of compensation within the range from 30,000 RMB to 5,000,000 RMB. This is referred to as statutory damage and it’s lower and upper limits are respectively raised to 3 times and 5 times of the current ones.
Furthermore, Article 27 of Interpretation (II) of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases regarding inversion of burden of proof for compensatory damage is incorporated into Article 71.4 of the amended Chinese Patent Law, which reduces the difficulty of proof for right holders.
H. Evidence disclosure obligation
It can be difficult to prove damages in patent infringement proceedings because defendants mostly refuse to disclose financial records. Article 74.1 implemented a preliminary evidence disclosure obligation. Where the infringer fails to provide the account book or materials or provide fake account book or materials, the people’s court may determine the amount of damages based on the claim made and the evidence provided by the right holder.
In the past one of the biggest difficulties faced by a patent right holder in a patent infringement lawsuit in China was the lack of discovery. It is often the case that infringement is found but there is no good evidence to calculate damages as the evidence is in the possession of the defendant.
I. Statute of Limitation
The statute of limitation for infringement of a patent right was 2 years, now it is 3 years. This change aims to have the Patent Law sharing a same term of statute of limitation for protection of civil rights, which is 3 years as stipulated in the General Rules of the Chinese Civil Law.
J. Design patents
Article 42.1 of the draft amendments extends the duration of a design patent to 15 years from its application date. This will allow right holders to enjoy exclusivity for a longer period, increasing the right’s value and reducing the cost and risk of having to file for surrogate IP, such as copyright and 3D marks, to try prolonging the life of the design creation. Such surrogates have proven to be only partially successful in replacing design patents, especially when enforced in place of a design.
According to Article 2.4 Partial designs will be allowed. Design, as defined by the Fourth Amendment, now means “any new design of the shape, the pattern, or their combination, or the combination of the color with shape or pattern, of the whole or part of a product, which creates an aesthetic feeling and is fit for industrial application.” China’s system with respect to design patent, from prosecution to litigation, was built on the inextricable tie between the scope of a design patent and the whole product to which the design is attached.
In the past, design patent applications in China could only claim priority to foreign applications. The new proposed law allows Chinese design applications to claim priority from domestic applications if filed within 6 months of the original priority document. All priority documents still need to be submitted within 3 months of the design patent application’s filing date.
A provision regarding domestic priority of design patent application is coded in the second paragraph of Article 29. According to this provision, a design patent application can claim and enjoy priority within six months from the date of filing a first design patent application for the same subject matter in China.
The current Patent Law stipulates that only patent applications for invention and utility model can enjoy domestic priority. The revised Patent Law permits all types of patent applications to claim and enjoy the domestic priority. Since the examination period for design patent is very short, the 6-month priority period stipulated in the revised Patent Law might, under some extreme circumstances, become a means for applicants to restore their rights. For instance, within the 6-month priority period, after a design is rejected or deemed withdrawn, its applicant can re-apply after a defect has been overcome based on this domestic priority provision.
K. Utility model
Under the current patent law, if a dispute over patent infringement involves a utility model patent, the people's court or the administration office may require the patentee or the interested parties to present a patent right evaluation report prepared by the CNIPA through searching, analyzing, and assessing the relevant utility model or design, which shall serve as evidence for trying or handling the patent infringement dispute. Currently only patentees or the licensees that have the right to launch lawsuits have the right to request patent right evaluation reports.
In Article 66.2, it is provided that relevant parties from both sides of the lawsuit may request the patent right evaluation report produced by CNIPA. This means that not only the patentee can request the CNIPA to produce the patent right evaluation report but the defendant is also able to do so.
The same applies to designs.
M. Pharmaceutical patents
During administrative review and approval for a drug, the party seeking drug approval and the patentee of a relevant patent may initiate legal proceeding with the court to determine whether the drug falls within the protection scope of the patent, Article 76.1. The drug regulatory agency, within a specified period of time, may decide whether to suspend the drug review and approval process based on an effective judgment by the court. This generally sets up a mechanism for settling patent disputes in drug regulatory review and approval process.
A very recent draft set of amendments to the regulatory law of the China’s National Medical Products Administration set forth more proposed details relating to this patent linkage provision, including a 45-day timeline within which the innovator must file lawsuit against the generic company, proposing a 9-month stay for the generic drug application to resolve patent disputes, and clarifying what types of drugs can be listed in the platform.
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