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31 Oct 2020

China Amends Patent Law

On 17 October 2020, the long-awaited fourth amendment to the PRC Patent Law[1] (“Amendment”) was passed; it will take effect on 1 June 2021. Consisting of revisions or additions involving over two dozen articles of the Patent Law, its changes will affect the rights and procedures both for obtaining patents and for protecting them. The Amendment is also overwhelmingly geared toward augmenting patent applicants’ and patent-holders’ rights, although some provisions are aimed as much if not more toward alleged infringers and commercial parties generally. This Newsletter covers the major changes introduced by the Amendment in these respects.

Changes to Obtaining Patent Rights

One of the Amendment’s focuses is on design patents. First, it will be possible to obtain a patent for partial designs or designs of part of a product, as the definition of design patents is revised to include “of the whole or a part [of a product]”. Second, domestic applications for design patents will be able to claim priority to domestic design patent applications filed up to six months earlier (though the design patent application claimed as priority will then be dismissed, precluding “double patenting”). Third, the term for design patents will be extended to 15 years, up from 10 and equal to utility patents but still fewer than the 20-year invention patent term.

Timing in patent applications more generally is revised in several respects. First, a patent application will not be denied on the grounds of a lack of novelty on account of the patented material having been previously made public (by the applicant) if the publication was made both (1) less than six months before the patent application and (2) for the purpose of public interest when a state of emergency or an extraordinary situation occurs in the country. A larger, more complex contribution of the Amendment is the establishment of a kind of “patent term compensation system”: if an invention patent is granted but only after a substantive examination taking longer than three years,[2] the term of the invention patent should be lengthened to compensate for the extra time taken in the examination (excluding extra time attributable to the patent applicant).[3]

Changes to Protecting Patent Rights

The Amendment introduces several principles or rules that may affect the initiation and conduct of lawsuits over patent infringement. For example, parties attempting to enforce their patent rights will have to do so “in good faith”; though the full potential meaning and effect of this principle must remain to be seen in practice, the Amendment does at least specify that using – or, rather, misusing – patent rights to eliminate or restrict market competition will be subject to the Anti-Monopoly Law.[4] Another change that might curb suits against (alleged) infringement is the provision that when a party is sued for patent infringement, it may obtain an “evaluation report” (for utility and design patents) from the China National Intellectual Property Administration (CNIPA) and submit it to the court, something that only a plaintiff has been able to do until the Amendment; if the report concludes the allegedly infringed patent is invalid for any reason, the court will try to persuade the plaintiff to withdraw the claim(s) of infringement that are based on the patent. On the other hand, the Amendment also introduces a mechanism for shifting the burden of proof regarding damages onto a defendant in a patent suit: specifically, if a rightsholder has “endeavored to present evidence” of a fact concerning damages, e.g., the amount of sales of an infringing patent, but the most relevant evidence is mainly in the control of the alleged infringer (e.g., account books), the court may order the latter to submit the relevant evidence; if the latter does not, the court can rely for its ruling on the evidence presented by the rightsholder.

Possibly the more significant changes made by the Amendment concern damages. First, the Amendment effectively introduces “punitive” damages into the patent infringement framework: previously, the law provided for courts to award damages equal to the amount of (1) the losses suffered by the infringed, (2) the benefits obtained by the infringer, or (3) patent licensing royalties (based on which could be determined, beginning with loss amount); now, the Amendment provides for courts to award up to five times the relevant one of those amounts. Furthermore, the amounts of statutory damages (i.e., damages set for specific types or subject matter of infringement, applied when none of the three relevant amounts can be determined) will change to the range RMB 30,000 to RMB 5 million (from RMB 10,000 to RMB 1 million). Finally, administrative penalty amounts will also be increased, though not as significantly.

Takeaways

The Amendment went through several drafts, released for public comments, and was meant to respond to issues and concerns raised by private parties and scholars who deal in or with patents. As such, its revisions and additions to the Patent Law, which was last amended in 2008, are relatively modest and it could be said to not respond to all the issues and concerns raised. For example, the framework for administrative mechanisms to protect patent rights could have been augmented beyond only increasing the amount of penalties (and only by a little), as was in fact reflected in a draft of the Amendment. In addition, some of the innovations of the Amendment could have been set out more fully, e.g., the so-called “open license system” established by the Amendment, whereby a patent-holder can have the patent administrative department of the State Council announce to the general public that the patent-holder is willing to license its patent to any party upon written notification and payment of set royalties to the patent-holder – much remains to be clarified about how this system will work. Nevertheless, the Amendment will bring some significant changes to patent law, including both the obtaining of patent rights and their protection, most notably the wider scope and term of design patents and the heightened damages for infringement. Perhaps most importantly, the majority of changes are meant to bolster the legitimate interests of patent applicants and patent-holders.



[1] Patent Law of the People’s Republic of China (中华人民共和国专利法), promulgated on 12 March 1984 and previously amended in 1992, 2000, and 2008.

[2] An additional precondition for the patent term compensation system to apply is that the overall time from the patent filing date to the grant of the patent must have been over four years, but in practice this precondition will essentially always be met if the substantive examination takes longer than three years, since the other procedures required for granting a patent as a rule take longer than a year.

[3] The terms of patents for new drugs in particular may be extended (subject to a cap) also for time taken in the review and marketing approval of the drugs.

[4] Anti-Monopoly Law of the People’s Republic of China (中华人民共和国反垄断法), promulgated on 30 August 2007, effective as of 1 August 2008.

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