CASRIP Newsletter - Fall/Winter 2009, Volume 16, Issue 1
China: Patent Law Amendment of 2008
By Zhe Peng and Hu Xiang1
On December 27, 2008, the Standing Committee of the National People's Congress of China approved the Amendment of Patent Law, which will be effective on Oct. 1, 2009. The State Council will revise The Detailed Rules for the Implementation of the Patent Law and Patent Examination Guideline according to this revision. This is the third time for China to revise its patent law since the first Patent Law was promulgated in 1984.
Compared to the earlier revisions which were mainly legal transplants, this revision is based on the domestic experience in the past 20 years and the needs of development, according to Chen Guangjun, in a news release. The most important two policies of this revision, he said, are to promote innovation and to enhance patent protection.2
In an earlier report addressed to Congress, the Chief of the State Intellectual Property Office explained the three purposes of revising patent law. One is "promoting independent innovation," through increased damages and a higher standard of examination. Another is "encouraging putting patented technology in use," for example, each co-owner of a patent can use or grant a non-exclusive license without the other co-owners' consent. The third is "compliance to TRIPS and other international treaties," by the new provision of genetic resources and the revision on compulsory licenses.
Following are the provisions changed by the Amendment.
1. CompulsoryLicense:There are some changes in the condition to get a compulsory license.
Illegal monopoly is a new cause to get compulsory license. Another cause that was added is the manufacture and import of patented drugs to countries and regions for public health purposes, under the condition of international treaties. These two revisions aim at TRIPS compliance.
The condition to get compulsory license becomes higher. "Blocking-patent," "patent not in use" and "failure to license under reasonable term within reasonable time" were three independent causes to ask for a compulsory license,3 but now failure to license is a pre-condition for the other two. Even if it is a blocking-patent or the patentee does not put the patent to use, a potential licensee has to seek a license under reasonable term first. If the patentee does not agree to license within a reasonable time, a compulsory license could be sought.4 "Patent not in use" was a condition for a compulsory license in the first version of Patent Law (1984) but was later deleted. Now it is back and combined with another condition --failure to license.
There is a new limitation on compulsory license regarding semiconductor patent. If the patent is about semiconductor technology, a compulsory license can only be granted under the condition of illegal monopoly or public interest, not for a blocking patent or patent not in use.
2. Genetic Resources：Protecting genetic resources is a new term added by this revision in order to comply with TRIPS. If the generic resources are obtained by violating any law or administrative regulation, the patent will not be granted.5 As a written description requirement, the applicant must disclose the direct and the original source where the genetic resources are from, if the patent is based on genetic resources. If the applicant is unable to do that, she needs to explain the reason.6 But the statute did not make it clear what the consequence of failing to disclose would be. Chinese Patent law has no unenforceability provision or other measure to punish bad faith in the application procedure.7 Nor does the current administrative penalty for inequitable patent prosecution cover failure to disclose. So the consequence of failure to fulfill this requirement is still left to more detailed regulation.
3. Design Patent: Several issues about design patent are clarified.
The exclusive rights of design patents cover the right to "manufacture, sell and import" and now the right to "offer to sell" has been added.8
The condition to get a design patent has also changed. To get a patent, the design needs to be obviously different from the prior design. The old law states that the design should be neither the same as nor similar to a prior design. Literally, "obviously different" is a higher standard than "not similar." The Examination Guideline, which will be revised according to this Amendment, is expected to clarify how different is "obviously different." The "prior design" is defined as "all design known to public within or outside the country," instead of "design disclosed in publication within or outside the country or used in public within the country" in the past. As a result, the design used outside China was not considered as prior design but now it is. This is consistent with the new definition of "prior art" for invention and utility patents.9 The design included in an earlier application, but disclosed later than the application date is not considered prior art. If it is the same as the design in the latter application, the latter one will be rejected. But if they are merely similar, the latter one will not be influenced. Classification of design patent is deleted, which makes applications easier. 10
The protection scope is still based on the photo or figure in the application, and now the specification can be used as an explanation.11 It is not clear if there is any limitation on how to "explain," for example, if a specification can narrow down the scope.
This Amendment added one limitation on subject matter regarding to design. If it is a graphic design on a picture, color or combination of both, and its main function is identification, it is not patentable.12
4. Double patent: Although only one patent can be granted to one invention, the applicant is allowed to file both an invention patent and a utility model patent applications at the same time. Usually, the applicant can get the utility model patent while the invention patent application is still pending. In that case, the invention patent can be issued, if the applicant declares to abandon the utility model patent before it expires.
5. Licensing: The new provisions make it easier to license a patent. The license agreement is no longer required to be written.13 If the patent is co-owned by more than one individual or organization, each of the co-owners can practice the patent technology or grant a non-exclusive license to the third party, unless it is in conflict with any agreement among the co-owners. So, if there is no agreement, each co-owner can put the patent into practice without the others' consent, but the profit will be equally shared by all co-owners.14
6. Infringement-Evidence Rule: In order to prove utility model infringement, the courts or the patent administration departments can require the plaintiff to submit an evaluation report by SIPO, as evidence to decide infringement. In this Amendment, the plaintiff alleging design patent infringement can also be asked to do the same thing.15 The patent administration departments mean local IP Offices which are a subdivision of SIPO and have authority to make administrative decision on patent infringement disputes.16 One research report conducted by SIPO suggested that the evaluation report requirement could possibly contribute to get the number of invalidation cases down.17
7. Infringement-Defense: Practicing prior art is a new defense added in this Amendment.18 If the alleged infringer can prove the technology or design accused of infringement is prior art, the infringement claim will be dismissed.19 In that case, the accused infringer needs neither to compare the patent to prior art nor to construct patent claims. Following German and Japanese experiences, this defense has been adopted into judicial explanations of the Supreme Court, which is a primary resource.20 Now it is codified. The Beijing High Court has put an effort into clarifying the standard to apply this rule.21 But, its explanation is not a primary resource and can only be officially cited as a source of law within its own jurisdiction.
8. Administrative Enforcement: The Local IP Offices are authorized to conduct an inspection on patent passing off cases, if they have some evidence.22 The administrative penalty for passing off is increased. Previously the penalty was triple an infringer's profit or up to 50,000 RMB. Now it is four times the infringing profit or up to 200,000 RMB.23
9. Consequence of Invalidation: If a patent is invalidated, it is not retroactive to the prior judicial or administration decision, license agreement or transaction. The patentee should compensate the damage, however, if it is caused by the patentee's bad faith. If it is not a case of bad faith, the patentee should return a royalty or payment for the transaction if it is obviously unfair without doing that. It is what was provided in the Patent Law 2000. Now the new Amendment also includes infringement damages as a subject to return in the case of obvious unfairness.
10. Damages The new Amendment increased infringement damages. Now the damages cover reasonable expenses of the plaintiff which was not covered before. There were four approaches to calculate damages: lost profit, infringer's profit, reasonable royalty, and statutory damages. The statutory damages can only be sought if all other three fail. Now the Amendment clarified the order to use the other three. Lost profit should be evaluated in the first instance. If it is not available, infringer's profit is the second choice. If both fail, reasonable royalty is the third one. In addition, the statutory damages are increased. If all three fail, the court can award damages, of which amount can be from 10,000 RMB to 1,000,000 RMB. In the past, it was 5000 RMB to 500,000 RMB. The discretion is based on the type of patent, the nature of infringement and other facts.24 Since in China obtaining evidence on damages is very difficult in some cases, it is a very practical consideration to have statutory damages. However, it demands a judge's discretion, which may be a challenge, since Chinese Judges traditionally have very limited power of discretion and are lacking relevant experience.
Recently the amount of damages in patent infringement cases increased. In December 2008, The Hongzhou Medium Court awarded a 50,000,000 RMB damage based on infringer's profit.25
11. Exception to Infringement--International Exhaustion Now patent exhaustion in China has become international exhaustion and parallel importation is allowed. Before this revision, only patent on some drugs can be internationally exhausted. As provided in Patent Law 2000, after a patent product is sold, the patent right is exhausted and can be sold or offered to sell again without infringement. However, the provisional exemption did not cover "import."26 Until 2005, a State IP Office regulation provided that some drugs for infectious disease can be imported without seeking a compulsory license.27 It was the first provision to allow parallel importation. The current exhaustion clause includes "import" besides "sell and offer to sell," making parallel importation legal for all kinds of patents.
12. Patent Agent Patent agencies that could be appointed by a foreigner, a foreign enterprise or other foreign organization that has no habitual residence or business office in China when applying for a patent or having other patent matters to attend to in China are expanded to include all legally established patent agencies, instead of those designated by the patent administrative department of the State Council.28
13. Secrecy Examination: The requirement of first filing a patent application for those inventions or creations that are completed in China by a Chinese entity or an individual is eliminated, instead the invention or utility model which is completed in China, no matter by Chinese entity or individual or by foreign entity or individual, shall be examined for confidentiality by the administrative department for patent under the State Council before filing an application in a foreign country, failure of which would result in no patent right in China.
14. Criterion of Patentability: The criterion for determining novelty and the inventive step was amended by changing the definition of prior art, which in the new Patent Act refers to any technology known to the public in the country or abroad before the date of filing, rather than those published worldwide and publicly used in the Country. Furthermore, the interference application will include not only those filed by others, but also filed by the applicant.29
15. Preliminary Injunction: Preliminary injunction is made more definite without substantial changes, and the property preservation measure is eliminated in the new Act.30
16. Evidence Preservation: Evidence preservation is newly added, which states the requirement and procedure for evidence preservation that are similar with those of preliminary injunctions.
17. Exceptions of Patent Infringement--Administrative Approval : With respect to exceptions for patent infringement, under Article 69, parallel import is permitted, and to make, use or import the patented medicine or medical treatment equipment for the purpose of providing information for administrative approval is excluded from patent infringement.31
Some terms appearing in earlier proposals are not included in this Amendment and are left for further discussion, like patent abuse and reforming the court system. This Amendment finished a fundamental task defined in The National IP Strategy Outline (2008), but it has a long way to go to achieve the goal of having a well developed IP system before 2020.