Protection of Integrated Circuit Layout Designs in China

The Layout Design Regulations provide protection against copying of registered integrated circuit layout designs and unauthorized commercial exploitation of registered layout designs. A layout design means (i) a three-dimensional disposition incorporating at least two components, of which at least one is an active component in a partially or fully connected circuit, or (ii) three-dimensional configuration for the purpose of manufacturing integrated circuits. To qualify under this definition, the layout designs must be original, innovative and three-dimensional circuit designs. It is fairly assumed that all integrated circuits are covered by the Layout Design Regulations. The protection is afforded to the patterns of the layout designs but not the function or the purpose of the designs.

For the purpose of registration, the layout design must be original and innovative in the sense that it is the result of the creator's own intellectual efforts and is not commonplace at the time of the creation.

Who is Protected

Both natural persons and domestic entities are able to file for registration of integrated circuit layout designs. Foreigners may also register their layout designs and seek protection under the Layout Design Regulations if the relevant layout designs were first put to commercial use in China. In addition, if their home country has entered into a bilateral agreement with China, or if their home country and China are both parties to an international treaty on layout design protection, foreigners may seek protection under the Layout Design Regulations as well, regardless of whether the layout design was first put to use in China. Because China is about to enter the World Trade Organization (WTO) and will therefore be a party to the Trips Agreement, the WTO member states will benefit from the layout design protection granted under the Trips Agreement.

Registration

The owner of the layout design must register it in order to have rights under the Layout Design Regulations. The creator of the design should apply for registration of the layout design. If the design was created under sponsorship from a corporate entity and according to the instruction and will of the entity, and if the entity will be responsible for the design, then the entity will be able to apply for the registration of the layout design. In the case of a commissioned work, the party who was entrusted to do the creation will be eligible for registration unless otherwise agreed in writing.

The application must be filed within two years of the first commercial exploitation of the layout design. The SIPO will not entertain any late applications.

The SIPO will conduct a preliminary examination of the application and will proceed to register the layout design if it finds no reason for objection. If the design is registered, the SIPO will issue a Registration Certificate and publish the registration on its website (http://www.sipo.gov.cn), or in its publication China Intellectual Property Daily.

Patent Agents

Under the Implementing Rules, the SIPO is designated as the department in charge of the registration of layout designs. Domestic entities or natural persons may file applications through local patent agents or the applicants themselves can file directly. Foreigners making applications, however, must file via patent agents designated by SIPO. The different requirement for patent agents is likely to arouse concerns as to compliance with the national treatment principle after China becomes a member of the WTO.

Date of Application

According to the Implementing Rules, the exclusive right to the layout design becomes effective from the date of application. Normally, the date when the SIPO receives the application from the applicant will be the date of application. However, when the application documents are sent by post, the date on which the application is mailed will be the date of application.

Protection of Confidential Information

In cases where the layout design has not been commercially exploited, the applicant may, for confidentiality reasons, request the SIPO not to disclose up to 50% of the layout design's layout area. The SIPO is obliged to place such a confidential part of the integrated circuit layout in a separate file and prohibit any access unless otherwise decided by the court in civil or administrative proceedings.

Procedures Available in the Registration Process

There are three distinct procedures available to the applicants to ensure the proper handling of the registration process.

Appeal

An appeal is available to the applicant who is not satisfied with the decision of the SIPO to reject the registration application. The appeal must be filed with the Patent Re-Examination Board (PRB) within three months of the date of the notice of rejection from the SIPO. The PRB will not accept any late appeals. The PRB has the right to confirm the SIPO's rejection decision or to revoke such rejection decision and authorize registration of the layout design.

If the applicant is still not satisfied with the decision of the PRB, the applicant has three months from the date of the notice from the PRB to seek recourse from the People's Court. Presumably, such recourse will be in the form of an administrative litigation to seek judicial review of the PRB decision.

Request for Review

An applicant also may request that the administrative review department of the SIPO conduct a review if SIPO's administrative acts infringe upon the applicant's lawful rights and the interests of the applicant. For example, if the SIPO refused to accept applications for unjustified reasons, its decision would be subject to administrative review.

Revocation of Registration

The PRB has the power to revoke the exclusive right to a registered layout design if the registration is found to be in breach of the provisions of the Layout Design Regulations. In such a case, the PRB would notify the owner of the layout design in advance and allow a specified period of time for the owner to defend the registration. The decision of the PRB to revoke the registered layout design is also subject to judicial review within three months of the date of the revocation notice.

What Rights are Granted

The Layout Design Regulations provide protection against copying part or all of a registered layout design, as well as unauthorized importing, selling or otherwise distributing for commercial purposes. Such protection extends to a registered layout design, an integrated circuit in which a registered layout design is incorporated, or an article incorporating such an integrated circuit.

The owner of the registered layout design obtains two distinctive rights under the Regulations:

(i) the right to reproduce all or part of the registered layout design; and

(ii) the right to commercially exploit the protected layout design, an integrated circuit in which a protected layout design is incorporated, or an article incorporating such an integrated circuit.

Term of Protection

The term of protection for exclusive rights in layout designs is 10 years from the date of application or the date of first commercial exploitation in the world, whichever comes first. In any event, regardless of whether the layout design is registered or commercially exploited, the layout design will no longer enjoy protection under the Layout Design Regulations after 15 years from the date of creation.

Assignment or Licence

The Layout Design Regulations permit assignment of registered layout designs. However, assignments must be registered with the SIPO and only become effective on the assignment's date of registration. Prior to registration by the SIPO, the relevant competent authority of the State Council must approve any assignment of a registered layout design by Chinese persons or entities to foreigners. Licences of registered layout designs are not subject to registration requirements.

Non-voluntary Licence

The Layout Design Regulations require a non-voluntary licence in certain situations. The SIPO may grant non-voluntary licences in situations such as state emergency, exceptional circumstances or for the purpose of public interests, or where the relief is required to prevent unfair competition activities by the layout design owner. The parties granted a non-voluntary licence must pay a reasonable amount of licence fee to the layout design owner.

The grant of a non-voluntary licence is subject to judicial review. If the owner is dissatisfied with the non-voluntary licence or with the decision of the SIPO on the remuneration for the non-voluntary licence, he may commence proceedings before the People's Court within three months. These rules appear to be based on the provisions of the Treaty on Intellectual Property in Respect of Integrated Circuits (Washington DC, May 26 1989).

Infringement

Any unauthorized copying of whole or part of the registered layout designs or any unauthorized import, sale or distribution in any other way for commercial purposes of the protected layout design, any integrated circuits incorporating such layout designs or any articles incorporating such integrated circuits will constitute infringement. The owner of the registered layout design will be entitled to damages in the amount of illegal profits of the infringer or the losses suffered by the party whose rights have been infringed upon. The owner is also entitled to recover all reasonable out-of-pocket expenses.

Defences to Infringement Claim

The Layout Design Regulations provide several defences to infringement claims. First, a party may claim "fair use" if it has legitimate reasons to reproduce the registered layout design. For example, it would be fair use if the reproduction were made for the purpose of personal study, research or for teaching purposes.

Second, the exhaustion of rights rule applies to registered layout designs or integrated circuits incorporating such designs after they have been lawfully released to the market by the registered owner or its licensees. Once they are lawfully placed on the market, any party may commercially exploit the registered layout designs without consent or payment of licence fees to the registered owner. Under this rule, the owner of the registered layout design will not be able to control the re-sale of products incorporating the relevant integrated circuits.

Third, lack of knowledge or constructive knowledge of the unauthorized reproduction of the registered layout design will also be a valid defence. The owner will need to prove that the infringer had actual or constructive knowledge of the infringement.

Conclusion

The Layout Design Regulations provide a new form of protection in China for layout designs of integrated circuits. It is a positive sign of the Chinese government's effort to comply with the obligations of the Trips Agreement. The actual implementation of the Regulations remains to be tested; particularly enforcement by Chinese courts and administrative authorities has yet to be tested. Owners need to be aware of the provisions on registration and the various defences available against infringement claims. They should take advantage of protective measures offered under these regulations, including filing for registration of their layout designs in China and placing appropriate markings on the layout designs or products incorporating such designs indicating that the designs are protected under registration in China. The protection offered under these new Layout Design Regulations puts owners in China in a much better position to control the commercialization of their layout designs.