New Patent Law implementing rules to have a deep impact

“In consideration of the consequence of failure to submit a patent application for security examination before filing abroad … foreign companies may tend to adopt a more conservative approach when interpreting whether an invention or utility model is completed in China,” says Ronald Chu.

“Unlike the past, for inventions or utility models accomplished in China, it will no longer be mandatory for Chinese applicants to first file the applications in China, provided a prior security examination is conducted by the Chinese Patent Office,” says Howard Tsang. “As Chinese applicants include foreign investment enterprises, the Rules would encourage foreign companies to devote more R&D resources [to] China.”

Wong says that foreign companies often ask how to determine whether the substantive contents of an invention are accomplished in China when they have multiple teams in several countries working on a common technical problem.

“Unfortunately there is no straightforward answer to this and each case will have to be addressed on its own facts,” she says. “Foreign companies are well advised to keep detailed records of their R&D activities in China, in case this becomes an issue at a later stage.”

Meanwhile, Chloe Lee highlights the fact that Article 9 of the new Rules provides the procedures for confidentiality examinations, and dictates that an applicant may need to wait six months or more after filing the request before he can make a foreign patent application.

“If clients have substantial R&D in China, and to avoid the adverse consequence of losing patent protection in China, clients should better seek to first apply for patent registration in China or submit [the confidentiality examination] request as soon as possible before making a foreign patent application,” Lee says.

Passing off
Under the revised Patent Law and the new Implementing Rules, patent passing off includes both passing off others' patents and non-patented products or methods.

“The provisions relating to patent passing off have been rewritten and simplified,” says Chu.

Lee says that Article 84 of the Implementing Rules makes a clarification which “helps to better protect the general consumers and to some extent strengthens patent owners' rights”. This Article concerns passing off of patents under Article 63 of the Patent Law, through means including affixing invalid patent markings on products or packaging.

Although he says the new Rules “make minimum amendments”, Tsang points out that they also newly exempt “infringers selling goods being passed off as patented goods from payment of penalty fine in an administrative action where their innocence can be established and they can provide proof as to the legitimate source of the goods”.

Compulsory licensing
The new Implementing Rules have further expanded the grounds on which compulsory licensing is available.

“These have been introduced primarily in response to the public health aspects of the Doha Declaration under TRIPs,” says Wong. The definition of a “patented pharmaceutical product” in the Implementing Rules bring the provisions in line with the World Health Organisation's Doha Declaration on the TRIPs Agreement and Public Health (2001), the WTO Decision of 2003 on the Doha Declaration, and the 2005 Decisions on Amendment of the TRIPs Agreement.

“The intention is to make it easier to obtain access to generic versions of patented drugs when public health problems issues are at stake,” Chu says.

The Implementing Rules do not, however, include detailed provisions on restrictive conditions in connection with compulsory licensing, as are found in TRIPs. They instead contain a provision which requires the Patent Office to ensure its decisions on compulsory licence for resolving public health issues conform with the relevant provisions of international treaties to which China has acceded.

“As of today, China has yet to grant any compulsory license of patented pharmaceutical products in connection with public health issues,” Chu points out.

“It remains to be seen whether the newly expanded grounds will actually result in an increase of compulsory licensing activity,” adds Wong. “There have not been any indications to say that Chinese authorities will not continue to proceed with the same caution as under the previous patent law when it comes to awarding compulsory licences.”

As for the grounds on which a licence may be granted: “As in the past … it has to be established that the patent has not been exploited, or fully exploited, by the patentee for a certain period of time without justified reason,” says Tsang. “As it is usually the case that foreign companies are the patentees, there are higher chances for their patents being subject to compulsory licence in China,” he adds.

Novelty
Wong says the move to an absolute novelty regime is “well overdue”, while Tsang notes that the revised Patent Law has brought China in line with patent practice worldwide, as regards novelty requirements: “the absolute novelty standard is now adopted such that novelty is lost if it forms part of the prior art anywhere in the world”.

And the result of this improved alignment?

“This higher standard may assist the elevation of the quality of Chinese patents which has often been criticised. As a consequence, there may be a higher level of innovation drive which is a main objective the new Law wants to achieve.”