China's New Draft Patent Law Has Innovation at Heart
January 10, 2019 | BY
Erick RobinsonErick Robinson, Partner at Dunlap Bennett & Ludwig, Beijing and author of China Patent Blog dissects the recently published Draft of the Patent Law Amendments, and discusses the good, the bad and the not too ugly implication of the law, should it come into force, on patent litigation in China.
On January 4, 2019, the National People's Congress published a draft amendment to the Patent Law (the “Amendment”). The Amendment is open for public comments through February 3, 2019. This article summarizes the most important changes in the proposed Amendment. (See full text of the Amendment here.)
The newly added Article 20 states that patentees should follow the principle of good faith and must not abuse patent rights to harm public interest and the legitimate rights and interests of others or to exclude or restrict competition. This seems a bit ominous, as these terms are unclear and undefined. This could potentially allow a court to take action against a patentee or its patent for antitrust and competition reasons. Specifically involving the court by law for such purposes is not a good thing, as China already has other entities to deal with such issues.
Article 26 adds a new category of technology that is specifically not patentable. Under this article, methods of nuclear transformation and the substances obtained by such methods are not patentable.
Article 43 of the Amendment adds a patent term extension system for certain drug patents to compensate for regulatory delays caused by the National Medical Products Administration (NMPA). This change affects invention patents on innovative drugs that simultaneously seek marketing approval in both China and abroad. Such patents will be eligible for a patent term extension of up to five years (so long as the total effective duration after the listing of innovative drugs does not exceed fourteen years).
Article 43 also extends the term of design patents to 15 years (currently 10 years) from the filing date. Another change to design patents in Article 30 adds a claim priority to an application on the same subject matter filed with the China National Intellectual Property Administration (CNIPA), if filed within six months. The term of utility models remains at 10 years.
Perhaps the most interesting amendments are Articles 50-52 which create an “open offer to license” in which the patentee could send a written statement to the CNIPA expressing its intention to grant a license to anyone who is willing to in-license the patent under specified standard royalty terms. CNIPA would publicly announce the statement. Anyone could then license the patent after notifying the right holder in writing and paying the specified licensing fee. During the period of open license, the patentee cannot grant a sole or exclusive license to the patent. A patentee could withdraw its open license offer through a public announcement, but this would not affect any open license previously granted.
Article 71 imposes joint and several liability on an internet service provider for not stopping an online infringement in a timely manner, after notification of a court or administrative judgment or order, or settlement agreement.
Article 72 provides that for willful infringement, compensation otherwise justified may be set at an amount between one and five times the awarded damages. It also increases “statutory damages” (when other damages cannot be proven) to a range of Rmb 100,000-5,000,000. This means that the upper boundary per case would be around $730,000. Not huge, but much better than the current approximate $150,000. Most importantly, though, this Article allows the court to order an accused infringer to provide the accounting books and materials relating to the infringement when the patentee has done his best to provide evidence and the accounting books and materials relating to the infringement are mainly in the possession of the infringer. Where the infringer fails to provide or provides false accounting books or materials, the court may determine the amount of compensation by reference to the claims of the patentee and the evidence. This basically codifies the burden-shifting provision from Article 27 of Supreme People's Court's Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases (II), published in April 2016.
Article 66 deletes a prior provision requiring the applicant for a preliminary injunction to provide a bond or a guarantee. This appears to shift the onus of structuring preliminary injunction rules from the patent law to the new rules regarding preliminary injunctions in IP disputes that was issued by the Judicial Committee of the supreme court on November 26, 2018, which took effect on January 1, 2019.
The current law provides a two-year statute of limitation period for patent infringement, which runs from the date on which the patentee knew or should have known about the infringement. For continuing infringement, the patentee can usually obtain an injunction against the infringement even if it failed to investigate within the two-year limitation period, provided that the patent rights are still in force, but damages will be limited to those suffered in the last two years. Article 74 extends this from two to three years.
Most of these changes are good for the practice of patent law and litigation in China. However, the rumored addition of a patent linkage system is not included in the proposed Amendment. This is disappointing, as it would have brought China's patent law regarding pharmaceuticals up to speed with that of the U.S..
Finally, the Amendment strengthens administrative enforcement. While this is helpful in some ways, the new Article 70 provides that the patent administration department under the State Council may, at the request of the patentee or an interested party, handle any dispute over patent infringement that has a significant impact throughout the country. This seems to say that an administrative panel can, at the urging of an accused infringer, take over a civil litigation filed in the courts. To the extent this is accurate, this is certainly a step in the wrong direction.
There are many supporters of administrative enforcement, but from a practical perspective, I rarely file them because appeal is to the court in which the case could have been filed in the first place. That is to say, the administrative process is a waste of time for any case that is likely to be appealed. From a personal perspective, since most of my cases are large high-stakes litigation, virtually any win for my client will be appealed. Indeed, the only reason to file an administrative case (in addition to cases that are small and unlikely to be appealed) is if there is a need for discovery from the accused infringer. Administrative panels are usually more flexible at forcing the accused infringer to provide non-public information very quickly.
Overall, these changes are good for China, innovation, and the world.
Please refer to the table below for a comparison between the current Patent Law and the Amendment.
COMPARISON OF CURRENT PATENT LAW WITH PROPOSED AMENDMENTS
| Before Amendment | New Draft |
| Article 6 An invention-creation that is accomplished in the course of performing the duties of an employee, or mainly by using the material and technical conditions of an entity shall be deemed an employment invention-creation. For an employment invention-creation, the entity has the right to apply for a patent. After such application is granted, the entity shall be the patentee.For a non-employment invention-creation, the inventor or designer has the right to apply for a patent. After such application is granted, the said inventor or designer shall be the patentee.For an invention-creation that is accomplished by using the material and technical conditions of an entity, if the entity has concluded a contract with the inventor or designer providing the ownership of the right to apply for the patent or the ownership of the patent right, such provision shall prevail. | Article 6 An invention-creation that is accomplished in the course of performing the duties of an employee, or mainly by using the material and technical conditions of an entity shall be deemed an employment invention-creation. For an employment invention-creation, the entity has the right to apply for a patent. After such application is granted, the entity shall be the patentee.The entity may dispose the right to apply for patents and the patent rights for employment invention-creation according to law and adopt property rights incentives mechanism, in the manner of equity, options, dividends, etc. to enable the inventor or designer to reasonably share innovation gains and promote the implementation and application of relevant inventions.For a non-employment invention-creation, the inventor or designer has the right to apply for a patent. After such application is granted, the said inventor or designer shall be the patentee.For an invention-creation that is accomplished by using the material and technical conditions of an entity, if the entity has concluded a contract with the inventor or designer providing the ownership of the right to apply for the patent or the ownership of the patent right, such agreement shall prevail. |
| Article 19 If a foreigner, foreign enterprise, or other foreign organization without a regular residence or business site in China intends to apply for a patent or handle other patent-related matters in China, he or it shall entrust a legally established patent agency with the application and such matters. If a Chinese entity or individual intends to apply for a patent or handle other patent-related matters in China, it or he may entrust a legally established patent agency with the application and such matters. A patent agency shall abide by laws and administrative regulations and handle patent applications or other patent-related matters as entrusted by its principals. It shall also be obligated to keep confidential the contents of the inventions of its principals, unless the patent applications have been published or announced. The specific measures for administration of the patent agencies shall be formulated by the State Council. | Article 19 If a foreigner, foreign enterprise, or other foreign organization without a regular residence or business site in China intends to apply for a patent or handle other patent-related matters in China, he or it shall entrust a legally established patent agency with the application and such matters.If a Chinese entity or individual intends to apply for a patent or handle other patent-related matters in China, it or he may entrust a legally established patent agency with the application and such matters. A patent agency shall abide by laws and administrative regulations and handle patent applications or other patent-related matters as entrusted by its principals. It shall also be obligated to keep confidential the contents of the inventions of its principals, unless the patent applications have been published or announced. The specific measures for administration of patent agencies shall be formulated by the State Council. |
| Article 20 (newly added) The application for patents and the exercise of patent rights should follow the principle of good faith and must not abuse patent rights to harm the public interest and the legitimate rights and interests of others or to exclude or restrict competition | |
| Article 21 The patent administration department under the State Council and its Patent Review Board shall, according to the requirements of objectivity, fairness, accuracy and timeliness, handle patent applications and requests in accordance with law.The patent administration department under the State Council shall release patent-related information in a complete, accurate and timely manner, and publish patent gazettes on a regular basis. Before a patent application is published or announced, the staff members of the patent administration department under the State Council and the persons concerned shall be obligated to keep such application confidential. | Article 22 (original 21) The patent administration department under the State Council and its Patent Review Board shall, according to the requirements of objectivity, fairness, accuracy and timeliness, handle patent applications and requests in accordance with law. The patent administration department under the State Council shall strengthen the construction of the public service system of patent information, regularly publish patent bulletins, release patent information in a complete, accurate and timely manner, provide basic data of patent information, and promote the dissemination and utilization of patent information. Before a patent application is published or announced, the staff members of the patent administration department under the State Council and the persons concerned shall be obligated to keep such application confidential. |
| Article 25 Patent rights shall not be granted for any of the following: (1) scientific discoveries; (2) rules and methods for intellectual activities; (3) methods for the diagnosis or treatment of diseases; (4) animal or plant varieties; (5) substances obtained by means of nuclear transformation; and (6) designs that are mainly used for marking the pattern, color or the combination of the two of prints. The patent right may, in accordance with the provisions of this Law, be granted for the production methods of the products specified in Subparagraph (4) of the preceding paragraph. | Article 26 (original Article 25) Patent rights shall not be granted for any of the following: (1) scientific discoveries; (2) rules and methods for intellectual activities; (3) methods for the diagnosis or treatment of diseases; (4) animal or plant varieties; (5) methods of nuclear transformation and the substances obtained by the nuclear transformation method; and (6) designs that are mainly used for marking the pattern, color or the combination of the two of prints. The patent right may, in accordance with the provisions of this Law, be granted for the production methods of the products specified in Subparagraph (4) of the preceding paragraph. |
| Article 29 If, within twelve months from the date the applicant first files an application for an invention or utility model patent in a foreign country, or within six months from the date the applicant first files an application for a design patent in a foreign country, he files an application for a patent in China for the same subject matter, he may enjoy the right of priority in accordance with the agreements concluded between the said foreign country and China, or in accordance with the international treaties to which both countries have acceded, or on the principle of mutual recognition of the right of priority. If, within twelve months form the date the applicant first files an application for an invention or utility model patent in China, he files an application for a patent with the patent administration department under the State Council for the same subject matter, the applicant may enjoy the right of priority. | Article 30 (original Article 29) If, within twelve months from the date the applicant first files an application for an invention or utility model patent in a foreign country, or within six months from the date the applicant first files an application for a design patent in a foreign country, he files an application for a patent in China for the same subject matter, he may enjoy the right of priority in accordance with the agreements concluded between the said foreign country and China, or in accordance with the international treaties to which both countries have acceded, or on the principle of mutual recognition of the right of priority. If, within twelve months from the date the applicant first files an application for an invention or utility model patent in China, or within six months from the date the applicant first files an application for design in China, he files an application for a patent with the patent administration department under the State Council for the same subject matter, the applicant may enjoy the right of priority. |
| Article 30 An applicant who requests the right of priority shall submit a written declaration at the time of application and submit, within three months, duplicates of the patent application documents filed for the first time. Where no written declaration is submitted or no duplicates of the patent application documents are submitted at the expiration of the specified time limit, the applicant shall be deemed to have waived the right of priority. | Article 31 (original Article 30) An applicant who requests the right of priority shall submit a written declaration at the time of application and submit, within 16 months from the date of filing the first application for a patent for invention or utility model, or within three months from the date of filing the application for a patent for design, duplicates of the patent application documents filed for the first time. Where no written declaration is submitted or no duplicates of the patent application documents are submitted at the expiration of the specified time limit, the applicant shall be deemed to have waived the right of priority. |
| Article 42 The duration of the invention patent right shall be 20 years and that of the utility model patent right and of the design patent right shall be ten years respectively, all commencing from the date of application. | Article 43 (original Article 42) The duration of the invention patent right shall be 20 years, and that of the utility model patent right shall be ten years, and that of the design patent right shall be fifteen years, all commencing from the date of application. In order to make up for the time taken for evaluation and approval of the innovative drugs, the State Council may decide to extend the duration of the patent right for the invention of innovative drugs, which is applied for listing simultaneously in China and abroad, for a period of no more than five years, and the total effective duration of the patent right after the listing of innovative drugs shall not exceed fourteen years. |
| Chapter 6 Compulsory license for exploitation of a patent | Chapter 6 Special license for the exploitation of a patent |
| Article 49 (newly added) The administrative department for patent under the State Council and the administrative department for patent affairs under the local people's government shall, together with the relevant departments at the same level, take measures to strengthen the public service for patent and promote the implementation and application of patent. | |
| Article 50 (newly added) Where the patentee has made a written declaration to the administrative department for patent under the State Council that it is willing to license any entity or individual to exploit its or his patent, and has made clear the method and standard of payment for the exploitation fee, the administrative department for patent under the State Council shall make a public announcement and issue an open license. Where an announcement of an open license is made for a patent for utility model or design, an evaluation report on the patent right shall be provided. Where the patentee withdraws the declaration of opening license, it shall do so in writing and shall be published by the patent administration department under the state council. The withdrawal of an open license announcement shall not affect the effect of the open license previously granted. | |
| Article 51 (newly added) Any entity or individual wishing to exploit the patent for which an open license is granted shall, after notifying the patentee in writing and paying the fee for the exploitation of the patent in accordance with the method of payment for the exploitation fee as announced and the standard for the exploitation fee, obtain the license for exploitation of the patent. During the period of open license, the patentee may not grant a sole or exclusive license to the patent. | |
| Article 52 (newly added) Where the parties have a dispute over the implementation of an open license, they may request the patent administration department under the State Council to mediate. | |
| Article 61 Where any infringement dispute relates to a patent for invention for a process for the manufacture of a new product, any entity or individual manufacturing the identical product shall furnish proof to show that the process used in the manufacture of its or his product is different from the patented process. Where the dispute of patent infringement relates to a patent for utility model or design, the people's court or the administrative authority for patent affairs may ask the patentee or interested party to furnish an appraisal report of the patent right made by the patent administration department under the State Council after conducting search, analysis and appraisal of the relevant utility model or design as an evidence for trial and handling of the patent infringement disputes. | Article 66 (original Article 61) Where any infringement dispute relates to a patent for invention for a process for the manufacture of a new product, any entity or individual manufacturing the identical product shall furnish proof to show that the process used in the manufacture of its or his product is different from the patented process. Where the dispute of patent infringement relates to a patent for utility model or design, the people's court or the administrative authority for patent affairs may ask the patentee or interested party to furnish an appraisal report of the patent right made by the patent administration department under the State Council after conducting search, analysis and appraisal of the relevant utility model or design as an evidence for trial and handling of the patent infringement disputes. The parties may also take the initiative to submit patent evaluation reports. |
| Article 63 Where any person passes off the patent, he shall, in addition to bearing his civil liability according to law, be ordered by the administrative authority for patent affairs to amend his act, and the order shall be announced. His illegal earnings shall be confiscated and , in addition, he may be imposed a fine of not more than four times his illegal earnings and, if there is no illegal earnings, a fine of not more than RMB200,000. Where the infringement constitutes a crime, he shall be prosecuted for his criminal liability. | Article 63 Where any person passes off the patent, he shall, in addition to bearing his civil liability according to law, be ordered by the department responsible for patent enforcement to correct his act, and the order shall be announced. A fine under five times of the illegal turnover may be imposed, where there is no illegal turnover or the illegal turnover does not exceed RMB50,000, a fine not more than RMB250,000 may be imposed; Where the infringement constitutes a crime, he shall be prosecuted for his criminal liability. |
| Article 64 In handling the act suspected of passing off of the patent, administrative authority for patent affairs may, based on the evidence collected, make inquiries of the relevant persons, investigate into the matters pertinent to the act suspected of violation of laws; conduct on-spot inspection of the place where the act of the relevant persons is suspected of violation of laws; examine and make copy of the contract, invoices, accounting books and other materials relating to the act suspected of violation of laws; inspect the product relating to the act suspected of violation of laws, and may seal and detain the products as proved by evidence to be counterfeits. The relevant persons shall help and cooperate with the administrative authority for patent affairs exercising the authorities as provided in the preceding paragraph and must not make any rejection or obstacles. | Article 69 (original Article 64) In handling the act suspected of infringing patent or passing off of the patent, the department responsible for patent enforcement may, based on the evidence collected, make inquiries of the relevant persons, investigate into the matters pertinent to the act suspected of violation of laws; conduct on-spot inspection of the place where the act of the relevant persons is suspected of violation of laws; examine and make copy of the contract, invoices, accounting books and other materials relating to the act suspected of violation of laws; inspect the product relating to the act suspected of violation of laws, and may seal and detain the products as proved by evidence to be the products passing off the patent. The relevant persons shall help and cooperate with administrative authority for patent affairs and the department responsible for patent enforcement exercising the authorities as provided in the preceding paragraph and must not make any rejection or obstacles. |
| Article 70 (newly added) The patent administration department under the State Council may, at the request of the patentee or an interested party, handle any dispute over patent infringement that has a significant impact throughout the country. The administrative department for patent affairs of the local people's government shall, at the request of the patentee or any interested party, handle any dispute concerning patent infringement, and may, at the request of the patentee or any interested party, handle all cases of infringement of the same patent within its own administrative region in a consolidated manner. Any cross-regional infringement of the same patent may be handled by the administrative department for patent affairs of the people's government at a higher level. | |
| Article 71 (newly added) The patentee or interested party may, on the basis of the written judgment, order or conciliation statement issued by the people's court or the decision made by the administrative authority for patent affairs ordering to stop infringement, notify the Internet Service Provider to take necessary measures such as deleting, blocking or disconnecting the link of the infringing product. If the Internet Service Provider fails to take necessary measures in time after receiving the notice, it shall be jointly and severally liable for the expanded portion of damages with the infringing network users. After the department responsible for patent enforcement makes the decision of ordering correction for fake patent, it may notify the Internet Service Provider to take necessary measures such as deleting, blocking or disconnecting the link of fake patented products. Upon receiving the notice, the Internet Service Provider shall take necessary measures in a timely manner. | |
| Article 65 The amount of compensation for the damage caused by the infringement of the patent right shall be assessed on the basis of the actual losses suffered by the patentee; where the actual losses are difficult to be determined, it may be assessed on the basis of the profits which the infringer has earned through the infringement. If it is difficult to determine the losses which the patentee has suffered or the profits which the infringer has earned, the amount may be assessed by reference to the appropriate multiple of the amount of the exploitation fee of that patent under contractual license. The amount of compensation shall include the reasonable expenses incurred to the patentee for handling the infringement. In case it is difficult to calculate the losses of the patentee, the profits which the infringer has earned, and the amount of the exploitation fee of that patent under contractual license, the people's court may, on the basis of such factors as the type of the patent, nature and circumstances of the infringement etc., determine the amount of the compensation from RMB10,000 to RMB1 million. | Article 72 (original 65) The amount of compensation for the damage caused by the infringement of the patent right shall be assessed on the basis of the actual losses suffered by the patentee; where the actual losses are difficult to be determined, it may be assessed on the basis of the profits which the infringer has earned through the infringement. If it is difficult to determine the losses which the patentee has suffered or the profits which the infringer has earned, the amount may be assessed by reference to the appropriate multiple of the amount of the exploitation fee of that patent under contractual license. For willful infringement and the circumstance is serious, the amount of compensation may be fixed at an amount between one and five times the amount determined in accordance with the above-mentioned method. In case it is difficult to calculate the losses of the patentee, the profits which the infringer has earned, and the amount of the exploitation fee of that patent under contractual license, the people's court may, on the basis of such factors as the type of the patent, nature and circumstances of the infringement etc., determine the amount of the compensation from RMB100,000 to RMB5 million. The amount of compensation shall include the reasonable expenses incurred to the patentee for handling the infringement In order to determine the amount of compensation, the people's court may order the infringer to provide the accounting books and materials relating to the infringement when the patentee has done his best to provide evidence and the accounting books and materials relating to the infringement are mainly in the possession of the infringer. Where the infringer fails to provide or provides false accounting books or materials, the people's court may determine the amount of compensation by reference to the claims of the patentee and the evidence provided. |
| Article 66 Where a patentee or interested party has evidence to prove that someone else is committing or is going to commit an infringement upon the patent right, and its (his) lawful rights and interests will be damaged and are difficult to be remedied if the said infringement is not stopped in time, it or he may, prior to initiating a lawsuit, apply to the people's court for taking such measures as ordering the stop of the relevant act. When an applicant files an application, it shall provide a guarantee. If it or he fails to do so, the application shall be rejected. The people's court shall make a ruling within 48 hours as of its acceptance of an application. If it is necessary to extend the time limit in a special circumstance, the time limit may be extended for up to 48 hours. If a ruling is made to stop the relevant act, it shall be executed immediately. If any party refuses to accept the ruling, it (he) may apply for one review. The execution of the ruling is not suspended during the process of review. If the applicant fails to lodge a lawsuit within 15 days after it takes such measures as ordering the stop of the relevant act, the people's court shall lift the said measure. Where there are errors in an application, the applicant shall compensate the party against whom an application is filed for the losses caused by the stop of the relevant act. | Article 73 (original Article 66) Where a patentee or interested party has evidence to prove that someone else is committing or is going to commit an infringement upon the patent right, and its (his) lawful rights and interests will be damaged and are difficult to be remedied if the said infringement is not stopped in time, it or he may, prior to initiating a lawsuit, apply to the people's court for taking such measures as ordering the stop of the relevant act. (Deleted) |
| Article 67 To stop a patent infringement, the patentee or any interested party may apply to the people's court for preserving the evidence when such evidence is likely to be destroyed and hard to be obtained again. The people's court may order the applicant to provide a guarantee for the preservation. If the applicant fails to do so, its or his application shall be rejected. The people's court shall make a ruling within 48 hours after it accepts an application. If it makes a ruling on preserving the evidence, the ruling shall be executed immediately. If the applicant fails to initiate a lawsuit within 15 days after the people's court has taken the measure of preserving the evidence, the people's court shall terminate the said measure. | Article 74 (original Article 67) To stop a patent infringement, the patentee or any interested party may apply to the people's court for preserving the evidence when such evidence is likely to be destroyed and hard to be obtained again. (Deleted) |
| Article 68 The statute of limitation on an action against an infringement upon a patent right shall be two years counted from the date on which the patentee or any interested party knows about or should have known about the infringing act. Where anyone uses an invention after the application for a patent for this invention is published but before the patent right is granted without paying adequate royalties, the statute of limitations for the patentee to claim payment of such royalties shall be two years, commencing from the date when the patentee knows or ought to know that his invention is used by some else. However, if the patentee has known or ought to have known about this fact prior to the date when the patent right is granted, the statute of limitations shall commence from the date when the patent right is granted | Article 74 (original Article 68) The statute of limitation on an action against an infringement upon a patent right shall be three years counted from the date on which the patentee or any interested party knows about or should have known about the infringing act. Where anyone uses an invention after the application for a patent for this invention is published but before the patent right is granted without paying adequate royalties, the statute of limitations for the patentee to claim payment of such royalties shall be three years, commencing from the date when the patentee knows or ought to know that his invention is used by some else. However, if the patentee has known or ought to have known about this fact prior to the date when the patent right is granted, the statute of limitations shall commence from the date when the patent right is granted |
| Article 72 Where any person usurps the right of an inventor or designer to apply for a patent for a non-service invention, or usurps any other right or interest of an inventor or designer as prescribed in this Law, he shall be subject to an administrative sanction by the entity for which he works or by the competent authority at the higher level. | Deleted |
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