China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

一、 中国国家创新政策和国家专利发展策略（2011-2020）

2006年，中国国务院发布了《国家中长期科学和技术发展规划纲要 (2006—2020年) 》（纲要”）。在该纲要中，中国政府明确表示要推动关键领域的科技发展，增强创新能力，从而促进未来中国的创新发展。据估计，到2020年，研发投入占国内生产总值的比重将达到2.5%以上。纲要还指出，到2020年，中国将成为创新型国家。纲要进一步介绍了一些重要配套政策和办法, 包括鼓励自主创新，以及实施国家知识产权战略。

2010年，中国国家知识产权局发布了《全国专利事业发展战略（2011-2020）》（ “战略”）。该战略的目标是，到2015年止，中国专利年申请量达到200万件。如果达到预期目标，中国国内发明专利年度授权量将进入世界前两名。战略还指出，中国对外专利申请量将会翻一番。

在经济快速发展的同时，中国的专利申请量已有显著增长。从2005年到2010年，年专利申请量增长率大约为20%[2] 。在2010年，中国的专利申请总数已达到120万，有大约90.7%专利申请是中国国内申请人递交的。国家还对中国公司在国外的专利申请进行补助。2010年，中兴公司和华为技术公司这两家中国公司的PCT申请量排在全球前五位[3] 。

考虑到中国知识产权政策环境，专利的寿命（从申请日起20年），以及专利现在与未来的潜在市场，国际跨国公司和中国本土公司在内的所有中国境内企业，在中国开展业务时必须制定一个可靠的专利战略。

二、 保护知识产权的行政措施和司法体系

在中国，知识产权可得到所谓的双轨制保护，即通过行政和司法渠道进行保护。采用“双轨制”的目的是及时有效的方式防止侵权、保护权利所有人的法定权利和利益。

对于知识产权所有人来说，在保护知识产权所有人的专利权、商标权、著作权和商业秘密的过程中，行政措施可以提供快速、有效的保护。即使知识产权权利人不能靠行政措施获得损害赔偿，但可以获得其他方面的非常快捷的救济，比如搜查、销毁侵权产品、罚款和临时禁令等。所以，知识产权所有人不应忽视该救济渠道。

中国司法体系可以为知识产权所有人提供禁令救济和损害赔偿救济。就知识产权诉讼案的数量而言，中国已成为世界最爱打官司的国家之一。2010年中国法院受理的知识产权诉讼案超过42, 000个[4] 。这些知识产权案件当中，大部分案子中只涉及中国本土企业，只有约3.2%的案件涉及外国企业或个人。知识产权诉讼已经成为中国企业保护其技术、商标、商品名和其它无形资产的商业手段。

外国公司在中国开展业务，不仅要与中国本土企业竞争，还要与其他国际对手竞争。无论是攻击性地将专利当作利器防止别人使用其专利技术，或是防范性地将专利当作一面盾牌来防止本地或国际竞争对手提起诉讼或反诉讼，外国公司想要在中国取得成功，必须作好走向法庭的准备，积极保护其在中国的专利。

三、 中国专利法第三次修正案

2009年中国进行了专利法的第三次修正，新专利法有了一些重要的修订。这些变化对中国的专利保护产生深远的影响。企业制定中国专利战略时，应考虑新专利法的关键变化。

1、 采用绝对新颖性的标准

旧专利法采用相对新颖性的标准。根据旧专利法，就新颖性评判而言，在中国专利申请之前在世界任何地方发表过的作品属于现有技术，但是在国外已公开使用或已被公众所知，例如通过贸易展览会、生产、销售等，就不属于现有技术。在新专利法中，现有技术被定义为申请日以前在国内外为公众所知的技术。

由于中国采用了先申请原则，为了在中国取得专利，申请人必须避免发明在申请日前以任何方式在世界任何地点公开。

一变化不仅改变了专利授权的标准，对无效一件中国专利也有很大的影响。所有在中国境内外发生的包括公开使用、公众认知的证据，现在都可以用来无效一件专利。

这一新变化也可以弥补发明的第三方在中国对他人发明寻求专利保护的漏洞，也称为专利劫持。根据新法，任何人都不能以他人的发明获取专利，即使该发明已经在展会首次公开，或在中国境外公开使用。

2、 向外国申请专利许可

旧专利法规定，中国单位或个人将其在国内完成的发明创造向国外申请专利的，应当在向国外申请前先向中国申请专利。但并没提到这是否适用中国外资企业或其实验室。因此，为了规避专利先申请的要求，中国的外资企业通常会把在中国完成的发明专利申请先转让给其国外的母公司或中国境外的其它相关实体，然后以外国实体的名义将该专利在中国境外提出申请。

根据新专利法，在国内完成的发明，在获得知识产权局授予的向国外申请专利许可后，可以先向外国申请专利。这项措施也被称为保密审查。未取得向外国申请专利许可或者未申请保密审查，又在中国申请专利的，将不授予专利权。

3、 重复授予专利

中国有三种专利：发明专利、实用新型专利和外观设计专利。中国的发明专利类似于美国的实用专利，保护期限从申请日起20年。外观设计专利保护产品的形状、图案或其结合，保护期限为从申请日起10年。因为实用新型专利不会像发明专利一样进行实质性审查，所以实用新型专利一般会在申请日起一年内授权。申请实用新型费用低，授权快，因此被中国申请人广泛使用。

目前为至赔偿数额最大的一起专利侵权案件涉及到授权给中国正泰集团股份有限公司的实用新型专利。在正泰集团股份有限公司诉施耐德电气低压（天津）有限公司一案中，中国公司对法国公司就其断路器实用新型专利提出侵权诉讼。温州一审法院判决中国公司获得约4500万美元的损害赔偿。该案于2009年和解，其中施耐德电气低压（天津）有限公司最终同意支付约2000万美元的侵权损害赔偿。这是中国专利权人用其拥有的知识产权资产作为与其他对手竞争的工具，赢得诉讼的一个典型例子 。
根据新专利法，专利申请人可以就同一发明创造同时申请发明专利和实用新型专利。通常情况下，会先授予实用新型专利。在授予发明专利权之前，申请人必须先放弃实用新型专利权。

外国公司也应该充分利用实用新型专利，尤其是其重要产品。在侵权诉讼中，实用新型专利可以与发明专利一样，用于起诉侵权人。

4、 发明人的补偿

根据新专利法，对于职务发明，单位必须在获得专利授权后给发明人以奖励。实施该专利后，单位还必须给予发明人报酬。

这一规定适用于包括中外合资企业和外商独资企业在内的中国境内所有实体。单位未与发明人约定，也未在其规章制度中规定奖励和报酬的方式和数额的，单位必须就一项发明专利发给发明人不少于3000元人民币作为奖励。实施发明专利后，单位应当从实施该项发明的营业利润中提取不低于2%，作为发明人的报酬。

对于给发明人报酬的要求对任何在中国营业的企业都构成潜在的风险。为了避免潜在的风险，单位应该与发明人就专利奖励和报酬签订协议。根据专利法，单位也可以制定规章制度明确专利奖励和报酬的具体细节。

中国知识产权体系正处于快速发展阶段，仍有很大的进步空间。对于在中国经营业务或者有业务的所有企业，既是机遇也是挑战。实用新型专利的专利权期限为10年，发明专利的专利权期限为20年。在随后的10年到20年，中国和中国知识产权体系会发生显著的发展和改变。为了拥有一个坚实的专利战略体系，任何企业制定专利战略时，不仅应该考虑到中国现在的知识产权形势，还应该考虑到其未来的需求。

注释：

[1] 《中华人民共和国专利法》于1984年3月12日由第六届全国人民代表大会常务委员会第四次会议通过，于1992年9月4日第七届全国人民代表大会常务委员会上进行第二十七次会议第一次修正，于2000年8月25日第九届全国人民代表大会常务委员会第十七次会议上进行第二次修正。十一届全国人大常委会第六次会议于2008年12月27日审议通过了第3次修改的《专利法》，并于2009年10月1日正式实施。

[2] 来源：中国国家知识产权局。

[3] 来源：世界知识产权组织。

[4] 来源：《中国法院知识产权司法保护状况（2010年）》白皮书。

China National Innovation Policy and National Patent Development Strategy 2011-2020

In 2006, the National Medium- and Long-Term Plan for Science and Technology Development (2006-2020) (the “Plan”) was published by the State Council. In this Plan, the central government created a clear vision to foster innovation in China in the future by promoting science and technology development in selected key fields and enhancing innovation capacity. By 2020, it is predicted that the R&D investment of the nation will be more than 2.5% of the total GPD. The Plan also projects that by 2020, China will become an innovative nation. The Plan further recommends the adoption of several important polices and measurements, including encouraging indigenous innovation and implementing national intellectual property strategies.

In 2010, the PRC State Intellectual Property Office published the National Patent Development Strategy (2011-2020) (the “Strategy”).  The Strategy's goal is that by 2015, the annual patent filings in China will reach 2 million. If achieved, China will rank among the top two in the world in terms of the annual number of patents for inventions granted to the domestic applicants. The Strategy projects that the number of overseas patent applications filed by Chinese applicants will double.

In parallel to its rapid economic development, there has been phenomenal growth in patent filing activity in China. From 2005 to 2010 the annual patent filing growth has been approximately 20%. (Source: SIPO). In 2010, the total number of patent filings in China has reached over 1.2 million. About 90.7 % of patent applications were filed by Chinese domestic applicants. The Chinese government also subsidies Chinese companies for filing filing in a foreign country. In 2010, two Chinese companies, ZTE Corporation and Huawei Technologies, now place among the top five applicants using Patent Cooperation Treaty. (Source: WIPO)

In consideration of Chinese intellectual property policy environment, the lifetime of a patent (20 years from filing date), and its potential market today and in the future, a solid patent strategy is needed for any business in China, including both international companies and local Chinese companies.

Administrative Channel and Judicial System to Protect IP rights

In China, intellectual property rights can be protected by the so-called double track system, i.e. administrative channels and judicial system. This "double-track system" is intended to prevent infringements in a timely and effective manner and to protect the legitimate rights and interests of the right holders.

Administrative channels can provide a quick and cost effective way to protect an owner's intellectual property rights, such as patent, trademark, copyright and trade secret, etc.  Even if it does not provide a damage remedy to an intellectual property holder, it is a simple way to get relief, such as raid, destruction of the infringed product, fines and an order to stop. An intellectual property holder should not ignore this channel.

The Chinese judicial system also can provide an intellectual property right holder with injunction relief and a damage remedy. Today, China is probably one of the most litigious countries in the world in term of the number of intellectual property litigation cases. In 2010, more than 42,000 IP cases were filed in Chinese courts. (source: White Paper of Intellectual Property Protection by Chinese
Courts in 2010). Among these IP cases, most of them involve domestic Chinese companies suing each other. Only 3.2% of these cases involve a foreign party. Chinese companies use IP litigation as a business tool to protect their technology, trademark, brand name and other intangible assets.

A foreign company conducting business in China not only competes with local Chinese companies, but also with other international competitors. To be successful in China, it must be prepared to go to the court and proactively protect its patents in China, either offensively using its patent portfolios as a sword to prevent others from using its patent technologies, or defensively by using a patent portfolio as a shield to prevent local and international competitors from bringing a lawsuit or a counterclaim against them.

Third Amendments to Chinese Patent Law

China made a third amendment to its patent law in 2009. There are several significant changes to the Patent Law. It will have a profound impact on patent protection in China. Several key changes should be considered in a company's Chinese patent strategy.

Absolute novelty standard adopted
The old Chinese patent law adopted a hybrid novelty standard. In accordance with the old Patent Law, a publication published anywhere in world before the Chinese patent filing date is deemed as prior art in terms of novelty assessment. However, prior public uses or knowledge such as trade show, manufacturing, sales outside China is not prior art.  Under the new patent law, prior art is now defined as publicly know art or technology known to the public before the filing date in China or abroad.

Since China adopts the first to file system, in order to obtain a patent in China, a foreign applicant must keep an invention from being disclosed in any way anywhere in the world before the filing date.

This new change not only creates a different standard for granting a patent, it also has an impact on the way to invalidate a patent in China. All evidence produced outside of China, including public use, public knowledge can now be used to challenge a patent.

This new change also closes the loophole whereby a third-party seeks patent protection in China for another party's invention, i.e. patent hijacking. Based on the new law, no one can obtain a patent for another party's invention even if it was first disclosed at a trade show, or publicly used outside of China.

Foreign Filing License
The Chinese old patent law required that a Chinese entity and individuals, for an invention completed in China, must first file a patent application in China before filed elsewhere. It does not mention whether it also applied to a foreign owned lab or a company. Thus, in order to avoid this first to file requirement, it is a common practice for a foreign owned company in China to assign its patent applications for inventions invented in China to its foreign parent company or other related entity outside of China.  Then the patent application can be first filed outside of China in the name of a foreign entity.

Under the new law, a patent application for invention made in China may be filed first outside of China after obtaining a foreign filing license from the State Intellectual Property Office. This is also called as a security check. Without a foreign filing license or failure to request the security check, the corresponding patent right in China will be forfeited.

Double Patenting
There are three types of patents in China: invention patent, utility model patent and design patent. A Chinese invention patent is similar to a US utility patent with 20 year term from its filing date. A utility model patent provides protection for a product's shape or structure or combination of thereof with a 10 year term from its filing date. Since there is no substantive examination for utility model patent as that for the invention patent, a utility model patent is normally granted within one year from the filing date. The utility model is widely used by Chinese applicants as it is cost effective and can be quickly granted.    

One of the most significant patent infringement cases in China involved several utility model patents granted to a Chinese company Chint Group Corp. Chint Group Corp (Chint) v. Schneider Electric Low-Voltage (Tianjin) Co., Ltd. (Schneider). The Chinese company sued the French company for patent infringements on its circuit breaker utility model patents. The award of damages granted at first instance by a court in Wenzhou, China is about $45 million. The case was settled in 2009 and Schneider agreed to pay over $20 million for the infringement. This is one example of where Chinese patent applicants won their cases, built up their own IP portfolios and use them as a tool to compete with other competitors. 

In accordance with the new patent law, a patent applicant can file an invention patent and a utility model patent for the same inventions at the same time. Normally, a utility model patent will be granted first. Before the invention patent can be granted, the utility model patent must be abandoned.

A foreign company should take the advantage of a utility model patent, especially for an important product. A utility model patent can be asserted as that of invention patent if having an infringement.

Inventor Compensation
 In accordance with the new patent law, for a service invention, the employer is required to give an inventor a patent award after a patent is granted. After the exploitation of the patent, the employer must also provide remuneration to the inventor.

This provision applies to all entities in China including joint ventures and wholly-owned foreign enterprises. Without an agreement between the employer and the employee or a corporate policy on the amount of patent award and remuneration and its payment method, the employer must pay no less than approximately $500 for an invention patent as a patent reward, and no less than 2% of the profits earned from the exploitation of the invention.

The inventor compensation requirements present a potential risk to any business operating in China. In order to avoid the potential risks, an employer should sign an agreement with the employee regarding the patent reward and remuneration. Based on the patent law, the employer may also establish a corporate rule defining clearly the specifics regarding the patent reward and remuneration.

The Chinese intellectual property system is young and still has a lot of rooms to improve. It presents both opportunities and challenges to any business operating in or having business in that nation. A utility model patent can last ten years and an invention patent can last for 20 years. For the next 10 to 20 year, China and its intellectual property system will be tremendously developed and changed. For a solid patent strategy, a company should not only consider China's current intellectual property situation, it should also keep in mind about its future needs.

This article was first published on IPWatchdog.com (http://ipwatchdog.com/2011/11/06/key-considerations-for-patent-strategies-in-china/id=20241/).

The State Intellectual Property Office (hereinafter known as "SIPO") of the P.R.C. oversees the granting of patents in the P.R.C. and provides detailed statistics on its website. Individual year statistics for invention patents granted can be seen for years beginning in 2001 through 2010. For the purposes of this analysis, the years, 2001, 2006 and 2010 were examined. Invention patents were chosen over "design" or "utility" patents because of the higher degree of rigor placed on the examination of invention patents and, arguably, a higher degree of "innovation", in many cases, associated with said patents. The statistics for invention patents for these years are as follows (percentages provided by the authors):

              Total Patents and Invention Patents Granted by SIPO (2001, 2006, and 2010)¹

As can be seen from that above statistics, total patents granted have grown by over 700,000 on an annual basis from 2001 to 2010. The sheer growth in patents granted would seem to indicate a move towards “indigenous innovation”, but when one looks at the breakouts of domestic invention patents an even stronger case for “indigenous innovation” can be made. As noted above, domestic invention patents account for 9.79% of total patents granted in 2010, as opposed to only 4.72% in 2001. As such, over twice as many domestic invention patents are being granted relative to total patents granted over this time period. Perhaps more pertinent to the questions being raised regarding the 2010 Notification, domestic invention patents now account for 58.86% of the total invention patents granted, as opposed to only 33.11% in 2001. By the rise in both the numbers of domestic invention patents granted and their numbers relative to both total patents and foreign invention patents granted, it is clear that domestic entities are playing an increasingly large role in  "innovation" in China.

Some may question whether SIPO acts more favorably towards domestic applicants and issue more patents, accordingly, in comparison to applications from foreign entities. It is, as such, valuable to look at the corresponding numbers and percentages of applications for invention patents. Again the following statistics can be found on SIPO's website.

Total Patent Applications and Applications for Invention Patents Filed with SIPO (2001, 2006, and 2010) ²

It can be see that the significant rise in the number of domestic invention patents granted is likely driven not by any inherent favoritism by SIPO towards domestic applicants, but rather by a huge upsurge in filings of domestic invention patent applications. Given this upsurge in applications, the rise in domestic invention patents granted can be expected to continue on its upward trajectory.

Looking at invention patents granted in the P.R.C. is but one possible measure of innovation and is not to be seen as wholly dispositive on the issue. It would appear by this measure, however, that the P.R.C's move towards "indigenous innovation" is well underway.

This publication is for informational purposes only and it does not in any way constitute a legal opinion.

¹ State Intellectual Property Office of the P.R.C., "Statistics", found at http://www.sipo.gov.cn/sipo_English/statistics/ (last visited on February 14, 2011).

² Ibid.

 The terms "technology," "technical problem," "technical effect," and "technical feature" are clearly defined in the Patent Law, or the Regulations and the Guidelines. Further to Paragraph 1 of Article 2 of the Patent Law, Part II, Chapter 1 of the Guidelines for Patent Examination (2010 Edition by the SIPO) ("Guidelines") further provides that "'[i]nvention in the Patent Law means any new technical solution relating to a product, a process, or improvement thereof. ...technical means is generally embodied by technical features...a solution not employing technical means to solve a technical problem to obtain technical effects in conformity with natural law does not fall under the scope as set forth in Paragraph 2 of Article 2 of the PRC Patent Law..."

Therefore, the Guidelines instruct an applicant to first consider whether a solution provided by an invention is under the scope of Paragraph 2 of Article 2 of the Patent Law and further defines a technical solution as “a collection of technical means employing natural law to solve technical problems.” When analyzing this definition, the following should be considered. A "technical solution" should be construed to have employed 1) technical means, 2) solved technical problems, and 3) achieved technical effects in conformity with the law of nature. The entirety of the claim should be examined and analyzed to determine whether technical means are employed.

Case Study:

An umbrella with an ornamental umbrella head that features a transparent umbrella head with an airtight inner cavity, an anti-freezing aseptic liquid is encapsulated in the inner cavity of the umbrella head and a small free-flowing ornament is immersed in the liquid. The description discloses that the problem the invention intends to solve is to make the umbrella more alluring.

Case Analysis

Because the umbrella head has a three-dimensional and dynamic ornament, the present application employs technical means. On the surface, this patent application aims to solve the technical problem by making the umbrella more alluring. However, the present invention modifies the umbrella structure by employing the technical means of filling a transparent, airtight inner cavity in the umbrella head with liquid and a small ornament to solve the technical problem that displays the said ornament floating in the umbrella head. As a result, this modification achieves the technical effect that the ornament floating in the umbrella head visibly and aesthetically. On the other hand, the alluring appearance of the umbrella is merely a derivative of the visual effect of the technical solution and cannot conceal its feature in constituting the technical solutions. Consequently, the features specified in the claim form a technical solution.

The present application utilizes the umbrella head's structural feature as a technical feature. By exploiting the said technical feature with technical means, it solves a technical problem by displaying the small ornament flowing in the transparent umbrella head. Furthermore, the naturally achieved effect is a technical effect.

From this example, it can be determined that if technical means consists of technical features, its solved problem is generally a technical problem, and its achieved effect is generally a technical effect in conformity with the law of nature. Essentially, contents recited in most inventions in the art of machinery can generally constitute a technical solution so long as the technical means employed consists of technical features.

The court found that although the result of rejecting the Bilski claims were correct, the Federal Circuit wrongly assumed that the Benson, Flook and Diehr line of cases required the machine-or-transformation test as the sole test for determining patentability of process claims. Instead, it found that while a useful tool, the machine-or-transformation was never intended to be the sole test. While under §101, patentable process is very broad, but there are limitations. The Benson, Flook and Diehr line of cases taught that abstract ideas, such as those in the Bilski claims, were not patentable process under §101.

The decision also left undisturbed the rejection of the “useful, concrete and tangible result” test from State Street Bank & Trust Co. v. Signature Financial Group, Inc., (1998). That case led to a torrent of business method patents in the past decade and its rejection should help to reduce the number of dubious business method patents going through the Patent Office.

In In re Bilski, the Federal Circuit threw down the gauntlet and challenged the Supreme Court to do something about the deluge of business method claims since the State Street case. Instead of accepting the challenge, a divided Supreme Court merely found business method claims are not categorically unpatentable and tossed the glove back to the Federal Circuit to find the proper test for limiting patentability of such claims. Interestingly, the Supreme Court came one vote short of changing the game. Bilski came close to dealing a death blow to business method claims, but it provided a glimpse of the struggle among the justices on the issue. Retiring Justice John Paul Stevens’ lengthy concurrence was joined by three other justices. But for one vote, his would have been the majority opinion which would have held that methods of doing business are not patentable processes under §101 of the Patent Act.

It is customary for each Supreme Court justice to author at least one decision in each term, so speculation was that Justice Stevens, who retired at the end of the term, was chosen to write the majority decision in this case. All justices agree that the Bilski claims were unpatentable and that the Federal Circuit was wrong on finding the machine-or-transformation test as the sole test for patentability of process claims. Thus, Justice Stevens may have been assigned the task of writing the opinion for the court and he concluded that business methods are not patentable. Three other justices agreed with his conclusion.

He could not convince five justices that the high court should ban business method patents outright. Perhaps, this was a factor in the unusual delay in the court's issuing the decision. The inability of convincing one more justice shifted Justice Stevens’ opinion from majority opinion to a concurrence and Justice Kennedy's shorter and less detailed opinion, which has the style of a concurrence, became the court's opinion instead.

Justice Kennedy recognized the problems of vagueness and suspect validity in some business method patents. He felt the need to set a bar high enough to reduce the flood of claims asserted by business method patent holders that may “put a chill on creative endeavor and dynamic change” but he left it to the Federal Circuit to search for a limiting principle. He stated that although some business method claims may qualify under §101 as “processes”, §101 is only a threshold. A business method claim must also be novel (§102), nonobvious (§103) and fully and particularly described (§112) before it can be patented. Justice Kennedy felt that these safeguards are sufficient to maintain a balance in the U.S. patent system.

There will be no wholesale changes to the U.S. patent system as the result of the Bilski case. Instead, what Bilski did was to say that the machine-or-transformation test will remain a useful tool for determining patentability of process claims, but not as the “sole test” as claimed by the Federal Circuit. Section 101 construes process broadly but there are limitations which bars patenting of abstract ideas. Finally, the Supreme Court hammered in the final nail to the “useful, concrete and tangible result” test enunciated in State Street Bank so business method claims that “ranged from the somewhat ridiculous to the truly absurd” should no longer see the light of day in the Patent Office..

Will this decision affect PCT applications with business method claims in China?

As discussed in our earlier posting  on In re Bilski, while China does not have a specific category for business methods, claims incorporating technical features to achieve business or commercial purpose are patentable in China. The rejection of the “useful, concrete and tangible result” test may help ensure fewer dubious business method patent applications are filed under the US system and business method claims that survived the initial screening should be more substantive and meritorious. The improvement in quality may make it easier for such claims to pass muster under the Chinese patent system. In this sense, Bilski helps bring US and Chinese patent law closer together.
 

One opinion is that patent ownership claims should be subject to the 2-year statute of limitations principle provided by Article 135 of the Civil Law, as there are no other provisions under the Patent Law stipulating otherwise. The date should be calculated from the date of announcement for granting the patent right.

Others argue that patent ownership disputes should be deemed as disputes under patent infringement and be handled under Article 23 of the Several Provisions of the Supreme People's Court on Issues Relating to Application of Law in the Trial of Patent Disputes (Judicial Interpretation [2001] No.20) (Interpretation), which provides that, while the patent is effective and infringement continues, patent infringement actions shall not be restricted by a statute of limitations.

A third opinion holds that the patent right is an absolute right and right in rem. Therefore, it has the same judicial characteristics as jus in re in conventional civil law. Under PRC law, the provisions on statute of limitations do not apply to enforcement by action in rem. Accordingly, patent ownership disputes is not subject to the 2-year statute of limitations.

Discussion

According to legislative intent, the statute of limitations only applies to the right to petition. Other rights, such as ownership, personal right, are rights of property dominion in nature, and thus are not subjected to the statute of limitations. Therefore, statute of limitations should not apply to non-credit patent ownership disputes.

China currently rejects adverse possession, because of its inherent conflict with traditional Chinese values and social principles. If the People's Courts refuse to grant trial due to statute of limitations, the rightful patent owner may lose his patent rights, and the announced patentee will, in all practicality, obtain the patent rights. The result is nothing short of adoption of adverse possession in China and conflicts with legislative principles of the Civil Law.

A statute of limitations only deprives the plaintiff's right to file suit, but the substantive right of ownership still exists. Dismissal due to statute of limitations does not mean that the People's Court has recognized the patentee as the legitimate patent owner and neither affirms nor denies the patent ownership status granted by the SIPO. As a result, it causes a strange situation, where legal ownership of the patent is in limbo. The ambiguities in law disrupt the social and legal relations derived from the patent rights, and will hinder the actuation of patented technology.

A patent not only brings economic benefits to the patentee, but also good reputation or recognition. Therefore, patent ownership disputes inherently involve a matter of deprivation of right to good reputation or recognition. This is pertains to a personal right, which does not vanish with the expiry of the patent right. Statute of limitations is not applicable to personal rights.

In general, the purposes of a statute of limitations are: (a) to stabilize social legal relations; (b) to encourage the timely protection of rights; (c) to avoid evidentiary difficulties. However, there is no reasonable basis for applying the statute of limitations to patent ownership disputes.

Settlement of patent ownership disputes does not affect already established legal relations. Patents are, in essence, intangible knowledge or information. Neither the patent owner nor any others can control technology or design in the same way as a tangible object. Possession and transfer of patent rights are not legally enforceable without SIPO's registration and announcement procedures. If a third party obtains a patent license in good faith, his reliance interest is protected by law and won’t be affected by the rightful patent owner's claim. The rightful patent owner's claims for compensation, license fees and assignment fees are obviously the creditor's claims and subject to the statute of limitations. In short, established legal relations, as protected under the systems of public credibility and statute of limitations, will not be undermined by rectification of ownership.

The loss of evidence due to the extended lapse of time is only a theoretical presumption. Such presumption might be correct in certain cases, but not in all cases. If the plaintiff fails to meet his burden of proof, the court may apply the Right Presumption Principle. Any such plaintiff willingly risks defeat, if he does not exercise his rights timely. This basic principle of civil proceedings is not unique to the nature of a statute of limitations but inherent in litigation. Therefore, evidentiary difficulties cannot justify application of statute of limitations to patent ownership disputes.

The second opinion asserts a statute of limitation exemption for continuous infringement is applicable to patent ownership disputes. Article 23 of the Interpretations exempts patent infringements, namely, exploitation of the patent without the patentee's consent and authorization. Since the patent infringements are not patent ownership disputes, such opinion that an exemption is available is unconvincing. Furthermore, although this opinion addresses the issue of statute of limitations in duration of patent, it does not indicate whether patent ownership disputes are subject to the statute of limitations after expiration of the patent.

The third opinion asserts that patent ownership disputes are peculiar and should not be subject to the statute of limitations. This opinion is feasible in practice for it reasonably settles conflicts between jurisprudence and legal provisions through the interpretation of laws, and thus incorporate jurisprudence and judicial practice.

Conclusion
As Chinese law has not yet explicitly stipulated the application range of the statute of limitations, judges should be allowed to exercise judicial discretion on a case-by-case basis and exclude the patent ownership disputes from the provisions of Article 135 of the General Principles.

We hope that the future PRC Civil Law may provide more reasonable and detailed stipulations on this issue.

Patenting Drug Product Inventions

In China, patents can be granted to inventions, utility models, and industrial designs. Invention patents are available to both product and method inventions. The term for invention patents is 20 years and the term for utility model and design patents is 10 years, from the filing date of patent application. The primary criteria for granting a patent are novelty, inventiveness, and industrial applicability. A finished drug or biological product (such as a vaccine and an antibiotic), typically consisting of active ingredients is generally eligible for product invention patents. However, active ingredients in a drug are also eligible for separate product patents. The invention patent for a finished drug must be defined in terms of usage. In other words, the applicant must clearly state in the application the diagnostic or therapeutic application of the drug.

The examiner will usually examine the ingredients of a finished product and their contents when determining the novelty of the product. In general, a finished product is considered novel if its active ingredients are novel. The standards for the inventiveness and industrial applicability of a finished product are not high. In general, a new drug will satisfy the inventiveness requirement as long as a new drug delivers beneficial effects which are not commonly seen in the existing treatments.

Advantages and Disadvantages

A product patent for a drug entitles the patentee the exclusive right to manufacture, market, and sell the drug. Any other party manufacturing or marketing the same product, regardless if a identical method being used for production or not, will be regarded infringing upon the patent holder's rights.

As a new drug is subject to a long clearance process before it can be marketed, the European Union, the United States and Japan have extended the patent term for drugs. However, China has yet to establish an extended term for pharmaceutical patents which shortens the time of protection compared to other jurisdictions. In addition, the 2008 Amendments to the PRC Patent Law ("2008 Patent Law"）, which came into force on October 1, 2009, also specifically provides an infringement exemption for generic drug manufacturers similar to the "Bolar exception" in the United States, namely, "manufacturing, using or importing patented drugs or medical devices solely for the purpose of acquiring information necessary for obtaining administrative approval, and manufacturing or importing patented drugs or medical devices for an enterprise for the purpose of seeking administrative approval, shall not constitute patent infringement." This enables a generic drug manufacturer to embark upon the preparation for manufacturing of a patented drug well before the patent expires and to be ready to compete with the patent holder immediately after the patent expires.

Administrative Protection

In addition to patent protection commonly accepted around the world, China also offers a special administrative protection system for drugs. The Chinese pharmaceutical administrative authorities (SFDA and its local branches) provide administrative protection to pharmaceutical companies by granting licenses and permits, which gives these companies certain exclusive rights.

China promulgated the PRC Patent Law ("Patent Law") in 1984. However, the Patent Law did not provide patent protection for drugs until it was amended for the first time in 1993. Before 1993, drugs were primarily protected by administrative measures. After patent protection was established upon the revision of the Patent Law in 1993, some administrative protection measures remained in force in addition to patent protection for pharmaceuticals. Until then, administrative protection for drugs covered new drugs, traditional Chinese medicines, foreign-related drugs, and protection during the trial period. With the constant improvement of China"s IPR system, the administrative protection for new drugs and foreign-related drugs may eventually be abolished, as the protection to these two types was provided due to specific historical reasons.

China introduced administrative protection for drugs during their trial periods in 2002. The varieties of new drugs subject to administrative protection of this type include traditional Chinese medicines, natural drugs, chemical drugs, therapeutic bio-products and preventive bio-products. The monitoring period of a new drug is 5 years from the date of approval to manufacturing the drug. During a new drug"s monitoring period, the SFDA will not give permission to other enterprises to make, modify or import drugs of the same type to ensure that the protected drug manufacture enjoys certain degree of exclusivity.
 

In paragraph 106, he expanded deductibility as capital expenditure of the purchase of registered trademarks, copyrights, and registered designs. Under the current scheme, only purchase of patent rights and industrial know-how are deductible. The purpose of the expansion is to promote wider application of intellectual property and to help develop the creative industries in Hong Kong. Actual formulation for deductions will be prepared by the Inland Revenue Department. This addition brought in the most common types of intellectual property rights transferred in Hong Kong and will serve as a boon for creative entrepreneurs.

The second item concerns funding for patent applications. Currently, the Hong Kong Government provides funding assistance for Hong Kong inventors and enterprises to help them pay for the cost of filing their first patent application. The current ceiling of such grants and funds is HK$100,000. In paragraph 107, Mr. Tsang raised the ceiling to HK$150,000. Hong Kong has a recordation system for patent registration that requires the granting of a patent in another jurisdiction before a Hong Kong standard patent may be issued. To obtain a Hong Kong standard patent, an inventor must file in an approved jurisdiction where substantive review is conducted and a patent granted before a Hong Kong patent can be registered. In essence, the inventor has to pay for two patent applications to have a Hong Kong patent granted. The increase in the funding should be helpful for small inventors.

Compared to other ‘sweeteners’ offered in the speech, these two additional benefits offered for intellectual property rights are fairly minor but will have a relatively broad application. At least, the topic of IP rights is not completely left out of the speech. A full copy of the Budget report can be downloaded at www.budget.gov.hk.
 

China filed 7,946 applications, an impressive 29.7% increase over its 2008 filings. Two Chinese filers were among the top 100. Huawei Technologies Co., Ltd. came in with 1847 applications, second only to Japan's Panasonic Corporation and ZTE Corporation jumped 15 places to finish 23rd with 502 filings. Together, these two companies accounted for 30% of China's 7,946 filings. For the year, Huawei filed 110 more applications than in 2008, an increase of 6.3% while ZTE increased by 52.6%, submitting 173 more applications into the PCT system than in the previous year.

The prolific activities of these two equipment makers in the telecommunications industry indicate the importance of protecting intellectual property rights in multiple jurisdictions as Chinese companies expand beyond China's shores to become players in the global market. The WIPO statistics indicates that Chinese companies are taking advantage of using PCT applications for international protection.

The PCT procedure gives an applicant the convenience of filing initially only one patent application with one set of papers in one language with a receiving office designated by the PCT. At a later stage, should the applicant desires, it can then choose the jurisdictions where the patent application should be filed. Only at that stage would the applicant have to pay for necessary translations and filing fees of the national jurisdiction where the application is filed. The procedure gives the applicant much more control over the application process. Companies with proprietary knowhow or inventions interested in expanding overseas should consider this option as part of their patent application strategy.
 

By so ruling, the Federal Circuit effectively overruled its own “useful, concrete and tangible result” test formulated in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 143 F.3d 1368 (Fed. Cir. 1998). This test focused on practical applications of the invention to determine if it is patent worthy. That decision was said to have led to the boom of business method and software patents in the past decade. The rejection of the useful, concrete and tangible result test raises questions about the validity of many existing business method and software patents. Because of the high stakes, dozens of interested parties filed a total of 44 amicus or ‘friends of the court’ briefs to express their viewpoints and concerns.

Few observers believe Mr. Bilski’s claims can survive either the useful, concrete and tangible result or the machine or transformation test. It is also unlikely that the Bilski claims will meet the standard ultimately adopted by the Supreme Court.

However, there is no consensus on whether the Supreme Court will come out with a new test or even if it will fully addressing the harder question of what the proper test for patent eligibility of business method or software claims. Indeed, the issues are complex and from the questions asked during oral argument, the high court seemed to lack confidence in dealing with the complexity of this area of patent law.

The questions of the justices reflect their concerns about broadly worded business method patents that may foreclose use of business processes by other parties. They peppered Mr. Bilski’s lawyer with hypothetical questions on the patentability. They asked about patentability of claims relating to estate plan, tax avoidance, resisting corporate takeovers, choosing juries (Ginsburg, p. 5); processes that help business succeed (Breyer, p. 6); speed dating (Sotomayor, p. 7); teaching antitrust law without students falling asleep (Breyer, p. 9); compiling actuarial tables and their application to risks (Kennedy, p. 11); horse whispering (Scalia, p. 16); and alphabet as a process of forming words (Roberts, p. 22). Transcript of the oral argument is available at www.supremecourtus.gov/oral_arguments/argument_transcripts/08-964.pdf.

Section 101 of the U.S. Patent Act provides that new and useful processes, machines, manufacture and composition of matters are patent eligible. This is very broad language. So under a Section 101 analysis, these extreme examples are patent eligible. In fact, the justices may be surprised that patents actually have been granted for the extreme examples they cited.

Although concerned about the broadness of Section 101, they were also clearly uncomfortable with the rigidity of the machine or transformation test the Federal Circuit ruled as the sole test for determining patentability of process claims. The justices recognize that technological advances mean that inventions may not necessarily have physical attributes. Thus, they seemed inclined to reverse the Federal Circuit’s ruling but at the same time, they struggled with finding and enunciating an appropriate test of patent eligibility.

Business method patents in China

Chinese patent laws do not have a specific category for business method claims so the standard applied to such claims are no different than other technical or computer related applications. Business method claims are patentable under Chinese law if they incorporate technical features to achieve a business or commercial purpose. The claim must specify the technical features required to be implemented on a commercial or business purpose. A detailed description of a business method without showing the technical features necessary for its implementation will not be patentable under Chinese law. Technical features must be an integral part of the business method. Thus, the Chinese standard is similar to the machine branch of the machine or transformation test.

Applying Chinese law, the Bilski claims will also be rejected. But a Chinese granted business method patent will also survive scrutiny under the machine or transformation test. On the other hand, business method patents granted under the useful, concrete and tangible result test may not be patentable under Chinese law unless they also incorporate sufficient technical features.

How will the Supreme Court resolve the problem?

Our speculation is that the Bilski claims will be rejected and the Supreme Court will reverse the Federal Circuit ruling that the machine or transformation test is the only test for patent eligibility. Instead, the Supreme Court may try to find a compromise standard that will allow protection of some business method and software claims but will screen out broad and abstract claims such as the Bilski claims. If we are correct, the new ruling may widen the gap between Chinese and U.S. law that the machine or transformation test had narrowed.

What was interesting about the oral arguments was the lack of mention of Section 112 of the Patent Act. This section also covers patent eligibility and requires that an invention must be specified in “full, clear, concise, and exact terms as to enable” someone to make and use it. While Section 101 uses broad language, Section 112 requires specificity in the claims. This serves to prevent abstract claims from gaining patent protection. These sections work together to prevent an inventor from precluding others from practicing a useful art merely by making general and broad claims. To be patentable, a claim must be sufficiently specific to enable someone to practice its teachings.

Since Section 101 should be read in conjunction with Section 112, one would think that Section 112 would be raised during oral arguments. Even if the Bilski claims can survive the broad language of Section 101, it would not pass muster under the specificity requirements of Section 112. Thus, the failure to bring up Section 112 has been described by a commentator as the elephant in the room that no one mentioned. The Bilski claims cannot pass Section 112 analysis. This will allow the Supreme Court to sidestep the machine or transformation test completely.

How will the Supreme Court rule? We will find out sometime in the spring 2010 when the decision is expected to be announced.

Up to the present, no unified view has been formed regarding the scope of "common knowledge" among examiners, patent attorneys and academics in China. According to the Guidelines, common knowledge refers to technical means disclosed in publicly known textbooks or reference books, including technical dictionaries or manuals, and customary means in the art to solve a particular technical problem. It is generally accepted that technical dictionaries, technical manuals and textbooks can be used as evidences for ascertainment of common knowledge. But some believe that the scope of "common knowledge" provided by the Guidelines is too broad and that many technical dictionaries, technical manuals and textbooks should not be regarded as common knowledge although they are highly specialized.

Ascertainment of Common Knowledge

Regarding ascertainment of common knowledge, the majority view is that common knowledge should be "publicly known facts". It is also an established rule that publicly known facts (also known as "prominent facts") do not need to be proved. In general, publicly known facts refer to facts that are indisputable and known to all or most people in a certain region or specialized in a particular field. However, the following elements should be taken into account when one ascertains common knowledge as publicly known facts:

Firstly, publicly known facts do not necessarily be known to the general public but must be well known to those who are specialized in a certain field in a particular temporal and spatial scope. In other words, these facts are general technical common knowledge known to those skilled in the art prior to the filing date of the patent application.

Secondly, according to evidence law, publicly known facts may be introduced into evidence by judicial notice. A court can admit judicial notice of a publicly known fact in a given lawsuit case in any procedure or phase of litigation where it believes necessary or upon the concerned party's request. Such notice is not subject to the time limit for submitting evidence.

Thirdly, where one party challenges the "common knowledge" asserted by the opponent party or confirmed by the Patent Reexamination Board, the opponent party or the Patent Reexamination Board should furnish pertinent materials and provide sufficient explanations. When one party raises opposition to a judicial notice taken by the court, the court should explain to the party the grounds on which and procedures via which the judicial notice is taken.

Fourthly, where there is counter evidence to overturn the facts confirmed through judicial notice, the party asserting the facts also needs to furnish evidence.

With regard to evidence, some think that common knowledge should be judged in accordance with knowledge of one skilled in relevant art and it is unrealistic to for the parties to adduce evidences for all common knowledge. Common sense in life does not need to be testified, nor does technical common knowledge. An exception is that the Patent Reexamination Board should bear the burden of proof when one party proves the confirmation of technical common knowledge by the Board is erroneous. Another view is that the coverage of common knowledge is wider than publicly known facts, which are not required to be testified, and the Patent Reexamination Board should only bear the burden of proof when a discrepancy exists between scopes of administrative notice and judicial notice regarding a particular fact.

Burden of Proof During Invalidation Procedures

a. A petitioner or the opponent party bears the burden of proof for its assertion that a certain technical means is common knowledge. If necessary, the Patent Reexamination Board can ask the party asserting certain technical means as common knowledge to adduce evidences.

b. Where one party explicitly raises opposition to the other party's common knowledge assertion, the challenged party bears the burden of proof.

c. The Patent Reexamination Board may ex officio introduce common knowledge in its decision-making process. But the Board may increase its burden of proof in the proceedings by doing so.

During patent prosecution or invalidation proceedings, the examiner, the applicant and the attorney should define the scope common knowledge in the art involved in the patent applicant in question from the perspective of one skilled in the art. Examining and analyzing what facts or technical means should be subject to common knowledge helps to evaluate the inventive step of a patent application in a fair and reasonable manner and avoid abuse of common knowledge in the art.
 

B. Reinforced Administrative Protection

The New Patent Law elevates the powers previously granted to the administrative authority including the power to inquire, conduct site inspections, duplicate relevant documents, etc. Furthermore, the new article also grants new powers of attachment and seizure, which are expected to reinforce the administrative protection of patent rights.

C. Increased Responsibility of Indemnification

The maximum fine for patent counterfeiting has been raised from 3 times the value of the illegal proceeds to 4 times. In cases where there are no illegal proceeds, the maximum fine has been raised from RMB 50,000 to RMB 200,000. The New Patent Law includes a provision concerning statutory compensation between RMB 10,000 to RMB 1,000,000, which the current Patent Law does not have any provision for. According to the judicial interpretation issued by the Supreme People's Court, the maximum statutory compensation that can be granted at the court's discretion is RMB 500,000.

D. Further Perfected Judicial Protection

The New Patent Law stipulates the procedure for pre-trial injunction, which was not previously provided for in the current Patent Law nor the PRC Civil Procedure Law. The New Patent Law also stipulates the procedures for pre-trial asset preservation. Such provisions will provide clearer guidelines to courts on the relevant procedures in the future.

E. Two Newly Added Causes for Non-infringements

“Parallel Importation” is expressly permitted in the New Patent Law. The existing patent law, and also other intellectual property laws, was silent on the legality of parallel importation.

The New Patent Law also provides an exception for infringement similar to the BOLAR exception in the US, which exempts pharmaceutical companies from infringement for the manufacture, use, and import of patented drugs or medical devices for the purpose of seeking administrative approval.

Generally, the amendment of patent laws has reflected the government's efforts to curb patent infringement and to protect intellectual property. Meanwhile, the public interest and the need for a healthy and competitive market have also been taken into consideration. The enforcement of patent rights in China is has now taken a step forward in its efficiency.
 

At the heart of this dispute was the reexamination of Pfizer's patent for Viagra. The courts revoked the invalidation decision with respect to the Viagra Patent and as a result, the PRB was requested to render a new decision on the validity of Viagra patent. The judgment was final, but I believe that the grounds for the rulings are highly debatable.

The final ruling does not provide new reasoning for why the Viagra Patent application satisfies the requirements set forth in the Patent Law, it simply repeats the Intermediate Court's previous ruling and leaves me unconvinced. Although the Guidelines on Patent Examination ("Guidelines") provides no specific provisions regarding the necessity of identifying specific compounds used in the pharmacology tests in a patent application, a clear and complete description of an invention is the basic requirement for the patent specifications. At the very least, the specifications should be consistent and self-explanatory. In this case, the applicants only provided one pharmacology test result and failed to specify the specific compound used in performing the test. It is impossible for the technicians in the industry to identify the relevant compounds to be used. If tests cannot be reproduced, then there are serious issues with the patent.

It is reasonable to say that the specification of the subject patent application did not satisfy the requirements of "providing clear and complete description of invention features". The final judgment reflects more or less a compromise between the Chinese and the US governments. As China is not a country that follows precedent, this has no practical significance for future patent drafting and examinations. I recommend that patent applicants, especially foreign applicants, should not be influenced too much by this court decision. Instead, patent applicants shall always provide clear specifications regarding the compounds applied in the pharmacology test in their patent specifications, as there won't be political compromises between governments for every patent. The viagara decision should be considered a stand alone ruling.