Mia Qu/Melody Shi/Nick Wang of King & Wood’s Patents Practice

The third amendment of the Patent Law of the People’s Republic of China (“New Patent Law”) was passed on December 27th 2008, and will come into effect on October 1st 2009. The New Patent Law will impact the legal administration of and court rulings on patents as follows:

A、Affirmed the “Plea of Free Prior Art”

The New Patent Law expressly affirms the “plea of prior art” concept that has frequently been raised in patent infringement law suits. Prior to this, the court was very cautious in applying such a principle due to the lack of a fully recognized legal basis. However, the specific conditions and standards for its use, which have been widely debated among professionals, have not yet been clarified. For example, whether this concept is only applicable to literal infringement cases, or does it also apply to equivalent infringement cases. We look forward to having a unified resolution through judicial interpretation in the future. This change enables quick closures to cases which were filed maliciously and lacking solid grounds.

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.