By Chen Changhui King&Wood Mallesons’ Intellectual Property Group

untitledAfter the Third Amendments to the Chinese Patent Law, Tort Liability Law (2009), Opinions on Further Strengthening Combat Against Infringement Upon Intellectual Property and Manufacture and Sales of Counterfeit Commodities (2011) issued by the State Council, the New Civil Procedure Law (2012), and Judicial Interpretation of Civil Procedure Law (2015) have been promulgated consecutively, and China is preparing to join The Hague Agreements Concerning the International Registration of Designs. For the purpose to enhance patent enforcements and adapt to these treaties, laws and regulations, the SIPO published Draft of the Fourth Amendments to the Chinese Patent Law (for public comments) on April 1, 2015. The Draft comprises substantive amendments to a total of 30 articles, including revisions of current 18 articles, addition of 11 articles, deletion of one article, addition of one chapter “Patent Enforcement and Application”, and adaptive wording amendments to or adjustment of two articles.

Main amendments to the current Patent Law in the Draft include the following aspects:

1. Expanding patentable subjects and extending patent term

To meet the needs of economic development and innovations, and to comply with international development tendency, the Draft proposes to properly expand patentable subjects and prolong patent term of designs. Specific amendments include the following:

1) Prolonging the patent term of design to 15 years

The patent term of designs under the current Chinese Patent Law is only ten years, shorter than many other countries and not in line with the requirement (at least 15 years) in The Hague Agreements (1999 version). Along with the increasing prominent role of design innovations and implementation of outbound strategies, it is necessary for China to strengthen protection for designs to prepare to join The Hague Agreements. Therefore, the patent term of designs is prolonged to 15 years in the Draft.

2) Partial design becoming patentable

The current Chinese Patent Law only provides protection for the overall design of a product. However, partial design can be easily simulated by another party in a manner such as simple put-together or substitution, and therefore cannot be protected effectively. To follow the international trend and encourage healthy development of China’s design innovation industry, partial design becomes patentable in the Draft.

3) Expanding patentable subjects to cover methods for diagnosing and treating diseases of cultured and bred animals

According to the current Chinese Patent Law, methods for diagnosis and treatment of diseases of human beings and animals are excluded from patentability. To stimulate innovation and development of animal culturing and breeding industry and to follow the industry’s call for patent protection for methods for diagnosis and treatment of cultured and bred animals such as aquatic products, husbandry and poultry, patent protection is expanded to methods for diagnosis and treatment of diseases of cultured and bred animals in the Draft.

2. Strengthening patent protection

To address problems universally voiced by patentees in patent enforcement, such as difficult burden of proof, long cycle, low compensation, high cost and poor effect, the Draft further improves patent protection system with Chinese characteristics and provides powerful legal guarantee for maintaining patentee’s legitimate rights and interests by strengthening patent protection, advancing administrative enforcement, building a long-term effective mechanism for combating against patent infringement, promoting effective combination of administrative enforcement and judicial protection, improving enforcement efficiency and lowering enforcement costs.

Main amendments include:

1) To address “difficult burden of proof” issue, the Draft improves relevant evidence rules. The Draft expressly entitles specific investigation and evidence-collecting means to the Patent Administrative Authority for patent infringement cases, and also adds a burden of proof shifting rule when determining the damages.

2) To address “long-cycle” issue for patent enforcement and speed up patent infringement dispute examination and handling, the Draft proposes that patent infringement dispute which is stayed due to an invalidation request should be restored after the issuance of the decision on invalidation request, validity of administrative mediation agreement is explicitly set forth, and judicial confirmation and compulsory execution thereof is clarified.

3) To address “low compensation” problem in patent enforcement, the Draft introduces a punitive damage system for willful infringements, wherein the damage is increased up to two to three times of the actual lose, strengthens the administrative penalty with respect to such willful infringements as group infringements and repetitive infringements, where the upper limit of the penalty is increased to five times of illegal turnover if the illegal turnover is over RMB 50,000 or RMB 250,000 if the illegal turnover is less than RMB 50,000.

4) To address “high cost and poor effect” issue in patent enforcement, the Draft proposes to increase penalty on patent infringements and specifies “notice-remove” rule in network infringement. The Draft requires network service providers to bear more legal obligations matching their capability, and meanwhile clarifies the network service provider’s obligations in executing the decision of patent administrative authorities and stopping patent infringing acts.

3. Promoting patent exploitation and utilization

China has become a big country in respect of the number of patent applications, but many patents are not exploited and utilized effectively. On the other hand, some patentees abuse patent rights to repel normal market competition and seriously hinder economic development. For these reasons, the Draft introduces some articles and clauses to better stimulate innovation and provides powerful legal safeguard for exploitation and utilization of patents. Main contents include the following:

1) To boost inventor and designer’s activity and promote technical innovations, the Draft extends the non-service inventions-creations to cover invention-creations accomplished by using material and/or technical conditions of an employer, unless otherwise agreed.

2) To address the issue of low conversion rate of patented technologies owned state-run research institutes and universities, the Draft entitles an inventor or designer to negotiate with the stated-run entity to implement a service invention-creation on his own and obtain corresponding earnings in the case that the entity is indifferent in implementing the service invention-creation.

3) To standardize patent pledging acts, the Draft presents explicit provisions on patent pledge registration and the pledgee’s rights and interests.

4) To address the problem of asymmetric supply and demand information of patent license and to lower transaction costs, the Draft Introduces the patent license-of-course system.

5) To duly handle the relationship between standards and patents and prevent patentee from abusing its patent in formulation of state standards, the Draft introduces the implied license system for standard essential patents.

6) The Draft introduces the general principle provisions on prevention of patent abuse. The current Chinese Patent Law already includes some provisions on limiting patent right such as compulsory license and exception of patent infringement, but it lacks of a general principle on patent abuse. To provide sufficient legal basis with the courts in trying some cases and with the administrative authorities in formulating relevant specific regulations, the Draft introduces the following provisions on the principle of regulating patent abuse: Exercise of the patent right shall comply with the good faith principle, and shall not damage public interests, unjustifiably exclude or restrict competition, or hinder technological advancement.

4. Facilitating patent filing

The current Chinese Patent Law is stringent in some procedural matters and already fails to suit the international trend. The Draft sets forth some proposals to facilitate the filing and prosecuting of patent applications. Main amendments include the following:

1) Lowering the procedural requirements for going through priority-claiming formalities.

The current Chinese Patent Law imposes strict provisions on the timing for priority claim and on the term and manner for supplementing duplicate documents of priority applications. In practice, it occurs occasionally that an applicant loses the priority claim because of the above requirements, whereupon an opportunity of remedy is requested. To safeguard applicant’s interests and follow the tendency of international rules, the Draft proposes to lower those requirements.

2) Providing a possibility to allow a foreigner applicant to handle some procedure matters before the SIPO by itself

The current Chinese Patent Law provides that foreigner applicants who do not have habitual residence or business office in China shall entrust a Chinese patent agent to handle patent filing and prosecution before the SIPO on his behalf. In practice, an applicant, particularly small or middle-sized enterprise, probably fails to select an appropriate patent agent and duly go through corresponding entrust formalities in time before filing a patent application, and thus cannot obtain an application date earlier. Meanwhile, entrusting the Chinese patent agent to handle purely procedural matters such as payment of patent fees and submission of some application documents brings a certain burden to the applicant. To better safeguard applicant’s interests, create favorable system environment for Chinese enterprises to file patent applications to foreign countries according to a reciprocal principle and meanwhile follow the trend of international rules, the Draft provides a possibility to allow a foreigner applicant to handle some procedure matters before the SIPO by itself, and the Implementing Regulations will further clarify specific requirements for entrustment, exceptional cases and conditions to be satisfied.

5. Specifying and strengthening functions of patent administrative authorities

To meet the requirement for building a service-type government, the Draft specifies and strengthens service functions of patent administrative authorities and adds legal basis to establish a patent administrative authority at county level.

1) Emphasizing responsibility of patent administrative authorities

The Draft further clarifies assignment of functions and responsibilities of the State and local patent administrative authorities. Particularly, in order to solve the problem that some local patent administrative authorities focus on patent filings but pay less attention to promotion of patent utilization, the Draft expressly requires that “patent administrative authorities at all levels shall promote patent exploitation and utilization”. Thus, the Draft clarifies from the legal perspective that promotion of patent exploitation and utilization is the functions and responsibilities of patent administrative authorities at all levels to solve issues such as low conversion rate of patented technologies and low degree of patent exploitation and utilization. The Draft also clarifies the function and responsibility of local patent administrative authorities to include “carrying out patent administrative enforcement, investigating and dealing with patent infringement and counterfeiting acts, and providing public patent information service”.

2) Adding legal basis to establish a patent administrative authority at county level

The current Chinese Patent Law mentions “patent administrative authorities of provincial, autonomous region and municipal governments”. In practice, only intellectual property offices at provincial and municipal level carry out patent administrative enforcement, which cannot meet practical needs. It is favorable for an intellectual property authority at the county level to carry out the patent enforcement to timely find, investigate and deal with patent infringement acts because it stands at the first line of management and gets closer to the market. Therefore, the Draft expressly defines “patent administrative authorities of local peoples’ governments above country level”.

3) Giving the Patent Reexamination Board more functions and powers to examine initiatively

The Patent Reexamination Board, as a patent verification authority, might find defects unmentioned in rejection decision and invalidation request during reexamination and invalidation proceedings. To avoid unreasonable extension of examination and approval cycle due to repeated procedures, the Draft provides that the Patent Reexamination Board, if necessary, may initiatively examine other requirements under the Chinese Patent Law besides those reasons and evidences as raised in the requests.

In addition to the above five aspects, the Draft also sets out specific proposals about how to improve patent agency legal system. Because of the limitation of length, no more details are given here.

(This article was originally written in Chinese, the English version is a translation.)

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