Brief Comments on the Fourth Revision of Patent Law of China

By Wang Maohua, Tina Tai, Ni Zhenhua(Ben), Guo Yu, King & Wood Mallesons’ Intellectual Property Group

The current Patent Law of China came into force in 1985 and was revised three times in 1992, 2000 and 2008, respectively. In order to keep up with developments of the times, the China National Intellectual Property Administration (hereinafter “CNIPA”) researched and drafted the Revision Draft of the Patent Law of the People’s Republic of China (Draft for purposes of Soliciting of Comments from the Public) (hereinafter “Revision Draft”) in accordance with the 2012 legislative work schedule of the State Council in China. The Revision Draft, published on August 10th, 2012 for comments, was followed by multiple drafts until a final draft was reached and submitted to the National People’s Congress of China for vote. On October 17th, 2020, the 22nd meeting of the Standing Committee of the 13th National People’s Congress of China passed the Decision on Revising the Patent Law of the People’s Republic of China. The newly revised Patent Law of China will come into force on June 1st, 2021. It took about 8 years to fulfill this fourth revision of Patent Law.

This current revision of the Patent Law primarily includes three parts: strengthening protection of legitimate rights and interests of patentees, promoting patent practice and patent application, and improving the patenting and prosecuting system. The highlights of this revision include:

• for willful infringement, one to five times of punitive damage can be applied, and the lower limit for statutory compensation has been increased from 10,000 yuan to 30,000 yuan, and the upper limit has been increased from 1 million yuan to 5 million yuan (see Part VII in this article);
• a patent linkage system in which judicial procedures and administrative procedures are parallel will be built up thereby enabling patentees of innovative drugs to prevent infringing generic drugs from touching the market during drug approval process (see Part VIII in this article);
• term of design patent is extended to 15 years, partial design patent is allowed, and design patent can enjoy domestic priority (refer to Part I in this article);
• a patent term adjustment system applicable on a condition that patenting of a patent application is delayed due to unreasonable examination is implemented, and a patent term compensation system applicable on a condition that a launch of a patented drug has been postponed due to lengthy administrative approvals is implemented (see Part V in this article).

In addition, this revision also involves service invention, reward and remuneration, open licensing system, patent abuse, etc. This article will discuss some key provisions of this revision for readers’ reference.

I. Amendments to Provisions Regarding Design Patent Protection

1. Partial Design is Allowable as a Design Patent

Partial design is brought into protection scope of design patent under Article 6 of the revised Patent Law. The current Patent Law limits an objective of a design patent protection to a “product as a whole”, and the Patent Examination Guidelines in China further stipulates that a partial design of a product, such as a heel part of a sock, a brim of a hat, a cup handle, which cannot be divided or sold separately from the product and cannot be used alone apart from the product, is not patentable. However, due to the trend of refined social division of labor and product design, a demand that partial design of product should be protected has been increasingly growing. An explanation drafted and issued by the CNIPA on April 1st, 2015 to explain the Revision Draft clearly recommended that product partial design be protected under the Patent Law. The explanation mentioned that China’s current patent law only protected product overall design, and partial design innovation can be easily copied by simply putting pieces together, replacements, etc., thereby making it difficult to be effectively protected, which is not helpful to stimulate a healthy development of China’s design innovation industry. Therefore, in order to meet innovation entities’ demands for partial design protection and to comply with the trend of design patent system in the world, the explanation stated that it is recommended that designs made on parts of products be protected under the Patent Law. In addition, from the perspective of examination practice, after the introduction of partial design, a current problem that both applicants and examiners have experienced, i.e., “what is a product design as a whole” will no longer be problematic. Thus, both patent application and examination will be focusing on a determination regarding novelty and non-obviousness of a design, thereby leading to a more objective and accurate determination conclusion.

2. The Term of Design Patent is Increased to 15 years

Article 42 of the revised Patent Law stipulates that the term of design patent is 15 years. That is, the term of a design patent, which is 10 years under the current Patent law, is extended to 15 years.

The 10-year protection period for design patent in China was coded into the Patent Law effective in 1992 and has not been revised since then. This 10-year protection period maps the minimum 10-year period requirement stipulated in the Trade-Related Intellectual Properties Agreement (TRIPs Agreement). However, as the economic value of design and its importance in market competition have become increasingly prominent, many countries have extended their term of design patent. On the one hand, in order to meet the needs of China’s accession to the Hague Agreement Concerning the International Registration of Industrial Designs, and on the other hand, from the perspective of encouraging innovative entities to create designs with more aesthetic and commercial value, the revised Patent Law extends the term of a design patent from 10 years as stipulated in the current patent law to 15 years. Of course, we are still expecting a clarification from Chinese lawmakers regarding whether this extension of term of design patent is applicable to those design patents that are still valid as of June 1st, 2021 and design patent applications filed before June 1st, 2021 after a balancing test between patentees’ interests and public interests is considered by the lawmakers.

3. A 6-month Domestic Priority Can be Claimed by Design Patent Application

A provision regarding domestic priority of design patent application is coded in the second paragraph of Article 29 of the revised Patent Law. According to this provision, a design patent application can claim and enjoy priority within six months from the date of filing a first design patent application for the same subject matter in China.

The current Patent Law stipulates that only patent applications for invention and utility model can enjoy domestic priority. The revised Patent Law permits all types of patent applications to claim and enjoy the domestic priority. Since the examination period for design patent is very short, the 6-month priority period stipulated in the revised Patent Law might, under some extreme circumstances, become a means for applicants to restore their rights. For instance, within the 6-month priority period, after a design is rejected or deemed withdrawn, its applicant can re-apply after a defect has been overcome based on this domestic priority provision.

II.Amendments to Provisions Regarding Service Invention, Reward and Remuneration.

Language is written after the first paragraph of Article 6 of the revised Patent Law: an entity may dispose of its patent application rights and patent rights originated from its service invention-creations in accordance with the law, and promote the implementation and application of related inventions. This language plays a clear and guiding role, to some extent, regarding entities disposing of their patent application rights and patent rights.

Language is written into Article 15 of the revised Patent Law as the second paragraph of that Article: China encourages entities having granted patents to use equity-based incentives, such as equities, options and dividends, to let inventors or designers enjoy a reasonable share of benefits obtained from their innovation. According to the relevant provisions regarding rewards and remunerations for inventors or designers of service inventions under Articles 76 to 78 of the current  Implementing Regulations of the Patent Law of China (hereinafter “the Implementing Regulations”), the way and amount of rewards and remunerations can be determined by agreements, rules and regulations, or provisions of the Implementing Regulations. This revised Patent Law incorporates those income-sharing mechanisms, such as equities, options, and dividends, which have been actually adopted in practice, and encourages entities to adopt various ways to share innovation income with inventors and designers, which is conducive to promoting technology innovation and further promoting patents implementation and practice. In a future revision to the Implementing Regulations, Chinese lawmakers may consider incorporating the income-sharing mechanisms provided by this Article into the reward and remuneration methods stipulated in the Implementing Regulations.

III. Amendments to Provisions Prohibiting the Abuse of Patent Right

Article 20 of the revised Patent Law stipulates that the principle of good faith shall be followed when a patent application right or a patent right is exercised. The patent application right and patent right shall not be abused to damage public interest or legitimate rights and interests of others. Anyone abusing patent rights, eliminating or suppressing competition, if monopoly is found, will be facing legal actions based on the Anti-Monopoly Law of the People’s Republic of China. The first paragraph of this Article mainly concerns abuse of patent right, and the second paragraph relates to anti-monopoly remedies for the consequences of the abuse of patent rights to eliminate or suppress competition.

1. Provisions Regarding Abuse of Patent Right

In order to prevent abuse of patent right, industry insiders have repeatedly called for special legislation which has ultimately and successfully been written in this revised Patent Law. The principle of good faith is a basic civil activity rule, which is also stipulated in Article 7 of the Civil Code which will come into effect on January 1st, 2021. To determine whether a patent right is abused is based on a test whether the principle of good faith is violated or not. In current judicial practice, the abuse of patent right is mostly manifested in malicious litigation, including:

• due to the non-substantive examination for utility model and design patent application a patent holder may maliciously apply for a patent that clearly does not meet patent requirements and consequently get it granted, and then use that patent to sue relevant entities. See (2016) Su 04 Min Chu No. 327;
• in a case where a patent has been modified in a prior patent inter-parte review, a plaintiff is still claiming the pre-modified claims in his/her infringement litigation. See (2015) Jing Zhi Min Chu Zi No. 1446; and
• before he/she files a lawsuit, the plaintiff already knew that before the application date of a design patent, a product similar to the design patent had been publicly sold, but he/she still files a lawsuit. See (2017) Yue Min Zhong No. 2782.

In addition, if a legitimate degree for protecting legal right is exceeded during the protection of patent right, e.g., an attempt to overwhelm competitors with massive disputes, an abuse of patent right may also be found. For example, in (2018) Yue 03 Min Chu No. 170, the defendant took, based on 6 patent rights, more than 30 civil actions and filed more than 20 administrative requests for patent infringement against the same manufacturer and different users. The court held that those legal actions clearly exceeded the legitimate degree for protecting patent right, violated the principle of good faith, and had a negative impact on the commercial operations of the plaintiff and its cooperative merchants, and believed that there was an abuse of right and unfair competition was found. In the case that the Patent Law has clearly prevented the abuse of patent right, courts in China are likely to directly apply Article 20 of the revised Patent Law in judgments for future cases.

2. Anti-monopoly Remedies Regarding the Abuse of Patent Right to Eliminate or Suppress Competition

The earliest provision regarding a relationship between technology and anti-monopoly can be found in Article 329 of the Contract Law of China regarding technology contract[1], and Article 10 of the China’s Supreme Court Interpretation on Several Issues concerning the Application of Law in Trial of Technology Contract Disputes[2] gave details on illegally monopolizing technology and hindering technological progress. As to patent, patent-related monopoly agreements and the use of patents to abuse market dominance have all been detailed in the Anti-Monopoly Guidelines of Intellectual Property from the Anti-Monopoly Committee of the State Council[3]. Monopoly agreements are mainly shown as cross-licensing agreements, and the abuse of market dominance is related to patent (especially standard essential patents) licensing and litigation. Among them, licensing actions that may touch the red line of monopoly include excessive pricing, tying, refusal to license, request for exclusive grant back, prohibiting questioning the validity of patent, restricting or prohibiting transactions, discriminatory treatment, etc. However, prior cases have held that a monopoly may be found if an owner of a standard-essential patent forces a standard implementer to accept unreasonable license conditions by filing lawsuits against the implementer.[4] Article 13 of the Provisions on the Prohibition of Abuse of Intellectual Property Rights to Eliminate and Suppress Competition also stipulates that if a standard-essential patent holder deliberately conceals information of standard-essential patent or expressly waives the patent during the standard formulation process, a subsequent patent claiming from the holder may also constitute a monopoly.[5]

It can be seen from the above analysis that although some provisions regarding the abuse of patent right have been added into Article 22 of the revised Patent Law, judicial practice and other supporting laws and regulations have all involved the abuse of patent right and possible monopolistic activities. This Article 22 does not have substantially new content under the existing legal system, but in term of legal application, courts in China should be able to directly apply this provision in the future.

IV.Amendments to Relevant Provisions of Patent Applications

1. Addition of a Specific Circumstance for Non-Prejudicial Disclosures

Article 24 of the revised Patent Law provides that an invention-creation, for which a patent is applied, does not lose its novelty if, within six months before the date of filing, the invention-creation is first disclosed for public interest purpose(s) during a national emergency or any extraordinary state of affairs.

This amendment is a newly added circumstance that specifically applies to the grace period concerning novelty. It is a further expansion and enrichment on the basis of the three specific circumstances for non-prejudicial disclosures provided in Article 24 of the current Chinese Patent Law. The purpose of this amendment is to ensure that when emergencies endangering the public interest occur or are about to occur, patents can still be applied and obtained for new technologies, for which no patent has been applied yet, after disclosure of said technologies, thereby, fully protecting the rights of applicants.

2. Explicit Exclusion of Methods of Nuclear Transformation from the Scope of Patentable Subject Matter

Article 25 of the amended Chinese Patent Law adds “methods of nuclear transformation” into the category of unpatentable subject matter.

The current Patent Law has no provision stipulating the unpatentability of methods of nuclear transformation, and said stipulation is only explicitly provided in the Guidelines for Patent Examination. The amendment to this article makes this provision of the Chinese Patent Law consistent with the corresponding provision of the Guidelines for Patent Examination.

In consideration of the special background and technical complexity of nuclear fission and nuclear fusion reactions in methods of nuclear transformation as well as said reactions’ important impact on national energy security, research activities regarding their use as an alternative energy source in various countries are often carried out at the national level. In our country, research activities regarding the use of nuclear reactions (especially nuclear fusion reactions) as an alternative energy source are mainly led by research institutions with governmental background, and huge manpower and material resources have been invested in those research activities. Meanwhile, judging from the current research progress, there is still a big gap between the research activities on the application of nuclear reactions as a clean alternative energy source in our country and those in some foreign developed countries. Thus, if this type of research technology is allowed to be monopolized or possessed by a certain organization or individual, it will inevitably pose a threat to our country’s future energy security. Therefore, in order to ensure that national security and vital interests are not harmed, this type of research technology cannot generally be protected. The revised Patent Law, through amendment to Article 25, makes itself consistent with the corresponding provision of the Guidelines for Patent Examination, therefore, making the specific examination operations smoother.

3. More Time for Parties to Prepare Copies of the Priority Documents to be Submitted

Article 30 of the amended Chinese Patent Law provides that an applicant who claims the right of priority of a patent for invention or utility model shall make a written declaration when the application is filed, and submit, within sixteen months from the date of the first application for the patent for invention or utility model, a copy of the patent application document which is first filed; while the current Chinese Patent Law provides that a copy of the patent application document which is first filed shall be submitted within three months from the filing of the subsequent application.

In practice, many copies of priority documents are produced abroad. Due to the objective difficulty of extraterritorial document collection and the unpredictable impact of other emergencies on the parties, it is to some extent difficult for the parties to submit copies of application documents within the three-month period. Based on the consideration of the provisions of relevant international treaties and the provisions stipulated by other major national patent offices, the amended Chinese Patent Law extends the time limit to 16 months from the date of the first application (resulting in a one-month extension in practice in most cases, compared with the pre-amendment time limit), giving applicants more time to prepare the corresponding materials.

V.Amendments to the Relevant Provisions of Patent Term Adjustment and Extension Systems

Article 42 of the amended Chinese Patent Law added two clauses on the basis of the original Article 42, which respectively relate to patent term adjustment system and patent term extension system.

1. Patent Term Adjustment System

According to Article 42.2 of the amended Chinese Patent Law, in the process of granting an application for patent for invention a patent right, if four years have passed since the filing date of the application for patent for invention and the application for patent for invention is granted a patent right three years after the filing of the request for substantive examination, the patentee can request compensation for any unreasonable delay of the grant caused by the patent administrative department under the State Council in the form of an adjusted patent term.

2. Patent Term Extension System

According to Article 42.3 of the amended Chinese Patent Law, to compensate for the time taken up by the review and approval of applications for new drug marketing approvals, the patent administration department under the State Council may, at the request of the patentees, give compensation in the form of extended patent term to the new drug invention patents that have been approved for marketing in China. The compensation period shall not exceed five years, and the total effective patent term after the new drugs are marketed shall not exceed fourteen years.

The amended Chinese Patent Law only provides upper-level provisions on patent term adjustment system and patent term extension system, and do not address the specific implementation issues such as the determination of “unreasonable delay,” the calculation of the compensation period, the announcement of the adjusted and extended patent term, etc., which needs to be improved through subsequent formulation of judicial interpretations and amendments to the Guidelines for Patent Examination.

VI.Amendments to the Relevant Provisions of Special Licenses for Patent Exploitation

1. Chapter Title Amendment and Systematic Improvement

In addition to fully retaining all the contents of the old law on compulsory licenses, Chapter 6 of the Amended Chinese Patent Law adds a new article, Article 48, on “strengthening patent public services and promoting patent exploitation and utilization.” Meanwhile, the provision of Article 14 of the current Chinese Patent Law regarding “special licenses for any patent for invention belonging to state-owned enterprises or entities approved by the State Council” becomes Article 49 of the amended Chinese Patent Law, and Articles 50-52 regarding open licenses are added. Accordingly, Articles 48-58 of the old law on compulsory licenses becomes Articles 53-63 of the new law.

Instead of being limited to “compulsory licenses,” Chapter 6 of the amended Chinese Patent Law includes three types of licenses that are to some extent special in nature: “special licenses for any patent for invention belonging to state-owned enterprises or entities approved by the State Council”, “open licenses,” and “compulsory licenses.” Thus, Chapter 6 adopts a higher-level title, “Special Licenses for Patent Exploitation,” in order to be distinguished from the mode where the patentee and the licensee reach a license through negotiation.

2. The Newly Added Open Licensing System

Articles 50 to 52 of the amended Chinese Patent Law provide more detailed regulations on open licensing system. Article 50 of the amended Chinese Patent Law provides methods of filing and withdrawing an open licensing declaration of a patent. Article 51 provides the method of obtaining a patent exploitation license through an open license, the annual patent fee reduction and exemption measures during the implementation period of an open license, and the restrictions on the open-licensed patents. Article 52 of the amended Chinese Patent Law provides a resolution mechanism for disputes arising from the implementation of open licenses. The following is our interpretation of some of the provisions.

First, Article 50 of the amended Chinese Patent Law stipulates that for an open licensing declaration involving a patent for utility model or a patent for design, the patentee shall provide a patent right evaluation report, but the article does not stipulate any substantive requirement for the results of the evaluation report. The resulting question is whether the patentee meets the requirements for submitting an open licensing declaration of the patent or not, when the patent right evaluation report submitted by the patentee determines that the patent for utility model or the patent for design does not meet the requirements for being granted a patent right.

We tend to believe that there is no need to impose any limitation on the results of the patent right evaluation report for the following reasons: 1) the law does not stipulate any substantive requirement for the results of the patent right evaluation report; 2) the results of the patent right evaluation report only serve as a reference for the determination of patent validity, rather than a legally binding conclusion on patent validity; and 3) potential licensees can access the patent right evaluation report through public channels, and then decide whether to obtain an open license.

Second, Article 51 of the amended Chinese Patent Law reflects the balance between the interests of patentees and the interests of licensees under the open licensing system. According to this article, after a patentee makes an open licensing declaration, he/she can still negotiate with a licensee to reach a license agreement, and the law does not require the license conditions reached by negotiation to be identical to the license conditions in the open licensing declaration.[6] However, in order to avoid any influence of the license agreements reached by patentees through negotiation on the interests of licensees who obtained licenses through open licenses, Article 51 of the amended Chinese Patent Law stipulates that the type of licenses allowed is limited to ordinary licenses and no exclusive licenses can be granted for the patents. Similarly, patent exploitation licenses obtained through open licenses should also be ordinary licenses, not exclusive licenses.

Third, the amended Chinese Patent Law provides for the submission and withdrawal of open licensing declarations, but does not provide for the amendment of the open licensing declarations. Patentees can withdraw open licensing declarations, and the law does not require the subsequent open licensing declarations submitted by the patentees on the same patents after the withdrawal to be different from the declaration the patentees withdraw (e.g., different licensing fee payment methods and standards), so in practice, patentees can amend their open licensing declarations through the “withdrawal and resubmission” method. Based on that, for the convenience of patentees, and in consideration of the changing values of patent licenses brought about by a changing market environment, a corresponding system for modifying open licensing declarations should be established to allow parties to directly modify the open licensing declarations that have been proposed by them. However, similar to Article 50.2, amended open licenses do not affect the validity of the open licenses granted earlier.

VII. Amendments to Relevant Provisions of Patent Protection

Various aspects of Chapter 7 of the Chinese Patent Law, such as administrative enforcement of patents, damage compensation calculation, pre-litigation preservation, statute of limitations, etc, have been amended, which further strengthens the protection of the legal rights and interests of patentees and interested parties.

1. Increase in Penalties on Patent Passing Off

Article 68 of the amended Chinese Patent Law provides the following: “In addition to imposing civil liability on any person who passes off a patent, the department responsible for patent enforcement shall order correction of said person, make an announcement, and confiscate the illegal income. A fine of less than five times of the illegal income may be imposed. If there is no illegal income or the illegal income is less than 50,000 yuan, a fine of less than 250,000 yuan may be imposed. Any person whose passing off constitutes a crime shall be held criminally responsible in accordance with the law.” The penalties provided in Article 68 of the amended Chinese Patent Law are significantly stronger than those in the old law, therefore, penalties on patent passing off are further increased.

2. Grant to the Patent Administrative Department under the State Council the Right to Handle Patent Infringement Disputes and Simplification of the Procedures for Handling Said Disputes by the Departments of the Local People’s Governments Managing Patent Works

Article 70.1 of the amended Chinese Patent Law provides that “the patent administrative department under the State Council may handle patent infringement disputes that have significant national influence at the request of the patentees or interested parties,” which explicitly grants the patent administrative department under the State Council (i.e., the China National Intellectual Property Administration) the right to handle patent infringement disputes. However, the definition and determination of “significant national influence” needs to be further specified through subsequent formulation of judicial interpretations or amendments to the Implementing Regulations. For example, patent infringement disputes involving circumstances such as large scale infringement, huge infringement profits, products related to public interests (such as drugs and medical devices), or national security, can be determined to have “significant national influence”.

Meanwhile, Article 70.2 of the amended Chinese Patent Law also provides that the departments of the local people’s governments managing patent works can consolidate patent infringement disputes and handle cross-jurisdictional patent infringement disputes, which further simplifies the procedures for handling patent infringement disputes by the local people’s governments. In consideration of the fact that presently, the above-mentioned administrative remedy provisions further concentrate and consolidate the judicial power dispersed across jurisdictions in terms of judicial remedy for patent infringement disputes, said administrative remedy provisions, in practice, conform to the principle of jurisdictional centralization to some extent, in order to avoid extreme local protectionism and to unify the judicial standards across jurisdictions.

3. Further Improvement of Damage Calculation Methods, Addition of Punitive Damage, and Solution for the Problem regarding the Difficulty of Proof for Right Holders

The amendments to Article 71 of the Chinese Patent Law are mainly reflected in moving “infringer’s gains from infringement” upwards into the category of first-ranked calculation methods, the same category of “right holder’s actual loss,” adding a punitive damage one to five times the amount of compensatory damage, and amending the numerical range of statutory damage from “above 10,000 yuan and below 1,000,000 yuan” to “above 30,000 yuan and below 5,000,000 yuan.” Furthermore, Article 27 of Interpretation (II) of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases regarding inversion of burden of proof for compensatory damage is incorporated into Article 71.4 of the amended Chinese Patent Law, which reduces the difficulty of proof for right holders.

4. Improvement of and Adaptive Amendments to Relevant Provisions of Property Preservation and Act Preservation

Articles 72 and 73 of the amended Chinese Patent Law stipulate pre-litigation property preservation, act preservation, and evidence preservation. The amendments are mainly reflected in three aspects. First, “acts that harm patentees’ or interested parties’ rights or hinder the realization of said rights” are newly added as one of the circumstances for pre-litigation property preservation and act preservation. Second, the expression of “order to stop relevant acts” is amended to the expression of “order to perform certain acts or prohibit certain acts,” so that the amended expression is clearer in scope and is consistent with the expression in Article 100 of the current Code of Civil Procedure. Third, because procedural matters such as the time limits for handling pre-litigation property preservation, act preservation, and evidence preservation, the requirements for guaranty, preservation cancellation, and remedies for preservation errors have been clearly stipulated in the Code of Civil Procedure and related judicial interpretations, the instant amendment deletes the above-mentioned content altogether from the Chinese Patent Law. Said deletion is mainly a technical adjustment of the legislation to avoid the redundancy among different branches of law.

5. Adaptive Amendments to Relevant Provisions of Statute of Limitations

Article 74 of the amended Chinese Patent Law relates to statute of limitations. The General Principles of the Civil Law of the People’s Republic of China (“General Principles of the Civil Law”), which came into effect on October 1, 2017, amended the ordinary statute of limitations to three years, which has been accordingly applied to cases of patent infringement in practice. The Chinese Patent Law is adaptively amended in that regard, and the starting point of the statute of limitations is amended from “the date when the infringement is known or should be known” in the old law to “the date when the infringement and the infringer are known or should be known,” to ensure consistency with relevant provisions of the current General Principles of the Civil Law and the Civil Code that is about to be implemented.

VIII. Amendments to Relevant Provisions of Drug Patent Linkage System

Article 76 of the amended Chinese Patent Law is a newly added article, which establishes a drug patent linkage system. According to Article 76.1 of the amended Chinese Patent Law, during the examination and approval process of a drug applied for market approval, if there is a possibility that the drug applied for market approval may infringe the patent rights of others, then any relevant party may file a lawsuit before a people’s court, requesting a judgement on whether the relevant technical solution of the drug applied for market approval falls within the protection scope of others’ drug patent rights or not. The drug regulatory and administrative department under the State Council may, within the prescribed time limit, on the basis of the effective judgement of the people’s court, directly make a decision on whether to suspend the marketing approval of the relevant drug or not. In addition, according to Article 76.2 of the amended Chinese Patent Law, any relevant party may also request an administrative ruling from the patent administrative department under the State Council for disputes over any patent related to the drug applied for registration. Article 76 of the amended Chinese Patent Law explicitly authorizes the drug regulatory and administrative department under the State Council and the patent administrative department under the State Council to formulate a specific linkage method for handling drug patent disputes during the drug’s application stage for marketing and the examination and approval stage of the application, which will be implemented after it is reported to and approved by the State Council.

In 1984, the United States passed the Drug Price Competition and Patent Term Restoration Act (also known as the Hatch-Waxman Act) in an effort to eliminate two imbalances: 1) because the product of the patentee (the research company of the brand-name drug) is not approved by the regulatory agency for marketing, the patentee is unable to sell the product on the market, therefore, not being able to enjoy the protection offered by a reasonable patent term, or not being able to enjoy any patent protection at all; and 2) because competitors (generic drug companies) are not allowed to carry out any experiment for the purpose of being approved for marketing before the patent expires, the generic drugs cannot enter the market immediately after the patent expires. Under the framework of the Hatch-Waxman Act, the United States has established a drug patent protection system with the Orange Book system, the Bolar exemption, drug patent linkages, test data protection, and patent term restoration at its core. The cooperation and coordination among the drug regulatory and administrative department, the patent administrative department, and the judicial department under the new system have promoted the balanced development and mutual prosperity of brand-name drugs and generic drugs in the United States.

Our country introduced the Bolar exemption provision during the third amendment to the Chinese Patent Law.[7] The introduction of said provision has resulted in a relatively loose environment for domestic generic drug companies. After the third amendment to the Chinese Patent Law, especially in recent years, with the increase in the scale of our pharmaceutical industry and the enhancement of the research and development capabilities of pharmaceutical companies, all sectors of society are calling for further improvement of our country’s drug patent protection system. The instant amendment to the Chinese Patent Law introduces a drug patent linkage system and a drug patent term extension system at the same time. And the Patent Information Registration Platform of Marketed Drugs, corresponding to the Orange Book system of the United States, is expected to be specified in the implementation measures of the drug patent linkage system.[8] In addition, the National Medical Products Administration has also issued a draft in 2018 for comments on specific regulations regarding the pharmaceutical test data protection system. The above discussion shows that the core content of the Drug Price Competition and Patent Term Restoration Act, which has played a huge role in the development of the US pharmaceutical industry, has all been adopted by our country’s legislation. The establishment of this series of systems shows that the Chinese government hopes to promote the development of innovative drugs while protecting generic drug companies.

According to Article 76 of the amended Chinese Patent Law, the drug patent linkage system of our country is quite different from that of the United States. Our country has not introduced the American concept of “artificial infringement” into its legal system. Instead, in our country, infringement litigation is initiated upon the determination that the drug applied for market approval falls within the protection scope of the relevant patent. And an even greater difference from the US drug patent linkage system is that our country’s drug patent linkage system can be initiated through two procedures: administrative procedure or judicial procedure. In our country, the administrative protection procedure for handling patent infringement dispute has always been regarded as one of the distinguishing features of our country’s intellectual property system. In view of such a fact that the law has already empowered administrative authorities to handle patent infringement disputes, when the drug patent linkage system is established this time, the above-mentioned administrative procedure is incorporated into the amended Chinese Patent Law, resulting in a system with administrative and judicial procedures parallel to each other. According to the information currently obtained, said administrative procedure is likely to be specifically implemented by the Re-examination and Invalidation Department of the Patent Office, China National Intellectual Property Administration (“CNIPA”).

It should be pointed out that the patent administrative department under the State Council only determines whether a specific generic drug product of a specific generic drug applicant falls within the protection scope of the relevant patent rights or not, and its conclusion has no impact on the determination regarding whether other generic drug applicants’ generic drugs similar to said specific generic drug fall within the protection scope of the relevant patent rights or not, let alone affecting the validity of the relevant patent rights. Thus, an administrative decision has only private binding effect and no public binding effect. Also, those who are not satisfied with the administrative decision may file an administrative lawsuit before the court.

The amended Chinese Patent Law confirms that our country will implement the drug patent linkage system, which will come into force as of June 1, 2021. The current focus of the industry is the specific implementing regulations of said system and the method for transitioning to said system.

[1] Contract Law of China has been cancelled, and relevant provisions have been incorporated into the Civil Code of China taking into effect on January 1st, 2021.

[2] Fa Shi [2004] No. 20.

[3] Published by Anti-monopoly Commission of the State Council on January 4th, 2019.

[4] See (2013) Yue Gao Fa Min San Zhong Zi No. 306.

[5] Order No. 74 of the State Administration for Industry and Commerce of the People’s Republic of China issued on April 7th, 2015.

[6] The situation involving FRAND obligations for standard essential patents is not considered here.

[7] The current Chinese Patent Law, Article 69.5.

[8] “Measures for Implementing Early Dispute Resolution Mechanism for Drug Patents (Trial) (Draft for Comments),” published on September 11, 2020.