On 17 October 2020, the Standing Committee of the National People’s Congress of China approved the fourth amendment to China’s Patent Law. The last amendment was passed in in 2008.
China’s IP system continues to improve, and we believe that foreign IP owners and businesses will be especially happy to see the new changes relating to designs, patent term extensions, patent linkage, dispute resolution, increased statutory damages, codification of punitive damages, evidentiary burden shifting and technology transfer.
Furthermore, the fourth amendment addresses some of the patent protection measures outlined in the US-China Phase One Trade Agreement signed in January 2020, and also provides for other many long-awaited changes. The changes also seek to bring portions of the Chinese Patent Law into better alignment with US and European laws and so should be welcomed by International businesses. These amendments will take effect on 1 June 2021.
Since the approval of the fourth amendment to the Patent Law, China also amended or will soon amend the judicial interpretations, rules and guidelines relating to patent practice. Accordingly, China’s patent practice landscape is reshaping at a very fast pace.
Among those changes, it should be noted that the China Intellectual Property Administration (CNIPA, formerly SIPO) published draft amendments to the Implementing Regulations of the Patent Law on 27 November 2020 for public comment [see CNIPA’s website]. The draft amendments provide further details on the changing landscape of China’s patent practice following fourth amendment to the Patent Law. The draft Implementing Regulations are open for comment until 11 January 2021, and the contact information for receiving comments is set forth in the link above.
It is also worth noting that the CNIPA also amended the Guidelines for Patent Examination (the “Guidelines”), and the new amendments will take effect on 15 January 2021. Whilst the amendments to the Guidelines include welcome changes such as confirmation of the use of post-filing data for proving inventiveness, the amendments do not address the changes in patent practice brought about by the fourth amendment to the Patent Law. It is thus expected that more changes are on their way.
Below is a brief discussion of some of the noteworthy highlights.
I. General Patent Term Extension
These changes should be welcomed by patent holders and pharmaceutical companies as they align Chinese Practice with international patent and regulatory laws which also allow for extensions due to unreasonable delay by the CNIPA and regulatory agencies.
New Patent Law Article 42 provides for a general patent term extension (PTE) scheme. Specifically, the term of an invention patent may be extended if a patent is granted more than four years from its filing date and three years from the requesting of the substantive examination. The patent application must encounter “unreasonable delay” during its prosecution. What constitutes “unreasonable delay”, however, is not further elaborated. To shed some light, Draft Rule 85 of the Implementing Regulations enumerates situations what does not constitute the “unreasonable delay” mentioned in new Article 42, such as delay intentionally caused by an Applicant. The same draft rule also provides that the request for patent term extension must be filed within three months from the date of allowance. It should be noted that patent term extension is NOT available for utility models and designs.
New Patent Law Article 42 also provides for a special patent term extension scheme for pharmaceutical patents, discussed below in Section II.
II. Articles Especially Directed Towards Pharmaceuticals
While China previously considered a US/European-style PTE and patent linkage system, they were not included in the draft first reading amendments published for comment, but they re-appeared in the draft second reading amendments. The PTE and patent linkage now seek to align China’s Patent Law with patent practice in other countries so as to encourage pharmaceutical companies to invest and file more in China’s robust market.
Patent Linkage System
New Patent Law Article 76 establishes a pharmaceutical patent linkage system (PLS) and a resolution mechanism for early-stage pharmaceutical disputes. Under the PLS, a pharmaceutical patentee may sue a potential infringer applying for marketing approval of a patented drug. An interested party may also request the CNIPA to issue an administrative ruling on the validity of a granted pharmaceutical patent. Marketing approval of a drug will be linked to the drug’s patent dispute ruling.
The PLS is only outlined at a high level in the new Patent Law. However, the National Medical Products Administration (NMPA, i.e., China’s FDA) published for comment draft Implementing Regulations of Early Settlement Mechanism for Pharmaceutical Patent Disputes (Trial) in September 2020 for details on the PLS [Chinese text accessible via NMPA’s website]. The Supreme People’s Court published Provisions of the Supreme People’s Court on Several Issues Concerning Application of Law to the Trial of Patent Civil Cases Involving the Review and Approval for Drug Marketing (Draft for Comment) in October 2020 [Chinese text accessible via the Supreme People’s Court’s website]. The two draft documents in conjunction set forth the PLS framework.
Special Patent Term Extension
As noted above, new Patent Law Article 42 establishes potential CNIPA PTEs. The CNIPA may grant a maximum of 5 year PTE, with the proviso that the effective patent term does not go beyond 14 years after the grant of the marketing approval of the patented drug. The PTE is to compensate the patent owner for the time consumed in conducting clinical trials and obtaining marketing approval for the patented drug.
Draft Rule 85 of the Implementing Regulations further specifies that the PTE is available to product patents, process/method patents and medical use patents on chemical drugs, biological products and novel traditional Chinese medicine. The same draft rule also provides that the extended term may not be granted where the unextended term of a patent at issue has less than 6 months left. The granted extended term is to be calculated by subtracting the filing date of a patent and 5 years from the issuance date of the marketing approval of the drug claimed by the patent. Among other things, it should be noted that draft Rule 85 states a PTE is only available to one patent where the patented drug is protected by multiple patents. Also, the extension is only available to one drug if the patent at issue relates to multiple drugs.
Pursuant to the same draft rule, the protection scope of the extended patent is limited to the patented drug for treating its approved indication during the extended term. In other words,
III. Amendments Relating to Designs
Three specific changes will greatly expand the attractiveness of Chinese Design Rights.
Pursuant to new Patent Law Article 2, partial design protection will now be available for the first time, which will significantly benefit design patent applicants. This appears to be a particularly welcome change to applicants seeking to protect Graphical User Interfaces (GUIs).
Currently, GUI protection requires incorporating the product into the GUI application [see, e.g., Apple Inc. vs. Patent Re-examination Board of State Intellectual Property Office, (2014)高行(知)终字第2815号], which presents challenges for establishing infringement when, for example, a mobile phone and a fridge possess the same GUI. Under the current scheme, infringement of a GUI design is only found when the use of an allegedly infringing product is the same as or similar to that of the product carrying the protected GUI. As such, with new Article 2 coming into force, the potential scope of Chinese designs is broadened both for GUIs as well as traditional partial designs (e.g., camera lenses).
Draft Implementing Regulations Rule 27 provides that a partial design should be shown in relation to the entire product, using a combination of dotted and solid lines or other methods. Currently, a Chinese design application does not permit dotted/dashed lines to show optional features. Thus, for example, when a Chinese design is filed based on a US counterpart, quite often the Applicant must amend the views to either remove the dotted lines or make them solid, potentially leading to protection scope confusion. As such, if draft Rule 27 is approved, it will not only put Chinese design practice more in line with US practice but also brings more certainty and clarity.
Draft Implementing Regulations Rule 28 requires that the brief description should reflect the applied-for partial design if necessary, which allows Applicants the ability to provide further clarity via a written description for the design.
New Patent Law Article 29 allows a Chinese design application to claim priority from a previous Chinese application. According to draft Implementing Regulations Rule 32, the previous Chinese application may be an invention patent application, a utility model application or a design application. Currently, whilst a design application may claim priority from a foreign design application, domestic priority is only available to invention patent or utility model applications. As such, new Patent Law Article 29 gives design applicants a second chance to adjust the applied-for designs, which may benefit Applicants in rapidly-evolving markets.
New Patent Law Article 42 extends the design patent term from ten years to fifteen years. At the moment it is unclear as to whether new Article 42 will only be applicable to design applications filed on or after 1 June 2021, the date on which the new amendment takes effect.
It should be noted that the draft amendments of the Implementing Regulations have a new section relating to international design applications under the Hague Agreement. This appears to suggest China’s upcoming accession to the Hague system.
IV. Amendments Relating to Service Inventions
Companies having R&D in China will need to be aware of the changes below related to service inventions and inventor remuneration.
New Patent Law Article 6 provides that an employer may relinquish its right to apply for service invention patents and patent rights. This codifies the current practice and clarifies that the employer may transfer its rights in the service invention to an employee inventor or a third party.
New Patent Law Article 15 encourages employers to share with an inventor or designer the financial gains from their innovations, by way of stocks, options and dividends etc. Draft Implementing Regulations Rule 76 provides that unless otherwise agreed in a contract, an employer must pay inventor remuneration pursuant to new Patent Law Article 15. This draft rule confirms that the contract between an employer and an employee inventor governing service inventions will prevail. Draft Implementing Regulations Rules 77 and 78 also confirm the previous default inventor remuneration, and therefore we highly suggest companies clearly contract with their employees about potential inventions early so as to avoid future issues. It is yet to be seen whether there will be further amendments to these draft rules in the final version of the Implementing Regulations.
Former Patent Law Article 72 relating to (employer) penalties for deprivation of the right to file a non-service invention patent is deleted, suggesting a more restrained position from administrative agencies.
V. Amendments Relating to Dispute Resolution
China has been using a “dual-track” scheme for patent dispute resolution whereby both of the administrative agencies (e.g., the CNIPA and local/regional Intellectual Property Offices) and courts may dispose of patent-related disputes. The current dual-track scheme for patent dispute resolution will continue to exist under the amended Patent Law.
Under the administrative track, new Patent Law Article 70 establishes the CNIPA’s new administrative capacity to adjudicate patent infringement disputes of national significance pursuant. Draft Implementing Regulations Rule 80.1 defines “patent infringement disputes of national significance” to include disputes having an impact on public interest or technical field development and interregional important cases.
Also, by operation of new Patent Law Article 70, local/regional Intellectual Property Offices may request the involvement of Intellectual Property Offices higher in the government hierarchy for assistance to address patent infringement across various administrative regions/districts. Pursuant to new Patent Law Article 68, the maximum fine for patent counterfeiting allowed under the administrative track increases to five times the unlawful gain or statutory damages of RMB 250,000 (about £28,600 GBP) from previously a maximum fine of four times the unlawful gain or RMB 200,000 (about £22,900 GBP).
New Patent Law Article 69 differentiates between enforcement administrative agencies and adjudicating administrative agencies. The former refers to various levels of Administrative Offices for Market Regulation, and the latter to the CNIPA and local/regional Intellectual Property Offices. Enforcement administrative agencies are now specifically granted stronger administrative powers than adjudicating administrative agencies. Specifically, an adjudicating administrative agency may conduct questioning of the involved parties and examination of sites and products relating to the infringement in a patent infringement dispute, whereas an enforcement administrative agency may additionally seize or detain counterfeit products and conduct evidence examination and reproduction.
Under the judicial track, Patent Law Article 71 newly-establishes punitive damages of up to five times the determined damages are available for willful infringement, and the maximum statutory damages increase to RMB 5,000,000 (about £572,000 GBP) from the previous maximum of RMB 1,000,000 (about £114,400 GBP).
In a clear message to discourage infringers, new Patent Law Article 71 provides explicit evidentiary burden-shifting. Where a plaintiff has performed due diligence to produce evidence but the infringer possesses the key infringement evidence, the evidentiary burden in proving damages will shift to the infringer. This codifies similar wording set forth in a judicial interpretation entitled “Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Patent Infringement Dispute Cases by the Supreme People’s Court (II)” issued by the Supreme People’s Court [法释〔2016〕1号, amended by 法释〔2020〕19号, which took effect on 1 January 2021 [Chinese text accessible at Supreme People’s Court’s website].
There are also changes relating to injunctions. New Patent Law Article 72 increases the scenarios under which pre-trial injunctions may be granted to include where a patentee or an interested party has evidence that someone is committing or is about to commit acts which hinders the realization of the patentee’s rights. New Patent Law Article 73 explicitly provides that a pre-trial injunction may be granted to preserve evidence in accordance with the law. Procedural requirements for the grant of a pre-trial injunction have been removed from new Patent Law Articles 72 and 73, which appears to impart more flexibility to the courts in determining whether to grant the injunction.
New Patent Law Article 74 increases the limitation period for infringement claims and claims for fees for exploitation during the interim protection period (which is from the publication to the grant of a patent application) from two years to three years. This removes the limitation period conflict between the previous Patent Law and the new Civil Procedure Law, which provides for a general three-year limitation period.
New Article 66 provides that, in an infringement dispute relating to a design or utility model, a patentee, an interested party or an alleged infringer may submit a patent evaluation report on its own initiative. This expands the list of allowed parties, as currently only a patentee or interested party may apply for a patent evaluation report to be issued by the CNIPA. Draft Implementing Regulations Rule 56 further elaborates that anyone may apply for a patent evaluation report once the grant of the patent is announced. Draft Implementing Regulations Rule 57 provides only one patent evaluation report will be issued where there are more than one request therefor. Nevertheless, the same draft rule states anyone may access the patent evaluation report, suggesting any report will go into the file.
Pursuant to new Patent Law Article 52, the “dual-track” scheme will also be applicable to disputes involving open licences, which concept is just introduced by way of the new amendments. Open licences are discussed under the Section VI below.
The “dual-track” scheme also appears applicable to patent linkage disputes. As noted above in Section II, an administrative validity ruling may be requested for a pharmaceutical patent. The Supreme People’s Court just released the draft of “Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Drug Marketing Review and Approval of Patent” for public comment [Chinese text accessible at website of Supreme People’s Court]. According to this judicial interpretation, the Beijing Intellectual Property Court will have jurisdiction over trials of patent linkage disputes.
VI. Open Licensing
To promote the Open Licensing programme previously-announced and to encourage domestic use of patented technologies, the amendments introduce measures encouraging technology transfer, such as reduced annuity fees.
New Patent Law Article 51 sets forth an open licensing mechanism for the purpose of promoting technology transfer and exploitation of patents. Specifically, an open licence is established where a patentee files a written request with the CNIPA, indicating its willingness to license its patent to any entity or individual along with its intended licence fees. The CNIPA will publish the open licence. For an open licence of a utility model or design, a patent evaluation report must be submitted along with the request. A patentee may revoke its open licence at any time, without retroactive effect on licences granted before the revocation.
Pursuant to new Patent Law Article 51, a patentee is entitled to in annuity fees during the period of open licensing. However, the specific reduction amount is neither set forth in this article, nor addressed in the draft Implementing Regulations. The patentee may also grant a regular licence to a licensee despite its open licence, but in such cases the regular licence may not be an exclusive or sole licence. For any dispute arising from an open licence, the patentee and the licensee may resort to the CNIPA or the courts for dispute resolution as noted above under Section V.
Draft Implementing Regulations Rule 72 further provides for the recording, publication, and revocation of an open license. It also provides for situations where an open license should be rejected for publication.
At the moment it is unclear as to how this open licensing scheme relates to standard-essential patent licensing.
Non-Novelty Destroying Disclosure
New Patent Law Article 24 provides that an invention will not lose its novelty if the application is filed within 6 months from its initial disclosure and the initial disclosure is made in the public interest. This amendment appears to be in response to the emergency measures taken during the COVID-19 outbreak.
As noted above under Section III, a design application will be able to take advantage of domestic priority pursuant to new Patent Law Article 29, and to that end a copy of the priority document should be submitted within 3 months from the filing of the subsequent application pursuant to new Patent Law Article 30.
The deadline for submitting a priority document for an invention patent or utility model is postponed to 16 months from the filing date of the priority application, pursuant to new Patent Law Article 30.
One potential noticeable change relating to priority claiming is the possibility of restoring priority. Draft Implementing Regulations Rule 31.1 provides for priority restoration of domestic Chinese invention patent or utility model applications, and draft Implementing Regulations Rule 110.1 provides for that of Chinese national phase PCT applications. If draft Implementing Regulations Rule 110.1 is passed, it means that China withdraws its notification of incompatibility with its national law under PCT Rules 49ter.1(g) and 49ter.2(h).