TEN HIGHLIGHTS OF CHINA’S NEW PATENT LAW

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Written by Mr. Jian Xu, IP Expert and collaborator of the China IPR SME Helpdesk

On 17 October 2020, China approved the fourth amendment to the China Patent Law (CPL), which will take effect on 1 June 2021. It has been 12 years since the last amendment made in 2008, so there a number of notable changes. Below is a brief summary of the highlights of the new CPL.

Design patents

There are two significant changes to the design patent in China via design patent term extension and the introduction of partial designs.

1. Partial design allowed

“Partial designs” is formally introduced in China. This is in line with international practice such as in the USA, Europe, UK, Japan and Korea. A significant boost of design filing activity can be expected due to allowance of this new category of design patents.

2. Design patent term extended to 15 years

The term of design protection has extended from 10 years to 15 years. This signals that China is under preparation to join the Hague system, which stipulates a minimum of 15 years protection term for member countries.

Phamarceutical patents

Another significant change is in the area of pharmaceutical patents through patent term compensation and introduction of patent linkage system. Continue reading “TEN HIGHLIGHTS OF CHINA’S NEW PATENT LAW” »

Revision of PRC Patent Law

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Charles Feng
Partner Attorney-at-Law
East&Concord Partners

On October 17 2020, Xinhua News Agency revealed the progress of the revision of eight laws, which includes the fourth revision of the PRC Patent Law (the “Law”). The revision attracted huge attention from international IP communities as it addressed multiple issues that has been awaited by international and domestic IP owners.
According to the disclosed information, the revision will substantially strengthen the protection in multiple aspects.

I. Enhancement of Protection for Interests of Patentee
1. Increase of damages against patent infringements
2. Perfection of the system of burden of proof
3. Addition of principle of honesty and trust in patent law
4. Perfection of the administrative protective mechanism against patents
5. Addition of patent term compensation system as well as patent infringement solution mechanism in earlier stage

II. Promotion of implementation of patents
1. Perfection of employment invention system
2. Addition of open licensing system for patents
3. Perfection of system for grant of design patents
4. Addition of situation of grace period of novelty
5. Perfection of patent evaluation report system

III. Enhancement of protection of patents
1. Addition of punitive damages
Chinese courts are authorized to rule the punitive damages as much as one to five times of amount as calculated on basis loss of right owner, profits made by infringer as well as multiplies of royalties.
2. Increase of statutory damages
The statutory damages are increased from CNY 3 million to CNY 5 million, the minimum amount of damages is increased to CNY 30 thousand

IV. Perfection of Design patent system
1. Addition of protection against partial design
2. Extension of term of design patent protection from 10 years to 15 years
3. Addition of domestic priority system against design patents

V. Addition of situation for exception of loss of novelty
In order to deal with emergent situation including control of pandemic as well as promote the timely use of invention and creation to solve the public health issue, the revision added the situation “when the situation of emergency or specialty occur, the first publication for the public interests” as an “exception for loss of novelty”.

Mr. Feng is an IP Specialist with substantial experience on intellectual property and anti-trust law. Mr. Feng was ranked as one of Top 15 China IP Lawyers by Asian Legal Business under Thomson Reuters as well as ranked as Top IP Attorney by WTR in 2020. Mr. Feng was also recommended by LegalBand as Leading IP litigator and Leading non-litigation lawyer consecutively from 2016 through 2020. A case represented by Mr. Feng was ranked as one of 50 Model IP Cases by Supreme People’s Court of China in 2013.

Email:   Charlesfeng@ecp-ip.com ; fchao7847@hotmail.com

Cell Phone: +86-13910336970  Wechat: Fchao7847

A PRACTICAL OVERVIEW OF THE DOCTRINE OF EQUIVALENCE IN CHINA

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Written by Mr. Jian Xu, IP Expert and collaborator of the China IPR SME Helpdesk

Equivalence infringement, or the doctrine of equivalence, was officially introduced into Chinese patent law legislation in 2009, through the implementation of the Chinese Supreme Court’s judicial interpretation, which stated the following:

Equivalent features shall mean features which use identical means to achieve identical functions and realise identical effects, and which can be contemplated by people skilled in the art without creative effort.

The Chinese court has since developed a three-step method to determine equivalence infringement, which is conveniently referred to by the Chinese legal community as the “three (basically identical) plus one (obviousness)” approach.

Continue reading “A PRACTICAL OVERVIEW OF THE DOCTRINE OF EQUIVALENCE IN CHINA” »

EXTRAS FOR EXPERTS: HOW TO SECURE AND ENFORCE YOUR LEGAL RIGHTS IN THE FIRST-EVER DIGITAL CANTON FAIR

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Written by Jamie Rowlands, IP Expert and collaborator of the China IPR SME Helpdesk

COVID-19 is rapidly changing the way we live as well as the way we do business. Therefore, the Canton Fair, China’s largest import and export fair, will unsurprisingly need to revolutionise how its 127th event is ran when it takes place in Guangzhou between 14th and 25th June. It will move the business from offline to online and will go completely digital for the first time.

This article looks at how a digital Canton Fair will work in practice and, more importantly, how it could impact the strategy for companies who might need to enforce their IP.

What is happening to the sellers and buyers?

Sellers

The sellers will have the capability to upload the introductions in advance including the pictures, descriptions and even the technology, etc., which the products apply to the trade platform.

With the AR technology, all-round 3D display for the products could be available. All the above information could be previewed by the attendees via the internet before the trade.

Buyers

As a buyer, it will be possible to access real time 24-hour live shows that display the products and allows real-time dialogue with the sellers. All the live shows can be played back at the convenience of the buyers.

The buyers will be able to access the Canton Fair online and easily find products they are interested in. They will be able to look around and negotiate deals as effectively as if they were physically at the Canton Fair, but without the crowds and queues.

Canton Fair has recently published step-by step instructions on its official website, which could be a useful reference.

What does this mean for IP protection?

Even though the Canton Fair has gone digital, the good news is that the organisers have introduced a virtual IP Complaints Centre where it will still be possible for IP owners to make complaints against infringing sellers. The detail of the virtual IP Complaints Centre can be found on the Canton Fair website.

The process of making a virtual complaint is broadly similar to the process that was used in previous physical Canton Fairs. But, obviously, there are also differences to consider – some that could be helpful for IP owners and some less so.

Potential positives

There are a number of potential positives.

Firstly, online searching. Products and sellers will be easily searchable online, which could make it easier and quicker to target products that may be relevant from an infringement perspective.

Secondly, online takedown. Complaints will, of course, be filed online and takedowns can, therefore, be completed rapidly once infringements are identified. It is a positive that Customs will also join the live stream and assist the trade fair online, which enable the Customs actions to be instant if necessary for IP protection.

Thirdly, all-weather surveillance. In addition, it should make it more difficult for sellers to hide the alleged infringing products “under the table” which, in our experience, happened relatively regularly. For example, it was not uncommon to patrol the Canton Fair on the first day and find none or very few infringing products, only to find on the second day there were many more infringing products on show because infringing sellers knew that the first day was when most of the foreign companies patrolled the Canton Fair. The transparency of an online virtual Canton Fair remove some obstacles of targeting alleged infringing products.

Possible challenges and counter measures

However, there are likely to be challenges at the same time.

Firstly, evidence preservation. In our view, one of the biggest difficulties in the virtual Canton Fair will be the evidence gathering.

Online trade leads to more uncertainty. Less physical evidence will undoubtedly cause complication to fix the evidence. In judicial practice, companies sometimes have difficulties bringing cases to court due to challenges in getting and preserving the substantial evidence. However, especially but not limited for the IPRs such as copyright, trademark and design patent, we are happy to help ease your burden by preserving evidence by doing the webpage notarization and time stamp certification, as well as notarised purchasing on your behalf.

Secondly, infringement identification. From the perspective of identifying infringement, infringement comparison would face challenges without having the physical products to support the complaint especially for patent infringement (including invention patents, utility models and design patent infringement).

This issue could be solved by applying the 3D-display in some degree when comparing the products with the design patent, trademark, copyright, etc. But when it comes to the invention patent and utility model, it is still questionable. Unlike the copyright, trademark and design patent, which mostly can be analysed using the pictures and text, invention patent and utility model shall be compared with the physical products in hand.

There is a possibility that once the IP protection receives the complaints from the right holder, it requires the sellers to send the physical products for comparison offline. However, we still need to wait and see the official detailed guidance.

Your IP enforcement strategy in the future

The world has suddenly changed due to COVID-19. It is predicted that the influence may last for several years and possibly much longer. This is very likely to quicken the pace of the development of digital trade more generally. The IP protection strategy needs to be adjusted accordingly to adapt to this shifting trend.

We have had very significant experience in assisting clients to protect their IP at the Canton Fair with great success. Therefore, we set out some helpful hints and tips below.

Before the Canton Fair: it is all about the preparation

  • Classify your IPRs. Identify your key IPRs and make sure they are registered in China.
  • Arrange your strategy in advance, i.e. to enforce your IP at the Canton Fair, or to use the fair as an opportunity to open a case as well as gathering evidence.
  • Prepare the documents. If you are going to enforce your IP, related documents should be prepared in advance, for example, certificate of registration, power of attorney, business license, etc.

During the Canton Fair: do not be hesitate to protect your IP

  • Make good use of the searching functions of the online Canton Fair. Pay attention to the products from previous infringers. This is a good opportunity to have an in-depth investigation.
  • Notarised purchasing or webpage notarisation can be carried out if you target an alleged infringer. Remember to download the record of the live show displaying the alleged infringing products and save the related information as evidence for further actions.
  • Check out the webpage for IP infringement complaints and learn how to effectively make a complaint. If the evidence gathering is completed, online complaints can be processed.
  • Don’t forget to assert your IP rights to the web visitor throughout the exhibition.

After the Canton Fair: follow up is critical

  • Follow up with the actions taken during the Canton Fair and the evidence gathering.
  • Check again if the infringer you targeted at the Canton Fair has stopped the infringement and keep monitoring if the sellers of similar products misuse your IP right.

Your corporate commercial solutions to the cross-border transaction

Do due diligence beforehand

  • Make sure that you do the due diligence on the potential business partners before each transaction. In previous years, when Canton Fairs took place offline, you were able to come and see, and have an intuitive understanding of the Chinese companies coming to the fair, including their staff and their actual products. They might even invite you to their factory or office where you could have a good look at what they could provide and how they are doing in their facility. However, this year, with the Canton Fair taking place online, buying through the online fair would be of no difference from buying on Alibaba or other B2B e-platforms, which makes doing your due diligence on your Chinese business partner much more important.

Be wary of potential fraud

  • As everything is happening virtually this year, it is very likely to attract fraud. If your “supplier” sends over their bank account information asking for payment for the goods, always double check with the contact person you deal with by phone before making any payment to re-confirm that the account information is indeed that of the supplier.
  • Contact your bank and call the police immediately if you think you have fallen for a scam.
  • You may also want to take good record of all documentation evidencing the transaction as a precaution, although this is a habit that you would need to have whether attending the fair online or offline.

Prepare for contract templates

  • Try to have a properly drafted contract or general terms and conditions attached to each order that you place, and ask the supplier to sign them when accepting the order. Although we understand that people in the business of international trade would prefer to have the legal documents as simple and straightforward as possible for proceeding with the transaction quickly, a properly drafted contract or terms and conditions, which does not necessarily need to be lengthy, will be worth the price when there is a dispute between you and the supplier.

This article was originally published on the website of the law firm Gowling WLG

The Latest Draft Amendments to the Chinese Patent Law

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Written by Paolo Beconcini, IP expert and collaborator of the China IPR SME Helpdesk

 

patent and related words

On July 3, 2020, China released the second draft amendments to the Patent Law. This second draft introduces significant changes to both the current Patent Law and the 2019 draft amendment. It also comes at a time when China is introducing significant legislative and judicial changes to other key IP rights, like new criteria for determination of infringement in administrative proceedings for trademark infringement, and more importantly, draft judicial regulations addressing the long disputed issues of protection of foreign trade secrets and the implementation of the commitment China recently assumed in this regard by signing the US-China Economic and Trade Agreement of January 15, 2020, also referred to as the Phase I Agreement. It remains to be seen whether all these amendments will go in the direction auspicated by the US and the EU, or whether and to what extent they may be the expression of China’s new protectionist policies and retaliation against alleged hostile foreign policies.

In the present blog we will review some of the major changes in the second draft amendment to the Patent Law and assess their likely impact on foreign businesses in China.

I.   Design Patents

Article 42.1 of the draft amendments extends the duration of a design patent to 15 years from its application date. Designs are registered patents that protect the aesthetic value of a product, where the design is original and adds commercial value to the product. The final approval of this provision would allow right holders to enjoy exclusivity for a longer period, increasing the right’s value and reducing the cost and risk of having to file for surrogate IP, such as copyright and 3D marks, to try prolonging the life of the design creation. Such surrogates have proven to be only partially successful in replacing design patents, especially when enforced in place of a design.

The current version of the Patent law generally does not allow protection of portions of a design. Right now, the only partial designs that can be protected are those parts of a product that can be used and sold separately from the main product. This means that only spare and replacement parts can theoretically be protected as design patents. In all other cases, the law only allows the applicant to include portions of its design that have a particular aesthetic value of their own by describing them in the verbal descriptive portion of the application. In particular, the current Patent Law excludes the patentability of portions of complete products using dotted lines.

The second draft amendments would eliminate these limitations and hindrances by introducing the patentability of partial designs. If the amendment is approved, all partial designs with no restriction will be eligible for patentability. The downside of this, especially considering the typical Chinese landscape and the fact that there is no substantive examination of design patent applications, will likely be the unchecked proliferation of junk designs . This will force legitimate rights’ holders to increase their budget for house cleaning, to reduce the risk of theft and trolling litigation.

II.   Patent Linkage

The proposed Patent Linkage provision provides that a patentee or interested party can initiate infringement proceedings (judicial or administrative) against a party who is seeking marketing authorization for a drug that falls within the scope of a patent recorded in the “Chinese Marketed Drug Patent Information Record Platform.” To utilize the proposed patent linkage provision, the patentee or the interested party will have to file civil or administrative proceedings before a People’s Court or the China National Intellectual Property Administration (“CNIPA”) within 30 days of the marketing authorization application being published by the competent drug administration. If the deadline passes without the patentee or interested party having filed a lawsuit, the party seeking the marketing authorization can file a legal action with a People’s Court or with the CNIPA to obtain a declaration of non-infringement.

The provision leaves a lot of critical points unclear and uncertain. First of all, it is not clear what the “Chinese Marketed Drug Patent Information Record Platform” is. Is it an already existing official database, like the Orange Book of the National Medical Products Administration, or a completely new repository or database? This will surely affect the type of patents registered therein and therefore the possibility for a patentee to qualify or not for patent linkage. Second, the jurisdiction of the courts is uncertain. The draft does not provide any indication of which court will have jurisdiction over the lawsuit and/or the declaratory action. Is it going to be that of the domicile of the patentee? That would contravene the general principles of the locus commissi delicti normally applied to patents. Also, it is not clear whether the pending of proceedings filed by the patentee will stay the market authorization process. Regarding the latter, the lack of express regulations may speak in favor of the market authorization not being immediately affected by the pending of linkage proceedings. However, a formal clarification would be welcome. Last but not least, there is no definition of “interested party”, although by analogy, we could safely surmise that this only includes the exclusive licensee.

One thing is certain —clarifications to the application of this new provision will be needed. Hopefully, they will be contained in a new set of amended implementing regulations to the Patent Law.

III.   Patent Terms Extension

By signature of the US-China Phase I Agreement of January 15, 2020, China committed to provide patent term extensions to compensate for unreasonable delays that occur in granting the patent or during pharmaceutical product marketing approval. Article 42.2 of the draft Patent Law provides that, if an invention patent has been granted after four years from the filing date or three years from the request for substantive examination, the patent owner may request compensation for the unreasonable delay in granting the invention patent, except for the unreasonable delay caused by the applicant. This provision seems to implement the corresponding commitment of Section D, article 1.12.2.(a) of the Phase I Agreement. In practice, and in order to fully comply with the agreement, China will have to issue implementing regulations to arrange for a process to determine the exact period of extension of the patent validity.

As to pharmaceutical patents, article 42.3 of the draft amendments provides that the duration of patents of innovative pharmaceuticals for which patent terms was lost during the regulatory approval period, when a drug cannot yet be marketed, will be extended as well. However, the compensation time cannot exceed five years, and the total effective patent term after the new drug is authorised to be on market shall not exceed 14 years. On the surface, this norm seems to comply with the stipulation of article 1.12.2(b) of Phase I Agreement. However, the real scope of such regulation remains uncertain due to the unclear definition of “new drug” and whether it should be limited to one that has been simultaneously applied for authorization in China and other jurisdictions or not. Further normative clarification is needed to understand the effective application and scope of this provision, and whether it indeed complies with the spirit of the corresponding norm of the Phase I Agreement.

IV.   COVID-19 Exemptions to Novelty Destroying Disclosures

China’s patent law is very strict when providing exceptions to novelty destroying disclosures (grace period disclosures). Traditionally, a disclosure of the invention without the consent of the right holder is exempted only if it occurred within six months from the date of filing. Any voluntary disclosure is always novelty destroying unless related to exhibitions sponsored or recognized by the Chinese government, or published for the first time at a specified academic or technological conference. The second draft adds a third case in which a voluntary disclosure of the invention will not be novelty destroying when occurring within six months prior to the date of filing. This is the case of the invention that is disclosed for the first time for the public interest in time of a national emergency or exceptional circumstances. It seems to be custom made for inventions related to the current emergency situation caused by the worldwide spread of the COVID-19 virus. Aside from the evident emergency caused by an epidemic, it remains to be seen what other situations could be considered as emergency and exceptional circumstances. Would an economic, political or trade crisis unrelated to a public health situation or a war, count as such an emergency?

V.   Enforcement and Damages

In China it is often difficult to provide evidence to support a specific claim for damage compensation in a patent enforcement action. The absence of discovery, the difficulty of convincing a judge to conduct further investigations on accounting records and other relevant documents of the defendant, and the illicit bookkeeping practices of many Chinese firms, make it very difficult to obtain evidence that meets the strict probatory standards and supports realistic damage compensation claims. For this reason, and as a palliative in most cases, the law left it to the discretion of the judges to determine the amount of reasonable damages. These are the so called statutory damages set forth by the Patent Law.

The problem, aside from the inevitable discretion of the judge, is that these damages were capped in a range going from a minimum of RMB10,000 (USD1,450) to RMB 1,000,000 (about USD145,000). These caps are far from adequate, especially when we consider that litigation involving foreign patentees in China is rare compared to litigation among local parties, and is normally filed in severe kinds of infringements. The first draft of the patent law amendment realized such shortcoming and proposed an increase of the range to RMB100,000-RMB5,000,000. This was surely an improvement. However, the second reading of the draft amendments now under scrutiny, has changed this again, setting only an upper ceiling of RMB5,000,000 and eliminating the minimum amount. To this problem we add that the statutory damage received is effectively reduced by any reasonable expense that the patentee has incurred in order to stop the infringing act! This is definitely a serious problem, especially when the patentee/plaintiff is not able to collect evidence on its own to eliminate his reliance on statutory damages.

In this respect, the draft seems to help right holders to reach the required evidence threshold by introducing some key presumptions regarding evidence of illicit profit of the defendant. The new draft amendment provides now that, in order to determine the amount for compensation, where the right holder has endeavored to present evidence and the related account books or materials are mainly in control by the accused infringer, the People’s Court may order the defendant to provide those books and materials relating to the infringing conduct. If the defendant does not provide or provides false account books or materials, the People’s Court may refer to the right holder’s claims and evidence to rule on the amount of compensation. This norm may seem revolutionary, but a similar one was already introduced in the China Trademark law back in 2014! Also, the courts are generally willing to grant evidence preservation requests, even when litigation is ongoing, to preserve such books as evidence. Considering also how often the Chinese counterpart will try to provide only part of the required books or even disclose forged ones, we can see that the introduction of this provision in the draft amendment will not be a game-changer.

For these reasons, when a foreign patentee decides to litigate in China, it has to invest large resources in the pre-lawsuit investigations and evidence collection. This will be the most critical phase to ensure a successful outcome of a patent lawsuit.

VI.   Conclusion

It is likely that this second reading will be adopted into a new law amending the current Patent Law by the end of this year or the beginning of 2021. While the draft adds useful improvements, the real impact of some of the major changes is still unclear and will need additional implementing legislation. This is nothing new. Chinese general laws, like the Patent Law, are always drafted in very general terms, leaving more detailed regulations to a sub-set of rules and court interpretations. The main takeaway for now is that China IP is massively on the move and the ongoing changes are the reflection of external political and economic events. On one hand, changes are dictated by China’s desire to keep up with its long term policies of modernization its IP law system, initiated back in 2001 upon access to the WTO and the related TRIPS Agreement. On the other hand, critical changes are now dictated by China’s own policies, like Made in China 2025, or by mounting external pressure like the trade war. Whether all this will make it easier and better for foreigners to protect their IP in China remains to be seen.

This article was originally published on the website of the law firm Squire Patton Boggs