China’s Revised Patent Examination Guidelines (Draft): implications for business

Insights into the “patent quality” landscape in China are increasingly important for understanding wider issues ranging from the types of risks businesses face when operating in China to the direction of the innovation-economy in the country. By way of one insight, this article discusses a recent initiative from the State Intellectual Property Office (SIPO) to improve patent quality in China and its implications for businesses.

Ongoing concerns

Utility model patents and design patents in China are cheaper and easier to obtain than invention patents because of lower patentability thresholds and because they do not undergo a rigorous mandatory examination. As a result, low quality utility model and design patents run a higher risk of being granted than low quality invention patents.

It is not possible to fully assess to what extent the millions of currently granted utility model and design patents in China are of low quality. But 2010 statistics from SIPO indicate that utility models and design patents face notably higher invalidation rates before the Patent Re-Examination Board than invention patents (125% and 48% higher, respectively).  Further, there have been concerning cases in China where utility model patents in particular were filed on inventions that were already part of the prior art and were used as harassment tools, barriers to entry and restrictions on freedom to operate.

The changes

On 4 February 2013, the State Intellectual Property Office (SIPO) released the revised Patent Examination Guidelines (Draft) 《专利审查指南修改草案(征求意见稿)》 (the “draft revised Guidelines”) for public comment.  The changes, while not extensive, encourage more thorough examination of the novelty component of utility model patents and design patents in China than the  existing (2010) measures (the “current Guidelines”).

Currently, SIPO’s examiners are generally not required to consider whether applications for utility models obviously lack novelty. They have the discretion to do so, but it is widely reported that this is rarely exercised. Under the draft revised Guidelines, examiners would be required to more thoroughly consider the issue.

Similar provisions for considering whether an application for a design patent is an obvious copy of a prior design are also contained in the draft revised Guidelines.

In summary, the revisions encourage more thorough examination of utility models and design patents than the current Guidelines. The provisions are narrow, however, and the measures stop short of explicitly mandating a search when considering obvious substantive flaws in the applications.

Implications

The proposed changes are welcome. If the draft revised Guidelines take effect, they will improve the chances that low quality/‘junk’ utility model and design patent applications in China will be rejected. This in turn could limit patent disputes that would have resulted from the assertion of junk patents. And simply by limiting entry of new patents with low or no value from the landscape, this would reduce the time and money spent by market entrants on assessing and hedging against the risk of infringement.

The revisions would also be another small step towards stimulating higher quality patents by creating a greater hurdle for junk patent applications to be granted. Also, they could enable government resources to be more focused on supporting true innovation, rather than just encouraging utility model and design patent filing as a numbers game.

In theory, all of these impacts could reduce risk for market entrants and better stimulate innovation. But, in practice, much will depend on how diligently the provisions are interpreted and applied. Without the examiner being required to conduct a prior art search, s/he will generally be relying on his/her own knowledge; and, absent strict requirements enforced by an oversight/comeback mechanism, there appears to be little incentive for examiners to actually conduct a comprehensive novelty examination.

If the measures are to have real effect, SIPO would need to commit more resources to training and execution of examinations. Those costs would likely in part be passed on to patent applicants, resulting in higher utility model and design patent application fees and longer times to grant.

Conclusion

The draft revisions to the Patent Examination Guidelines encourage more thorough examination of the novelty component of utility models and design patents. These revisions, if adopted, could reduce risk associated for market entrants in China, and could stimulate innovation in China. However, much will turn on SIPO’s commitment to this becoming a real measure to eliminate junk patent filings. That will require a commitment of resources, which could lead to higher utility model and design patent application fees and longer times to grant.

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