Proposed Revisions to the Chinese Patent Law (December 2015)

PatentToday’s blog post has been kindly brought to you by our IPR expert Mr. Toby Mak from Tee & Howe Intellectual Property Attorneys. In his article, which was first published in UK Chartered Institute of Patent Attorneys (CIPA) Journal,  Mr. Mak gives a detailed overview of the Chinese State Intellectual Property Office’s final draft of the proposed revisions to the Chinese Patent Law. 

In December 2015, the Chinese SIPO published their final draft of the proposed revisions (the proposal) to the Chinese Patent Law (the Law) to seek public opinion. Compare to the draft in April 2015 (please see my report in the May issue of the CIPA Journal), there are a lot of significant changes in this proposal, while many changes proposed in April 2015 were retained. This article reports these proposed revisions in the final draft, together with my comments.

As this article closely relates to mine published in May 2015 issue of the CIPA Journal, I will continue to use the same number scheme for various topics so that the two articles could be referred to each other.

To start with, let us have a look at the changes that have been retained and remain unchanged:

  1. Changes to Chinese design patent
  2. Introduction of protection to partial design
  3. Allowing priority to be claimed for domestic design patent application
  4. Extending maximum term of Chinese design patent to 15 years from 10 years 

III.  Changes to duty invention

  1. Inventor’s remuneration

VII. Allowing restoration and/or correction of priority claim

  1. Changes in damages
  2. Adducing evidence for damages
  3. Introduction of punitive damages
  1. Handling of online infringement

XII. Regulating patent attorneys

XIII. Introduction of “license as of right” mechanism

The wordings of the above topics in the Law remain largely unchanged (most remain the same, some with minor modifications and/or movement to a new article). Please refer to my May 2015 article for more details of the above topics.

For simplicity, I will only focus on changes that in my view are significant as follows. My comments are in brackets for ease of reference.

  1. PARTLY CHANGED – Changes to patent administrative enforcement

This would be the biggest changes to the Law in comparison with the April 2015 version. The following changes were proposed:

  1. Specifying duties of SIPO

The following duties of the SIPO (the one in Beijing) remain the same as in the April 2015 version:

Market supervision and management involving patent

Investigating and handling patent infringement and counterfeit patent acts with profound affect

Constructing patent information public service system, facilitating the transmission and utilization of patent information

Offering qualification of patent attorney, examining and approving patent agency in accordance with the law

The following have been changed:

Deleted – Local Intellectual Property Offices (IPOs) are no responsible for investigation on patent infringement and counterfeiting patent (i.e. patent passing-off).

(This may be due to concerns from all sides, local and foreign, criticizing this measure.

Frankly this is a big relief to me. Referring to my article published in Aug 2015 issue of the Journal, it can be realized that the SIPO does not have direct control over local IPOs, and this may lead to doubts on the capability and neutrality of these local IPOs to carry out the function of investigation on patent infringement. These may result in the removal of this measure from the proposed final draft. Therefore, with respect to this aspect of the revision to the Law, things now remain unchanged.)

  1. REMAINS UNCHANGED – Specifying compulsory enforcement of administrative mediation
  1. DELETED – Expansion of administrative actions on infringement

(The proposed final draft removed the power of confiscation and delivery up of infringement products and relevant tools from local administration, which could be considered as changes echoing removal of duty of local IPOs on patent infringement investigation. However, this deletion makes administrative enforcement of patent goes back to the original toothless situation, i.e. just can determine infringement, and “order to stop infringement” has no actual operations and is difficult to be enforced).

  1. REMAINS UNCHANGED – Additional administrative punishment on repeated and/or group infringement

III. PARTLY CHANGED – Changes to duty invention

  1. REMAINS UNCHANGED – Re-defining “duty invention” to exclude inventions devised mainly using material and technological conditions of the employer
  1. DELETED – Allowing inventor(s) to exploit if state-owned institutes being employer does not

(As I said in my May 2015 article, I am against this change as this may introduce uncertainties that would in fact decrease collaboration interests with outside parties. I must say I am glad that this has been removed, hopefully partly due to the comments I submitted.)

  1. PARTLY CHANGED – Principles on enforcing patent rights

In comparison to the April 2015 versions, the relevant article now also covers patent application rights.

(It is not sure of the reason and background of this addition. Would it be possible to target default assignment of ownership of IP rights developed during contract manufacturing, and/or influence by the Anti-monopoly guidelines (see my next article)? Specifically, it is not unusual that Chinese and Hong Kong contract manufacturers are required in their manufacturing contract to assign any IP rights developed by these manufacturers to their customers through contractual obligation, without any compensation, or they will not get the manufacturing contract in the first place. I have seen these contracts with my own eyes in my clients’ offices, and the above practice was what they told me. According to my understanding, this is against the anti-competition regulations in Europe, but will be grateful to any confirmation and education. This addition may be due to the influence of the Chinese anti-monopoly law, which is modeled from the US and European counterparts.)

  1. DELETED – Allowing methods of diagnosis and/or treatment for breeding animals

(I have to say that this deletion is very disappointing. This is a big backslash to the hope of opening the possibility of allowing methods of diagnosis and/or treatment for human. As now even those for breeding animals are not allowed, allowance of methods of diagnosis and/or treatment for human may not be seen in China in the next 20 years (i.e. it is unlikely to happen before my retirement…… I hope very badly that I am wrong on this point.)

VIII. PARTLY CHANGED – Changes to re-examination of rejected patent application, and handling of invalidation request

The only change is the removal of the requirement to timely publish re-examination and invalidation decisions.

(I have absolutely no idea of the reason of this change. On one hand the revision of the Law promises ease of access to patent information, on the other hand removing such timely publication requirement? Would this mean that the Chinese Patent Re-examination Board will go back to the current practice, i.e. re-examination/invalidation decisions are only published after possible appeals, for which the publication of the decision is not unusual to be delayed by one to two years due to appeals?)

  1. PARTLY CHANGED – Patentability evaluation report for utility model and design patent

The changes are as below:

  • Reverted to old version, such that submission of such report to People’s Courts and/or administration is not
  • However, defendant of an infringement case can request this report from the SIPO. In the current Law and the previous proposed revision, it was restricted that only the patentee and licensee whom have rights to sue can obtain this report from the SIPO.

(The change in 1) is disappointing, although in practice almost all courts require submission of this report. However, this would mean that problematic decision may be resulted if a court decided not to require submission of this report due to whatever reason.

Change in point 2) would be welcomed and considered as making sense – why should the defendant, whom got so heavily involved with the utility model or design, not be allowed to obtain this report? However, I hope this restriction could be lifted further to allow everyone to obtain such a report, which would be useful in many cases, for example a potential licensee. Still further, it would be even more helpful if these reports could be published once established.)

XIV. PARTLY CHANGED – Default licensing of standard-essential patents

The only change is relieving local IPOs from make a ruling on license fee, but the SIPO in Beijing could still make such license fee determination.

(The reason of this change may be similar to those of relieving local IPOs from investigation on patent infringement and counterfeiting patent (please see my comments above). Again, I believe companies having standard-essential patents would welcome this change.)

  1. PARTLY CHANGED – Clarifying rights to patent mortgage

The only change is the deletion of the provision that the mortgagee could ask for additional security from the mortgager if the value of the mortgaged patent depreciates.

(It is not sure of the reason of this removal. My guess may be due to technical and financial difficulties in enforcing this. In order to ask for additional security, the mortgagee has to show that the mortgaged patent depreciates. The next questions will then be who is going to do this, and who is going to pay for this, and naturally the mortgagee would not be too motivated to do these. Further, there will be contentions on the depreciation, and it could be expected that the mortgager will always fight back against this claim. Finally, it may turn out that the additional security obtained based on the proven depreciated value may not be able to cover the costs in the whole exercise.)

XVI. NEW – Indirect infringement article

This new article is as below:

Without the consent of the patentee, the parties whom knowingly supply product that is raw material, intermediate, component, and equipment specifically designed for implementing the patent to other parties infringing the patent, in the purpose of business, shall be jointly liable with the infringer.

Without the consent of the patentee, the parties who know the relevant products or methods are patented, in the purpose of business, induce other parties to infringe the patent, shall be jointly liable with the infringer.

(Although the wordings are very different from the equivalence in Europe, the readers could realize the effort of the Chinese law makers to introduce contributory infringement to the Chinese Patent Law. However, in fact this idea has long existed in the Chinese legal system, for example in Beijing Higher People’s Court’s guiding opinions 2001. The above new article merely codifies the Court’s practice into the Law, which is a good move in my view, as this more clearly clarifies rights to a patent. Apparently how this article would be effected have to wait and see, but as in other jurisdictions, I believe the keywords would be “knowingly” and “specifically”. However, with the high evidence requirements in China, I myself would not be too excited about this could be easily enforced. In any event, having one more gun (well, although the gunpowder may be quite damp) is always a good thing.)

My observations

Although many good changes remain (like the changes to design patents and handling of online infringement, and so on) there are many good changes in the proposed final draft (like changes to patent administrative enforcement and default licensing of standard-essential patents), the reason of some changes remain uncertain. Some changes are in fact moving things backward, and the most disappointing one is the removal of the allowance of methods of diagnosis and/or treatment for breeding animals.

However, this shows that the revision to the Chinese Patent Law become the results of striking a balance between various parties with conflicting interests, which in my view is the most interesting thing after all. This is because with the one-party-ruling system (Which party? You really need me to say it loud?), I would not expect such to surface. I hope this could mean that the Chinese system is becoming more modern, i.e. revision to the law is after real balancing of interest.

Toby MAK, Tee & Howe Intellectual Property Attorneys

This article was published in the March 2016  issue of the UK Chartered Institute of Patent Attorneys (CIPA) Journal, and is re-posted here with the kind permission from the UK CIPA. The UK CIPA Journal covers updates, articles and case law reviews on IP in the UK, Europe, and around the world. The Journal is available for subscription at GBP130 per year, and for free by becoming a foreign member at GBP405 per year. For more information on the CIPA Journal please email editor@cipa.org.uk

 

 

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