Open Standards Update: Standards Activity Review

On December 27, 2008, the Standing Committee of The National People's Congress passed the newly revised Patent Law of the PRC. Here are the key provisions of this amendment and corresponding summarized discussions.

* Article 9.1 provides that only one patent can be granted to one invention; However, where the applicant applies for both a utility model patent and an invention patent on the same day for the same invention, during the term of the utility model patent (if being granted), if the applicant declares to waive the utility model patent, the invention patent can be granted.

The patent applicant sometimes prefers to apply for both an invention patent and a utility model patent for the same invention for the purpose of prolonging patent protection because (1) there is no substantial examination for a utility model patent application in contrast to invention patent application; (2) by applying a utility model patent, the applicant may get a utility patent protection earlier than an invention patent protection; and (3) then after the invention patent application enters into the substantial examination, the applicant may waive the utility model patent for purpose of grant of the invention patent. Article 9.1 of this amendment positively confirms this strategy if the conditions required are met.

* Article 10.2 provides that where a Chinese entity or individual is to assign the right to apply for a patent or a patent right to a foreigner or a foreign enterprise or any foreign organization, it or he shall go through the formalities by the 4 relevant laws and administrative regulations.

According to the Regulations on Technology Export and Import (2002), any technology can be categorized as being forbidden from export, being restricted for export (i.e. its export must be approved by the administrative authority), or being free for export. As for the technology being restricted for export, if the assignee of the patent is a foreign entity, the approval by the Ministry of Commerce must be first obtained before entering into the assignment proceedings by SIPO; as for the technology being free for export, the filing certificate issued by the Ministry of Commerce must be first obtained before entering into the assignment proceedings by SIPO.

* Article 11.2 provides that no entity or individual may, without permission of the patentee, exploit a design patent, that is to say, they shall not make, promise to sell, sell, or import the product incorporating the patented design, for commercial purposes.

The legal protection for a design patent is consolidated by supplementing Promise to Sell as being an infringement on a design patent. Promise to Sell means expressing the intention to sell by advertisement, publicly exhibition or any other similar means.

* Article 15.1 provides that if there is any agreement between the joint owners of the right to apply for a patent, or a patent right regarding the exploitation of the relevant right, this agreement prevails. However, otherwise any of the joint owners may exploit the patent independently or license others to exploit the patent on a non-exclusive basis. In the case of licensing others to exploit the patent, royalties charged shall be distributed among the joint owners.

Please note that only licensing on a non-exclusive basis can be unilaterally granted by a patent joint owner.

* Article 20.1 provides that where an entity or individual intends to file an application in a foreign country for patenting an invention or utility model accomplished in China, it or he shall report in advance to the patent administrative department of the State Council for confidentiality review. The formalities and term of such confidentiality review are specified by the State Council. Article 20.4 provides that as to an invention or utility model for which a patent application is filed in a foreign country in violation of article 20.1, no patent will be granted to it by SIPO.

Some multi-national companies own, directly or indirectly, one or more R&D centers located in China. The invention made out of those R&D centers is probably deemed as being accomplished in China. In event that the applicant first violates article 20.1(i.e. first applies such invention accomplished in China to another country), and then applies the same invention to SIPO, SIPO will probably not actively demand the applicant to clarify such violation. Therefore, article 20.1 may serve mainly as a legal ground in patent invalidating proceedings. How to determine whether a technology is accomplished in China? Under most circumstances, if the technology is accomplished through a laboratory located in China and the researchers are working in China, then such technology is deemed to be accomplished in China, regardless of its IP ownership.

* Article 22.2 provides that novelty means that the invention or utility model is not an existing technology.

The formerly adopted concepts of Disclosure by Publication and Disclosure by Domestic Public Use are both replaced by the concept of Existing Technology. If the invention is an existing technology (i.e. being publicly known), then it loses novelty regardless of how it is disclosed.

* Article 23.2 provides that as compared with the existing design or combination of the existing designs, the design to be patented must have distinctive feature(s).

A higher threshold for patenting a design is imposed. Besides novelty, a design patent must be sufficiently distinctive from the existing design(s).

* Article 31.2 provides that as to two or more similar designs for the same product, an application containing these similar designs for the same product as a package may be filed.

The applicant may prefer to apply several similar designs for the same product. The purpose is to exclude the adverse possibility as much as possible of circumventing infringement by any one exploiting a design not identical with but similar to the patented design while claiming that the exploited one is different from the patented one. Article 31.2 provides a lawful channel to realize this purpose for the design patent applicant.

* Article 48 provides that the patent administrative department of the State Council may, upon the request of a capable entity or individual, grant it or him a compulsory license to exploit an invention patent or a utility model patent if

(1) the patentee, after the lapse of three years from the date when such patent is granted and after the lapse of four years from the date when such patent application is filed, fails to exploit or to fully exploit such patent without any justifiable reason; or
(2) the patentee’s act of exercising such patent is legally ruled as a monopolizing act and the compulsory license to be granted is to eliminate or reduce the adverse effects by such monopolizing act on competition.

This provision relates to compulsory licensing. As for the preceding paragraph (1), at least two issues must be raised. The first issue is proof burden, and it is reasonable to demand the patentee to undertake the burden to prove the existence of exploitation. The second issue is how to construct the word Exploit. Does Exploit mean the stage of product being manufactured and marketed, or being actually used in event of a process patent? Does Exploit also include the stage of being licensed? The answers thereof may be subject to the actual conditions. If the patentee is a manufacturer, Exploit may probably mean the stage of product being manufactured and marketed, or being actually used in event of a process patent; however, if the patentee is a R&D entity, Exploit may probably include the stage of being licensed.

* Article 62 provides that in a patent infringement dispute, if the accused infringer has evidence to prove that the technology or design it or he exploits is an existing technology or design, no patent infringement is constituted.

This provision confirms the defense of exploiting existing technology/design as a lawful defense to challenge the infringement claim. Therefore, in a patent infringement lawsuit, the defendant may assert the defense of exploiting existing technology/design without initiating the patent invalidating proceedings.

* Article 65.2 provides that if it is difficult to determine the losses incurred to the patentee, the gains obtained by the infringer, and the royalties for the infringed patent, the court may award damages ranging from 10, 000 RMB to one million RMB based on the type of the patent, the nature and particulars of the infringement as well as other conditions concerned.

The statutory damages for patent infringement are raised with the minimum from 5000 RMB modified to 10,000RMB, and the maximum from 500,000RMB modified to one million RMB.

* Article 69.5 provides that none of the following circumstances shall be deemed an infringement upon a patent right: (5) (a) producing, using or importing patented medicine or patented medicinal equipment for the purpose of providing the information as required for administrative examination and approval, and (b) producing and importing the patented medicine or patented medicinal equipment exclusively for the said purpose.

The administrative proceedings for a drug approval include the clinical R&D and the new drug filing or the generic drug filing. These proceedings consume a considerable term for completion. According to the amended article 69.5, a company may enter into the stage of the clinical R&D, the new drug filing, the generic drug filing or applying for manufacturing licensing, prior to the expiration of relevant patents without fearing claims of patent infringement. Once the patent concerned expires, then the company may immediately begin to manufacture and market relevant products.