Review Of The 4th Amendment Of China’s Patent Law

On 17 October 2020, twelve years after the third amendment of China’s Patent Law, the fourth amendment (hereinafter, ‘the Amendment’) was approved by the Standing Committee of the National People’s Congress. The Amendment will come into effect on 1 June 2021. Many of these changes were a part of the proposed draft amendments released in 2019 and 2020.

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To have a brief overview, the Amendment, firstly, enhanced the protection of patent rights in China by awarding increased punitive damages, increased statutory damage, reversed burden of proof, increased fine for passing‐off, and extended time limit for initiating litigation; secondly, by redefining design, extending the term of design patent and providing for ‘partial designs’; thirdly, by extending the term of the patent and introducing patent linkage systems; fourthly, by providing for open license system; fifthly, by making changes to patent term adjustment, grace period provision, patent right evaluation report and extending the deadline to submit priority documents; and sixthly, by introducing additional changes like the anti‐monopoly provision.

HIGHLIGHTS OF THE AMENDMENT

Article 71 of the Amendment provides for willful infringement and associated punitive damages which were missing in the previous statute. In cases of serious willful patent infringement, punitive damages can be up to five times the original damages. The amount of damages for patent right infringement shall be determined by ascertaining the amount of damages in accordance with patentee’s actual losses caused by the infringement or the benefits acquired by the infringer through the infringement. Where it is difficult to determine the same, the amount of damages may be determined according to the reasonably multiples of the royalties of that patent. If it is difficult to determine the losses of the patentee, benefits of the infringer, or royalties of the patent, the people’s court may determine the amount of compensation within the range from RMB30,000 to RMB5,000,000 on the basis of various factors. This is referred to as statutory damage and its lower and upper limits are raised to 3 times and 5 times respectively as opposed to the present statute.

Furthermore, in cases where the right holder has tried his best to provide evidence but the account book and materials related to the infringement are mainly in the possession of the infringer, Article 71 of the Amendment grants the discretionary power to the people’s court to order the infringer to provide the account book and materials related to the infringement acts for determining the amount of damages.Where the infringer fails to provide the account book or materials or provide fake account book or materials, the people’s court may determine the amount of damages based on the claim made and the evidence provided by the right holder.

Article 68 of the Amendment provides that in patent passing‐off cases, a patent enforcement authority can confiscate the illegal gains of the party who passes off a patent and impose a fine of five times the illegal gain at the most along with civil liability.The current limit of the fine is four times the illegal gain. In case of no illegal gain or an illegal gain of less than RMB50,000, a patent enforcement authority may impose a fine of up to RMB250,000.

Article 74 of the Amendment extends the time limit for taking legal action against patent right infringement to three years as opposed to the current two years, commencing from the date when the patentee or interested party knows or should have known of the infringing activity and the infringer. If a patentee wants to sue another party for compensation during the period from the publication of the invention patent application to the grant of the patent right, the time limit would commence from the date when the patentee knows or should have known of the use of the patent by that other party.

Article 42 of the Amendment extends the term of a design patent to 15 years from 10 years provision in current statute.

Article 2 of the Amendment redefines design as any new design of the shape, the pattern or their combination, or the combination of the color with shape or pattern, of the whole or a part of a product, which creates an aesthetic feeling and is fit for industrial application. This makes it possible to protect a portion of a product, often referred to as “partial design”.

The allowance of partial design also renders design patent protection for graphic user interface (GUI) more useful. A design patent may be used to protect the design of the GUI itself or some parts of it, with the other parts of the product or GUI itself respectively disclaimed and presented by dotted lines.

Article 29 of the Amendment includes a domestic priority for design applications, which is not available under the current statute. If within 6 months from the date of first filing an application for a design patent in China, the applicant files another design application in China for the same subject matter, the applicant may enjoy the right of priority.

Article 42 of the Amendment provides for pharmaceutical patent term compensation by CNIPA (China National Intellectual Property Administration) at the request of the patentee to compensate for the long regulatory approval period which effectively reduces the patent protection term for pharmaceutical patents. The total compensation period is a maximum of 5 years. For new drugs being granted regulatory approval to be put on the market, the total patent term shall not exceed 14 years. The Article further provides that where an invention patent right was granted after four years from the filing date of the invention patent application and after three years from the date of the substantive examination request, CNIPA shall, at the request of the patentee, provide compensation for the term of the patent with respect to the unreasonable delay in the examination stage of the invention patent.

Article 76 of the Amendment provides for a patent linkage system for pharmaceutical patents. Under this provision, the patentee and the regulatory approval conductor can bring a patent infringement dispute before the court or the local patent administrative office. China’s pharmaceutical regulatory body can make a decision on whether to suspend the regulatory approval process for said medicine based on the judgment from the court or local patent office. This regulatory body will work with the CNIPA to make detailed guides on the patent linkage system.

Articles 50 to 52 of the Amendment lays down an “Open License” system to encourage the use of patents in China. A patentee may express in writing to CNIPA its willingness to license their patents to anyone and specify relevant royalties and method of payment. CNIPA will announce the patentee’s statement and offer an open license. The Patent right evaluation report has to be provided with the offer of an open license for utility model or design patent. The patentee can withdraw the open license at any time, but licenses granted before such withdrawal will not be affected.

According to Article 51, anyone that complies with the above provision automatically gets a license. The patentee that offers the open license and potential licensees can further negotiate on license fees. During the period of open licensing, a sole license or exclusive license will not be available whilst a normal license is still possible. Licensors and licensees should settle disputes among themselves. If negotiations break down, they may request mediation or may file lawsuits.

According to Article 24 of the Amendment, disclosure of an invention for the public interest in case of a national emergency can enjoy the grace period of 6 months.

The Amendment also provides that relevant parties from both sides of the lawsuit, i.e. the patentee and the defendant may request the patent right evaluation report produced by CNIPA. The defendants, under the current patent regime, are not permitted to request the evaluation report.

Under Article 30 of the Amendment, the deadline for submitting priority documents is extended from 3 months from claiming priority to 16 months from the priority date in cases of inventions or utility models. Copies of priority documents for claiming priority from a design application should be submitted within 3 months from filing an application for a design patent.

One of the most important highlights of the Amendment has been an introduction of Article 20 which provides that the application for and the use of patent rights should follow the principle of good faith. Abuse of patent rights to exclude or restrict competition, which constitutes monopolistic behavior, shall be dealt with in accordance with the Anti‐Monopoly Law of China. Article 22 further provides for the promotion of the dissemination of public information by improving the public service system of patent information by the patent office. Article 25 expands the list of patent-ineligible subject matter, adding “methods of nuclear transformation and substances obtained by said method.”

Author: Manasvi Sharma, a student of B.A.LL.B (Hons.), Maharashtra National Law University, Aurangabad, intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at [email protected].