Third revision of Chinese Patent Law

China's top legislature approved the third revision of Patent Law on December 27, 2008. The revised law will take effect on October 1, 2009. Highlights of the amendments are listed below:

The amended Patent Law raises the administrative penalty and maximum statutory damages in cases of patent infringement. Statutory damages are awarded when it is hard to prove actual damages, profits or a licensing fee. When actual losses can be determined, damages are awarded based on actual losses suffered by the patentee. If actual losses cannot be determined, damages are awarded based on profits earned by the infringer. If earned profits cannot be determined, damages are awarded based on a multiple of a licensing fee. If a licensing fee still cannot be determined, the statutory damages are awarded between 10,000 to 1,000,000 RMB. The amendment increases the administrative penalty for patent infringement to four times from three times of the illicit profits and raises the penalty from 50,000 yuan to 200,000 yuan if there was no profit from infringement.

The process of a patent lawsuit has a change, too. The revision permits preserving evidences before instituting legal proceedings, other than preliminary injunction. The preservation will be overseen by the court and applied by the patentee or interested party. The applicant may be requested to provide guarantee, and court should make the preservation decision within 48 hours. Previously, preservation of property is available before instituting a lawsuit.

The amended law has also been strengthened in that an offer for sale is now considered an infringement of a design. Previously, infringement of designs only included making, selling, or importing.

The New Patent Law amends exhaustion of patent rights and adds Bolar exemption. It provides that where a product is sold by the patentee or a party authorized by the patentee, using, offering for sale, selling or importing of such product is not an infringement of the patent rights. It also exempts from infringing liabilities the making, using and importing of a patented medicine or medical device for regulatory approval purposes by a party intending to market such a product after expiration of the patent.

The amended law also provides that, where the infringement relates to a patent for utility model or a patent for design, the people's court or the administrative authority for patent affairs may ask the patentee to furnish a report of evaluation on the patent rights made by the State Intellectual Property Office (SIPO) as an evidence. Previously, a search report made by SIPO is necessary for enforcement of a patent for utility model.

The new law provides that where an alleged infringer in a patent infringement suit can provide evidences to prove that the technology or design it exploits was "existing technology" or “existing design” at the filing date of a patent at issue, no infringement should be decided. According to this amendment, there should be no need to wait for the result of a patent invalidation proceeding.

The New Patent Law amends compulsory licensing articles. It authorizes SIPO to grant a compulsory license if the patentee's exploitation of the patented technology is found either to be insufficient within three years from the grant date or four years from the filing date or to be eliminating or restricting competition (monopolizing). It also introduces circumstances under which SIPO may grant a compulsory license for making and exporting a patented medicine to certain countries and regions for the benefit of public health in accordance with international treaties. It also limits compulsory licensing the patents related to semiconductor technology only for public interest purpose or against monopolization. It adds that, except compulsory licensing against monopolization or for a patented medicine for the benefit of public health, the exploitation of a compulsory license should be mainly for supplying domestic market.

The amended Patent Law requires "absolute novelty" for invention patents, utility models and designs, which is applied internationally. Under this standard, patent examiners are required to consider public use evidences within China or abroad before the date of filing. Previously they only consider public use evidences within China.

Another important change is the removal of the requirement for all Chinese individuals and entities to first file applications in China for inventions made in China. The revision allowed Chinese individuals and entities to file their patents for the first time in other countries, not necessarily China. But the applicants must, before filing its patent applications in other countries, go through a secrecy review held by patent authorities of the State Council. If filing applications in other countries without undergoing the secrecy review, the applicant will not be granted patent rights for its corresponding Chinese filings, according to the new law.

The New Patent Law adds new requirements on patent filings for inventions made relying on genetic resources. It provides that for any invention made relying on genetic resources, the applicant must disclose the direct source and the original source of the genetic resources in the application. An explanation must be included if the applicant is unable to provide the source of the genetic resources. If the acquisition or use of genetic resources breaches any relevant laws and regulations in China, then no patent shall be granted for any invention made relying on such genetic resources.

The New Patent Law provides that the transfer of patent related rights to a foreign party shall comply with the applicable regulatory requirements, to remove the previous requirement inconsistent with the related regulations. The related Technology Import/Export Regulations provides that only the import/export of a "restricted" technology requires an administrative approval.

The New Patent Law adds a new provision which provides that where the patent rights to a patent or rights to apply for a patent are jointly owned, the exploitation of such rights shall be governed by the agreement between the joint owners. If the joint owners have not entered into any agreement regarding such an exploitation, each joint owner shall be able to exploit itself or to grant to a third party a general license of the patent, and distribute the royalties therefrom between the joint owners.

The New Patent Law amends regulations on design patents. If a design is about patterns, colors or combination thereof on Ichnographic prints, mainly for identifying, it is unpatentable, pursuant to the new law. For example, beer labels, soft drink bottle labels, or wine labels can no longer be granted design patents. Obvious distinction between a design and the existing designs is newly required for granting patent rights to the design. Additionally, when determining the scope of a design patent, its specification can be used for explanation, pursuant to the new law. Two or more similar designs for the same product can be included in one application, which pursuant to the previous law has to be applied in two or more applications.

We are updating the third revision of Patent Law in our website now. Please visit our website for details.

AFD China Newsletter is intended to provide our clients and friends information only. It should not constitute legal advice of AFD China or any of its attorneys, and AFD China will not be held responsible for any reliance on its contents.