China,  Patent Linkage,  Patent Term Extension,  Pharma,  Updates and Changes

Breaking News: China passes Fourth Amendment to the Chinese Patent Law

After 12 years, the Fourth Amendment to the Chinese Patent Law has passed and will be in effect on 1 Jun 2021. After years of multiple draft amendments that moved in various directions, we FINALLY have some clarity on what patent protection is going to look like in China in the coming future.

Many of these changes were already in the proposed draft amendments that came out in 2019 and 2020, though there have also been some adjustments.

Most notable aspects of this new law include (1) patent term extension due to regulatory or patent office delay (2) patent linkage between new drug approval and patent disputes; (3) litigation reform such as significantly higher damage amounts and stronger and more streamlined patent enforcement provisions; (4) increased damages for willful infringement; and (5) creation of an open-licensing regime to encourage use of “dormant” patents in China. Additional changes to service inventions, priority timelines, partial design, and provisions about good faith and the public interest have been added.

Below is a summary of some of the highlights:

Patent Term Extension / Adjustment

Great news to anyone in the biopharma sector, the new draft amendment includes provisions to compensate patentees for both (1) unreasonable delays by the patent office during prosecution and also (2) delays due to the drug approval process, similar to Patent Term Adjustment (PTA) and Patent Term Extension (PTE) in the US.

Regulatory Delay: China will allow up to 5 years of patent term extension, provided that the patent term does not go beyond 14 years after drug approval. These basic numbers are very similar to those in the US, though details of how the extension will be calculated have not been disclosed yet.

Patent Office Delay: Upon request, patent term adjustment may be possible to compensate for unreasonable delay caused by the Chinese National Intellectual Property Administration (CNIPA). “Unreasonably delay” occurs if the total patent prosecution time between the request for examination and patent grant is 3 years, and the total time between filing and grant is 4 years. Provided the delay is not caused by the applicant, the CNIPA will provide compensation for this lost patent term. Further guidelines will be provided for the calculation.

Design Patents: The patent term for Design patents will be extended from 10 years to 15 years. To some, it signals China’s willingness to join the Hague Agreement, an international treaty that streamlines global design patent applications but requires a 15-year patent term to participate. Furthermore, the design can now claim only part of the product, which is good news especially for GUI designers.

Patent Linkage

The CNIPA and the CFDA will work together to link (1) marketing approval of new drugs and (2) patent disputes on the new drugs, withholding marketing approval until patent disputes are resolved. Owners of patents listed in China’s “drug patent information registration platform” can sue potential infringers applying for marketing approval of new drugs. Likewise, generic companies can request an administrative ruling on the validity of an issued patent.

A very recent draft set of amendments to the regulatory law set forth more proposed details relating to this patent linkage provision, including a 45-day timeline within which the innovator must file suit against the generic company, proposing a 9-month stay for the generic drug application to resolve patent disputes, and clarifying what types of drugs can be listed in the platform.

Litigation Reform: Infringement and Enforcement

In the past, innovators sometimes stayed away from pursuing patent litigation in China because damage amounts were so low. This newest draft amendment increases statutory damage amounts to CNY 5,000,000. However, the previously proposed minimum damage award of CNY 100,000 has been removed in view of the low market value of certain patents (mainly utility models and designs) in practice, and has been adjusted to CNY30,000.

Notably, the patent law now finally includes a willful infringement provision that allows for damages of between one and five times the normal damages amount in the case of willful infringement.

The statute of limitations for bringing an infringement lawsuit is extended to 3 years from the date that the patentee knew or should have known about the infringement.

Patentees can also request preliminary injunctions if they can show that irreparable damage will result or the evidence will be destroyed.

In a patent infringement suit, once a design / utility model patent is used as evidence in a trial, the patentee, interested party or the alleged infringer can submit a patent evaluation report.

Open Licensing

China will create an open-licensing scheme to encourage use of patents in China. Patentees can notify the State Council through a State-created system their intention to provide an open license and the associated licensing fees. The State Council will publish information related to available open licenses. The patentee can withdraw the open license at any time, but licenses granted before such withdrawal will not be affected. A patent evaluation report will need to be provided for utility models and design patents.

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 amongst themselves. If negotiations break down, they may request mediation or may file lawsuits.

6-Month Grace Period for Disclosure during Emergency/Extraordinary Situations

When an emergency or extraordinary situation occurs in the country (China), a public disclosure for the purpose of public interest will not destroy the novelty of a patent application filed within 6 months from such public disclosure.

Service Inventions

The Chinese patent law defines service inventions as those that are made (1) in the course of performing the employee’s duties or (2) mainly by using the materials or technical means of the employer. The final law keeps this unchanged, but adds language clarifying that although the right to file service inventions legally belongs to the employer, the employer may provide certain incentives (e.g., stock shares, stock options, dividends, etc.) to share with inventors the gains from exploitation of the patent. The employer may also give up those rights to file in order to further exploit the patent.

Priority

In the past, applicants had to submit all priority documents within three months of the filing date of the patent application. Under the new proposed law, applicants can submit priority documents up to 16 months from the filing date of the earliest priority document for invention and utility models. Please note that the proper priority claims still need to be made at the time of filing.

In the past, design patent applications in China could only claim priority to foreign applications. The new proposed law allows Chinese design applications to claim priority from domestic applications if filed within 6 months of the original priority document. All priority documents still need to be submitted within 3 months of the design patent application’s filing date (unchanged from before).

Additional Changes

Additional changes include newly added Article 20 which emphasizes that patents should follow good faith principles, not harming the public interest nor restricting competition. Article 22 further states that the patent office will promote the dissemination of public information by improving the public service system of patent information. Article 24 mandates that inventions be made public for the purpose of public interest during a state of emergency in the country. Article 25 expands the list of patent-ineligible subject matter, adding “methods of nuclear transformation and substances obtained by said method.”

Applicant dissatisfied with a rejection decision from CNIPA can appeal and request a review within 3 months. If the applicant is still unhappy, the applicant can file suit in the People’s Court.

Concluding Thoughts

For those of us who have been following the multiple draft amendments that kept coming out for years, it’s a relief that the revised patent law is finalized. We most certainly welcome the addition of patent term extension and patent linkage, both of which place Chinese patent law more in line with international standards. China has been trying to encourage foreign drug companies to enter China for some time now. These provisions will certain change the business calculation for drug companies as they decide whether and when to enter China, especially considering the extended patent terms, stronger protection against generics due to patent linkage, and more serious consequences of infringement.

China is pushing quickly forward in strengthening its patent laws to match international patent law standards. This latest amendment, together with the recent creation of the “Supreme IP Court” and new policies to encourage the importation of innovative drugs, gives companies all the more reason to file in China as part of a robust global patent strategy.

Looking ahead, we will learn a lot more details when the implementing rules and examination guidelines are published, likely around mid-2021.

Interesting, on the same day that the new patent law was approved, China also approved new amendments to the biosafety law and the export controls law. It’s quite clear that China is moving quickly on overhauling and refining many different parts of its entire legal system.

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About the Authors

Jennifer Che, J.D. is Vice President and Principal at Eagle IP, a Boutique Patent Firm with offices in Hong Kong, Shenzhen, and Macau.

Yolanda Wang is a Principal, Chinese Patent Attorney, and Chinese Patent Litigator at Eagle IP, a Boutique Patent Firm with offices in Hong Kong, Shenzhen, and Macau.

This article is for general informational purposes only and should not be considered legal advice or a legal opinion on a specific set of facts.

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