Major and Exciting Changes to China’s Patent Law [Fourth Amendment to China’s Patent Law]

Major changes are on the horizon for China’s Patent Law, which will see an overhaul in many areas as early as this year (2019). On January 4, 2019, the National People’s Congress in China published the latest draft of the Fourth Amendment to China’s Patent Law. Several draft amendments have been released for public comment in the past several years, starting from 2012 to this most recent one in 2019. The period for public comment just closed on February 3, 2019. The goal is to implement this amendment in 2019. As a whole, these proposed changes address a lot of the criticisms people have had regarding the strength of IP protection in China. These changes, once implemented, will make China a much more patent-friendly jurisdiction, benefiting innovators worldwide. Examples of notable changes include (1) a longer patent term for innovative drugs and design patents; (2) litigation reform such as significantly higher damage amounts and streamlined processes for suing infringers; (3) new ways of rewarding innovators for their contributions; and (4) creation of an open-licensing regime to encourage use of patents in China.

Extended Patent Terms: Innovative Drugs and Design Patents

One of the most exciting changes is the addition of patent term extension due to regulatory delay for innovative drugs that are applying for approval simultaneously in China and abroad. 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. China has also proposed extending the patent term for design patents from 10 years to 15 years, a significant development. 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.

Litigation Reform: Increased Damages and Willful Infringement

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 from “RMB 10,000 to RMB one million” to “RMB 100,000 to RMB five million”. The concept of willful infringement has also been added to the draft law, allowing for damages of between one and five times the normal damages amount in the case of willful infringement. Additional proposed changes streamline and facilitate the litigation process in general. Internet Service Providers have a heightened duty to take down links to products that are ruled to be infringing, otherwise they become jointly and severally liable for the expanded infringement that results. Multiple infringement cases on the same patent may be consolidated into one case, at a higher level court, for example.

Open License

China will create an open-licensing scheme to encourage use of patents in China. New Articles 49 to 52 create a system by which patentees can notify the State Council their intention to provide an open license and the terms associated with such a license. The State Council will publish information related to available open licenses and will also be available to mediate disputes.

Service Inventions

China differs from the US in that inventions made (1) in the course of performing an employee’s duties or (2) using the materials or technical means of the employer are called “Service Inventions” and automatically belong to the employer. The new draft amendment keeps this unchanged, but adds language allowing companies to provide certain incentives (e.g., stock shares, stock options, dividends, etc.) to share with inventors the gains from exploitation of 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 26 expands the list of patent-ineligible subject matter, adding “methods of nuclear transformation and substances obtained by said method.”

Reflections

These are surely exciting times for patent law in China. Just last month we shared about major advances related to the creation of a specialized IP court at the Supreme People’s Court level, unifying and harmonizing IP court decisions throughout China. Now, significant law changes are following, harmonizing China’s Patent Law with many other major jurisdictions around the world. The law is changing quickly in very favorable directions for innovation companies and inventors who want protection in China. There are a lot of interesting strategic questions that arise with regards to the timing of various activities in view of these law changes. Things are moving fast, and all directions point towards stronger IP protection in China and China’s increased importance in a global patent portfolio. Fourth Amendment to China’s Patent Law (in Chinese)

Jennifer Che, J.D. is a US Patent Attorney and Vice President and Partner at Eagle IP, a Boutique Patent Firm with offices in Hong Kong, Shenzhen, and Macau. eip@eipgroup.asia