How the Fourth Amendment to PRC Patent Law will Improve Protection over Patent in China

The fourth amendment of the PRC Patent Law (the “Amendment”) was adopted on October 17, 2020 and will come into force as of June 1, 2021. The current PRC Patent Law was promulgated in 1985 and subsequently amended in 1992, 2000 and 2008. In this article, we present a full analysis on the amendments and enlighten the future trend of patent protection in China.

Executive Summary

• The Amendment strengthens the protection over patent by adding 1) patent term extension; 2) patent term adjustment; 3) protection of partial design patent; 4) domestic priority for design patent; 5) open license system; 6) an early resolution mechanism for drug patent disputes.

• Administrative enforcement and civil litigation regimes are improved by 1) introducing punitive damages; 2) increasing statutory damages; 3) shifting the burden of proof; 4) enriching the method of calculation damages; 5) enlarging pre-litigation preservation measures

I. Prompting Protection over Patent by Adopting Various Revisions

1. Major Revisions around Design Patent

(1) Patent Term Extension over Design Patent

The term of design patent is extended from 10 years to 15 years, counted from the date of filing.²

• The extension is understood as the efforts by PRC government to join Hague Agreement concerning the International Registration of Industrial Designs.

(2) Protection of Partial Design Patent

The Amendment newly offers the patent protection over partial design while the current PRC Patent Law merely grants patent protection over overall design rather than a portion of it.³

• Making partial design patent patentable brings huge motivation for companies to develop and innovate each detail of a design.

(3) Domestic Priority for Design Patent

The Amendment newly offers domestic priority for design patent application, specifically, where an applicant files a patent design application in China first, the applicant may claim a right of priority where filing another patent application for the same subject matter within 6 months from the date of first application with the patent administration department under the State Council (Chinese National Intellectual Property Administration, “CNIPA”).⁴

• In practice, it is mainly applied in two situations: 1) the applicant slightly modifies the design and re-files the patent application after first filing; 2) the applicant re-submits application materials because the previous materials have deficiencies. There, the filing date claws back to the date of first filing.

2. Major Revisions around Pharmaceutical Patent

(1) Patent Term Adjustment over Pharmaceutical Invention Patent

In China, the protection period for pharmaceutical invention patent is 20 years, counted from the date of filing patent application. However, for the new drug to be marketed in China, it has to go through administrative approval and obtain drug registration certificate before getting into market⁵ (“Market Approval Process”) and it is reported that the average remaining protection period after passing Market Approval Process is 6-9 years⁶. Therefore, an applicant may request to extend the term of patent by 5 years, at maximum, for a new drug patent to compensate the time spent during the Market Approval Process. However, the total patent term for the new drug cannot exceed 14 years from the approval of marketing.⁷

The Amendment also makes a general term adjustment to address the patent office delay on invention patent: An applicant may request to extend the term of the patent where an invention patent is issued more than 4 years after the date of filing and more than 3 years after the application for substantive examination, unless the delay is caused by the applicant.⁸

(2) An Early Resolution Mechanism Introduced for Drug Patent Disputes before Drug Used in PRC Market

The Amendment creates a collaborative mechanism among Chinese National Intellectual Property Administration (the “CNIPA”), PRC courts, and National Medical Product Administration (the “NMPA”) to resolve potential drug patent disputes before the drug is used in PRC market. To be specific, during the Market Approval Process, the Amendment acts as a new legal basis for relevant interested party to file a lawsuit before a PRC court or request administrative rulings from the CNIPA to block the drug Market Approval Process applied by potential patent infringer. The Amendment also adds that NMPA, based on the judgment issued by PRC court or administrative decision made by CNIPA, is entitled to suspend the whole Market Approval Process of the drug.⁹

3. Extended Deadline for Submitting Priority Documents

For invention and utility patent applications, the deadline for submitting relevant documents for priority is extended from 3 months from claiming priority to 16 months from filing the first patent application.¹⁰

• The extension benefits to foreign invested enterprise (the “FIE”s) since FIEs generally bear longer process to collect relevant materials than domestic companies due to the cross-border operations.

4. Open License System

The Amendment newly sets up open license system for patent to promote the implementation of patents. Open license system is a mechanism where anyone who intends to exploit the patent may obtain the license by paying the compensation declared by the patentee, without obtaining the permission of the patentee, nor having to go through the formalities of filing patent license.

The system consists of following components:

• First, patentee may apply to openly license the patents to any individual or entity and specify the royalties and payment method in CNIPA by written declaration.¹¹ The open license patentee may enjoy reduction or exemption on annuity fees.¹²

• Second, any individual or entity may enjoy the open license by written notice and payment of royalty. The license granted in this scenario is ordinary licenseinstead of sole or exclusive license.¹³

• Third, parties may solve any disputes related to the open license through mediation by CNIPA or lawsuit in a PRC court.¹⁴

II. Improving Administrative Enforcement Regime and Civil Litigation Regime

1. Higher Level of Administrative Enforcement

State and local Administration for Market Regulation is granted several powers to investigate and handle suspected patent counterfeiting based on evidence obtained:

• Inquire the parties concerned and investigate the relevant circumstances;

• Conduct on-site inspection on places where illegal actions occurred;

• Review and reproduce the contracts, invoices, account books and other relevant materials;

• Inspect the products related to the suspected illegal acts;

• Seize or detain patent counterfeited products.¹⁵

• It is worth noting administrative enforcement plays a significant role in protecting patent in China and taking advantage of the administrative enforcement is also a promising option for many foreign invested enterprises to protect their patent portfolios.

2. Damages for Patent Infringement

In China, there are three categories of damages for patent infringement: 1) compensative damages (calculated in line with the actual damages a patentee suffers), 2) punitive damages (1 time to 5 times of actual damages), 3) statutory damages (a fixed amount range). A patentee can alternatively claim these three kinds of damages in the legal proceeding.

(1) Punitive Damages

The Amendment newly introduces punitive damages against intentional patent infringement: patentee may obtain punitive damages ranging from 1 time to 5 times of actual damages of intentional infringement where the circumstances are serious.¹⁶

• The introduction of punitive damages is consistent with Article 1185 of PRC Civil Code which provides the right to obtain punitive damages for patentee whose IP rights are seriously and intentionally infringed.

(2) Statutory Damages

The statutory damages regime is extended from “RMB 10,000 – RMB 1 million” to “RMB 30,000 – RMB 5 million”.¹⁷ Where the actual damages cannot be calculated, the statutory damages may be granted by a PRC court.¹⁸

(3) Calculation Method of Compensative Damages

The Amendment newly grants the right to patentee to freely choose calculation method of damages—the patentee may claim damages based on patentee’s losses or the infringer’s illegal profits at his/her sole discretion. The current PRC Patent Law requires that patentee firstly claims patentee’s losses, and if it does not work out, then claims the infringer’s illegal profits.¹⁹

3. Shifted Burden of Proof

A major input of the Amendment is the shift of the burden of proof from the patentee to the infringer: the infringers shall present the accounting books and other materials in their custody for the purpose of calculating compensative damages; while in current PRC Patent Law, the patentee bears the burden to prove damages.

• There is a natural deficiency in PRC judicial system, that is, lack of discovery (typical common law evidential mechanism and litigants may easily obtain evidence from opposing party through discovery), therefore, the patentee may have no access to certain evidence materials. The shift benefits the patentee by easing the challenge of producing evidence on damages.²⁰

4. Pre-litigation Preservation Measures

The Amendments offers any patentee or interested party to apply preliminary injunctions to preserve property, order certain actions, or prohibit certain actions where they have evidence to show their patent rights are being infringed or hindered by others and it is likely to cause irreparable harm without prevention.²¹

There is no doubt that the protection system over patent in China is evolving to be line with international patent law standards. Asiallians will keep a close eye on the practical implementation and metrics and keep you posted timely.

(1) http://www.xinhuanet.com/2020-10/18/c_1126624476.htm

(2) Article 42 of the Amendment

(3) Article 2 of the Amendment

(4) Article 29 of the Amendment

(5) Article 24 of PRC Drug Administration Law (revised in 2019)

(6) https://www.thepaper.cn/newsDetail_forward_10057777

(7) Article 42 of the Amendment

(8) Article 42 of the Amendment

(9) Article 76 of the Amendment

(10) Article 30 of the Amendment

(11) Article 50 of the Amendment

(12) Article 51 of the Amendment

(13) Article 51 of the Amendment

(14) Article 52 of the Amendment

(15) Article 69 of the Amendment

(16) Article 71 of the Amendment

(17) Article 71 of the Amendment

(18) Article 71 of the Amendment

(19) Article 71 of the Amendment

(20) Article 71 of the Amendment

(21) Article 72 of the Amendment

Should you have any inquiry about the above rule, please contact us at asiallians@asiallians.com. As always, Asiallians remains at your service and our teams are currently mobilized in all our offices in Mainland China, in Hong Kong and in Taipei.