LESI 2019: How policy changes are shaping patent strategies in Asia

According to Justin Zhou, licensing director at GE (China), having a good patent strategy in China means combining patent, copyright, trademark and trade secret protection rather than focusing only on patents.

Zhou, who was speaking at the Licensing Executives Society International’s Annual Conference in Yokohama, said that foreign businesses should also take into account a whole series of regulations outside of IP. These include the Regulation on the Administration of the Import and Export of Technologies (TIER), foreign investment law, capital controls under the State Administration of Foreign Exchange and contract law.

One of the weaknesses of the patent law in China has been the low level of damages and high burden of proof for evidence, making it costly for businesses to enforce patents. But Zhou said he remains optimistic with the expected changes to China’s patent law this year which will see an increase in damages.

The elimination of a number of TIER provisions and recent changes made to the foreign investment law also mean the creation of a more level playing field for foreign businesses that conduct licensing in China. Zhou said that companies with a strong US patent portfolio continue to have good leverage for licensing deal negotiations with Chinese companies, with injunctions under Section 337 of the Tariff Act of 1930 being a strong factor. Section 337 helps to fight against unfair practices in import trade and enforce US IP rights.

For Eric Kirsch, IP chief counsel at Nikon Corporation in Japan, changes to the US’s patent law mean that getting injunctions has been difficult and the IP environment has moved away from being pro-patentee. One of the most impactful cases has been eBay v MercExchange in 2006, in which the US Supreme Court held that permanent injunctions are not granted automatically in patent cases and that a four-factor test needs to be applied.

Kirsch said that the effects of 35 USC Section 101 defences on patentable subject matter have also contributed to a challenging IP environment in the US. Furthermore, inter partes reviews under the America Invents Act have been on the rise.

“The pendulum has swung too far due to an overreaction to non-practising entities,” said Kirsch, adding that further contributing factors have included royalty stacking which have resulted in the reduction of the value of patents.

The combination of a difficulty in enforcing patents and broad discovery means that companies that file patents in the US need to leverage provisions such as 28 USC Section 1782, which allows litigants outside the country to apply to a US court to get evidence for use in non-US proceedings.