Utility models: a cornerstone in building your Chinese patent portfolio

Utility models are actively utilised in China, as illustrated in the graph below. Figure 1 shows the recent trend in the number of patent, utility model, and design applications. According to the 2023 data, there were:

• 1,677,701 patent applications (up 3.6% compared with the previous year);

• 3,063,928 utility model applications (up 3.8%); and

• 820,361 design applications (up 3.2%).

Over 99% of the utility model applications were from Chinese applicants.

Figure 1: Trends in patent, utility model, and design applications in China

Figure 2 is a flow chart of the utility model application process. Once a utility model is filed, the application undergoes a preliminary examination. During the preliminary examination, the submitted documents are checked for conformity with prescribed formalities, including whether there are any obvious reasons for rejection, such as a lack of novelty, or whether there are any other clear issues (Article 40, Patent Law of the People’s Republic of China, or the Patent Law); Rule 50, Implementing Regulations of the Patent Law of the People’s Republic of China, or the Implementing Regulations).

The revised Implementing Regulations, which came into effect on January 20 2024, incorporated the examination of obvious lack of inventiveness in the preliminary examination process. If formal defects are found, a correction request is issued, and if substantial defects are found, a notice of examination opinion is issued.

It should be noted that, under the current Chinese utility model system, technical solutions related to methods and materials are not eligible for utility model protection. In recent years, the examination of the subject matter eligible for protection in the preliminary examination has become more stringent.

The applicant can respond by submitting a correction or a statement of opinion addressing the issues raised in the examination opinion notice. If no reason exists to reject or refuse the application following the preliminary examination, the utility model right will be granted and then published in the official gazette.

The duration of the utility model right is 10 years from the filing date (Article 42, Section 1, Patent Law), and the applicant can make voluntary amendments within two months from the filing date (Rule 57, Section 2, Implementing Regulations).

Figure 2: Flow chart of the utility model application process

Figure 3 shows the trend in the number of invalidation cases for patents, utility models, and designs in China. The number of invalidation cases is highest for utility models. Invalidation cases are often filed as a countermeasure in patent infringement lawsuits. From this graph, it can be seen that utility model rights are actively used as a basis for infringement lawsuits in China.

Figure 3: Trends in invalidation cases for patents, utility models, and designs in China

Figures 4 and 5 show the breakdown of invalidation decisions for patents and utility models. In the case of patents, 54% to 60% of the claims are maintained in their entirety in invalidation proceedings, whereas for utility models, 40% to 43% of the claims are maintained.

In terms of novelty and inventiveness examination, patents undergo strict substantive examination for novelty and inventiveness before being granted, while utility models are registered after only a preliminary examination for clear lack of novelty or inventiveness.

From figures 4 and 5, it can be concluded that the stability of utility model rights is not significantly lower than that of patents and therefore utility models can be effectively enforced in China.

Figure 4: Breakdown of invalidation decisions for patents

Figure 5: Breakdown of invalidation decisions for utility models

In cases of infringement disputes involving utility model patents, the relevant people’s court may require the patent holder or the accused infringer to submit a patent evaluation report. This report is prepared by the Patent Administrative Department of the State Council after conducting searches, an analysis, and an evaluation of the relevant utility model. The patent holder or the alleged infringer may voluntarily request the preparation of this report (Article 66, Section 2, Patent Law; Rule 62, Implementing Regulations).

Previously, only the utility model patent holder could request the evaluation report, but under the revised Implementing Regulations, the accused infringer may also request the preparation of the report.

Applicants can file for a patent and a utility model for the same technical solution on the same day (Article 9, Patent Law; Rule 47, Implementing Regulations). If both are filed on the same day, the utility model application, which typically undergoes only a preliminary examination, is usually registered first. Later, a substantive examination is conducted for the patent application. If the patent meets the requirements, the applicant can abandon the previously granted utility model and acquire the patent.

Rule 56, Section 2 of the revised Implementing Regulations, and Section 5, Chapter 7, Section 8.3 of the Patent Examination Guidelines regulate a deferred examination system. For patent applications, the start of an examination can be delayed by one, two, or three years, while for utility models, it can be delayed by a year. For designs, the start of an examination can be delayed by up to 36 months in one-month increments.

To request a delayed examination, the applicant must submit a request with a substantive examination request for patents, or submit it with a filing request for utility models and designs. The applicant may also withdraw a request for deferred examination before the delay period expires.

Typically, a utility model is registered and the registration announcement is made about six to eight months after filing. By using the deferred examination system, the applicant can delay the public disclosure.

Once a patent or utility model right is granted and the right is established, the scope of the right cannot be expanded or modified. Therefore, competitors often engage in strategic competition by dividing patent applications and keeping them in the examination stage. In China, this strategy of dividing applications can also be adopted. However, one must be cautious that in China, divisional applications cannot be made more than two months after the allowance decision or three months from the rejection decision, or if the corresponding deadline for filing an appeal against the rejection has passed.

In comparison with the strategic use of divisional applications, the simultaneous filing of patents and utility models with deferred examination allows the applicant to secure early rights with the utility model while postponing the examination of the patent application. This way, the applicant can keep the patent application in the examination stage for an extended period, potentially up to six years, without incurring additional costs.

Figure 6: Example of using simultaneous filing and deferred examination

In China, utility models are actively filed, and their rate of maintenance in invalidation cases is not low, suggesting that utility model rights are effectively used for enforcement. To the best of the author’s knowledge, the highest damage compensation (around $300 million) in Chinese patent infringement litigation history is related to a utility model. And in relation to a utility model drafted and prosecuted by Uni-intel Patent and Trademark Law Firm for a client in the car battery field, the accumulated damage compensation in a series of patent litigation actions against the client’s competitors was in the order of $40 million.

Although the preliminary examination of utility models has become stricter in terms of the subject matter, novelty, and inventiveness, understanding and utilising the characteristics of China’s system – such as the simultaneous filing of patents and utility models, and the deferred examination system – enables the effective building of a patent portfolio in China.