This content is from: Asia Pacific

China: Patents: Patent Law amendments cause hopes and questions

The Legislative Affairs Office of the State Council of China has recently released the latest draft of the amended Patent Law on its website for public opinions (the 2015.12 draft).

According to the 5th Plenary Resolution, China places innovation as its primary policy priority. Innovation at the theoretical, institutional and technological levels are highly encouraged by the government. The 4th amendment of the Patent Law is widely considered as a promising opportunity to support technology innovation initiatives in China.

The latest draft was prepared by the State Intellectual Property Office (SIPO) and is now submitted to the State Council Legislative Affairs Office for review. A new draft may be available for public comments later this year or early next year.

A major discussion point so far about this draft is the administrative endowment of patents. The dual-track approach of patent enforcement system in China is unique. A patentee is allowed to choose between judicial and administrative remedies for patent enforcement, although in practice few patent owners rely on administrative enforcement approach. One common issue, as patent owners and practitioners have often noted, is that local patent offices do not have enough manpower and always use a mediation approach to resolve disputes.

In this fourth amendment, it seems that the SIPO wishes to significantly add more utility to the administrative enforcement mechanism. It has aroused lots of attention that the 2015.12 draft proposed that in order to combat wilful infringement that disturbs market order such as group infringement and repetitive infringement, patent administrative authorities have the power to issue injunctions, and to confiscate or destroy infringing products and tools for infringement.

There has been some concern that the expansion of administrative enforcement powers may increase the risk of patent trolls. Some people argue that China should centralise its patent enforcement in the hands of judges, rather than allowing patent offices across the country to handle disputes. The final outcome of this debate remains to be seen.

A pleasant surprise is that SIPO proposes that China should allow partial designs to be patentable. The scope of design patent is expanded to partial design of a product from merely the design of a product (Article 2 of 2015.12 draft) This would further promote industrial designs, especially graphical user interface designs.

Besides, as China plans to sign up to the Hague Agreement Concerning the International Registration of Industrial Designs, the protection term of a design patent is extended to 15 years as required by the Hague Agreement (Article 42 of 2015.12 draft). In addition, a domestic design patent application is entitled to enjoy priority of six months, which gives foreign and domestic applications equal treatment (Article 29 of 2015.12 draft). But industry experts have been proposing China may follow the US practice, giving a one year grace period to patent applicants, without imposing harsh conditions.

Another pleasant improvement in the 2015.12 draft relates to damages. Punitive damage of up to three times for wilful infringement are introduced in the amendment of the Patent Law. Statutory compensation is significantly increased from Rmb10,000 to Rmb 1 million up to Rmb100,000 to Rmb 5 million (Article 68 of 2015.12 draft), although the lower limit Rmb100,000 is not meant to be a requirement. Considering that in practice the statutory compensation is adopted by a court in most patent infringement cases, the change on statutory compensation may be good news for patentees.

At the same time, some small medium enterprises raise a concern that a statutory damage of Rmb100,000 may be burdensome and even unfair if the scale of infringement is small.

Similar to what we have seen in the China Trademark Law, the proposed amendment also sets a mechanism regarding the burden of proof. After the infringement is concluded, if the patentee tries its best to collect evidence on damages, a court may shift the burden of proof to the infringer to provide evidence such as account books (Article 68 of 2015.12 draft).

SIPO also makes an encouraging change to the idea of the indirect infringement liability in the patent law. This was dropped in 2008 when China amended its patent law. SIPO seems to intend to change this through the new draft. In the 2015.12 draft, any one who knowingly provides raw materials, intermediaries, components or equipment that is specifically designed for infringing a patent, shall bear joint and several liability with an infringer. Besides, anyone inducing others to infringe a patent shall bear joint and several liability with an infringer (Article 62 of 2015.12 draft). This provision expands the scope of indirect infringement and may provide broader protection to patent holders.

A related rule is for online infringement. To combat online patent infringement, the SIPO now proposes that if an internet service provider knows or should know an infringer uses its internet service for patent infringement, but does not timely take any action to stop the infringement, the internet service provider shall bear joint and several liability with the infringer (Article 63 of 2015.12 draft). Similar rules often appear in the copyright law sector. It is a bit surprising that the SIPO wishes to impose contributory liability in the online space in the patent law. We expect some debate will take place.

The 2015.04 draft further regulates standard essential patents (SEPs). For example, if a SEP fails to be disclosed by a patentee during its participation in a national standard formation, that SEP shall be deemed to be licensed to a standard implementer. Both parties could negotiate a royalty afterwards. If the negotiation fails, the parties may request the SIPO to make a determination.

Industry players, patent practitioners and academics should follow the developments closely to make substantial improvements to China's innovation ecosystem.

Ying-Wang
Li BinxinWang Ying

AnJie Law Firm26/F, Tower D, Central International Trade Center6A Jianguomenwai Avenue, Chaoyang District, Beijing 100022, PR ChinaTel: +86 10 8567 5988Fax: +86 10 8567 5999wuli@anjielaw.comwww.anjielaw.com

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