The Measures for the Marking of Patent Marks, issued by China's State Intellectual Properly Office (SIPO), will take effect on May 1. Under the Measures, manufacturers could pay high damages for selling falsely marked products, as marks may be misleading if the marketing process is poorly managed.
"An effective IP auditing system is essential for regularly tracking the status of patent rights. Existing patents may expire, or be challenged by competitors. The scope may also change over the course of litigation," said Jonathan Yuan of Shangcheng & Partners. "These are all likely to incur liabilities if marking does not correspond with the status of IP rights," Yuan added.
The Measures cover marking on packaging and on instructions for use under Article 6. The marks must also be in simplified Chinese (Article 5). However, patent markings are not compulsory.
This contrasts with the US, where all products covered by patents are required to be marked, and it is common to see a long list of patents placed on products and their packaging.
"However, you'd better mark only those highly relevant patents. Marking those that are of peripheral relevance does not help, and are otherwise likely to cause you trouble," said Yuan, a US qualified lawyer.
In the US, damages are measured at $500 of each item sold, rather than by each offence, as a result of the controversial case of Forest Group, Inc v Bon Tool Co, (Fed Cir 2009).
But the risk of liability in the US has lessened since the passing of the America Invents Act, which contained a provision retroactively amending Section 292(a) of the patent law to stipulate that only the US government may sue for the penalty of $500 for each falsely marked article. Previously it was possible for a third party to bring a suit on behalf of the government in order to protect the public interest
The fine for violation is less harsh in China than in the US, but it is high compared with other patent infringement offences. Article 8 of the Measures provides that damages of false markings be measured in accordance with Article 63 of the PRC Patent Law, being no more than four times of the illegitimate sales income or a maximum of Rmb200,000 ($32,000) if the sum is not capable of being calculated. Local IP offices have the power to enforce these fines.
However, the law is more lenient in terms of the burden of proof: "claimants do not have to show that manufacturers have malicious intent as is required in the US," said Yuan.
If a company is planning an initial public offering (IPO), a failure in IP management leading to patent rights being falsely publicised could have serious consequences.
Darren Cai of Lifang & Partners said the regulations underlined the importance of connecting IP and marketing teams.
"Marketing departments have to fully understand the most up-to-date status of IP rights, when producing your catalogue and brochure," he said. "There is likely to be an additional offence for false advertising," Cai also warned.
The Measures are of greater importance since the Implementing Rules for the PRC Patent Law came into effect in 2010. Those Rules blurred the line between passing off a patent – marking a patent that belongs to a third party – and false marking – falsely claiming a patent of one's own.
Courtesy of China Law & Practice
