CHINA AMENDS THE PATENT LAW: A STRONGER...

, 56 les Nouvelles 21

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56 les Nouvelles 21

les Nouvelles
March, 2021
Chuanhong Long
Patent Attorney, Vice President, CCPIT Patent and Trademark Law Office, Beijing, China
E-mail: longchh@ccpit-patent.com.cn

Copyright © 2021 by Licensing Executives Society International; Chuanhong Long

CHINA AMENDS THE PATENT LAW: A STRONGER PROTECTION IS ON THE WAY

I. Introduction

On October 17, 2020, China's top legislature, Standing Committee of the National People's Congress (SCNPC), adopted the
Fourth Amendment of the China Patent Law, which shall become effective as of June 1, 2021. The Amendment materializes
the continuing spirit of enhancing patent protection in China, e.g., introducing one to five times punitive damages for willful
infringement where the situation is serious, increasing the amount of statutory damages, ordering the defendant to provide
evidence that can prove the damages, protecting partial design, extending the patent term of design from 10 years to 15 years,
providing patent term extension for new drugs, establishing patent linkage, etc.

II. Main Changes

The major contents of the Fourth Amendment are introduced more specifically as follows. Some other changes that are either
minor or of advocacy are omitted.

1. Strengthening the Patent Protection Against Infringement

One of the major objectives of the Fourth Amendment of the China Patent Law is to strengthen the patent protection against
infringement. In order to achieve this objective, the following measures were taken in the Amendment.

(i) Introducing punitive damages for serious willful infringement: For the willful infringement of patent
rights, if the circumstances are serious, the amount of compensation may be determined within one to five times
the amount calculated according to the losses suffered by the patentee, the benefit obtained by the infringer or the
multiple of the patent licensing fee. (see Article 71(1)).

(ii) Increasing the amount of statutory damages: In case it is difficult to calculate the amount of compensation
due to patent infringement, the amount of compensation that the court may determine at its discretion increases
from 10,000 Yuan RMB to one million Yuan RMB (about U.S. $1,500 to U.S. $147,000) as stipulated in the
current Patent Law to from 30,000 Yuan RMB to five million Yuan RMB (about U.S. $4,500 to U.S. $735,000)
in the Amendment. (see Article 71(2)).

(iii) Ordering the defendant to provide evidence that can prove the damages: In order to determine the amount
of compensation, when the patentee has done his best to provide evidence, but the accounting books and materials

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relating to the infringement are mainly in the possession of the infringer, the court may order the infringer to
provide the accounting books and materials relating to the infringement. Where the infringer fails to provide or
provides false accounting books or materials, the court may determine the amount of compensation by reference
to the claims of the patentee and the evidence as submitted. (see Article 71(4)).

(iv) Extending the statute of limitation on an action against patent infringement and modifying the starting
date: The statute of limitation on an action against patent infringement is extended from two years in the current
patent law to three years in the Amendment, counted from the date on which the patentee knows about or should
have known about the patent infringement and the infringer. (see Article 74).

(v) The relief measures that patentee or interested party can petition the people's court to adopt before filing
a patent infringement lawsuit include preserving property, ordering other party to take certain actions or
prohibiting other party from taking certain actions: In the current patent law, the relief measures only include
ordering the other party to stop the related infringing acts. (see Article 72).

(vi) The IP administration is vested with more authority: When handling the patent infringement dispute
cases, the IP administration may make inquiries of the relevant persons, investigate into the matters, conduct
on-spot inspection, and inspect the alleged infringing products. According to the current patent law, the IP
administration only has such authority when handling the cases relating to the passing off of the patent right.
(see Articles 68, 69).

*22 2. Strengthen the Protection of Designs

(i) Enlarging the protectable subject matter so that the design on an inseparable part of a product is
patentable, which means partial design can be protected under the amended patent law. (see Article 2(4)).

(ii) Extending the term of a design patent from 10 years to 15 years to prepare for joining the Hague Agreement.
(see Article 42(1)).

(iii) Adding the domestic priority for design application: If, within six months from the date the applicant first
files an application for design in China, he files another application for design in China containing the previous
subject matter(s), the applicant may enjoy the priority of the previous Chinese design application. (see Article
29(2)).

3. Strengthen the Protection of Drug-Related Patents

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(i) Introducing patent term adjustment (PTA) for a patent for invention that is granted after four years from
the date of filing and after three years from the date of requesting substantive examination. PTA is available to all
invention patents, including, but not limited to, pharmaceutical patents. (see Article 42(2)).

(ii) Providing patent term extension (PTE) for new drug-related patents: In order to compensate for the
time taken for review and approval of a new drug for marketing, the China Intellectual Property Administration
(CNIPA) shall, at the request of the patentee, extend the term of a patent related to the approved new drug for
a period of no more than five years, and the resulting total effective patent term shall not exceed 14 years from
the marketing approval of the new drug. (see Article 42(3)).

(iii) Establishing patent linkage: A dispute arising between an applicant for drug marketing authorization and a
relevant patentee or interested party out of a patent right related to the drug for which the registration is applied
can be resolved in civil judicial proceedings of the people's court or administrative proceedings of CNIPA. The
National Medical Products Administration (NMPA) may make a decision as to whether the approval of the relevant
drug for marketing is suspended according to an effective judgment of the people's court. NMPA together with
CNIPA shall formulate specific methods for linking the approval of drug marketing authorization application and
the resolution of patent right disputes at the stage of application for drug marketing authorization, which shall be
implemented after the approval of the State Council. (see Article 76).

4. Perfect the Patent Granting System

(i) Adding a new category for the grace period without loss of novelty: Disclosure within six months before
the filing for the purpose of public interests in the case of national emergency. (see Article 24).

(ii) Giving the applicant more time to submit certified copy of the priority document: The applicant who
requests the right of priority can submit, within 16 months from the date of filing the first application for a
patent for invention or utility model, a certified copy of the patent application documents filed for the first time.
According to the current patent law, the time limit to submit certified copy of the priority document is within
three months from the filing of a patent application in China. (see Article 30).

5. Promote the Exploitation and Utilization of Patent

(i) Clarifying the patentee's right to dispose the patent right: For an employment invention-creation, the entity
may dispose the right to apply for patents and the patent rights according to law and promote the implementation
and application of relevant invention-creations. (see Article 6(1)).

(ii) Establishing the open license system: The patentee can make a statement of open license to the CNIPA, i.e.,
the patentee is willing to give license to anyone at a defined royalty for his patent. During the exploitation of the
open license, the annuity paid by the patentee shall be reduced or exempted accordingly. The patentee granting

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the open license may, after negotiating with the licensee on the licensing fee, also grant a common license to the
licensee, but may not grant a sole or exclusive license for the patent. (see Articles 50, 51 and 52).

6. Add Restrictions to the Patentee when Enforcing the Patent Right

(i) The application for patent and exercise of the patent right shall follow the principle of good faith and shall
not harm the public interest or the legitimate rights and interests of others. Abusing patent rights to exclude or
restrict competition, when constituting a monopoly, shall be treated in accordance with the Anti-monopoly Law.
(see Article 20).

III. Conclusions

From the above introduction, it is clear that the patent protection in China will be further strengthened after the Fourth
Amendment to the Patent Law becomes effective.

Currently, it is not clear how to interpret and apply the Fourth Amendment, especially the brand-new *23 PTA, PTE and
patent linkage sections. Moving forward, CNIPA will formulate new regulations to implement the Fourth Amendment of the
Patent Law, which will be published for public comments and then will be approved by the State Council. Also, CNIPA will
publish transitional rules on how the Fourth Amendment shall be applied to the pending patent applications and patents. To
implement the patent linkage, CNIPA and NMPA already released Draft Measures for Implementation of Early Resolution
Mechanisms for Drug Patent Disputes (for trial implementation) on September 11, 2020 for public comments. We expect that
specific rules for PTA, PTE and patent linkage will be available well before June 1, 2021.

Relevant Articles of the Patent Law (The portions in boldface type are the amended or added words.)

Article 2

In this Law, “inventions-creations” mean inventions, utility models and designs.

“Invention” means any new technical solution relating to a product, a process or improvement thereof.

“Utility model” means any new technical solution relating to the shape, the structure, or their combination, of a product, which
is fit for practical use.

“Design” means any new design of the shape, the pattern, or their combination, or the combination of the color with shape or
pattern, of the whole or part of a product, which creates an aesthetic feeling and is fit for industrial application.

Article 6

An invention-creation that is accomplished in the course of performing the duties of an employee, or mainly by using the material
and technical conditions of an entity shall be deemed an employment invention-creation. For an employment invention-
creation, the entity has the right to apply for a patent. After such application is granted, the entity shall be the patentee.
For an employment invention-creation, the entity may dispose the right to apply for patents and the patent rights
according to law, and promote the implementation and application of relevant invention-creations.

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For a non-employment invention-creation, the inventor or designer has the right to apply for a patent. After such application
is granted, the said inventor or designer shall be the patentee.

For an invention-creation that is accomplished by using the material and technical conditions of an entity, if the entity has
concluded a contract with the inventor or designer providing the ownership of the right to apply for the patent or the ownership
of the patent right, such agreement shall prevail.

Article 15 (original Article 16)

The entity that is granted a patent right shall award to the inventor or creator of a service invention-creation a reward and, upon
exploitation of the patented invention-creation, shall pay the inventor or creator a reasonable remuneration based on the extent
of spreading and application and the economic benefits yielded.

The State encourages the entity that is granted a patent right to implement property incentives, such as equity, option,
and dividend, etc., to enable inventors or designers to reasonably share the profits brought by the invention-creation.

Article 20 (newly added)

The application for patents and the exercise of patent rights should follow the principle of good faith and shall not abuse
patent rights to harm the public interests or the legitimate rights and interests of others.

Abusing patent rights to exclude or restrict competition, when constituting a monopoly, shall be treated in accordance
with the Anti-monopoly Law of the People's Republic of China.

Article 21

The patent administration department under the State Council shall, according to the requirements of objectivity, fairness,
accuracy and timeliness, handle patent applications and requests in accordance with law.

The patent administration department under the State Council shall strengthen the construction of the public service system
of patent information, release patent information in a complete, accurate and timely manner, provide basic data of patent,
publish patent gazettes on a regular basis, and promote the dissemination and utilization of patent information.

Before a patent application is published or announced, the staff members of the patent administration department under the
State Council and the persons concerned shall be obligated to keep such application confidential.

Article 24

An invention-creation for which a patent is applied for does not lose its novelty where, within six months before the date of
filing, one of the following events occurred:

(1) Where it was first disclosed for the purpose of public interest when an emergency or extraordinary situation
occurs in the State;

(2) Where it was first exhibited at an international exhibition sponsored or recognized by the Chinese Government;

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*24 (3) Where it was first made public at a prescribed academic or technological meeting;

(4) Where it was disclosed by any person without the consent of the applicant.

Article 25

Patent rights shall not be granted for any of the following:

(1) Scientific discoveries;

(2) Rules and methods for intellectual activities;

(3) Methods for the diagnosis or treatment of diseases;

(4) Animal or plant varieties;

(5) Methods of nuclear transformation and substances obtained by means of nuclear transformation; and

(6) Designs that are mainly used for marking the pattern, color or the combination of the two of prints.

The patent right may, in accordance with the provisions of this Law, be granted for the production methods of the products
specified in Subparagraph (4) of the preceding paragraph.

Article 29

If, within twelve months from the date the applicant first files an application for an invention or utility model patent in a foreign
country, or within six months from the date the applicant first files an application for a design patent in a foreign country, he
files an application for a patent in China for the same subject matter, he may enjoy the right of priority in accordance with the
agreements concluded between the said foreign country and China, or in accordance with the international treaties to which
both countries have acceded, or on the principle of mutual recognition of the right of priority.

If, within twelve months from the date the applicant first files an application for an invention or utility model patent in China,
or within six months from the date the applicant first files an application for design in China, he files an application for
a patent with the patent administration department under the State Council for the same subject matter, the applicant may
enjoy the right of priority.

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Article 30

An applicant who requests the right of priority for a patent for invention or utility model shall submit a written declaration
at the time of application and submit, within 16 months from the date of filing the application for the first time, duplicates
of the patent application documents filed for the first time.

An applicant who requests the right of priority for a patent for design shall submit a written declaration at the time of
application and submit, within three months, duplicates of the patent application documents filed for the first time.

Where the applicant submits no written declaration or no duplicates of the patent application documents at the
expiration of the specified time limit, the applicant shall be deemed to have waived the right of priority.

Article 41

Where an applicant is not satisfied with the decision of the patent administration department under the State Council rejecting
his application for patent, such applicant may, within three months from the date of receipt of the notification, request the patent
administration department under the State Council to make a re-examination. The patent administration department
under the State Council shall, after re-examination, make a decision and notify the applicant for patent.

Where the applicant for patent who made the request for re-examination is not satisfied with the decision of the patent
administration department under the State Council, he or it may, within three months from the date of receipt of the
notification, institute legal proceedings in the people's court.

Article 42

The duration of the invention patent right shall be 20 years, and that of the utility model patent right shall be ten years, and
that of the design patent right shall be fifteen years, all commencing from the date of application.

If a patent for invention is granted after four years from the date of application and after three years from the date of
the request for substantive examination, the patent administration department under the State Council shall accord the
compensation of the duration of the patent right for the unreasonable delay during the prosecution of the patent for
invention, at the request of the patentee, except for the unreasonable delay caused by the applicant.

In order to compensate for the time taken for review and approval of a new drug for marketing, the patent administration
department under the State Council shall accord the compensation of the patent duration to the patent for invention
related to the new drug for which a marketing approval is obtained in China, at the request of the patentee. The
compensated duration shall not exceed five years, and the total effective duration of the patent right shall not exceed
fourteen years from the approval for marketing of the new drug. Article 48 (newly added)

The patent administration department under *25 the State Council and the administrative authority for patent affairs
under the local people's government shall, together with the relevant departments at the same level, take measures to
strengthen the public service for patent and promote the exploitation and utilization of patent.

Article 50 (newly added)

Where the patentee has voluntarily made a written declaration to the patent administration department under the State
Council that he is willing to license any entity or individual to exploit his patent, and has made clear the method and
standard of payment for the licensing fee, the patent administration department under the State Council shall make a

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public announcement and issue an open license. Where the declaration of the open license is made for a patent for utility
model or design, an evaluation report of the patent right shall be provided.

Where the patentee withdraws the declaration of an open license, he shall make a written submission and the
patent administration department under the State Council shall make a public announcement. The announcement of
withdrawal of the declaration of an open license shall not affect the effectiveness of the open license previously granted.

Article 51 (newly added)

Any entity or individual wishing to exploit the patent for which an open license is granted shall make a written
notification to the patentee, and after paying the licensing fee in accordance with the method and standard of payment
for the licensing fee as announced, obtain the license for exploitation of the patent.

During the exploitation of the open license, the patent annuity paid by the patentee shall be reduced or exempted
accordingly.

The patentee granting the open license may, after negotiating with the licensee on the licensing fee, grant a common
license to the licensee, but may not grant a sole or exclusive license for the patent.

Article 52 (newly added)

Where the parties have a dispute over the implementation of an open license, they may resolve it through negotiation;
if they are unwilling to negotiate or fail to negotiate, they may request the patent administration department under the
State Council to mediate, or may file a suit with a people's court.

Article 66 (original Article 61)

Where any infringement dispute relates to a patent for invention for a process for the manufacture of a new product, any entity
or individual manufacturing the identical product shall furnish proof to show that the process used in the manufacture of its or
his product is different from the patented process.

Where the dispute of patent infringement relates to a patent for utility model or design, the people's court or the administrative
authority for patent affairs may ask the patentee or interested party to furnish an evaluation report of the patent right made by
the patent administration department under the State Council after conducting search, analysis and evaluation of the relevant
utility model or design as an evidence for trial and handling of the patent infringement disputes. The patentee, interested
party or accused infringer may also proactively submit the evaluation report of the patent right.

Article 68 (original Article 63)

Where any person passes off the patent, he shall, in addition to bearing his civil liability according to law, be ordered by the
department responsible for patent enforcement to correct his act, and the order shall be announced. His illegal earnings
shall be confiscated and he may be imposed a fine of not more than five times his illegal earnings; where there is no illegal
earnings or the illegal earnings do not exceed 50,000 RMB, a fine of not more than 250,000 RMB may be imposed; where
the infringement constitutes a crime, he shall be prosecuted for his criminal liability.

Article 69 (original Article 64)

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When investigating and prosecuting the suspected act of passing off a patent, the department responsible for patent
enforcement may, based on the evidence collected, have the right to take the following measures:

(1) Make inquiries of the relevant persons and investigate into the matters pertinent to the act suspected of violation
of laws;

(2) Conduct on-spot inspection of the place where the act of the relevant persons is suspected of violation of laws;

(3) Examine and make copy of the contract, invoices, accounting books and other materials relating to the act
suspected of violation of laws;

(4) Inspect the product relating to the act suspected of violation of laws; and

(5) May seal and detain the products as proved by evidence to be the products passing off the patent.

When handling a dispute over patent infringement at the request of patentee or interested party, the administrative
authority for patent affairs may take the measures listed in items (1), (2), and (4) of the preceding paragraph.

*26 When the department responsible for patent enforcement and the administrative authority for patent affairs performs
its functions and duties specified in the two preceding paragraphs in accordance with the law, the interested party shall assist
and cooperate and shall not refuse or interfere the performance.

Article 70 (newly added)

The patent administration department under the State Council may, at the request of the patentee or an interested party,
handle any dispute over patent infringement that has a significant influence throughout the country.

The administrative authority for patent affairs under the local people's government, when handling any dispute over
patent infringement at the request of the patentee or any interested party, may handle all cases concerning infringement
of the same patent right within its own administrative region in a consolidated manner; or request the administrative
authority for patent affairs under the people's government at a higher level to handle the cases concerning cross-regional
infringement of the same patent right.

Article 71 (original Article 65)

The amount of compensation for the damage caused by the infringement of the patent right shall be assessed on the basis of
the actual losses suffered by the right holder because of the infringement or the profits the infringer has earned because of the
infringement. Where it is difficult to determine the losses the right holder has suffered or the profits the infringer has earned,
the amount may be assessed by reference to the appropriate multiple of the amount of the exploitation fee of that patent under
a contractual license. For willful infringement and where the circumstance is serious, the amount of compensation may

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be determined at an amount between one and five times the amount assessed in accordance with the above-mentioned
method.

Where it is difficult to determine the losses suffered by the right holder, the profits the infringer has earned and the licensing fee
of that patent under a contractual license, the people's court may award the damages of not less than RMB 30,000 Yuan and
not more than RMB 5,000,000 Yuan in light of such factors, as the type of the patent right, the nature and the circumstances
of the infringing act.

The amount of compensation for the damage shall also include the reasonable expenses of the right holder incurred for stopping
the infringing act.

In order to determine the amount of compensation, when the right holder has done his best to provide evidence but the
accounting books and materials relating to the infringement are mainly in the possession of the infringer, the people's
court may order the infringer to provide the accounting books and materials relating to the infringement. Where the
infringer fails to provide or provides false accounting books or materials, the people's court may determine the amount
of compensation by reference to the claims of the right holder and the evidence as submitted.

Article 72 (original Article 66)

Where any patentee or interested party has evidence to prove that another person is committing or will soon commit an act
that infringes the patent right or hinders it or him from exercising its or his right and that if such infringing act is not
checked or prevented from occurring in time, it is likely to cause irreparable harm to it or him, it or he may, before any legal
proceedings are instituted, petition the people's court to adopt measures of preserving property, ordering to take certain
actions or prohibiting from taking certain actions according to law.

Article 73 (original Article 67)

In order to stop patent infringement, under the circumstances where the evidence might be destroyed or where it would be
difficult to obtain in the future, the patentee or the interested party may petition the people's court for evidence preservation
before instituting legal proceedings according to law.

Article 74 (original Article 68)

Prescription for instituting legal proceedings concerning the infringement of patent right is three years counted from the date
on which the patentee or any interested party knows about or should have known about the infringing act and the infringer.

Where no appropriate fee for exploitation of the invention, subject of an application for patent for invention, is paid during
the period from the publication of the application to the grant of patent right, prescription for instituting legal proceedings by
the patentee to demand the said fee is three years counted from the date on which the patentee knows about or should have
known about the exploitation of his invention by another person. However, where the patentee has already known about or
should have known about the exploitation before the date of the grant of the patent right, the prescription shall be counted
from the date of the grant.

Article 75 (original Article 69)

The following shall not be deemed to be patent right infringement:

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(1) After a patented product or a product directly obtained by using the patented method is sold by the patentee or sold by any
unit or individual with the permission of the patentee, any other person uses, offers to sell, sells or imports that product;

*27 (2) Before the date of patent application, any other person has already manufactured identical products, used identical
method or has made necessary preparations for the manufacture or use and continues to manufacture the products or use the
method within the original scope;

(3) With respect to any foreign means of transportation that temporarily passes through the territory, territorial waters, or
territorial airspace of China, the relevant patent is used in the devices and installations for its own needs, in accordance with
the agreement concluded between the country it belongs to and China, or in accordance with any international treaty to which
both countries have acceded, or on the principle of mutual benefit;

(4) Any person uses the relevant patent specifically for the purpose of scientific research and experimentation; and

(5) Any person produces, uses, or imports patented drugs or patented medical apparatus and instruments for the purpose of
providing information required for administrative examination and approval, or produces or any other person imports patented
drugs or patented medical apparatus and instruments especially for that person.

Article 76 (Newly added)

Where in the process of the review and approval of a drug for marketing, a dispute arises between an applicant for drug
marketing license and a relevant patentee or interested party out of a patent right related to the drug for which the
registration is applied, the related party may take legal action before a people's court to request a judgement on whether
the technical solution associated with the drug of which the registration is applied for is covered by the protection scope
of the drug patent right of another. The medical products administration department under the State Council may
make a decision as to whether the approval of the relevant drug for marketing is suspended, according to an effective
judgement of people's court within a specified time limit.

The applicant for drug marketing license and the relevant patentee or interested party may also request the patent
administration department under the State Council to make an administrative ruling as to the dispute out of a patent
right related to the drug of which the registration is applied for.

The medical products administration department under the State Council together with the patent administration
department under the State Council shall formulate specific methods for linking the approval of drug marketing
license and the resolution of patent right disputes at the stage of application for drug marketing license, which shall be
implemented after the approval of the State Council.

Available at Social Science Research Network (SSRN): https://ssrn.com/abstract=3771417

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