A new Chinese patent regime will go into effect in 2009. This is the third amendment to the Chinese patent law, which was first promulgated about 25 years ago. The amended patent law includes provisions both favorable and unfavorable for foreign applicants.
The Standing Committee of the Eleventh National People’s Congress approved the most recent draft of the amended patent law on December 27, 2008. The amended patent law will take effect on October 1, 2009. This is the third amendment to the Chinese patent law, which was first promulgated about 25 years ago.
The amended patent law includes provisions both favorable and unfavorable to foreign applicants. For example, maximum statutory damages have been doubled to 1 million RMB (approximately $146,134 at the time of writing), while compulsory licensing has been expanded. Highlights of the amended patent law are discussed below.
As mentioned above, the maximum statutory damages for infringement have been increased to 1 million RMB. Statutory damages are awarded when it is hard to prove actual damages, which is typically the case in China, due to the lack of available discovery. When damages can be determined, damages are based on actual losses suffered by the patentee. If actual losses cannot be determined, the damages are awarded based on profits earned by the infringer. If earned profits cannot be assessed, damages are based on a multiple of a licensing fee. However, it is expected that the maximum statutory damages of 1 million RMB will become the effective cap on damages awarded by courts in China in most cases. While 1 million RMB for patent infringement is still a small amount by Western standards, it is a step in the right direction.
The Chinese patent law has also been strengthened in that an offer for sale is now considered an infringement of a design. Previously, infringement of designs only included making, selling, or importing.
The amended patent law confirms that the strategy of simultaneous filings of applications for utility models and invention patents for the same invention is acceptable as long as one abandons the utility model upon granting of the invention patent. The goal of this strategy is to secure quick but limited patent protection while the invention patent application is pending. A utility model is a patent that undergoes examination only for formalities and therefore is granted quickly (typically in six to 12 months), while an invention patent (similar to a utility patent in the U.S.) undergoes both formalities and substantive examinations and can take several years to grant. Accordingly, an applicant can file applications for both a utility model and invention patent, have the utility model granted while the invention patent application is pending, and enforce the utility model while the invention patent application is pending. The downside of a utility model is that it can be relatively easy to invalidate in comparison to an invention patent.
The amended patent law requires absolute novelty for invention patents and utility models. That is, prior art includes any technology known to the public within China or abroad before the date of filing (e.g., via publication, public use, etc.). Previously, publicly known technology (e.g., public use) was only relevant if known within China. However, as mentioned above, utility models are not examined substantively, so this will only be relevant for utility models if reexamined.
Unfortunately, the amended patent law has retained compulsory licensing and, in fact, extended its availability to eliminating monopolistic practices and action for the sake of public health (for export). However, the laws are unclear as to when the new conditions apply, and we will need to await the final version of implementing regulations for more details.
For an invention made in China, the applicant must submit the invention for a secrecy review before filing outside of China. This will presumably be implemented in a similar fashion to the U.S. foreign filing license system, but, again, we will need to await the implementing regulations. Previously, only Chinese applicants were required to file an application first in China before filing outside of China. This new system will apply to both Chinese and foreign applicants in China (e.g., multinationals with R&D divisions in China).
In conclusion, the amendments clarify many areas of the Chinese patent law and appear to provide both benefits and detractions. However, the devil is in the details and we will need to await the final version of the implementing regulations to determine the true impact of the amendment.
- However, the First Intermediate People’s Court of Beijing recently awarded damages of 21.16 million RMB recently to MAN Group’s Neoplan Bus for design infringement showing that sometimes Chinese courts will award higher damages. [Back to reference]