New Version of the
Draft Amendment to China’s Patent Law
China’s Standing Committee of the National People's Congress released the latest version of the drafted Amendment to the Patent Law on January 4, 2019. The Amendment was formulated to improve the current patent system, a system which has been beset with complaints that it is insufficient to tackle the emerging and complex issues faced by China in the area of patent law. This will be the fourth amendment to the Patent Law since its enactment in 1984. The government has invited the public opinions on how to improve the current Patent Law since 2015. This newest draft published at the beginning of 2019 signals that series of substantive changes in the statutory rules will soon become reality, very likely before the end of this year.
To conform to Hague System for design, of which China is still not an official member, the term of design protection will extend from 10 to 15 years from the filing date. However, the 15-year term is not retroactively applicable to cases filed before the amendment becomes effective. Furthermore, a domestic design application can be a valid priority basis for another design application. Amendement to Partial design has been crossed out from the latest verson.
This newest version of China’s Patent Law sees the introduction of punitive damages, with the possible amount allowed for statutory damages slated to be significantly increased. For willful infringement with grave malicious intention, the infringer may be sentenced a punitive amount for up to five (5) times of the found damages at the court’s discretion, much higher than other leading nations in the field of intellectual property. Furthermore, the court may award an amount ranging from RMB 0.1 to 5 million depending on factors outside of the standard calculation basis for damages, such as the type of patent or the severity of the infringement.
The Amendment also introduces a mechanism to shift the patentee’s burden to proof. During litigation, when the patentee has exhausted all means in considerable attempts to demonstrate the amount of damage, the court may order the accused infringer to present hitherto undisclosed information such as ledgers, books or other financial records to the court. If the accused infringer fails to present or has tampered with the information, the court may determine the damages amount solely based on the evidence provided by the patentee.
Notably, the methods for calculating damage amount remain the same as what has already been written in the previous version of the Patent Law. This method entails that the lost profit of the patentee, the financial gains of the infringer and the reasonable royalty must be considered consecutively. Only when the previous method is not eligible or applicable can the patentee adopt the next method.
In addition to rewarding employees with monetary remuneration for their service inventions, the employer is encouraged to reward its employees by conferring financial assets. To reasonably share innovative revenues, the employer may grant company’s equity share, options, dividends, etc. to its inventor employee. However, this provision may not be interpreted to establish a lawful entitlement on which the inventor employee may request for company stocks instead of monetary rewards. Indeed, an employment contract or a company policy clearly governing invention remuneration will prevail. In the absence of a contractual rule or policy, the Implementing Regulation of the Patent Law stipulates that the employee is entitled to monetary rewards. Despite of the employee’s entitlement, the new provision still provides more remuneration options for some startups that are slow in cash flow but eager to hire inventors with talent.
The internet service provider (ISP) bears explicit duty of care in instances of online infringement. The patentee or a person of interest may request the ISP to remove, block, or disconnect the accused product based on the court’s adjudication, ruling, mediation decision, or the local patent administration’s order. Without a necessary action after receiving patentee’s request, the ISP shall be responsible for joint liability over any extended scope of damages. The currently effective E-Commerce Law also has similar provisions.
The patentee may grant a license to anyone after the grantee has paid a pre-determined license fee. This is done by submitting a voluntary statement in writing to the CNIPA. The CNIPA will approve and make public the statement so that anyone interested in implementing patented technology can be bound by an agreement after giving consent to the license terms and paying the license fee. If the patent open for license is a utility model or a design, a patent evaluation report is an additional requirement.
An open license statement can later be withdrawn at the patentee’s request in writing. A withdrawal, however, will not revoke any ongoing and effective license(s).
A lawsuit against an infringer must be filed within three (3) years from the time when the patentee or a person of interest knows or is supposed to know the relevant facts of infringement, which is only two (2) years under current law regime.
To enforce provisional right after publication before a grant, the patentee may claim for reasonable royalty within three (3) years (two [2] years under current law regime) from the time the patentee knows or is supposed to know the facts of a third party’s use of the claimed technology, or from the time of patent grant if the patentee knows or is supposed to know the facts of exploitation before the patent grant.
Some problems remain unresolved, namely: collecting effective evidence, overspending in litigation, insufficiency in damages awards are those of many issues bothering the patentees. Cases of trans-regional infringement and on-line infringement are increasing, while abuse of patent rights also occurs. In terms of IP monetization, patented technology transfers are not as efficient as expected. Information asymmetry and non-transparency in the market of patent licensing apparently demonstrates the inchoate status of relevant services. All those issues require the CNIPA administration’s more efforts and amendments to regulations in hope of a better improvement.
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