Consequences of Violation of CNIPA Confidentiality Review

- A 2022 Top Listed Case in China

A “foreign filing license” or “first filing requirement” means that, when an innovation created locally is related to national security, it may fall under the category of confidential information that should be reviewed in advance by the competent IP Office before a patent application is filed abroad. If an applicant files his first application with the IP Office of the jurisdiction in which an invention is completed, the IP Office will examine whether or not the invention constitutes confidential information. If an applicant intends to file his first application with a foreign IP Office, a separate confidentiality examination shall be requested and approved by the competent authority of the jurisdiction in which the invention is completed. Failure to comply with this requirement constitutes grounds for refusal or invalidation.

According to Article 19(1) of the China (PRC) Patent Law, "[i]f any entity or individual intends to file a patent application abroad in a foreign jurisdiction for an invention or utility model completed in China, they should report in advance to the patent administration department under the State Council for a confidentiality examination." In April 2023, the China National Intellectual Property Administration ("CNIPA") announced the Top Ten Invalidation Cases of 2022.[1] Among these, CNIPA highlighted a case of an invalidation request for a utility model right as an example of invalidation due to violation of the confidentiality examination. The case is outlined below.

The patentee (Zhejiang Jiechang Linear Drive Co., Ltd.) filed a provisional application with the United States Patent and Trademark Office ("USPTO") on December 20, 2016; they then filed an application for the same invention with CNIPA on January 10, 2017, before filing a further utility model application on April 14, 2017, claiming priority based on the previous Chinese application. The invalidation requester filed a request for an invalidation trial on the grounds that its priority claimed was not the first application and that it violated the confidentiality examination regulation.

The invalidation requester stated that:

1.      All of the inventors of the utility model at issue are Chinese nationals;

2.      The initial public offering prospectus and the online article report about the patentee showed that the patentee had a complete R&D system and organization in China;

3.      In order to effectively conduct research and development in this technical field, the technology needs to be integrated with the manufacturing process; and

4.      The patentee did not establish an R&D department overseas.

The patentee submitted immigration records of Mr. Hu, the founder, president, and the lead inventor of the utility model at issue, to prove that Mr. Hu had traveled to the United States three times in 2016. The patentee argued that the invention at issue had been completed during his stay in the U.S. and that the only contribution made by the other inventors had been through correspondence.

CNIPA firstly pointed out that the patentee had failed to submit the evidence of immigration records within the specified period. However, since it proved that the invention at issue had been completed in a foreign jurisdiction, the evidence was eventually used in the invalidation proceeding; this was a crucial element of the case.

Next, CNIPA stated that if the invalidation requester can establish prima facie evidence showing that the invention was for the most part completed domestically and the patentee cannot in turn provide sufficient evidence for rebuttal, the patentee shall bear the legal consequences, namely that the invention is not entitled to patent protection.

In this case, the invalidation requester submitted evidence of the patentee's domicile and the inventor's nationality, which was considered sufficient to establish the prima facie evidence. The Court held that the burden of proof should be transferred to the patentee to prove that the invention at issue was not completed in China. However, the patentee failed to provide any evidence other than the immigration records, which were at best additional evidence but could not directly prove that the invention at issue had been completed in a foreign jurisdiction.

Comments

The question of whether an invention or utility model is subject to a confidentiality examination in China depends on "whether or not the majority of the creation was completed in China", regardless of the nationality of the inventor. If the majority of the creation is completed in China and then filed as an application with a foreign IP Office without an initial request being made for a confidentiality review, this fact will constitute grounds for rejection or invalidation in China.

This case clearly shows that if the evidence presented by the invalidation requester is persuasive enough to support the claim, the burden of proof will be transferred to the patentee. If the patentee fails to provide direct evidence to refute the claim, the patent will be invalidated by CNIPA. In addition, CNIPA may accept evidence provided by the patentee outside the specified period if the evidence has sufficient influence on the outcome of the invalidation trial. Therefore, in order to avoid unfavorable outcomes regarding patent protection, applicants should pay attention to local regulations concerning the confidentiality examination.

With regard to the method of requesting a confidentiality examination, in addition to directly filing a request with detailed technical contents, if an applicant files his first application with CNIPA or files a PCT application where CNIPA is the receiving office, they will be deemed to have requested a confidentiality examination at the same time without filing a separate request.

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