CHINA : Understanding utility model patent and design patent protection
published on 18 Feb 2016
Utility models and designs are two available categories of patents in China. Utility models are sometimes referred to as small inventions because they have comparatively lower level of inventive step and are less costly than an invention. Subject to preliminary examination, a utility model only takes several months from filing to grant. Therefore utility model protection is worthwhile for some invention-creations that have small technical improvements but are of significant commercial value. As for designs, an application is also preliminarily examined only. A design is an artistic creation which features a decorative or aesthetic exterior appearance of an article, unlike invention or utility model which involve technical solutions.
In 2014, SIPO received approximately 928,000 utility model and 869,000 design applications, respectively accounting for 22% and 21% of the total number of annual patent applications. From 2010 to 2014, the mean annual growth rate of utility model applications filed by domestic applicants is 29%, whereas about 7% of those are filed by foreign nationals. It suggests that utility models are still attracting both domestic and foreign IP holders despite of the high invalidity rate of roughly 65-72% over the past two years according to available commercial statistics. On the other hand, the total number of design filings peaked in 2013 among the past four years but later slightly declined in 2014 with a difference of some 24,000 applications. Nevertheless, design applications filed by foreign applicants have demonstrated a constant increase each year.
Patentable Subject Matter
PRC Patent Law 2008 (the Patent Law) defines a utility model as any new technical solution relating to the shape, the structure, or their combination, of a product. In other words, a utility model does not protect any methods, processes, or improvements of such. Also, non-technical solutions are not eligible for utility model protection, such as the use of a product or substance with an unfixed shape, and products only featuring decorative designs.
A design patent means any new design of the shape, the pattern, or their combination, or the combination of the color with shape or pattern, of a product which creates an aesthetic feeling.
In principle, one application is limited to only one design. But an exception provides that similar designs for the same product or a plural of similar designs incorporated in products as a set may be filed together in one application including at most 10 designs.
Graphic user interface (GUI) is also a patentable subject matter. The protection of a GUI was affirmed in an administrative litigation in 2014 where the court ruled that a GUI in combination with the installed product presents appealing features complies with the definition of a design. Under SIPO’s Order No. 68, by removing restrictions on the product pattern of being permanent and visible rather than flickering or being conditionally visible, the Guidelines were amended to include a GUI as a patentable subject matter for design.
As a universally governing clause, Article 5 of the Patent Law applies to all creations that an application for utility model or design would be rejected if the subject matter is contrary to the laws or social morality or that is detrimental to public interest.
Notably, unlike in some countries, Patent Law does not specifically provide a conversion of application from an invention to utility model and vice versa.
Acquiring Patent Protection for Utility Models and Designs
Patentability
Utility Models: According to Article 22(1) and (3) of the Patent Law, “An invention or utility model for which a patent is to be granted shall be novel, inventive and practically applicable…….Inventiveness means that,……..the invention has prominent substantive features and represents a notable progress and that the utility model has substantive features and represents progress.” Whereas an invention has to represent notable progress in order to meet the inventiveness requirement, a utility model that has progress will suffice. Therefore, a utility model requires comparatively lower level of inventive step than that of invention patents.
Designs: Composing of the same elements, a patentable design shall be novel, significantly differing from prior design, and applicable in industry. Notably, a patent will only be granted to a design which is not conflicting with existing and legitimate rights, such as copyrights, trademarks, trade dresses, images, etc.
Preliminary examination
The Patent Law does not require utility models and designs to be examined substantively. The applications are only checked by preliminary examination without conducting any prior art or prior design search before grant. The preliminary examination generally takes from three (3) months to a year.
Preliminary examination does not imply that the featured novelty will not be investigated at all. According to SIPO’s Order No. 67 and the post-amendment Guidelines for Patent Examination 2010 (the Guidelines), the examiner may look into whether an application for utility model or for design is prima facie lack of novelty (namely, an examination on obvious and substantive defects), as well as any facts of double patenting. Without conducting a search, the examiner may use the available technical solutions and information that may conflicts with the application as the prior art, including the search results in other countries.
Scope of Protection
The product or article on which the design applies is an indispensable element that has to be designated or illustrated in the application in order to define the boundary of right. Different from invention patents or utility models, the scope of protection for a design is defined in the drawings or photographs submitted. To interpret a design, the Patent Law requires a brief description in the specification. Furthermore, Article 28 of the Implementing Regulations demands the brief description to indicate the essential features, which is particularly important for distinguishing prior designs.
Term of patent
The term of patent protection for either utility models or designs is 10 years from the filing date.
International priority
To enjoy international priority, the applicant must file in China within twelve (12) months for utility model or six (6) months for a design from the date on which the applicant first filed in a foreign country an application for the same utility model or design. A priority claim shall be made upon filing and a copy of the priority document shall be submitted within three (3) months from the filing date. Failure to meet either requirement will deem the priority claim to be void.
China allows the national entry of a PCT application as a utility model application. However, the applicant will not be able to take advantage of the “one-invention-creation-two-applications” strategy by filing through the PCT national entry route (please find more information in the “Dual-filing strategy” paragraph). The applicant will need to choose either an invention patent or a utility model application for PCT national entry.
There is a concern whether a foreign partial design can be the priority basis for a Chinese design application, as China does not permit design in part. According to SIPO’s current practices, if only the dotted lines or double-dotted lines are modified to solid lines in the drawings submitted to SIPO, the Chinese application may be entitled to a priority claim to a first-filed foreign partial design. Nevertheless, such concern will not be a problem if a partial design is admitted as patentable subject matter by the prospective 4th Amendment of the Patent Act.
Dual-filing Strategy
Article 9 of the Patent Law establishes the principle of double-patenting prohibition, but it allows for a “one-invention-creation-two-applications” filing strategy. Article 41 of the Implementing Regulations prescribes that, where the same applicant files same day applications for both utility model and for invention patent relating to the identical invention-creation, he or she should indicate on the applications that the same invention-creation has also been applied for another patent application. Failure to specify at filing may cause the applications to be rejected according to the principle of double patenting.
Since a utility model does not have a substantive exam, in practice it will be granted much earlier than an invention patent. The applicant can then enjoy utility model right and may then opt to abandon the earlier granted and effective utility model upon the grant of the invention patent. The utility model will cease from the publication date of invention patent grant. Namely, the later granted invention patent, which enjoys longer term of protection, takes over and continues the patent right from the cessation of the utility model. This patent prosecution strategy implies that utility models can not only be used as a supplementary protection during the pending period of an invention application, but also an alternative protection in lieu of an invention patent if unfortunately the latter is rejected during the substantive examination.
Notably, this route will be available only when both applications are filed in China on the same date, and are based on the same priority date, if any. It can be claiming priority based on the first-filed foreign application according to Paris Convention. If the first-filed application is a PCT application, the applicant needs to file national applications for utility model and invention respectively, claiming priority to the PCT application under the Paris Convention. This means the applicant should not take the route of PCT national entry. If the route of the PCT national entry is desired, the applicant will only be able to choose one type of application between utility model or invention patent, and cannot take advantage from the “one-invention-creation-two-applications” filing strategy from this step forward. It is because the filing date of the second national application for the same invention-creation differs from the filing date of the PCT application which the national entry is based on.
Enforcement of Patent Rights
According to the statistics available at a commercial database, the patent validity rate during 2014 for utility models is about 28% and the same rate for invention patent is roughly 30%. However, while the validity rate during 2015 for utility models increases to around 36%, the same rate for invention patent plunges to only 8%. Since a utility model requires only a comparatively lower level of inventive step, a utility model’s stability against an invention patent is quite competitive. It is also shown that an utility model patentees’ winning rate in infringement cases during 2014 to 2015, again according to available commercial data, is about 61-72%, while the same rate for invention patentees is approximately 59-69%. As our interpretation, acquiring an invention patent, which takes a lengthy and expensive procedure relative to the investment for a utility model does not guarantee the patentee a more confident winning rate in infringement law suits. However, a suitable patenting strategy still depends on the kind of invention-creation the patentee would like to protect and the length of protection desired.
Patent Evaluation Report
The Law requires a special burden of proof on the patentees of utility models and designs in the event of infringement litigations. Article 61(2) reads, “[...] the people's court [...] may ask the patentee or any interested party to furnish an evaluation report of patent made by [SIPO] after having conducted a search, analysis and evaluation of the relevant utility model or design, and use it as evidence for hearing or handling the patent infringement dispute.” Since utility models and designs are only subject to preliminary examination before being granted, their validity may be vulnerable during the trial. However, an evaluation report is neither an administrative decision regarding patent validity nor a prerequisite for initiation of a legal action. The report only serves as a preliminary reference for the court, which has full discretion, to determine and order whether or not to suspend the pending proceeding. Only the Patent Reexamination Board has the authority to confirm or invalidate the patent in dispute. Moreover, whether the report is appealable may invite some criticism. SIPO's standpoint poses that the report is not an agency's decision and therefore the patentee is unable to file an administrative litigation against the same.
Highlights: the 4th Amendment Proposal relating to utility models and designs
According to the latest version of the Draft of the 4th Amendment to the Patent Act published in December of 2015 (the Draft), several new provisions concerning utility model and design will be introduced, as explained below.
Partial design
The currently effective Patent Act 2008 does not expressively rule out the patentability of partial designs. Instead, its ineligibility for protection is listed as an example in the Guidelines for Patent Examination 2010. Additionally, the Guidelines require the entire appearance of the article to be delineated by solid lines, precluding the use of dotted lines.
In the Draft, now the Article 2(4) defines designs as new designs of “the whole or partial” shape, pattern, of the combination thereof […]. Therefore, by legislation, partial designs will be available for patent protection. The Guidelines and relevant regulations are expected to also be modified accordingly.
Extension of Term for Design Patent
In line with the U.S. system, a design's term of protection will be extended to 15 years from the filing date, while that for utility model may remain the same as 10 years.
Punitive damage and Elevated Statutory Damage
The change in the amount of monetary damages attracts lots of attention. The first three methods of calculation, namely the actual loss of patentee, the profits obtained by the infringer, and the reasonable multiples of royalty, remain as they are. What is surprising is that the court may weigh the circumstances, scale, and consequences of patentee/licensee's injuries to award up to triple damages calculated via one of the aforementioned methods. The damages may include patentee/licensee's rational expense in the effort to cease infringement. Most importantly, the statutory damage is considerably elevated to a range of RMB¥ 0.1 to 5 million.
Indirect Infringement
In the new Law, contributory and induced infringements are two types of liable offenses. Contributory infringement is constituted when “[t]he parties who knowing the raw materials, intermediates, components, equipment are specifically designed for implementing the patents, in the purpose of business, provide the products above to the other parties infringing patents.” And an act is deemed as induced infringement when “[t]he parties who knowing the relevant products or methods are patented, in the purpose of business, induce the other parties to infringe the patents.” Note that a fundamental prerequisite for indirect infringement is the presence of a direct infringer. It requires an inducer or a contributor's knowledge of infringing acts as well. In other words, the patentee has to prove that an inducer or a contributor’s intent is willful. Once infringement is found, the inducer or contributor shall be jointly liable with the direct infringer for damages.
For any questions relating to this topic, please contact us at cjchen@tsailee.com.tw
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