China patent: China publishes revised Draft Amendments to the Patent Law

February 04, 2019

On January 4 2019, the Standing Committee of the National People's Congress of China published a new version of the proposed Draft Amendments to the Patent Law (the Draft) for public comments. The commenting period ends on February 3. This new draft is the result of the first reading at the end of December by the Standing Committee. The second reading of the Draft is expected to be in April 2019. The final version may be approved in June or October this year.

Compared to the earlier version, the Draft has eliminated some provisions that generated intense discussions, e.g. rules related to administrative enforcement on repeated infringement matters, some special rules on service invention, secondary infringement. The Draft has introduced a new provision on patent term extension for innovative pharmaceutical drugs, among other notable points. The Draft seems to be driven by strong motivation to demonstrate pro-IP attitudes. The following are highlights:

1) Article 6 of the Draft relates to service invention and inventor remuneration. The new rules seem to intend to give more freedom to state-owned companies to handle service inventions. The controversial part in the earlier version, which could be interpreted as giving default rights to inventors, was deleted.

2) Article 20 of the Draft adds a new broad rule against patent abuse which stipulates: "The applying of a patent and exercising of patent rights shall abide by the principle of good faith. Abuse of patents shall not be allowed to harm public interests and others' lawful rights and interests or to exclude or restrict competition." The new provision arguably touches on competition law and overlaps with some of the rules in antimonopoly law in China. The concept of patent abuse is not defined in the Draft, nor is the term "public interest" clarified. This provision is likely to generate lots of discussions.

3) Article 42 extends the patent term of a design patent to 15 years. The Article also stipulates patent term extension for pharmaceutical inventions. The proposed rule states: "The State Council may make a decision to extend the duration of the innovative pharmaceutical patents that are synchronously applied for market launch in China and abroad, to make up the time used for drug approval." The draft language seems to require lots of clarifications, but in general it should be beneficial to innovative pharmaceutical companies. What should be included as a priority is inserting additional rules into the Draft to enable the patent linkage system. This was expressly stated as being explored by the highest level policy documents back in 2017.

4) Article 50-51 stipulates a system of open licence for patents. Under this system, a patent owner may publish the licensing royalty rates, and a potential licensee can take on the licence based on such terms by written notice. Some commentators believe such a system is no longer necessary.

5) Article 70 of the Draft provides patent enforcement powers to the China National Intellectual Property Administration (CNIPA) and its local patent offices. It is proposed that the CNIPA has powers to handle patent infringement disputes that are of nationwide significance. While this might be an interesting route for enforcing standard essential patents, the question remains whether the powers of administrative enforcement will somehow make the current patent enforcement system overly complicated.

6) Article 72 of the Draft provides one to five times punitive damages for wilful infringement. However, the issue of wilful infringement is not addressed. The Draft proposes increasing the statutory damages to RMB 5 million with a minimum of RMB 100,000 and shifting the burden of proof to the defendant under a duty to cooperate in providing relevant information in order to determine the amount for compensation. Similar rules already exist in trade mark law.

The proposed Draft Amendments to the Patent Law reflect the Chinese legislature's determination to protect intellectual property. China's current patent law was implemented in 1985, and was revised three times in 1992, 2000 and 2008. Though China is trying to speed up the process of changing patent law, the current set of amendments might still be short of what is possible.

Some academics and practitioners really hope that this round of amendments will clearly define the issues of secondary infringement, clarify the exhaustion issue of method claims and add in protection for partial designs. More importantly, many people are calling for the restructuring of invalidation proceedings so that they are a quasi-judicial proceeding such that only one judicial review is necessary. Currently, the judicial review of the invalidation result at the Patent Review Board is considered as administrative litigation. Two levels of judicial review are required and most of the time the decisions are simply remanded for additional consideration resulting in a significant waste of time.

The ensuing months this year are critical to the finalisation of the amendments. Hopefully, the opinion of the international community will make a difference.