Recent patent changes in China (sponsored article)

Howard Hao

Howard Hao is a patent attorney and the manager of the patent department. Mr Hao provides consultation services on a wide range of patent issues, including inventions, utility models and industrial designs. Mr Hao specializes in patent prosecution in China. He has filed over 600 patent applications and responded to over 500 office actions relating to medical equipment, engines, automotive technology, machine tools, metal materials and mechanical and electrical control systems. He also provides broad IP legal services on a strategic scale.

Chenyan Wu

Chenyan Wu is licensed to practice patent work in China, has passed the US Patent Bar Exam and is a licensed Judicial IP Appraiser. Ms Wu has more than 12 years of work experience in the field of intellectual property including one-and-a-half years working at a US patent law firm and a two-month internship at a multinational corporation based in the US. She has a bachelor's degree in Electrical Engineering and received her Master's degree in Intellectual Property at University of New Hampshire School of Law (formerly Franklin Pierce Law Center). Ms Wu is specialized in formulating patent prosecution strategy and has handled numerous cases for leading Chinese companies including Levono and ZTE. She is an active participant of INTA, AIPLA, AIPPI and ABA and have hosted a dozen of seminars at AIPLA and ABA.

Howard Hao: SIPO used to issue a lot of subject matter rejections under Article 2 of the Chinese Patent Law, asserting that the claims relate to non-technical subject matters and thus are not patentable. This kind of rejection related to not only computer-implemented methods, but also some apparatus claims, and typically was very difficult to overcome, no matter how we illustrated the technical essence of the invention. This practice is somewhat similar to the current practice at the USPTO.

Chenyan Wu: This practice was changed by the Re-examination Board by revoking the rejections made by the examiners and remanding the applications back for further prosecution. Now the SIPO rarely issues this kind of rejection. Instead, the SIPO now focuses more on the merits, such as whether the invention is new and has inventive step (which is similar to the Section 103 requirement in the US). Taking a business method-related patent application as an example, if the technical problem solved by the distinguishing features is not "technical" compared with the closest prior art, there is no technical contribution to the prior art. Thus, the claim lacks inventive step.

Howard Hao: Since May 2014, the SIPO started to accept design applications for Graphical User Interface ("GUI") designs. Since then, a huge number of GUI design applications have been filed by both domestic and foreign applicants. As the competition between software companies gets more and more heated, the GUI design patents are also being used as a weapon by software companies to attack competitors. For example, Qihu (a Chinese software company) has brought civil litigation against Jiangmin (another Chinese software company), claiming infringement on its GUI design patent and asking for a compensation of RMB15,000,000 (about USD2.23 million). GUIs are very important for software companies because they engage with users directly. Now with this development in SIPO's practice, an applicant can seek to protect its unique GUI by filing design applications. However, different from other jurisdictions, SIPO only allows GUI designs if the drawings show the GUI along with the hardware. In other words, the design application needs to show not only the GUI itself but also the hardware.

Chenyan Wu: In 2015, SIPO received approximately 2.8 million patent applications, which included about 1.1 million invention patent applications (similar to utility patent applications in the US), 1.1 million utility model patent applications and 600,000 design patent applications. The filing numbers in 2016 continue to grow. So SIPO now is working on improving the quality of the granted patents. What we as practitioners are feeling now is that the examination practice is more stringent than before. Now the examiners even cite new prior art references in the fourth or fifth Office Actions to reject cases based on novelty or inventive step, and very often, rely on "common knowledge," asserting that the claimed inventions lack inventive step. This requires patent practitioners to deal with more prosecution challenges.

Howard Hao: As stated above, SIPO only accepts a GUI design application if it includes a portrayal of physical hardware. This practice is different from many other jurisdictions. For example, the US generally allows a US GUI design application to only show the pure GUI design without including specific hardware devices, which means a broken line may be used to illustrate the border of the GUI to indicate the border of an electronic device.

Chenyan Wu: This difference in practice may create some problems. Assume that a Chinese design application claims priority to a US design application. When the applicant files a design application in China based on the US application, the drawings from the US application would not work since pure GUI design is not patentable by itself and SIPO requires a GUI design to be applied to hardware.

In this situation, the applicant would need to illustrate the hardware, such as an iPhone, tablet, Android phone, or smart watch, in order to meet SIPO's standards. This may also be problematic if SIPO rejects the priority claim based on the drawings in the Chinese application being different from the drawings in the US application. If the Chinese application cannot claim a priority to the US application, the patentability of the granted Chinese design patent may be easily challenged because the granted US patent, and any public disclosure (including use) of the design between the US filing date and the Chinese filing date, will become prior art against the Chinese design patent.

Howard Hao: In order to deal with this situation, we suggest that applicants who are filing in the US or other countries incorporate drawings showing the hardware on which the GUI can be applied. These drawings may just be reference drawings, but will offer significant convenience when filing a Chinese application with a priority claim.

For example, in a US application, in addition to the drawings of the pure GUI, the applicant may include several drawings showing iPhone, tablet, Smart Phone, GPS, and other electronic devices with GUI applied. When filing a design application in China, the applicant may select which hardware it intends to protect, or just combine several hardware with identical or similar GUI designs in one application and file divisional applications later.

Chenyan Wu: The Chinese Patent law is under its fourth amendment. The main proposed amendments include the following:

1. One proposed amendment would extend the term of Chinese design patents to 15 years, compared to the current 10-year term. The industrial designs of products are becoming more and more important in the competition for market share. Design patents are the most effective way to protect industrial designs in China. A proposed amendment will permit China to join the Hague agreement, the filing system for international design protection.

2. Partial designs may be allowed by SIPO. This would be a significant breakthrough since in the past 30 years SIPO never allowed a partial design for an inseparable part of a product. Partial designs can better protect fine design details. We look forward to seeing this change in the finalized Patent Law. If this proposed amendment gets approved, the GUI issue mentioned above will be resolved.

3. The compensation for patent infringement may be increased. The court may find "willfulness" in the defendant's infringement and then double or even triple the compensation awarded to the plaintiff. This can be deterrent to bad-faith repeat infringers.

4. Statutory damages for patent infringement may be increased from an amount of between RMB10,000 (about USD 1,486) and RMB 1 million (about USD 148,587) to between RMB 100,000 (about USD 14,860) and RMB 5 million (about USD 742,936).

5. Considering the huge number of patents/patent applications, it is a big problem of how to promote the commercialization of those patented technology. In the draft amendments to the Patent Law, there are the provisions for indications of licensing availability. For example, the patentee, after the patent is granted, may submit a declaration before SIPO, stating that it is willing to license the patent to anyone or any entities at the proposed royalty rate. This information will be published by SIPO.

Howard Hao: Applicants in the computer and software industry should be aware of the patent infringement litigation which took place between Nokia and Huaqin in 2015. Expressions like modules configured to perform some functions are commonly used in software applications and SIPO does not have serious problems with this kind of claim language. However, the patentee after receiving the granted patent may become frustrated when trying to assert the patent rights against competitors because the court may have a different interpretation of this claim language. In the case mentioned above, Shanghai High Court confirmed that the claim language "terminal configured to…" should be construed as a means-plus-function feature because it defines a component by the function it performs, rather than by its structure. So the judges need to refer to the embodiments in the specification to determine the scope of the means-plus-function feature. However, in this case the specification did not define any specific structure of the hardware, nor did it give a detailed description of how the function is performed. So finally, the court decided that the claims were unclear and thus there could not be a finding of infringement as to the unclear claims.

This case has caused a great shock among practitioners because this kind of language has until now been quite commonly used when drafting software inventions. But since the case was confirmed by one of the most sophisticated courts in China, patent practitioners are compelled to pay more attention to this aspect of application drafting. We note that this decision actually is in alignment with the treatment of means-plus-function language in the US.

Chenyan Wu: Our suggestion is to avoid means-plus-function language if possible and to use structure claiming instead. If means-plus-function language must be used in claims, the specification should give more details about the hardware and provide figures showing the physical hardware. In case the hardware only involves generic computers or components, the specification should describe how the functions of the modules are achieved, for example by flowchart. Given the current state of the law, merely describing the function performed by a module may not be sufficient.

Chenyan Wu: The Patent Prosecution Highway (PPH) is a great tool to accelerate the prosecution of Chinese applications and possibly reduce the number of Office Actions per case, which in turn reduces overall prosecution costs. SIPO now has PPH agreements with about 20 countries including the US, Japan, Germany, Britain, and Canada. In recent times, PPH practice in the Chinese patent office has become more and more flexible and friendly.

In the Chinese patent office, with PPH, the first Office Action will be issued very often within about two months of the grant of the PPH request. In Chinese practice, the PPH request needs to be filed at the time when filing a request for substantive examination if the case is published or after the application enters into substantive examination, and in any event needs to be filed before the first Office Action is issued.

Howard Hao: We see a steady increase in patent litigation in many jurisdictions including Beijing and Shanghai. The judges hearing patent litigations cases are also becoming more and more sophisticated. As a policy embraced by the central government, IP protection is being enhanced. Some current trends may reflect this policy. For example, some judges are willing, upon request, to help the plaintiff to collect evidence from the defendant by evidence preservation. Some judges are willing to award a high compensation to the plaintiff even though the plaintiff may not be able to establish a complete chain of evidence showing the damages. We litigated an anti-unfair competition case for a US client early this year and won four-million CNY (about USD600, 000) for the client. The compensation was relatively high because the judges took the defendant's bad faith into consideration.

Applications for three kinds of patents
	Total	Invention	Utility model	Design
2010	1222286	391177	409836	421273
	25.1%	24.4%	31.9%	19.9%
2011	1633347	526412	585467	521468
	33.6%	34.6%	42.9%	23.8%
2012	2050649	652777	740290	657582
	25.5%	24.0%	26.4%	26.1%
2013	2377061	825136	892362	659563
	15.9%	26.4%	20.5%	0.3%
2014	2361243	928177	868511	564555
	-0.7%	12.5%	-2.7%	-14.4%
2015	2798500	1101864	1127577	569059
	18.5%	18.7%	29.8%	0.8%
Source: 2015 SIPO Annual Report