On April 1, 2015, the State Intellectual Property Office of China (i.e. the SIPO) released a notice seeking for opinions on the newly drafted amendments to the Chinese Patent Law, which were published simultaneously The drafted amendments pertain to the fourth amendments to the Chinese Patent Law. Routinely, the Chinese Patent Law is amended every about 8 years.

The drafted amendments to the Patent Law intend to enhance protection and operation of patents from all aspects. Below the bold Italic words represent the amended portions of the relevant articles.

I. Enhancing Patent Protection through Administrative and Judicial Routes

1. Efficacy of a Mediation Agreement and Enhanced Administrative Sanctions against Patent Infringement

Drafted Article 60 of the Patent Law reads,

Where a dispute arises as a result of the exploitation of a patent without the authorization of the patentee, that is, the infringement of the patent right of the patentee, it shall be settled through consultation by the parties. Where the parties are not willing to consult with each other or where the consultation fails, the patentee or any interested party may institute legal proceedings in the people's court, or request the patent administration department to handle the matter. When the patent administration department handling the matter considers that the infringement is established, it may order the infringer to stop the infringing act immediately and may confiscate and destroy the infringing products, the parts, tools, moulds and equipments specially used for making the infringing products or carrying out the infringing process. If the infringer is not satisfied with the order, he may, within 15 days from the date of receipt of the notification of the order, institutes legal proceedings in the people's court in accordance with the Administrative Procedure Law of the People's Republic of China. If, within the said time limit, such proceedings are not instituted and the order is not complied with, the patent administration department may approach the people's court for compulsory execution. The said patent administration department handling the matter may, upon the request of the parties, mediate in the amount of damages caused by the infringement of the patent right. If the mediation fails, the parties may institute legal proceedings in the people's court in accordance with the Civil Procedure Law of the People's Republic of China. Where the concluded mediation agreement is affirmed valid by the people’s court, one party may request the people’s court for compulsory execution if the other party refuses to fulfill or only partly fulfills the agreement.

For the willful infringing act that disrupts the market order, such as that being suspected of infringement in group or repeated infringement, the patent administration department may investigate and handle it in accordance with law. If the patent administration department has found that the willful infringing act is established and disrupts the market order, it may order the infringer to stop the infringing act immediately, confiscate and destroy the infringing products, the parts, tools, moulds and equipments specially used for making the infringing products or carrying out the infringing process, etc. If the illegal turnover is over RMB 50,000 Yuan, the patent administration department may impose a fine of one to five times of the illegal turnover, if there is no illegal turnover or the illegal turnover is not more than RMB 50,000 Yuan, the patent administration department may impose a fine of not more than RMB 250,000 Yuan.

For the pending patent infringement dispute which is stayed due to the request for invalidation of the patent, the people's court or the patent administration department shall timely proceed with it after the decision announcing the patent invalid or maintaining the patent valid is published.

Note: The efficacy of a mediation agreement and its execution has been a headache to the patentee in practice. When the accused infringer refuses to fulfill the mediation agreement, the patentee has to additionally institute legal proceedings though an effective mediation agreement is there.The drafted amendments to Article 60 enhance and clarify the efficacy of a mediation agreement made by a local intellectual property office, i.e. where the mediation agreement is affirmed valid by the people’s court, it is executable by the court.

Further, the drafted amendments empower the local intellectual property offices (i.e. the patent administration department) administrative measures such as confiscating and destroying the infringing products, the parts, tools, moulds and equipments specially for carrying out the infringing act, so as to enable the local intellectual property offices to be more powerful in handling patent infringement.

For the infringing act in group or repeated infringing act, it not only harms the rights and interests of the patentee directly, but also disrupts the market order and harms the environment of innovation as well as the public interests. The patent administration department may get involved in the case at its own discretion and hold the infringer for administrative accountability.

The amendments also clarify the following proceedings once the Patent Reexamination Board has made a decision on the validity of the alleged patent.

2. Improved Administrative Fines against Patent Counterfeiting

Drafted Article 63 of the Patent Law reads,

Where any person passes off the patent, he shall, in addition to bearing civil liability according to law, be ordered by the patent administration department to correct his act, and the order shall be announced. If the illegal turnover is over RMB 50,000 Yuan, he may be imposed a fine of one to five times of his illegal turnover and, if there is no illegal turnover or the illegal turnover is not more than RMB 50,000 Yuan, a fine of not more than RMB 250,000 yuan. Where the infringement constitutes a crime, he shall be prosecuted for his criminal liability.

Note: The drafted amendments to Article 63 improved the upmost administrative fines against patent counterfeiting from the current “a fine of not more than four times of his illegal earnings”, “a fine of not more than RMB 200,000 Yuan” to “a fine of one to five times of his illegal turnover” and “a fine of not more than RMB 250,000 yuan” respectively.

3. Enhanced Administrative Investigation on Patent Infringing or Counterfeiting Act

Drafted Article 64 of the Patent Law reads,

In handling the act suspected of infringement or passing off of a patent based on the evidence that has been obtained, the patent administration department may make inquiries of the relevant persons, investigate into the matters pertinent to the act suspected of violation of laws; conduct on-spot inspection of the place where the act of the relevant persons is suspected of violation of laws; examine and make copy of the contract, invoices, accounting books and other materials relating to the act suspected of violation of laws; inspect the product relating to the act suspected of violation of laws, and may seal and detain the products as proved by evidence to be the products of willful infringement or the products of passing off of the patent that disrupt the market order.

The relevant persons shall assist and cooperate with the patent administration department exercising the authorities as provided in the preceding paragraph and must not make any rejection or obstacles. If the relevant persons refuse the patent administration department to excise its authorities or obstruct the later from excising its authorities, the patent administration department may impose a punishment of warning, if the act of the relevant persons violates the public security management, the public security organs may impose a public security punishment, and if the act of the relevant persons constitutes crime, they shall be prosecuted for criminal liability.

Note: The drafted amendments to Article 64 are mainly for enhancing the capabilities and authorities of the local intellectual property offices to make investigation on patent infringing or counterfeiting act, solving the difficulty in collecting evidence against patent infringing or counterfeiting act.

4. Punitive Damages for Willful Infringement

Drafted Article 65(3) of the Patent Law is newly added and reads,

For the willful infringing act of a patent right, the people’s court may increase the damages up to two to three times of the amount of damages decided according to the preceding two paragraphs, in consideration of factors such as the particular circumstances, the scale and the consequences of damages of the infringing act.

Note: The drafted amendments to Article 65 empower the people’s court to award double or treble damages for willful infringement to punish the infringement in bad faith and with serious consequences. This is a great change to the current principle of indemnity in awarding damages.

5. Shifting of Burden of Proof re Damages

Drafted Article 61(3) of the Patent Law is newly added and reads,

Where the people’s court hold that the patent infringing act is established, for determining the amount of damages, the people’s court may order the accused infringer to furnish the accounting books and materials relating to the infringing act, if the patent owner has done all to collect evidence, while the accounting books and materials relating to the infringing act are mainly under the control of the accused infringer. The people’s court may decide the amount of damages with reference to the claim of the patent owner and the submitted evidence if the accused infringer doesn’t furnish or furnish false accounting books or materials.

Note: In consideration of the difficulty in collecting evidence in relation to damages, the drafted amendments to Article 61 provides that, on the premise that the patent owner has tried his best in collecting evidence, the people’s court may at its discretion order the accused infringer to submit materials including accounting books in relation to the infringing act in order to determine the damages. The damages will be in the patent owner’s favor if the accused infringer refuses to disclose the ordered materials.

6. Internet Infringement and Safe Harbor Rule for ISPs

Drafted Article 71 of the Patent Law is newly added and reads,

Where the internet service provider knows or should know that an internet user infringes upon a patent right through the internet service it provides, but does not timely take any necessary measures such as deleting, shielding or disconnecting the linkage to the infringing products to stop the infringement, it shall bear joint liability with the internet user.

The patentee or an interested person submits evidence showing that an internet user takes use of the internet service to infringe upon his patent right, he may give the internet service provider a notice to take measures in the preceding paragraph to stop the infringement. Where the internet service provider does not timely take necessary measures upon receipt of an eligible and effective notice, it shall bear joint liability with the internet user for the enlarged part of the damages.

The patent administration department, having decided that an internet user infringes upon a patent right through the internet service, shall give the internet service provider a notice to take necessary measures to stop the infringement. If the internet service provider does not timely take necessary measures, it shall bear joint liability with the internet user for the enlarged part of the damages.

Note: With the development of the internet technology and the e-business, patent infringement through internet is also increasing in China. Currently, the people’s court can only apply the principles in the Tort Law to determine the liability of internet service providers (i.e. ISPs). By introducing the above article, the ISPs may predict their obligations more accurately. This newly added article also provides for the “notice and takedown” rule for the ISPs to effectively remove products being suspected of infringing a patent in especially e-business.

II. Improving Patent Examination System and Patent Quality

1. Protection of Partial Designs

Drafted Article 2(4) of the Patent Law reads,

"Design", means any new design of the shape, the pattern or their combination, or the combination of the color with shape or pattern, of the entirety or a part of a product, which creates an aesthetic feeling and is fit for industrial application.

Note: This article introduces protection of a partial design in China, i.e. a design incorporated into a part of an entire product which is not physically separable from the entire product.

Under the current Patent Law, only the design of an entire product is protectable by a design patent. Meanwhile, a number of improvements to designs lie in only certain elements of the designs. Since the people’s court applies the “comprehensive consideration to overall visual effects” test in design patent infringement assessment (see Article 11 of the Interpretation of the Supreme People’s Court on Several Issues Concerning Adjudicating Patent Infringement Disputes) , a patented design can be readily copied by simply mixture of the creative elements of the patented design with prior design elements. The drafted amendments can surely enhance protection of the creative elements of a design.

2. Extended Protection Term for a Design Patent

Drafted Article 42 of the Patent Law reads,

The duration of the patent right for invention shall be twenty years, for utility model shall be ten years, and for design shall be fifteen years, counted from the date of filing.

Note: The drafted amendments to Article 42 are for meeting the requirement of the Hague Agreement Concerning International Registration of Industrial Designs. It is expected that China will join the Agreement in a near future.

3. Exception for Un-patentable Subject Matters

Drafted Article 25 item (3) of the Patent Law reads,

For any of the following, no patent right shall be granted: (3) method for the diagnosis or for the treatment of diseases, other than those relating to bred animals.

Note: The drafted amendments to Article 25 are for the purpose of meeting the government policy of developing large-scale livestock and poultry breeding and aquatic healthy breeding and for harmonization with the practice in some other countries.

4. Domestic Priority for Design Applications

Drafted Article 29(2) of the Patent Law reads,

Where, within twelve months from the date on which any applicant first filed in China an application for a patent for invention or utility model, or within six months from the date on which any applicant first filed in China an application for a patent for design, he or it files with the Patent Administration Department under the State Council an application for a patent for the same subject matter, he or it may enjoy a right of priority.

Note: The current Chinese Patent Law only provides that an applicant may claim priority to a prior design application filed in a foreign country or area. With the incorporation of multiple designs in a single design application in 2009 and the partial designs this time, it becomes necessary to give the applicant the right to claim priority to the prior domestic design application.

5. Authority of the PRB to Examine a Patent Application or Patent at Its Discretion

Drafted Article 41(2) of the Patent Law reads,

The Patent Reexamination Board shall make examination on the request for reexamination, and may make examination on other matters as to whether the patent application complies with the relevant provisions of this law when necessary. It shall make a decision and notify the applicant for patent.

Drafted Article 46(2)(3) of the Patent Law reads,

The Patent Reexamination Board shall make examination on the request for invalidation of patent right, and may make examination on other matters as to whether the patent right complies with relevant provisions of this law when necessary, and make a decision timely and notify the petitioner and the patentee.

After making a decision declaring the patent right invalid or maintaining the patent right, the Patent Administration Department under the State Council shall register and announce it timely.

Note: The Patent Reexamination Board (i.e. the PRB), according to the drafted amendments to Article 41, is authorized to examine at its own discretion, defects, especially obvious defects concerning the merits of the invention, in a patent application without being limited to the scope of the request for patent reexamination during reexamination proceedings. This may help improve the quality of granted patents and the efficiency of patent prosecution.

The PRB is also authorized, according to the drafted amendments to Article 46, to examine at its own discretion, during the invalidation proceedings, defects in a patent, especially those obvious defects concerning the merits of the invention which are not raised by the petitioner of the request for invalidation, so as to improve the stability of granted patents and reduce further requests for invalidation against the same patent on different grounds.

III. Improving the Service Invention-creation System

1. Statutory Ownership of Service Invention-creation

Drafted Article 6 of the Patent Law reads,

An invention-creation, made by a person in execution of the tasks of the entity to which he belongs, is a service invention-creation.

For a service invention-creation, the right to apply for a patent belongs to the entity. After the application is approved, the entity shall be the patentee.

For a non-service invention-creation, the right to apply for a patent belongs to the inventor or designer. After the application is approved, the inventor or designer shall be the patentee.

In respect of an invention-creation made by a person using the material and technical means of an entity to which he belongs, where the entity and the inventor or designer have entered into an agreement in which the right to apply for and own a patent is provided for, such an agreement shall apply, where there is no such an agreement, the right to apply for a patent belongs to the inventor or designer.

Note: According to Article 6 of the current Patent Law, an invention-creation made by a person by using the material and technical means of the entity to which he belongs is a service invention-creation. The drafted amendments obviously restrain the statutory scope of service invention-creation, i.e. the ownership of such an invention-creation shall be based on an agreement regarding the ownership, and if there is no such an agreement, the inventor or designer shall be the patentee.

2. Obligations of the Entity of a Service Invention-creation

Drafted Article 16 of the Patent Law reads,

After a patent for a service invention-creation is granted, the entity shall award to the inventor or designer a reward. Upon exploitation of the patented invention-creation, the entity shall pay the inventor or designer a reasonable remuneration based on the extent of spreading and application and the economic benefits yielded.

Where the entity and the inventor or designer have entered into an agreement according to Article 6(4) of this law that the right to apply for a patent for the invention-creation belongs to the entity, the entity shall according to the preceding paragraph render the inventor or designer a reward and remuneration.

Note: The drafted amendments to Article 16 clarifies that the employer of the inventor or designer has the obligation to reward the inventor or designer and pay a remuneration to the inventor or designer upon exploitation of the invention-creation, regardless whether the invention-creation is transferred to others or not.

IV. Prompting Exploitation and Operation of Patents

1. General Policy for Prompting Exploitation and Operation of Patents

Drafted Article 76 of the Patent Law is newly added and reads,

The patent administration department at all levels shall promote exploitation and application of patents, encourage and regulate the service of patent information marketization and patent operation.

Drafted Article 78 of the Patent Law is newly added and reads,

Where any research and development institution, college or university, established by the State, within a reasonable time from grant of a patent right to its service invention-creation, doesn’t exploit the patent by itself or get ready for exploiting the patent, nor assigns or licenses the patent to others, on the premise of not changing the ownership of the patent, the inventor or designer may exploit the patent by himself or license others to exploit the patent by entering into an agreement with the entity, and enjoy the rights and interests in accordance with the agreement.

Note: Although the annual patent applications in China have taken the first place in the world, exploitation and operation of patents in China is not effective yet. Drafted Article 76 provides that the local intellectual property offices have the responsibility to promote exploitation and operation of patents.

Drafted Article 78 intends to relieve the constraint of the current system on the state-owned R&D institutions and colleges or universities, endowing the inventors or designers with more rights to exploit the service invention-creation.

2. Commitment license

Drafted Article 79 of the Patent Law is newly added and reads,

Where a patentee declares in written to the Patent Administration Department under the State Council that he is willing to license his patent right to any other person with definite license fees, the Patent Administration Department under the State Council shall publish the declaration for the commitment license.

Where a declaration of commitment license is directed to a utility model patent or a design patent, the patentee shall submit the evaluation report on patentability.

To discharge the declaration of commitment license, the patentee shall make it in written, and the Patent Administration Department under the State Council shall publish it. Discharging the declaration of commitment license doesn’t affect the rights and interests of the prior licensee.

Drafted Article 80 of the Patent Law is newly added and reads,

Any person who wants to exploit a patent with commitment license shall give a notice to the patentee in written and pay the license fees.

During the period of commitment license, the patentee shall not grant an exclusive license or sole license or request for a pre-action preliminary injunction for the patent.

Drafted Article 81 of the Patent Law is newly added and reads,

Any dispute between two parties in relation to a commitment license shall be decided by the Patent Administration Department under the State Council. Where a party is not satisfied with the decision, he may appeal the decision with the people’s court within fifteen days of receipt of the notification of the decision.

Note: These newly added articles relate to the commitment license, of which the fundamental purpose is to prompt disclosure of patent information and operation of patents by establishing a platform for those who are interested in exploiting the patent to contact the patentee.

A patent with a declaration of commitment license is open for others to use in a fair, reasonable and un-discriminative manner. This reduces the difficulty of negotiation and the costs and risks in patent transactions.

3. Patent Right Pledge

Drafted Article 83 of the Patent Law is newly added and reads,

To pledge a patent right, the pledgor and the pledgee shall jointly go through the pledge registration with the Patent Administration Department under the State Council. The right of pledge comes effective from the date of registration.

During the period of pledge, if the value of the pledged patent right is evidently decreased, the pledgee may ask the pledgor to provide additional security or guaranty. The pledgee may dispose of the pledged patent, if the pledgor does not provide additional security or guaranty.

Note: This newly added article introduces the relevant provisions relating to patent pledge in the Regulations of the Patent Law into the drafted Patent Law and adds provisions to guarantee the interests of the pledgor.

IV. Restricting Abuse of Patent Right

1. Restriction to Abuse of Patent Right

Drafted Article 14 of the Patent Law is newly added and reads,

Excising a patent right shall abide by the principle of honesty and good faith and shall not impair public interests, not improperly exclude or restrict competition, nor impede technology advancement.

Note: The amendments to Article 14 will enable the people’s court to cite the provisions of the Patent Law directly without relying on other laws when the patentee takes abuse of his patent right in violation of the general principles of good faith, public interest and fair competition etc.

2. Requirements for Submitting the Evaluation Report on Patentability

Drafted Article 61(2) of the Patent Law reads,

Where the patent infringement dispute relates to a patent for utility model or design, except for that requires immediate trial or handling, the people's court or the patent administration department shall ask the patentee or interested party to furnish an evaluation report on patentability of the patent right made by the Patent Administration Department under the State Council after conducting search, analysis and appraisal of the relevant utility model or design as an evidence for trial and handling of the patent infringement dispute.

Note: The drafted amendments to Article 61(2) actually render the evaluation report on patentability for a utility model patent or a design patent, which is granted without being subjected to substantive examination, one of the prerequisites for instituting a patent infringement litigation before the people’s court or for claiming patent infringement before an intellectual property office.

3.Disclosure Requirements for Standard Essential Patents

Drafted Article 82 of the Patent Law is newly added and reads,

Where the patentee, who have participated in setting of a national standard, doesn’t disclose his standard essential patent during the setting of the standard, it shall be deemed that he allows exploiter of the standard to use his patented technology by a license. The license fees shall be determined by mutual consultation. Where the parties can not reach an agreement, the patent administration department of the local people’s government shall make a decision. If a party is not satisfied with the decision, he may appeal the decision with the people’s court within three months of receipt of the notification of the decision.

Note: This newly added article aims at protect the interests of standard exploiters and consumers and to urge the patentee who participated in setting of a standard to disclose his patents.

V. Defining the Administrative and Service Functions of the Patent Administration Departments

Drafted Article 3 of the Patent Law reads,

The Patent Administration Department under the State Council takes charge of patent-related matters throughout the country. It receives and examines patent applications uniformly, grants patent rights for invention-creations in accordance with law, and is responsible for market supervision and administration involving patents, investigating and handling significant patent infringing or counterfeiting acts, establishing public service system of patent information, promoting dissemination and use of patent information, granting qualification of patent attorneys and examining and approving patent agencies in accordance with law.

The patent administration departments of the local people's governments at and above the county level are responsible for patent-related matters within their respective administrative areas, carrying out administrative enforcement of patent law, investigating and handling patent infringing and counterfeiting acts, and providing patent-related public services.

Drafted Article 21(3) of the Patent Law reads,

The Patent Administration Department under the State Council shall release completely, correctly and timely patent-related information and publish periodically patent gazettes, and provide basic patent information data.

Note: The drafted amendments to the above articles clarify the responsibility of the SIPO (i.e. the Patent Administration Department under the State Council): 1) supervision and administration of the market involving patents; 2) investigating and handling significant patent infringing or counterfeiting acts; 3) establishing public service system of patent information, prompting dissemination and use of patent information; 4) granting qualification of patent attorneys and examining and approving patent agencies.

The drafted amendments also intend to urge establishing local intellectual property offices at the county level and to unify the responsibility of the local intellectual property offices, including: 1) administrative enforcement of the patent law; 2) administration of patent-related matters, and 3) providing patent public service. The amendments broaden and enhance the responsibility of the local intellectual property offices to enable the later to play a more important role in patent administration.

VI. Improving the Patent Agency System

1. Responsibility of Patent Attorneys and Nature of the ACPAA

Drafted Article 19(3) of the Patent Law reads,

Patent attorneys and patent agencies shall comply with the provisions of laws and administrative regulations, and handle patent applications and other patent-related matters according to the instructions of their clients. In respect of the contents of clients' invention-creations, except for those that have been published or announced, an agency shall bear the responsibility of keeping them confidential. The administrative regulations governing patent attorneys and patent agencies shall be formulated by the State Council.

Drafted Article 85 of the Patent Law is newly added and reads,

The All-China Patent Attorneys Association is a social legal organization established in accordance with law, a self-disciplined organization of patent agencies, and is under the guidance and supervision of the Patent Administrative Department under the State Council.

Patent attorneys and patent agencies shall join the All-China Patent attorneys Association. The All-China Patent attorneys Association may take disciplinary action against a member who violates the provisions of self-disciplines, in accordance with its constitution.

Note: By the drafted amendments to Article 19 and the introduction of Article 85, for the first time, the Patent Law provides for the responsibility of Chinese patent attorneys and the nature of the All-China Patent Attorneys Association (i.e. ACPAA).

2. Actions against Not-eligible Patent Agencies and Attorneys

Drafted Article 72 of the Patent Law is newly added and reads,

Without approval of the Patent Administration Department under the State Council, any entity or individual shall not engage in patent commissioning service for business purposes. If any entity or individual violates the provisions of this article, the patent administration department may order he or it to stop the illegal act, confiscate the illegal earnings and impose a fine, in consideration of the particular circumstances.

Note: This newly added article aims at kicking out the patent agencies and attorneys not qualified for patent services acting in the dark.

VII. Conclusion

Summarizing, 30 articles of the Patent Law are substantially amended according to the drafted amendments, wherein 18 articles are amended, 11 articles are newly added, and 1 article is deleted. Additionally, 2 articles are literally amended. The above introduction has covered the most significant drafted amendments to the Patent Law.

The drafted amendments aim at principally enhancing the authorities of the SIPO and of the local intellectual property offices, improving the damages and/or fines against patent infringement or patent counterfeiting, prompting exploitation and operation of patents, providing more convenience for the applicant or patentee, and restricting abuse of patent rights. All of these amendments will directly or indirectly enhance protection of patent rights in China through a more sophisticated patent system.