On October 17, 2020, the Standing Committee of the National People’s Congress of China approved the new Chinese Patent Law, which will become effective on June 1, 2021. The new Chinese Patent Law aims to promote innovation in China with the following enhanced protection and enforcement measurements.
Under the new Chinese Patent Law, the term of a valid design patent is 15 years from the effective filing date, which is five years longer than the term of 10 years under the current law. (Art. 42.) Further, the new Chinese Patent Law allows the protection of a portion of a product design, in addition to the protection of the entire product design under the current law. (Art. 2, Section 4.) The new Chinese Patent Law also adds the option for a design patent application filed in China to claim priority within six months from the date on which an applicant first files in China. (Art. 29, Section 2.)
In addition, the new Chinese Patent Law provides potential patent term adjustment for the patentees of invention patents. Specifically, Article 42, Section 2, of the new Chinese Patent Law states: If an invention patent is issued after four years from the filing date of the invention patent application and three years after the date when the substantive examination request is filed, the Chinese National IP Administration (“CNIPA”) shall, at the request of the patentee, compensate the patent term for unreasonable delay in the patent issuance process, except the unreasonable delay caused by the applicant.
The new Chinese Patent Law also provides patent term extension for new drug patents. Specifically, Article 42, Section 3, of the new Chinese Patent Law states: In order to compensate for the time that is spent during the review and approval of new drugs before entering into the market, the CNIPA shall, at the request of the patentee, grant patent term extension for an invention patent of a new drug that is approved to be entering into the market in China. The period of the patent term extension shall not exceed five years, and the total valid patent term after the approval of the new drug shall not exceed fourteen years.
The new Chinese Patent Law adds Article 76, which provides early resolution mechanism for drug patent disputes, i.e., patent linkage system. Specifically, Article 76 states that, during the process of drug market review and approval, if the applicant for a drug approval has a dispute with the patentee or interested party of the patent right related to the drug, the drug-approval applicant and the patentee or an interested party of the patent right can file a complaint with a people's court for a decision on whether the drug-related technical solutions for which the drug is to be approved falls into the scope of protection of the patent rights. Within certain time period, the drug regulatory department under the State Council (i.e., China FDA) may, in accordance with the effective decision of the people's court, decide on whether to suspend the approval of the relevant drug to enter into the market.
Article 76, Section 2, of the new Chinese Patent Law further provides an option of an administrative route with the CNIPA for the drug-approval applicant and the patentee or an interested party of the patent right to resolve the drug patent dispute.
As to the implementing detail of such a patent linkage system, the new Chinese Patent Law leaves it to the drug regulatory department under the State Council (i.e., China FDA) and the CNIPA to decide upon the approval of the State Council. (See Article 76, Section 3.) This is a strategic and wise move of the legislative body in China in view of the last draft of Chinese Patent Law that was published for the comments from the public and the controversial comments that were received on implementing details, i.e., establishing the patent linkage system for drug patents in the new Chinese Patent Law without specific implementing detail.
To deter the willful infringement, the new Chinese Patent Law mandates compensation of between one and five times if “the circumstances are serious” in willful infringement. (See Article 71.)
The new Chinese Patent Law also increases the amount of the statutory damages for a patent infringement case to be between RMB30,000 and RMB5,000,000 (i.e., approximately US$4,400-US$735,300) (see Article 71), in comparison to that of between RMB10,000 and RMB3,000,000 (i.e., approximately US$1,470-US$441,200) under the current law (see Article 65). In China, the damages that are awarded in most patent infringement cases are statutory damages, due to the challenges of proving actual losses of the patentees or gains of the infringers. Thus, increasing the amount of the statutory damages at least provides a patentee with an incentive to enforce the patent right and further deters patent infringement in China.
Due to lack of discovery in China, a patentee generally faces great challenges in satisfying the burden of proof in providing evidence on damages. To remedy this deficiency, the new Chinese Patent Law mandates that, to determine the amount of damages, the people’s court may order the infringer to submit the accounting books and materials that are related to the infringement if the patentee has made every effort to prove it and the accounting books and materials are mainly in the hands of the infringer. (Article 71.)
Finally, to encourage commercialization of the patents in China, the new Chinese Patent Law adds Articles 50-52 to provide an opportunity for a patentee to openly license the patent to the public.
Specifically, if a patentee voluntarily declares in writing to the CNIPA that the patentee is willing to license any entity or individual to implement the patent and specifies the method and standards of payment of royalties, the CNIPA shall make a public announcement and implement an open license. (See Art. 50.) In addition, if an open license declaration is made for a utility model or design patent, a patent evaluation report shall be provided. (See id.) If the patentee withdraws the declaration of the open license, the patentee shall submit it in writing and be announced by the CNIPA. (See id.) And if the notice of the open license is withdrawn, it shall not affect the validity of the open license granted earlier. (See id.)
If any entity or individual wishes to implement an open license for a patent, such entity or individual shall notify the patentee in writing and obtain a patent license after paying the royalties in accordance with the published methods and standards of payment of royalties. (See Art. 51.) During the implementation period of an open license, the annuity fee of the corresponding patent shall be reduced or waived. (See id.) After negotiation of the royalties with the licensee, the patentee (i.e., licensor) under such open license can grant the licensee an ordinary license, but not an exclusive license, for the patent. (See id.)
The new Chinese Patent Law also provides dispute resolutions to the open license in Article 51, in which parties resolve disputes over the implementation of an open license through consultation; if parties are not willing to consult with each other or fail to do so, they may request mediation with the CNIPA or file a complaint with a people’s court.
Based on the amendments of the current Chinese Patent Law set forth above, we clearly see the determination of the Chinese government to promote innovation and encourage commercialization of patents in China. It will take a while to see how the new law affects the market competition in China. It will also be interesting to see how the patent linkage system for drug patents that is established under the new Chinese Patent Law will be implemented.
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