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November 2020
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Introduction to the Fourth Amendment to Chinese Patent Law

The fourth amendment to Chinese Patent Law was just approved by China’s National People’s Congress on October 17, 2020, and will come into effect on June 1, 2021. The amendment proposes 29 changes for the problems and challenges the patent law has faced and depicts what the patent law is going to be like in China in the future. These changes mainly refer to design patent, patent infringement proceedings, damages, open license, etc. Specific descriptions are as follows:

Design patent

According to the amendment, regulations concerning design patents are changed in three aspects. First, the duration of a design patent extends from 10 years to 15 years from its application date. It allows patentees to enjoy exclusivity for a longer period, increasing the right’s value and reducing the cost and risk of having to file for alternative IPs, such as copyright and 3D marks, to try prolonging the life of the design creation. More importantly, this extension will help clear the way for China to join the Hauge Agreement, which is extremely urgent due to the development of design patents in China.

Second, the partial design is permitted, which is more harmonized with the other major countries. It will provide flexibility to all applicants and many conveniences to applicants from countries where partial designs are allowed. However, the concern is that since there is no substantive examination of design patent applications, it may trigger more unchecked junk designs.

Third, applicants are entitled to claim priority to their first-filed Chinese design patent within 6 months of the first filing, which is also welcomed by the design applicants.

Statutory damage

Courts can demand infringers to pay compensation ranging from 30,000 yuan to 5,000,000 yuan ($4,500 to $747,000) when the loss to patent holders, the benefit gained by violators, or the patent license fee cannot be determined. Due to the difficulty of proving the loss, the benefit, or the license fee, statutory damage is usually granted in successful patent infringement cases. So, increased statutory damage might stimulate the patentees to protect their patents by litigation. For those really valuable technologies, however, the precious caps are far from adequate.

Willful infringement

If someone is found to have intentionally and seriously harmed others' patents, compensation will be capped at five times the loss suffered, the benefit received or the patent license fee.

Combined with the increased statutory damage and the improved evidence rules, such a regulation shows China’s determination to strengthen patent protection.

Discovery proceeding

In China, it is often difficult to provide evidence to support a specific claim for damage compensation in a patent enforcement action since there is no discovery proceeding.

So in the amendment, in order to determine the amount for compensation, if the patentee has exhausted all possible ways to collect evidence and the related financial materials are mainly controlled by the accused infringer, the Chinese court may order the defendant to provide those materials relating to the infringing conduct. If the defendant does not provide or provides false account materials, the court may refer to the patentee’s claims and evidence to rule on the amount of compensation.

This is a good try to make it easier for the patentee to prove the damage. However, in practice, since the other party will try to provide only part of the required books or even disclose forged ones, it is still very important to do a very good job in pre-lawsuit investigations and evidence collection. This will be the most critical phase to ensure a successful outcome of a patent lawsuit.

Patent term extension

In response to the trade war between China and the US, China committed to provide patent term extensions to compensate for unreasonable delays that occur in granting the patent or during pharmaceutical product marketing approval.

If an invention patent has been granted after 4 years from the filing date and three years from the request for substantive examination, the patent owner may request compensation for the unreasonable delay in granting the invention patent, except for the unreasonable delay caused by the applicant.

Such regulation will make the patent term more reasonable, but more details are required for implementation.

Open licensing

Patentees can declare, through the CNIPA, its intention to give an open license with the royalty specified.  During the open license period, the patent annuities can be fully or partially waived. Such regulation is intended to help commercialize patents. As to the effect, it remains to be seen.

On the other hand, because the substantive examination is not a must for utility and design patents, the patent evaluation report should be provided when the open license of a utility or design patent is proposed. This is to balance the strengthened patent protection and the requirement of high-quality patents.

According to the above changes, it is clear that the main purposes of the new amendment are to strengthen the protection of patent rights and benefits, promote the implementation and application of patent and improve the patent authorization system. Some of the amendments show China's response to its promise made in the trade agreement between China and the US. But it is more about an internal motivation to build an innovative country.

Author: Feng Cao, Jun Wang, Chenyan Wu

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