Editor's note: This article was prepared by Charles C. Liu, PhD, JD, Partner, Director of US Practice, Unitalen Attorneys at Law and Jeanne J. Liu. Unitalen, the largest private IP law firm in China (see website), is a partner of ChinaBio® Accelerator. Dr. Liu has kept ChinaBio® Today readers current with the evolving changes in each iterative Proposed Draft of the new Patent Law. Here he discusses the Draft of August 2008. Earlier, Dr Liu reviewed the 2006 Draft (see article) and the February 2008 Draft (see article).
We are presenting the material in three installments, which will appear on a weekly basis. In this section, the second of the three, Dr. Liu covers the subjects of “Crossover of Invention and Utility Model,” “Design Patents,” and “Patent Infringement and Limited Exceptions.” Forthcoming topics include and “Damages and Injunctive Relief,” “Compulsory Licenses,” and “Disclosure of Genetic Resources,” among others. Our first installment (see article) covered “Novelty and Inventiveness” and “Secrecy Check and Foreign Filing License.”
CROSSOVER OF INVENTION AND UTILITY MODEL
For an invention related to physical items, as discussed in our earlier articles, one may file patent applications for both invention and utility model, even though only one patent for either invention or utility model can ultimately be obtained. The Chinese utility models are similar to the German and Japanese utility models. Foreign entities, however, often overlook the use of utility models when seeking patent protection in China.
If a person has both an issued patent and a pending patent application, both based on the same invention, and the patent application is allowable for issuance, the applicant has two options: abandon the patent right of the issued patent (for example, a utility model patent) or withdraw the pending patent application (for example, an application for invention patent).
The Draft Revision 2/2008, like the prior drafts, has a clause to address the above issue, such that if an application for invention patent and an application for utility model patent based on the same invention were filed on the same day by the same applicant, the applicant may take advantage of the crossover of the invention and utility model applications.
According to the Patent Examination Guidelines revised in 2006 (Examination Guidelines), however, if choosing to abandon the issued patent the applicant must claim the abandonment being effective from the filing date of the issued patent. As a result, the options of the crossover become much less attractive.
Also, based on the Examination Guidelines, an applicant may take advantage of the crossover of the two types of applications when filing the applications in China through the Paris Convention, but the applicant has to select either invention or utility model, but not both, at the national entry into China for a PCT application.
Design patents now account for one-third of Chinese patents, but the quality of many design patents is of much concern. Unlike the prior two revisions, the third revision of the patent law will cast more light on the rule changes for design patents.
As reflected in the draft revision, the statutory requirements for design patents are likely to be tightened. The current patent law requires only that, to be patentable, a design shall not be identical to or similar with any prior design. However, a thin inventiveness requirement is added in the Draft Revision 8/2008, such that a patentable design shall be “substantially distinguishable” from any prior design or a combination of the features of a prior design. The sameness or similarity, based on the current Examination Guidelines, is judged by an ordinary customer, whereas, as proposed in the earlier drafts including the Draft Revision 2/2008, the substantial distinguishableness is judged by “an ordinary designer in the field.” Though the phrase of “an ordinary designer in the field” is not mentioned in the Draft Revision 8/2008, the issue may be raised again in the revisions of the Chinese Patent Rules or the Examination Guidelines.
On the other hand, the scope of patentable subject matters for design patents is expected to be further restricted. Attention will be drawn more toward the design of the product itself rather than the design of the identity of the product, while the subject matter of the latter often overlaps with that of trademark. The Draft Revision 8/2008, like the prior drafts, states that those patterns, colors or a combination of patterns and colors of a plane printed matter, such as label prints, that are intended mainly for product identification, are not patentable.
To determine the scope of a patented design under the current law, only drawings or photographs of the product in the design application are considered, whereas the description of design needs not be submitted with the application. The Draft Revision 8/2008 keeps a provision added in the prior drafts stating that applicants have to provide a brief description of the design in the application documents and that a brief description can be used to describe the drawings or photographs. This added provision is obviously helpful to determine the scope of the design protection.
For multiple designs, the draft adopts a more flexible approach. The current law provides that an applicant may file two or more designs in a single application for designs of products that fall in the same class and are sold or used as a set. On top of the above clause, the draft revision, as reflected in all of the drafts, proposes an option to file a single application including multiple similar or related designs for a single product.
While addressing the heightened statutory requirements on design patents, the draft revision also proposes to expand the patent owners’ rights on design patents to exclude others from offering to sell patented products. It is noted that under the current law the rights on a design include that of manufacturing, sale and importation of the patented products.
To facilitate the enforcement of design patents, the requirement of a “patent assessment report” is proposed. Based on the Draft Revision 8/2008, the patent owner, when taking an action for patent infringement, may be required to submit a patent assessment report, while the report is being produced by the SIPO. It should be noticed that the term “search report,” which is required under the current law for enforcing utility model patents, is adopted in the prior drafts. Obviously, “patent assessment report” is more appropriate to fit the intended purpose. Moreover, the Draft Revision 8/2008 adds a paragraph to define the legal use of the patent assessment reports as preliminary evidence for patent validity assessment in court or administrative proceedings.
PATENT INFRINGEMENT AND LIMITED EXCEPTIONS
To strengthen the enforcement against patent infringements, the Draft Revision 8/2008 proposes to raise the cap of the amount of statutory damages for cases where the actual loss of the patent owner, illegal gain of the infringer, and reasonable royalties of a patent license are uncertain. We will get to this topic in more detail below in the section regarding damages.
To address the issue of willful infringement, the Draft Revision 12/2006 states that if a judgment is made, the patent administration has the power not only to order the infringing party to stop the infringement, but also to confiscate the illegal gain and impose a fine upon the infringing party, and further that the fine could be up to three times of the illegal gain or up to CNY 100,000 if no illegal gain can be found. In the Draft Revision 8/2008 and its preceding draft, however, the above proposed provision on willful infringement was removed. One of the arguments is that, at this point, the key element of willfulness is hard to be reasonably defined and adjudicated.
To curb patent counterfeiting, the legislature also intends to tighten the measures against such particularly egregious patent violations. For acts of forging another’s patent, the Draft Revision 8/2008 raises the cap of the administrative fines. The draft states that patent administration may order the confiscation of any illegal gain and at the same time impose upon the violators a fine up to four times (three times being provided under the current law and in the prior drafts) of the sum of the illegal gain, or, if no illegal gain can be found, a fine up to CNY 200,000 (CNY 50,000 being provided under the current law and CNY 100,000 proposed in the prior drafts). It is noticed that, under the current law and also in the draft revision, criminal punishment could be imposed upon server violators for forging another’s patents. For acts of falsely representing a non-patented product or method as a patented one, the patent administration may confiscate any illegal gain and at the same time fine the patent violators for up to CNY 200,000 (CNY 50,000 being provided under the current law and CNY 100,000 proposed in prior drafts).
To protect the legitimate interests of the public, on the other hand, the draft revision touches the issues on prior art defense in infringement actions. The Draft Revision 8/2008, like the prior drafts, states that, in an action for patent infringement, if the defendant is able to forward sufficient evidence showing that the patented subject matter falls within the scope of prior art, the defendant’s conduct shall be held as not constituting infringement.
Regarding limited exceptions to patent infringement, the Draft Revision 8/2008 keeps two provisions, which are introduced in the prior drafts, in keeping with the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS Agreement”). First, the drafts provide that after the first sale of patented products that were manufactured, or products that were obtained using a patented process, by the patent owner or with his consent, “importation” as well as use, sale or offer for sale of such product is defined as not constituting infringement. In other words, parallel or grey-market imports are permissible. Second, the drafts introduce the “Bolar” exemption by stating in the Draft Revision 8/2008 that a person or organization, for the purpose of providing information required for regulatory approval of a drug or medical device, is permitted to manufacture a patented drug or patented medical device. It is noted that a seemingly too broad permission is proposed in the prior drafts, including the Draft Revision 2/2008, that manufacture, use, or importation of a patented drug or patented medical device by an individual or organization in the purpose of providing information for regulatory approval, or even manufacture for or importation and sale to such individual or organization is permissible.