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 have presented the material in three installments, of which this is the third. In this section, Dr. Liu covers the subjects of “Damages and Injunctive Relief, “Patent Misuse and Unfaithful Proceeding,” “Compulsory Licenses,” “Disclosure of Genetic Resources,” “Designation of Patent Firms to Handle Foreign-Related Matters,” and “Empowerment of Patent Administration.”

Part I (see article) discussed “Novelty and Inventiveness” and “Secrecy Check and Foreign Filing License.” Part II (see article) covered “Crossover of Invention and Utility Model,” “Design Patents,” and “Patent Infringement and Limited Exceptions.” 



DAMAGES AND INJUNCTIVE RELIEF

To ensure more effective enforcement against patent infringement, the draft revision provides more specific and stringent damage measures for patent infringement. The Draft Revision 8/2008, like the Draft Revision 12/2006, provides that statutory damages could range from 5,000 RMB to 1,000,000 RMB under the circumstances where the actual loss of the patent owner, illegal gain of the infringer, and reasonable royalties of a patent license are uncertain. Here, the statutory damages cap is doubled from that of the current practice. Further, the draft adds that the compensation should include all reasonable costs for the patent owner in the effort to stop the infringing activities. The intent here is to increase the risks and costs of the infringers.

Pre-suit injunction is available under the current law for a patent owner or an interested party if he possesses evidence to show that another party is acting or is going to act to infringe his patent rights and that his legitimate interest would suffer irreparable harm if the infringing act is not timely stopped. In the Draft Revision 8/2008, it is proposed to make the injunctive relief available even during a lawsuit for the purpose of enhancing the effectiveness of patent enforcement. Such broadening of the availability of injunctive measures is based on judicial interpretations earlier issued by the Supreme People’s Court.

In certain exigent cases of patent infringement, evidence preservation might be critical especially because there are no formal discovery rules in China. In the Draft Revision 8/2008, a provision is added to make pre-suit evidence preservation available for the purpose of stopping an infringing act where evidence might be destroyed or would be difficult to obtain. For social and judicial efficiency, the draft also describes more detailed requirements regarding bonds, the timing of the court’s decision, and the duty of the requesting party to subsequently bring an intended lawsuit in a timely fashion.


PATENT MISUSE AND UNFAITHFUL PROCEEDING

Patent misuse and unfaithful proceedings are of great concern, and are addressed in the recently released National IP Strategy Outlines. It is observed also that a few paragraphs have been also added in the prior drafts of the patent revision to tackle the most concerning issues. As reflected in the Draft Revision 8/2008, however, the legislation is reluctant to address the issues in the patent law.

In the Draft Revision 12/2006, a provision regarding unfaithful accusation is proposed by stating that a patent owner shall be held liable if he knew that his patented art belongs to prior art but nevertheless unfaithfully brought a court or administrative action for infringement against, and caused harm to another party. This provision, however, was removed in the Draft Revision 2/2008, and also is not included in the Draft Revision 8/2008. On the other hand, the Draft Revision 8/2008 removes a provision added initially in the Draft Revision 2/2008, the provision stating that a patent owner shall be held liable if he brought a court or administrative action for infringement against another party without any factual basis or legitimate grounds but rather solely in the purpose of harassing or causing harm to the other party, and actually caused harm to the other party. The reason behind the removal of the above earlier proposed rules to tackle unfaithful accusation might be the difficulties of legal definition and practical enforcement of the rules.

Similarly, the Draft Revision 8/2008 removes a provision added initially in the Draft Revision 2/2008, the provision stating that if a patent owner, through his conduct, expression or silence, caused another party who practices the patented invention reasonably believed that the patent owner was not and would not claim the patent rights, but later the patent owner brought an action against the other party before a court or patent administration, the patent owner’s claim will be deemed as against the principle of faithfulness and honesty. Thus, the patent owner will be estopped from claiming the rights to get compensation for the period prior to the date of the action or to ask the court or patent administration to stop the other party from practicing the invention. Again, the legislation seems to be reluctant at this point to address this issue directly in the patent law partially because of the lack of sufficient judicial experience on this issue.


COMPULSORY LICENSES

The Draft Revision 8/2008 keeps essentially all the revisions with respect to compulsory licenses proposed in the prior drafts. It is provided in the drafts that the patent administration may grant a compulsory license, upon request, for the use of a patented invention or utility model if the patent owner, without any legitimate reason, has not practiced or adequately practiced the patented invention for three years after the issuance of the patent and four years after the filing of application for the patent. The draft also provides broadly that a compulsory license may be granted if the patent owner’s practice of the patented invention is judged by a judicial or administrative authority as of unfairly excluding or restraining competition.

To implement China’s commitment under the Doha Declaration on the TRIPS Agreement on Public Health adopted by the WTO Ministerial Conference in 2001, the drafts address the issue of compulsory licenses for important public interest under certain circumstances. The drafts restate that compulsory licenses may be granted under state emergencies or for the public interest, while the Draft Revision 8/2008 adds that such compulsory licenses must be for non-commercial purposes.

The earlier drafts stipulate that public health crises caused by epidemics or contagions may constitute a special public health concern, and the prevention, treatment and control of the spread of epidemics or contagions all fall under the public interest banner. The Draft Revision 8/2008 draft states more broadly that, for the purpose of public health, compulsory licenses may be granted for the manufacturing and export of certain pharmaceuticals patented in China to help underdeveloped countries or those countries that have special needs but do not have any or sufficient capacity to manufacture such pharmaceuticals.

Where the targeted invention is of semiconductor technologies, the Draft Revision 8/2008 set forth the limitation that compulsory licenses can be granted only for non-commercial purposes of the general public and only if the patent owner’s conduct is determined as of excluding or restraining competition.


DISCLOSURE OF GENETIC RESOURCES

China is regarded as one of the countries that are rich in genetic resources and related traditional knowledge. For the third revision of the patent law, attention has been drawn on the protection of genetic resources, a non-patent subject matter, in China, aiming to balance the interests derived from the use of biodiversity among the owners of the resources, the owners of patent rights and the general public. It is known that certain legal measures for protection of genetic resources have been adopted in countries such as India, Brazil, Sweden, and Denmark.

Based on the principle of access and benefit sharing of genetic resources under the Convention of Biological Diversity, a special measure to protect local genetic resources is proposed for the first time in the Draft Revision 12/2006, and it remains in the later drafts including the Draft Revision 8/2008. It is stipulated in drafts that the direct source and original source of a genetic resource should be disclosed in the specification of a patent application if the accomplishment of the claimed invention relies on acquisition and use of the genetic resource. In the case where such original source is not able to be disclosed, an explanation shall be presented with the specification.

The drafts further stipulate that no patent shall be granted on an invention if it is found that the acquisition or use of the genetic resource for the accomplishment of the invention is illegal. Detailed requirements for the disclosure of genetic resources are likely to be worked out later in the revision of the Patent Rules.


DESIGNATION OF PATENT FIRMS TO HANDLE FOREIGN-RELATED MATTERS

The current Chinese Patent Law, since its enactment in 1984, includes a special provision empowering the state patent administration to designate certain patent agencies to handle foreign-related maters for patent prosecution. Under such provision, any domestic Chinese applicant who intends to file patent applications abroad or any foreign applicant who intends to file patent applications in China has to entrust a Chinese patent agency that is designated by the state patent administration.

Over twenty years of practice, it is obvious that such provision of governmental designation as defined in the patent law ha become obsolete and unfair. Such requirement of governmental designation is proposed to be removed, which is reflected in the Draft Revision 12/2006 and the later drafts including the Draft Revision 8/2008. After the removal of such requirement, foreign applicants may entrust any legally formed patent agency in China to represent their patent applications in China, and on the other hand, domestic Chinese applicants may entrust any legally formed patent agency in China to work with a foreign law firm, or even directly entrust a foreign patent firm, to file their patent applications in a foreign country.


EMPOWERMENT OF PATENT ADMINISTRATION

In the Draft Revision 12/2006, a provision was proposed to give patent administrations more power in handling cases of patent infringement or patent counterfeiting. The power that is intended to be given includes that of examining the alleged infringing party and other relevant parties, inspecting the premises of the alleged infringing act, inspecting or copying relevant documents, and, if reasonable evidence of the illegal activities is provided, seizing or confiscating relevant products or equipment.

In the later drafts including the Draft Revision 8/2008, however, this provision for administrative empowerment is removed. Such removal of the earlier proposed provision is in conformity with the legislative trend reflected in the recently released National IP Strategy Outlines. The outlines emphasize the importance of strengthening China’s IPR enforcement system especially that of judicial branch.


CONCLUSION

As released in the National IP Strategy Outlines, the revision of the patent law seeks to fuel innovation in China. In doing so, the government, on one hand, aims to raise the hurdle on patent application, and on the other hand, to tighten the grip on patent enforcement. The draft revision is not yet finalized and we have to cross our fingers.


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