Editor's note: For the past four years, China has been involved in the process of considering an update to its patent laws and regulations, the third revision of its original patent law, which was passed in 1984. The now-enacted law will become effective on October 1, 2009. We have been covering the major changes contained in each draft of the latest revision, and now we do the same for the law as approved.

This article was prepared by Charles C. Liu, PhD, JD, Partner, Director of US and Canada Practices, 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.

In this installment, which is the second of three, Dr. Liu discusses “Design Patents,” “Limited Exceptions from Infringement,” “Damages and Injunctive Relief,” and “Patent Counterfeiting.” Previously, Dr. Liu covered “Novelty and Inventiveness,” “Secrecy Check and Foreign Filing License,” and “Crossover of Invention and Utility Model” (see article). 

The last installment, appearing soon, will include “Patent Misuse and Unfaithful Proceeding,” “Compulsory Licenses,” “Disclosure of Genetic Resources,” “Patent Licensing and Joint Ownership,” “Empowerment of Patent Administration,” and “Designation of Patent Firms to Handle Foreign-Related Matters.”

DESIGN PATENTS

Design patents now account for about 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 casts more light on the rule changes for design patents.

The legislature intends to tighten the statutory requirements for design patents. Prior to the revision, the patent law required only that, to be patentable, a design shall “not be identical to or similar with” any prior design. However, the Finalized Revision 12/2008 raises the bar for patentability on design patent by adding a thin inventiveness requirement, such that a patentable design shall be “substantially distinguishable” from any prior design or a combination of the features of a prior design.

On the other hand, the scope of patentable subject matters for design patent is 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 or copyright. The Finalized Revision 12/2008 states that patterns, colors or a combination of patterns and colors of a plane printed matter, such as label prints, are not patentable if they are intended mainly for the identification of a product.

To determine the scope of a patented design under the law prior to this revision, 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 Finalized Revision 12/2008 states that applicants “have to provide a brief description of the design” in the application documents and further defines that the brief description can be used to describe the design shown by the drawings or photographs. These newly added provisions are obviously helpful to determine the scope of the design for its prosecution and enforcement.

For multiple designs, the finalized revision adopts a more flexible approach proposed in the drafts. The patent law prior to this revision provides that an applicant may file two or more designs in a single application for designs on products that are of the same class and are sold or used as a set. On top of the above clause, the finalized revision provides an option to file a single application to include multiple “similar designs” of a single product. To implement the revised provision, certain limitations regarding the filing for similar designs are proposed in the Draft Revision of Rules 11/2008.

While addressing the heightened statutory requirements on design patent, the finalized revision also gives the owner of a design patent the right to exclude others from “offering to sell” patented products, noting that, under the law prior to the revision, the owner’s rights on a design include only that of manufacturing, sale and importation of the patented products.X To facilitate the enforcement of design patents, the requirement for “patent assessment reports” is newly added in the Finalized Revision 12/2008. Based on the revision, the patent owner, when taking an action for patent infringement, may be required to submit a patent assessment report, including search, analysis and assessment, of the design. Such assessment reports are required to be issued by the SIPO.

It should be noticed that, under the law prior to this revision, a “search report” is required for enforcing utility model patents. Now, the law as revised describes the requirement of patent assessment reports for both utility model and design patents. Here, the name “patent assessment report” (as opposed to “search report”) is more appropriate to fit the intended purpose of the document.

For the patent assessment reports, the finalized revision further defines that the reports can be used as evidence in court or administrative actions for infringement of a patented design or utility model.

LIMITED EXCEPTIONS FROM INFRINGEMENT

To protect the legitimate interests of the public, the finalized revision touches the issues on prior art defense in infringement actions. The Finalized Revision 12/2008 states that, in an action for infringement of a patented invention or design, if the defendant is able to forward sufficient evidence showing that the patented subject matter falls within the scope of prior art or prior design, the defendant’s conduct shall be held as not constituting infringement.

The Finalized Revision 12/2008, in keeping with the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS Agreement”), also expands the scope of applicability of the limited exceptions from patent infringement. First, the drafts provide that after the first sale by the patent owner or with his consent of a patented product or a product obtained from a patented process, “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 patent law as revised introduces a statutory Bolar-type provision, i.e., Bolar exemption, by stating that a person, for the purpose of providing necessary information for regulatory approval, is permitted to manufacture a patented drug or patented medical device. Such exemption would permit a generic company to conduct studies, tests and trials of a generic medicinal product in preparation for the expiry of the market monopoly of an original patented product.

DAMAGES AND INJUNCTIVE RELIEF

To ensure more effective enforcement against patent infringement, the patent law as revised provides more specific and stringent damage measures for patent infringement. The Finalized Revision 12/2008 provides that statutory damages could range from CNY 5,000 to CNY 1,000,000 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 law as revised 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 prior to this revision for a patent owner or an interested party if he possesses evidence to show that another party is acting or is about to act to infringe his patent rights and that his legitimate interest would suffer irreparable harm if the infringing act were 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. In the Finalized Revision 12/2008, however, such broadening of the availability of injunctive measures is not adopted, though it has been included in an earlier issued judicial interpretation 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 Finalized Revision 12/2008, a provision is inserted 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 special 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 COUNTERFEITING

To curb patent counterfeiting, the legislature strives to tighten the measures against particularly egregious patent violations. The Finalized Revision 12/2008 modifies and combines two paragraphs in the law regarding administrative measures on the fraudulent conduct of forging another’s patent and conduct of falsely representing a product or method as being patented.

As described in the law prior to the revision, to act against the conduct of forging another’s patent, the patent administration may confiscate any illegal gain of the violator and at the same time impose upon the violator a fine up to three times of the sum of the illegal gain, or, if no illegal gain can be found, a fine up to CNY 50,000. To act against the conduct of falsely representing a product or method as being patented, on the other hand, the patent administration may confiscate any illegal gain and at the same time impose a fine up to CNY 50,000. In addition to the above, under the law prior to the revision, criminal punishment could be imposed upon severe violators who forged another’s patents.

The Finalized Revision 12/2008 raises the maximal amount of the administrative fines against the conduct of patent counterfeiting. The Finalized Revision 12/2008 states that for the conduct of patent counterfeiting the patent administration may order to confiscate any illegal gain and at the same time impose upon the violator a fine up to four times of the sum of the illegal gain, or, if no illegal gain can be found, a fine up to CNY 200,000. Further, based on the revision, criminal punishment could be imposed upon severe violators for patent counterfeiting.

To provide more effective enforcement, the legislature modified the law by inserting a paragraph that gives more power to the patent administrations in handling cases against the fraudulent conduct of patent counterfeiting. Detailed discussion is provided in a following section.

To be continued…