China publishes 2nd draft of amendment to patent law

On 3 July 2020, the second draft of the Amendment to the Patent Law of the People’s Republic of China was published.

Different from the first draft published in early 2019, this second draft includes enhanced design patent protection, the possibility of being compensated for invention patent terms, pharmaceutical patent term extensions, increased statutory damages for patent infringement, and the establishment of an early pharmaceutical patent-dispute resolution mechanism and patent linkage system that further protects the rights of patentees.

Enhanced design patent protection: The draft specifies that parts of a product can also be the subject matter for a design patent. This right greatly expands the protection scope of design patents. Also, the draft preserves the extended design patent term initially proposed of 15 years. Applicants are allowed to claim priority from a previously applied for Chinese design patent within six months from its first application date.

Compensation for invention patent terms: the draft allows the patentee to apply for an extension of a patent term to compensate for unreasonable delays in granting the patent not attributable to the applicant. This extension applies if the invention patent is not granted within four years from the date of application and three years after the date of the request for substantive examination.

Pharmaceutical patent term extensions: for pharmaceutical patents, the draft adjusts the requirements for obtaining patent-term compensation due to time lost during the application for a new drug. In the first draft, patent-term compensation was only applicable for innovative drugs and if the application for marketing the drug was filed simultaneously in China and abroad. Under the second draft, patent-term compensation can be granted if the drug is new and marketing authorisation in China has been successfully obtained. As in the first draft, the compensated term cannot exceed five years in total, and the patent term cannot exceed 14 years after the new drug has been authorised for sale on the market.

Increased statutory damages for patent infringement: Although the draft eliminates the RMB 100,000 minimum amount for statutory damages, it retains the maximum statutory damage of RMB 5 million and the punitive damage of up to five times the amount for the patentee's actual losses or for any benefits illegally obtained for wilful infringement. The draft also retains the clause stipulating that when a patentee diligently provides evidence proving the amount of the damage and when information for verifying this damage is controlled by the infringer, failure to provide information or the submission of false information by the infringer will lead to recognition of the patentee’s damage claim.

Establishment of a pro-patentee early pharmaceutical patent dispute resolution mechanism: The draft states if the patentee or an interested party believes the relevant technology of a drug under application falls under the protective scope of a patent published on China’s drug marketing patent-information registration system, the patentee or interested party is entitled to file a lawsuit with the people’s court or apply for an administrative decision with the relevant government department within 30 days after the publication of the drug marketing authorisation. A decision will be made by the court or government department within nine months after the acceptance of the request. The State Drug Administration can decide whether to grant the marketing authorisation based on the decision. The draft also indicates that a specific patent linkage system between the examination of marketing authorisations and patent disputes arising during this stage will be established by State Drug Administration and Patent Administration Department of the State Council.

Other important amendments include: In light of the COVID-19 pandemic, the draft states that a disclosure made within six months of a patent's application date will not destroy the "novelty" of the patent if the disclosure is made in response to a national emergency or an unusual circumstance surrounding the public interest.

Patent validity reports may become more relevant since the draft further specifies that a patentee, interested party, or an alleged infringer can voluntarily submit patent validity reports as evidence in patent-infringement proceedings.

In addition to retaining the first draft's extended statutory limitation on initiating a patent infringement lawsuit from two years to three years, the second draft also stipulates that the starting date of the statutory limitation should be the date when the patentee or an interested party knew or should have known that the infringement had taken place and the identity of the infringer.

The draft also provides enhanced punishment for counterfeiting a patent; enhanced administrative protection against counterfeiting a patent or patent infringement; more specific regulations regarding patent open licensing; and a link between abuse of patent rights and anti-trust laws.

Compared to the first draft, the second draft increases patent protection in various areas, underscoring China’s commitment to enhanced patent protection and updating national laws to keep pace with industry developments.

The second draft is still in a draft form and is open for public comment until 16 August 2020. We will monitor the developments in this draft legislation and keep you updated.

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Link to the website:

http://www.npc.gov.cn/flcaw/userIndex.html?lid=ff80808172b5fee8017313b6232c2b55