China amends its Patent Law

China

On 17 October 2020, China’s National People’s Congress Standing Committee passed amendments to the patent law, and the revised patent law (“2020 Patent Law”) will take effect on 1 June 2021. Since the previous law was revised in 2008 ("2008 Patent Law"), this is the first time that China has amended its patent law.

Before the passage and promulgation of the 2020 Patent Law, two draft amendments were published on 4 January 2019 (“First Amendments”) and on 3 July 2020 (“Second Amendments”) for public comments and consultation. Compared to the Second Amendments, the 2020 Patent Law slightly modifies certain provisions. In general, compared to the 2008 Patent Law, the 2020 Patent Law maintains the key developments from the Second Amendments including enhanced design patent protection, the possibility of receiving compensation for invention patent terms, pharmaceutical patent-term extensions, increased statutory damages for patent infringement, an improved damage determination method, 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 2020 Patent Law stipulates that parts of a product can also be the subject matter for a design patent, which expands the protection scope of design patents in China. Moreover, the 2020 Patent Law preserves the extended design-patent term of 15 years from the date of application proposed in the First Amendments and Second Amendments. In respect to priority rights, the 2020 Patent Law provides for the right to claim national priority of design patents, namely, within six months from the date when an applicant initially filed a design-patent application in China, the applicant can again file a patent application for the same subject matter with China's patent administrative department and may receive the right of priority. If the right of priority is claimed, the design-patent applicant will have three months from the application date to submit the priority document (i.e. a certified copy of the initial application).

Compensation for invention patent terms: The 2020 Patent Law allows the patentee to apply for an extension of the patent term to compensate for unreasonable delays (not attributable to the applicant) in granting the patent. This extension applies if the invention patent is not granted within four years from the date of application and three years after the request date for a substantive examination.

Pharmaceutical patent term extensions: For pharmaceutical patents, the 2020 Patent Law provides that the patent holder may request patent-term compensation for the time period lost during the application process for a new drug. The patent-term compensation can be granted for a patent if the drug is new and marketing authorisation in China has been successfully obtained. 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.

Establishment of patent linkage system: Consistent with the Second Amendments, compared to the 2008 Patent Law, the 2020 Patent Law adds that the pharmaceutical supervisory and administrative department under the State Council must work with the patent administration department under the State Council and set specific measures for dispute resolution involving patent rights during the new drug application stage, which will be implemented after being submitted to and approved by the State Council. The 2020 Patent Law states that during the review of a new drug, the drug applicant, the relevant patent holder, or an interested party can initiate a patent dispute of the relevant drug against the new drug's applicant before the People’s courts. The pharmaceutical supervisory and administrative department under the State Council may, within the stipulated time period, make a decision on whether to suspend the approval of the relevant drug's marketing authorisation based on the effective judgment of the People’s court. Alternatively, the drug applicant, the relevant patent holder, or an interested party can also bring forward a patent dispute concerning the relevant drug to the patent administration department under the State Council.

Increased statutory damages for patent infringement and damage determination method: Compared to the 2008 Patent Law, the 2020 Patent Law sets statutory damages at between RMB 30,000 and RMB 5 million. Also, consistent with the First Amendments and Second Amendments, the law stipulates that the damage for patent infringement is determined by the actual losses of the right holder or the illegal gains of the infringer. It preserves the punitive damage provision of one to five times the actual damage when a wilful infringement occurs. It also preserves the provision stipulating that when the patent holder makes every effort to provide evidence for determining damages and the infringer controls this information, the court may order the infringer to submit the information. Failing to comply with such a court order would result in a finding in favour of the damage alleged by the patent holder.

Other important amendments include:

Employee invention: The 2020 Patent Law adds that the employer has the right to handle the filing of its patent applications, exercise its patent rights and promote the implementation and application of the relevant invention. The employer is encouraged to award its employee inventor by property right incentives such as stock shares, options, and dividend awards.

Good faith application and implementation: The 2020 Patent Law adds that patent applications and patent implementation must follow the good-faith principle and not be abused in a way that damages the public interest or the lawful rights and interests of others. Those who abuse patent rights, exclude or limit competition, and thus constitute a monopoly will be punished in accordance with the Anti-trust Law of the People’s Republic of China.

Conditions for granting a patent: The 2020 Patent Law adds that where an invention-patent application is filed within six months from its initial disclosure that has been made in the public interest during a national emergency or under extraordinary circumstances, the application will not be considered to be lacking novelty. It also specifies that nuclear-transformation methods are not patentable subject matter.

Expanding the scope of the special licence: The title of chapter six was changed from compulsory licensing to special licencing in the 2020 Patent Law and contains several new articles specifically directed to open licencing. The added provisions stipulate publication of open-licence invitations, revocations, acceptance of open licences and how to resolve disputes.

Enhanced punishment for passing off the patent of another: The 2020 Patent Law increases the administrative fines for passing off the patent of another to five times the illegal gains. In situations where there are no illegal gains or the illegal gains are under RMB 50,000, the imposed fines can be up to RMB 250,000.

Extended statutory limitation: The 2020 Patent Law extends the statutory limitation for a patent infringement lawsuit to three years. The starting date is when the patent holder or an interested party knows or should have known of the infringing activity and the infringer.

Link to the passed amendments here.

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