Recent Proposed Amendments to China's Patent Law: Will it Help to Improve the Enforceability of Patents in China?

• Publication year: 2014
• Author: By Alex Zhang and Xuelin Ma*

Recent Proposed Amendments to China's Patent Law: Will It Help to Improve the Enforceability of Patents in China?

By Alex Zhang and Xuelin Ma*

I. INTRODUCTION

By 2015, the Chinese government plans to double the number of patent applications filed with the State Intellectual Property Office ("SIPO"), such that applications will increase from 1 million in 2010 to 2 million per year.¹ According to SIPO's "National Patent Development Strategy (2011-2020)" (the "Patent Strategy"), "China will rank among the top two in the world in terms of the annual number of patents for inventions."² The Chinese government also expects that "the number of overseas patent applications filed by Chinese entities and individuals will double."³ However, this ambitious plan cannot relieve concerns about the quality of Chinese innovation. The basis for these concerns is that "the vast majority of these applications are for utility model patents that merely undergo a preliminary examination for formalities rather than substance—a concept that does not exist in the US."⁴ According to a Shanghai-based patent attorney quoted by the Economist: "Patents are easy to file but gems are hard to find in a mountain of junk."⁵

China has undertaken a number of efforts to transform from a country where products are merely "made" to one where they are innovated, designed, and branded.⁶ During the past 20 years, China has made several significant and meaningful amendments to its intellectual property laws. Nevertheless, China has realized that its current patent system without further improvement could hinder the Patent Strategy: "The patent system has not become fully integrated with development of socialist market economy, and its role has not been brought into full play in guiding industrial restructuring and upgrading and promoting China's innovation capacity."⁷ The systems and mechanisms for patent administration need to be improved and legal enforcement of patent protection needs to be further enhanced. To this end, on August 10, 2012, SIPO published the first draft of the proposed Fourth Amendment to China's Patent Law for public comment. This article provides an overview of the legislative history of China's Patent Law and its amendments, analyzes the proposed Fourth Amendment's positive and negative effects, and provides additional recommendations for the new amendment.

II. LEGISLATIVE HISTORY OF THE CHINESE PATENT LAW AND ITS FIRST THREE AMENDMENTS

China's patent system became modernized in 1984 under Deng Xiaoping's Economic Reform Policy. From 1978, China transformed from a planned economy to a market-oriented economy. During the 1980s, the Chinese intellectual property system was established through a series of laws: the Trademark Law in 1982,⁸ the Patent Law in 1984,⁹ and the Copyright law in 1990.¹⁰ Each of these laws was designed for the Chinese political and economic environment, while following international trends in intellectual property law.

The first Patent Law, which set the foundation for the Chinese patent system, was promulgated on March 12, 1984, and came into effect on April 1, 1985.¹¹ Although the patent system started when China still had a planned economy,¹² the 1984 Patent Law contained all of the basic elements of a modern patent system, including provisions concerning conditions for granting patent rights, filing and prosecuting patents, and protecting patent and related rights.¹³ Under the first Patent Law, there were three types of patents based on the "first-to-file" principle: inventions,¹⁴ utility models,¹⁵ and designs.¹⁶ Each of these is still used today.

On January 17, 1992, the Chinese and American governments entered into an agreement called the "Memorandum Of Understanding Between The Government Of The People's Republic Of China And The Government Of The United States Of America On The Protection Of Intellectual Property."¹⁷ This document required China to amend its Patent Law. The first amendment to the 1984 Patent Law was enacted on September 4, 1992 ("First Amendment").¹⁸ The core changes included forbidding importation of patented products without the patent holder's permission,¹⁹ extending the protection of invention patents from 15 to 20 years,²⁰ extending the protection of utility model patents and design patents from 5 to 10 years,²¹ and broadening the scope of patentable inventions.²² In 1994, China joined the Patent Cooperation Treaty ("PCT")²³ and the Chinese Patent Office became the PCT International Receiving Office, International Search Authority, and the International Preliminary Examination Authority for China.

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The Second Amendment to the Patent Law was driven by China's 2001 accession to the World Trade Organization ("WTO")²⁴ and the need to comply with Trade Related Aspects of Intellectual Property Rights ("TRIPS") agreement²⁵ requirements. The Second Amendment was promulgated on August 25, 2000, and came into force on July 1, 2001. It abolished the term "patent right holder," and substituted the term "patentee."²⁶ The concept of employment invention-creation was also defined more clearly in the new amendment.²⁷ In addition, this amendment added provisions regarding offers to sell²⁸ and preliminary measures,²⁹ such as evidence preservation. After this amendment, China's patent system was, in essence, consistent with TRIPS requirements.

Unlike the two earlier amendments, which were driven by foreign businesses and governments, China's third amendment was designed to foster the development of its own domestic economy and technology.³⁰ In 2007, the 17th National Congress of China focused on enhancing the capacity of indigenous innovation. The next year in 2008, the State Council formulated the Outline of National Intellectual Property Strategy.³¹ On December 27, 2008, China's Patent Law was amended for the third time and came into force on October 1, 2009 (the "Third Amendment").

The Third Amendment introduced the absolute novelty standard to the Chinese patent system. Under that standard, an invention is not new and therefore not patentable if it was publicly known or publicly used in China or in any foreign country, or described in any publication in China or any foreign country before the filing of the patent application. By contrast, under the previous Chinese patent law, only disclosures in printed publication in China or a foreign country before the filing date could destroy novelty. Public knowledge and mere use or sales in China or a foreign country did not destroy novelty. The Third Amendment, among other things, adopted a foreign filing license policy, introduced pretrial preservation measures, and added the costs incurred by the patentee in stopping infringement to the calculation of damages.³² In sum, the Third Amendment upgraded the Chinese patent system to keep pace with international standards.

III. THE DRAFT FOURTH AMENDMENT

A. Legislative History of the Draft of the Fourth Amendment

In 2011, SIPO initiated the fourth revision process to China's Patent Law, conducted comprehensive research in 2012, and, on August 10, 2012, released the first draft of the fourth amendment for public comments (the "proposed Fourth Amendment").³³

On November 13, 2011, the State Council released a working agenda concerning the protection of intellectual property rights ("IPR") and the crackdown on the production and sale of counterfeit goods.³⁴ The working agenda pointed out that combating the infringement of IPR and the counterfeiting of goods will be a long-lasting, complicated, and tough mission.³⁵ Therefore, it required revising relevant laws and regulations to enhance punishment and establishing a long-lasting effective legal mechanism.³⁶

To implement the State Council's requirements, SIPO began to amend the Patent Law for the fourth time in November 2011 and, in 2012, the revision of the Patent Law was placed on the State Council's legislative agenda. In June 2012, SIPO conducted a meeting to set up the core legislative purpose of the revision: "strengthening patent protection and intensifying law enforcement."³⁷ To create a better patent system, the new revision proposes enhancements of both administrative enforcement and judicial protection.

B. Salient Modifications Under the Proposed Fourth Amendment

Evidence of patent infringement can be difficult to obtain because patent infringement generally is easy to conceal. This difficulty is especially problematic in a country like China, which lacks a formal discovery process to collect evidence.³⁸ The difficulty is further exacerbated by the development of the Internet and improvements to logistics, both of which have accelerated the manufacturing and distribution of infringing products.³⁹ "Willful infringement, repeated infringement and infringement by multiple parties" frequently occur.⁴⁰ To safeguard their patent rights, patentees must incur significant costs in time and money. Such obstacles oftentimes severely discourage innovation and disturb market order.

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To address these problems, the Fourth Amendment proposes the below provisions.

1. Provides judicial and administrative authorities the power of investigation and evidence collection.

To address the difficulty in obtaining evidence of infringement, the proposed Fourth Amendment provides a two-pronged approach.

First, it affirms the People's Courts' right of investigation and evidence collection. For example, Article 61 provides the following:

During patent infringement litigation, based on the request from the plaintiff or its litigation agent, the People's Courts shall investigate and collect according to law evidence with respect to alleged infringing products and books, information or other evidence controlled by accused infringer; [i]f the accused infringer refuses to provide, or transfer, falsify, or destroy evidence, the People's Courts according to law take forceful actions against obstructing civil litigation; [f]or those that commit a crime, a criminal penalty according to law

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