Patents

On December 27, 2008, just a few days before the turn of the New Year, the Standing Committee of the Chinese National People’s Congress approved the third revision of the Chinese Patent Law. The newly revised law is expected to become effective on October 1, 2009. As a final update, this article presents an overview of the process and major changes approved by the top legislature in the third revision of the Chinese Patent Law.

INTRODUCTION

Before this third revision, the Chinese Patent Law has been revised in 1992 and 2000 following enactment of the law in 1984. The first revision of 1992 was driven by the government’s intention to further open up the country’s economy to the global market and also partially affected by the promises in the US-China Memorandum of Understanding (“MOU”) on protection of intellectual property rights signed in January 1992. The second revision in 2000 resulted from the nation’s effort to develop a market system and meet with the international norm after the country joined the WTO in November 1999.

The earlier two revisions may be regarded as aiming to establish the domestic environment for intellectual property protection and to attract more foreign technologies and investments. The third revision, on the other hand, is based more on the country’s own twenty-year experience with patent examination and protection. The revision reflects the government’s intention to enhance the quality of domestic innovations by raising the bar on patent requirements and provide adequate patent protection for both domestic and foreign industries (See: Charles C. Liu: A Balancing Act, CHINA DAILY, China Business Weekly—IP Special, page 9, September 9, 2008).

As mentioned in our earlier articles of this series, the process of the third revision began in April 2005. The preliminary investigation and preparation lasted about a year. After it was complete, a draft was released on July 31, 2006 by the State Intellectual Property Office (SIPO) for comments and a modified draft was submitted on December 27, 2006 by the SIPO to the State Council (Draft Revision 12/2006). Subsequently, a draft was released on February 28, 2008 by the legislative office of the State Council for comments (Draft Revision 2/2008) and a further draft was submitted on August 25, 2008 by the State Council (Draft Revision 8/2008) to the Standing Committee of the People’s Congress for the legislative approval. Now, the top legislature passed the final version of the revision (Finalized Revision 12/2008), with enforcement starting October 1, 2009.

In the following, we will discuss the major issues of the patent law as revised that are pertinent to innovative entrepreneurs and patent practitioners. To follow the format of our earlier published articles, we will also make comparison, whenever necessary, between the approved provisions in the finalized revision and the proposed changes in the drafts.

The major issues to be discussed here include: Novelty and inventiveness, inventions made in China and foreign filing license, crossover of invention and utility model, design patents, limited exceptions from infringement, damages and injunctive relieves, patent counterfeiting, 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.

NOVELTY AND INVENTIVENESS

The draft revision proposed to tighten the novelty requirement. The current patent law adopts an absolute novelty test (novelty being defined with no territorial boundary) for prior publication and a relative novelty test (novelty being defined with a territorial boundary of China) for prior use or knowledge.
On December 27, 2008, just a few days before the turn of the New Year, the Standing Committee of the Chinese National People’s Congress approved the third revision of the Chinese Patent Law. The newly revised law is expected to become effective on October 1, 2009. As a final update, this article presents an overview of the process and major changes approved by the top legislature in the third revision of the Chinese Patent Law.

INTRODUCTION

Before this third revision, the Chinese Patent Law has been revised in 1992 and 2000 following enactment of the law in 1984. The first revision of 1992 was driven by the government’s intention to further open up the country’s economy to the global market and also partially affected by the promises in the US-China Memorandum of Understanding (“MOU”) on protection of intellectual property rights signed in January 1992. The second revision in 2000 resulted from the nation’s effort to develop a market system and meet with the international norm after the country joined the WTO in November 1999.

The earlier two revisions may be regarded as aiming to establish the domestic environment for intellectual property protection and to attract more foreign technologies and investments. The third revision, on the other hand, is based more on the country’s own twenty-year experience with patent examination and protection. The revision reflects the government’s intention to enhance the quality of domestic innovations by raising the bar on patent requirements and provide adequate patent protection for both domestic and foreign industries (See: Charles C. Liu: A Balancing Act, CHINA DAILY, China Business Weekly—IP Special, page 9, September 9, 2008).

As mentioned in our earlier articles of this series, the process of the third revision began in April 2005. The preliminary investigation and preparation lasted about a year. After it was complete, a draft was released on July 31, 2006 by the State Intellectual Property Office (SIPO) for comments and a modified draft was submitted on December 27, 2006 by the SIPO to the State Council (Draft Revision 12/2006). Subsequently, a draft was released on February 28, 2008 by the legislative office of the State Council for comments (Draft Revision 2/2008) and a further draft was submitted on August 25, 2008 by the State Council (Draft Revision 8/2008) to the Standing Committee of the People’s Congress for the legislative approval. Now, the top legislature passed the final version of the revision (Finalized Revision 12/2008), with enforcement starting October 1, 2009.

In the following, we will discuss the major issues of the patent law as revised that are pertinent to innovative entrepreneurs and patent practitioners. To follow the format of our earlier published articles, we will also make comparison, whenever necessary, between the approved provisions in the finalized revision and the proposed changes in the drafts.

The major issues to be discussed here include: Novelty and inventiveness, inventions made in China and foreign filing license, crossover of invention and utility model, design patents, limited exceptions from infringement, damages and injunctive relieves, patent counterfeiting, 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.

NOVELTY AND INVENTIVENESS

The draft revision proposed to tighten the novelty requirement. The current patent law adopts an absolute novelty test (novelty being defined with no territorial boundary) for prior publication and a relative novelty test (novelty being defined with a territorial boundary of China) for prior use or knowledge.
The Finalized Revision 12/2008 adopts the patent-denial penalty provision proposed in the earlier drafts, i.e., the Draft Revision 6/2006 and Draft Revision 12/2006, but somehow was not included in the Draft Revision 8/2008. The patent as revised states that no patent shall be granted for patent application filed in China if the applicant failed to follow the rule of foreign filing license.

It is noted that, some detailed rules, as proposed originally in earlier drafts, to implement the foreign filing license are not included in the revised law. Such detailed rules, for example those for petition and secrecy check, will be more reasonably included in the Rules Implementing the Patent Law (“Patent Rules”) and the Patent Examination Guidelines (“Examination Guidelines”).

On November 5, 2008, the SIPO released its proposal as the first draft revision of the Patent Rules (Draft Revision of Rules 11/2008), the proposed rules stating that a petition for foreign filing license is implied whenever an applicant files a regular national application or PCT application at the SIPO.

The proposed rules also state that, within two months from the office’s receipt of the petition, the SIPO shall give a notice to the petitioner if upon the office’s review the related invention is regarded as to be “possibly related” to state security or interests, and further that, if no such notice is received by the petitioner, a foreign filing license is deemed to be granted and thus the petitioner is permitted to file applications for foreign patent.

Based on the proposed rules, moreover, after the above notice was given and within four months from the office’s receipt of the petition, the SIPO shall give another notice to the petitioner whether a secrecy order is necessary, and further that, if no such notice is received by the petitioner, a foreign filing license is deemed to be granted and thus the petitioner is free to file applications for foreign patent. It shall be noted that the detailed rules mentioned here are subject to change during the process of the revision of the Patent Rules.

CROSSOVER OF INVENTION AND UTILITY MODEL

Under certain circumstances for an invention related to physical items, a person may file patent applications for both invention and utility model, even though only one patent, for either invention or utility model, can ultimately be obtained. If a person has both an issued patent and a pending patent application, both based on the same invention, and the patent application is allowable for issuance, the applicant has two options: To abandon the patent right of the issued patent, a utility model patent for example, or to withdraw the pending patent application, an application for invention patent, for example.

The Finalized Revision 12/2008 inserts a clause to address the above issue, such that if both an application for utility model patent and an application for invention patent that are based on the same invention” were “filed on the same date by the same applicant,” and if the earlier granted utility model patent is still in force, the invention patent may be granted provided that the applicant claims to abandon the earlier granted utility model patent.

It is worth noting the changes in the definition of the effective date of the abandonment of the earlier granted utility patent. When the Examination Guidelines were revised in June 2006, the effective date of such abandonment was changed from the date of issuance of the invention patent to the date of filing of the application for the utility model patent. As a result, the options of the crossover became much less attractive. It seems that the legislature may reinstate the old rule on the timing of the abandonment, which is reflected in the Draft Revision of Rules 11/2008.

It should be pointed out that, based on the Examination Guidelines, although an applicant may take advantage of the crossover of the two types of applications when filing the applications in China through the Paris Convention, the applicant is obligated to select either invention or utility model, but not both, at the national entry into China for a PCT application.

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