Everything you need to know about China’s new Patent Law

On 17 October 2020 China’s top legislature, the National People’s Congress, passed the fourth round of amendments to the Patent Law, which will come into effect on 1 June 2021.

It has been eight years since the first draft was released to solicit public opinions.

This latest set of changes updates China’s patent regime in the following ways.

Civil litigation

Article 71 introduces a punitive damages regime in the context of wilful infringement, which allows a court to grant at its discretion up to five times the actual losses suffered by the patentee as a result of the infringement, the proceeds gained by the infringer from the infringement or multiples of the patent royalties, in extreme circumstances. Statutory damages have also increased to between Rmb30,000 and Rmb5 million.

The burden of proof may be shifted from the patentee to the infringer, provided that the patentee has exhausted its efforts in fulfilling the obligation of burden of proof but the account books and materials relating to the infringing acts are mainly controlled by the infringer.

Article 74 increases the statute of limitations for instituting legal proceedings for patent infringement from two years to three years, starting from the date on which the patentee or any interested party has or should have knowledge of the infringing act.

Administrative enforcement

Article 70 provides the China National IP Administration (CNIPA) and the local patent administrative authorities with more powers in patent administrative enforcement involving infringement disputes. On the request of the patentee or an interested party, the CNIPA may handle patent infringement disputes of significant impact nationwide and local patent administrative authorities may handle patent infringement disputes by combining cases involving the same patent.

In cases involving counterfeiting, patent administrative enforcement authorities may impose fines of up to five times the illegal gains or up to Rmb250,000 if the illegal gains are less than Rmb50,000 (Article 68).

Resolution of patent disputes during regulatory approval process (patent linkage)

Article 76 allows applicants for regulatory approval, patentees or interested parties to solve patent disputes during the drug marketing approval process. Viable options include patent litigation before the court or a petition for CNIPA administrative ruling. The Drug Administration of the State Council may issue a decision within the prescribed time limit as to whether the drug approval process should be suspended based on the effective court judgment.

This tasks the drug administration and the CNIPA to formulate a specific resolution mechanism for drug patent disputes arising between generic drug and innovative drug manufacturers. On 11 September 2020 the Drug Administration of the State Council and the CNIPA jointly published the Draft for the Implementation Measures for Early Resolution Mechanism of Pharmaceutical Patent Disputes (for Trial Implementation) to solicit public opinions.

Patent term compensation

Article 42.2 allows for the adjustment of the patent term for invention patents if an unreasonable examination delay occurs during the granting procedure.

Article 42.3 further provides for the adjustment of the patent term for new pharmaceutical product patents, to compensate for the curtailment of the effective patent term as a result of the regulatory approval process. Adjustments are limited to up to five years, thus limiting the resulting effective patent term to up to 14 years from the date of regulatory approval in China.

Design patents

Article 42.1 extends the term of protection for design patents to 15 years. The latest amendments also allow partial designs to be patentable subject matter (Article 2.4), and establish that applicants may enjoy six-month domestic priority for design applications filed in China (Article 29.2).

Patent exploitations/utilisations

The new changes codify the state’s encouragement for patent exploitation and utilisation, putting the CNIPA and local IP authorities in charge of the mission. In particular, it establishes an open licence system to further this (Articles 48-52).

Novelty grace period

In response to a national emergency or in extraordinary circumstances, a six-month grace period will be granted to the inventions or creations first disclosed for the purpose of public interests, without losing their novelty for the respective patent applications. This clause is believed to have been prompted by the covid-19 pandemic (Article 24).

Abuse of patent rights

The good-faith principle has been introduced to rein in abuse of patent rights. Article 20 stipulates that patent applications and asserting patent rights must not harm public interests, affect others’ legitimate rights and interests or exclude or restrict competition (Article 20).