China’s Changing Patent Rights Environment

In the last 6 months there have been a series of legislative changes announced that will affect the patent rights environment in China. These changes are intended to benefit intellectual property rights holders and to further encourage innovative technology companies to invest in China. In summary, these changes include:

  1. Changes to the China Patents Act

Increased damages. Firstly, in cases of wilful infringement, Courts will be able to increase the award of damages by up to 5 times the original amount. Secondly, the range for statutory damages will be increased from RMB10,000 - RMB1,000,000 to RMB100,000 - RMB5,000,000.

Damages calculation. If a plaintiff is unable to provide evidence in support of a damages claim, the Courts will be able to order a defendant to provide the relevant information.  If the defendant does not comply with that order, the Courts will be able to award damages based on what the plaintiff has requested together with the evidence that the plaintiff has provided.

Patent administrative enforcement. The CNIPA and local IP offices will have the power to seal infringement verdicts and to order the seizing of infringing products.

Internet Service Provider (“ISP”) liabilities. A patentee will be able to request the ISP to delete, block or disconnect webpage links to infringing products following Court or Administrative decisions.  The ISP will be also be liable if it if it does not comply with the patentee’s request within a reasonable period.

Open licensing. A patentee will be able to grant an open patent license by registering a declaration to that effect at the CNIPA.  The open licence must have standard terms and conditions for all licensees under the open licence, amongst other requirements.

Domestic design patent priority. A domestic design patent applicant will be able to claim priority for a second design patent from a first design patent application with the same subject matter filed within 6 months in China.

Extension of design patent term. The term of a design patent will be extended from 10 to 15 years. China will join the Hague Agreement in 2019 which requires a 15 year industrial design term.

Abuse of patent rights. A provision has been proposed that relates to the situation where a patentee abuses its patent right and (i) causes harm to the public interest (ii) causes harm to the lawful interests of others or (ii) impacts legitimate competition.

Extension of term for pharmaceutical patents. The State Council may extend the term of a relevant pharmaceutical patent by up to 5 years to compensate for regulatory delays.

  1. Changes to China’s Foreign Investment Law

The new law replaces three existing laws on Chinese-foreign equity joint ventures, wholly foreign-owned enterprises, and Chinese-foreign contractual joint ventures.

Intellectual property related changes include:

  • Foreign investors’ intellectual property right royalties (amongst other income/profits) obtained in China will be able to be freely transferred in RMB or foreign exchange out of China.
  • Government departments and their employees must not force technology transfer by administrative measures.
  • Government departments and their employees must maintain the confidentiality of trade secrets they learn at work and must not disclose or unlawfully provide them to others.
  1. New Supreme People’s Court IP Tribunal

On 1 January 2019 the new Supreme People’s Court (SPC) IP Tribunal began hearing patent and other complex technical IP case appeals. This IP Tribunal hears appeals from civil (first-instance court) decisions and administrative (CNIPA Patent Re-examination Board) law cases. The China Daily reported on 29 March 2019 that, in its first decision, the IP Tribunal had upheld the Shanghai IP Court’s decision that two Chinese companies infringed a Chinese patent held by Valeo Systemes d'Essuyage.

One practical question that remains unanswered is: how will the SPC IP Tribunal control the flow of appeals from the lower court decisions? The risk is that, if appeals are restricted, the cases before the lower courts may become defining as there is no alternative appeal option.