Draft of Patent Law Amendments for Public Opinion

After a long wait, the National People’s Congress of China (“NPC”) published the latest draft amendment of the Patent Law for public comment on January 4, 2019. According to the NPC’s notice[1], the general public are allowed to provide comments on the draft amendment via the NPC’s website[2] or by post before February 3, 2019.
The highlights in the latest draft amendment include:
Increased damages compensation (Amended Art. 72) – The damages compensation for patent infringement is significantly increased in the amendment: (i) the court is allowed to award quintuple damages in cases of willful infringement; and (ii) the ceiling for statutory damages is increased from RMB 1,000,000 (USD 145,679) to RMB 5,000,000 (USD 728,215 ).
Shifted burden of proof regarding damages calculation (Amended Art. 72) – If the right owner has exhausted its capacities to provide evidence regarding damages, the court can order the defendant to provide the relevant financial documents to ascertain the amount of the damages. If the defendant fails to comply, the court is allowed to award the damages compensations based on the claim and preliminary evidence set forth by the right owner.
Improved patent administrative enforcement proceedings (Amended Art. 70) – The National Intellectual Property Administration of the PRC (“CNIPA”) is allowed to accept and examine administrative complaints for patent infringement with nation-wide significance. The local IP Administrations are also allowed to accept and examine administrative complaints for patent infringement occurred within its geographic jurisdiction.
Additional liabilities for ISPs (Amended Art. 71) – The right owner can request the Internet Service Provider (“ISP”) to delete, block or disconnect the webpage links to the infringing products based on effective judicial or administrative decisions (e.g. court verdicts, court rulings, court-ratified mediation agreement, or administrative decisions). The ISP will be subject to joint liabilities if it fails to comply with the aforesaid request within reasonable time.
Newly established open licensing system (Amended Art. 50 and 51) – The patentee can grant an open license of a patent to any entity or person by registering a written declaration at the CNIPA. The conditions and means to pay the open license fee must be standardized. The patentee is allowed to withdraw the open license, but it will not impact the effectiveness any open license granted before the withdrawal. Any entity or person can obtain the open license by sending a written notice to the patentee and paying the standardized license fee. No exclusive or sole license can be granted for the same patent during the effective period of an open license.
Domestic priority right for design patents (Amended Art. 30) – The applicant can claim priority right for a design patent application if it has filed another design patent application with the same subject matter in China within six month before the latter filing.
Extended protection period for design patents (Amended Art. 43) – The protection period for design patent has been extended from ten years to fifteen years.
Highly generalized rule on abuse of patent right (Amended Art. 20) – The patentees is forbidden to abuse its patent right to harm the public interests or the lawful interests of others, or to exclude or limit competition. More detailed provisions regarding patent right abuse are expected to be described in subsequent implementation rules or judicial interpretations.
(Han Kun Dispute and IP Department, please contact us if you have any questions.:lili.wu@hankunlaw.com;yan.wang@hankunlaw.com;xiaowei.wei@hankunlaw.com;rui.luo@hankunlaw.com)
Attachment 1: Explanation to the Draft Amendment to the Patent Law of the People’s Republic of China;
Attachment 2: Comparison Chart for the Fourth Draft Amendment to the Patent Law of the PRC. (If you wish to read or download Attachment 2, please click "Read More".)
[1] http://www.npc.gov.cn/npc/flcazqyj/2019-01/04/content2070155.htm
[2] http://www.npc.gov.cn/COBRSLFYJNEW/user/UserIndex.jsp?ID=13137851
Attachment 1:
Explanation to the Draft Amendment to the Patent Law of the People’s Republic of China[1]
I. Necessity of Amendment
The Communist Party and the State Council of China attach great importance to the protection of intellectual property rights (“IPR”). President Xi has pointed out that, China is going to enhance the IPR protection, improve the enforcement power and let infringers be punished and pay a heavy price for its wrongdoings, so that the power of law would be well defended and exerted. Prime Minister Li Keqiang also emphasized that, to protect IPR is to protect innovation, to strengthen and promote the IPR’s use, and to strike hard at the IPR infringements and the malicious and illegal sales of counterfeiting products.
Currently, China is in the critical stage, facing great challenges to reform economy development, promote sustained and sound economic growth, and switch to develop productive forces. Innovation is always the most productive force to drive economy development. Thus, strengthening the IPR protection and improving our ability of independent innovation has already become an urgent need for China in order to accelerate our smooth economic transformation and to implement our innovation-driven development strategy. The Patent law enforceable in China was promulgated in 1984, since when China has amended the Patent Law three times: first in 1992, then again in 2000, and most recently in 2008, which played an important role in encouraging and protecting inventions and promoting scientific and technological progress.
With the development of practices, there are multiple new situations and new problems in the patent field: a gap has emerged between the patentee’s expectation and the actual effect of patent protection; it is difficult and costly for patent holders to prove the infringing acts; the damage is low; the cross-regional infringement, network infringement and abuse of patent rights happen; the commercialization rate of patent technology is not high; the information of patent licensor and licensee is asymmetrical, and the services for commercializing patent technology are insufficient, etc. Moreover, to comply with relevant international treaties and provide more convenience for inventors and designers to obtain patent rights, our patent granting system also needs to be further improved.
Therefore, in order to solve the practical problems, it is necessary to amend the current Patent Law.
In July 2015, the China National Intellectual Property Administration (“CNIPA”) submitted the “Amendment to the Patent Law of the People’s Republic of China (Draft for Review)” to the State Council for review. After receipt of the draft for review, the former legislation office of the State Council made a deeply research; twice sought the opinions of relevant departments, local governments and relevant organizations; publicly solicited opinions from the society; and then repeatedly made researching, modifying and improving. Since the beginning of this year, the Ministry of Justice, the CNIPA along with other departments also have repeatedly studied, coordinated and revised according to the new situations and new requirements, and finally formed the “Draft Amendment to the Patent Law of the People’s Republic of China” (“Draft”). The Draft has been discussed and approved at the 33rd executive meeting of the State Council.
II. Brief Content of the Draft
The Draft mainly emphasizes the following three points. First, the protection of the legitimate rights and interests of patentee is strengthened with severe punishment to patent infringement, and the leading role of judicial protection is ensured while improving administrative law enforcement regimes, to thereby enhance the effectiveness and efficiency of patent protection. Second, the use of patents is promote; the incentive mechanism as well as patent granting systems for inventors and designers are improved; patent public services are strengthened to provide more convenience for the acquisition and exploitation of patent rights, to stimulate innovation enthusiasm and creation. Third, the mature and proven practice is transformed to legal norms.
1. Strengthening the protection of the legitimate rights and interests of patentee.
(1) Making severe financial punishment to patent infringement.
The Draft stipulates that, For any willful infringement acts, where the acts are severe, an amount of damage of one to five times of actual losses of the patentee, profits the infringer has earned or appropriate multiple of the amount of the exploitation fee may be imposed, and the people’s court may, where damage is difficult to calculate, award the damages of not less than RMB 100, 000 Yuan and not more than RMB 5,000,000 Yuan, which is higher than the standard of 10,000 RMB to 1,000,000 RMB prescribed in the current patent law. (See Articles 72.1 and 72.2 of the Draft)
(2) Improving the rule of the burden of proof.
The Draft newly adds a provision that, in order to determine the amount of damage, where the right holders tried their best to provide evidence, but the accounting books and materials related to the infringement acts are mainly controlled by the infringer, the people’s court may order the infringer to provide such accounting books and materials relevant to the infringement acts; if the infringer does not provide or if a false accounting book or other false information is provided, the people's court may determine the amount of damage by referring to the claim of the right holder and the evidence provided by the right holder. (See Article 72.3 of the Draft)
(3) Improving administrative law enforcement regimes.
The patent administration department under the State Council may, upon the request of the patentee or the interested party, handle patent infringement disputes with significant influence throughout the country. The administrative authority for patent affairs of the local government, upon request of the patentee or the interested party to hear the patent infringement dispute, may combine several cases in its administrative region where a same patent right is infringed. Where a patent is infringed across different regions, one may request it to be handled by the administrative authority for patent affairs of a higher-level people’s government. (See Article 70 of the Draft)
(4) Clarifying that the network service provider shall be jointly liable with the infringing network user for internet infringement.
The Draft newly adds that, the patentee or interested party may notify the network service provider to remove, block or disconnect the link to the infringing product or take other necessary measures according to a judgment, ruling, mediation decision issued by the people’s court, or an injunction decision issued by the administrative authority for patent affairs. If the network service provider fails to take necessary measures in time after receiving the notice, it shall be jointly liable with the infringing network user. (See Article 71 of the Draft)
(5) Clarifying the good faith principle.
The application for patents and the enforcement of patent rights shall conform to the good faith principle. One shall not abuse the patent right to impair the public interest and the legitimate rights and interests of others or to exclude or restrict competition. (See Article 20 of the Draft)
(6) It is advised to establish the patent duration extension system for invention of innovate drugs.
2. Promoting the exploitation and use of patents.
(1) Clarifying that the employer has the right of disposal of employment invention-creation.
The Draft newly adds that, the employer may, as according to the law, dispose the right to apply for a patent and the patent right of an employment invention-creation, implement property rights incentives in the form of equity, options, dividends or others, so that inventors or designers can reasonably share their benefits brought by the innovation and that the exploitation and application of those relevant inventions and creations can also be promoted. (See Article 6 of the Draft).
(2) Strengthening commercialization of Patents.
The Draft newly adds that, the patent administration department under the State Council should strengthen its construction of the patent information public service system. It should provide basic patent information, and promote the dissemination and utilization of patent information. The patent administration department of the State Council and the administrative authority for patent affairs under the local government shall, in conjunction with the relevant departments at the same level, take measures to strengthen the public service with respect to patents and promote patent exploitations and applications. (See Articles 22 and 49 of the Draft).
(3) Establishing the declaration of open license system.
The Draft newly adds that, where the patentee declares in writing to the patent administration department under the State Council that it is willing to license any entity or individual to exploit its patent, and clarifies the payment method and standard of the license fee, the patent administration department under the State Council shall make an announcement and implement an open license. Where any entity or individual is willing to exploit an open-licensed patent, it will obtain the patent exploitation license after notifying the patentee in writing and paying the license fee in accordance with the published license fee payment method and standard. (See Articles 50 and 51 of the Draft)
3. Improving the patent granting systems.
(1) Establishing the domestic priority system for the design patent.
The Draft newly adds that, where, within six months from the date on which the applicant first filed in China an application for a patent for design, he or it files with the patent administration department under the State Council an application for a patent for the same subject matter, he or it may enjoy a right of priority. (See Article 30 of the Draft)
(2) Optimizing the priority claiming procedure.
The Draft provides a relatively low requirement for the time limit for the patent applicant to submit a copy of the patent application documents filed for the first time. (See Article 31 of the Draft)
(3) Extend the term of the design patent.
To be adapted to the membership of the “Hague Agreement concerning the International Deposit of Industrial Designs”, the duration of the design patent is extended to fifteen years commencing from the date of application which is longer than ten years according to the current Patent Law. (See Article 43 of the Draft)
[1] The contents are basedon the explanation published in http://www.npc.gov.cn/COBRS_LFYJNEW/user/UserIndex.jsp?ID=13137851. No substantial amendments are made except someformat edition in which the renumbered articles are cited.