Fourth amendment to Patent Law aims to increase damages and more

By Wu Li and He Jing, AnJie Law Firm
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Q : Please briefly describe the Patent Law amendment currently being considered.

A: The State Intellectual Property Office (SIPO) published the draft amendment to the Patent Law for public comment on 1 April. Once passed, this will be the fourth time that a major amendment has been made to the Patent Law since its adoption. Based on experience, the Patent Law undergoes a relatively major revision once every eight years on average. The previous amendment was made in 2009, and the current amendment accordingly falls within our range of expectation.

Amending the Patent Law was included in the first tier items of the five-year legislative plan of the National People’s Congress (NPC), and it is anticipated that it will be completed within the term of the current NPC.

Wu Li Senior Consultant AnJie Law Firm Beijing
Wu Li
Senior Consultant
AnJie Law Firm
Beijing

Q: How wide is the amendment’s scope? What is its objective?

A: The current amendment touches upon a total of 30 articles of the Patent Law: 18 existing articles have been revised, 11 new articles have been added and one article has been dropped. One new chapter entitled “Exploitation and Application of Patents” was added. According to SIPO, the objective of the current amendment is to address such issues existing in patent practice in China as the difficulty in adducing evidence, inadequate damages, long timeframes for patent protection, high costs, low efficiency, etc.

Q: Could you give some examples of the major changes?

A: The draft proposes adopting a model shifting of the burden of proof to counter the difficulty of providing evidence in support of the measure of damages in patent infringement lawsuits. Where the rights holder has done its utmost to adduce evidence, the infringer is obligated to adduce evidence. If the infringer refuses to provide such evidence, the court can determine the measure of damages for infringement by making reference to the rights holder’s claims and exhibits.

The draft proposes the establishment of a punitive damages system for intentional infringement to counter the relatively low measure of damages in patent infringement lawsuits in general, with the measure of damages for intentional infringement increased to two to three times.

To counter the long timeframe required for the protection of patent rights, the draft proposes that a decision by the Patent Re-examination Board to invalidate or uphold a patent be promptly registered, gazetted and enter into effect once it is rendered, rather than entering into effect after completion of the prolonged relevant appeal procedure.

The draft additionally proposes that patent administrative authorities be given the power to conduct investigations and gather evidence in patent infringement cases, be permitted to render determinations on the measure of damages and be given the power, at their own initiative, to investigate, deal with and put a stop to patent infringements that are suspected of disrupting market order.

Lastly, the draft also addresses a number of further aspects, including extending the term of validity of design patents (from 10 to 15 years), specifying network service providers’ liability for patent infringement, establishing the patent license of right system and strengthening regulation of the patent agent market.

He Jing Senior Consultant AnJie Law Firm Beijing
He Jing
Senior Consultant
AnJie Law Firm
Beijing

Q: Is there any contention over the amendment? What is its outlook?

A: The overall reaction to the draft has been positive, with the revision of evidentiary rules for adducement of infringement and the introduction of a system of punitive damages unanimously welcomed. The evidentiary rules and the punitive damages systems proposed by the draft will reduce the difficulty of protecting rights and increase the anticipated costs of infringement. These, it is optimistically hoped, will powerfully promote the protection of patent rights in China. Notably, similar systems have already been adopted in the newly amended Trademark Law, so it is anticipated that their incorporation into the Patent Law will not meet too much resistance.

However, there are concerns that the change in the time that an invalidation enters into effect as provided in the current amendment deviate from the principle established in the Agreement on Trade-Related Aspects of Intellectual Property Rights that an administrative patent decision should be subject to judicial review. If the proposed draft is adopted, the main battlefield for the confirmation of patent rights in China will, in the future, be concentrated in the Patent Re-examination Board, with the importance of judicial review greatly reduced due to the limitation of actions. In this way, the two-track patent system particular to China (where the administrative and judicial systems have equal importance) will be even more marked. Considered from this perspective, although the proposed revisions may produce a short-term effect, in the long term, they will be of no benefit to the effort to erect an independent, impartial, highly transparent and highly predictable patent system.

Furthermore, many comments indicate a worry that the draft manifests a trend to invest the administrative patent authorities with greater power. Based on the proposed draft, the administrative authorities will be given the power to conduct investigations, gather evidence and determine the measure of damages in the course of handling infringement disputes. Moreover, they will be able to intervene at their own initiative if it is determined that an infringement materially disrupts market order.

Considering that patent rights have always been considered private rights, and that patent infringement disputes are ordinary civil concerns, the intervention of the administrative authorities may result in these ordinary civil concerns becoming less equal in actuality due to the patent administrative authorities being public authorities. If a patent infringement is not so serious as to jeopardize the public interest, those in many circles are questioning whether a system designed this way is required. Accordingly, it is anticipated that there will be significant resistance to the implementation of this design.

Q: What can companies take away from the draft?

A: By following the direction of the current amendment, it is possible to gain an oblique insight into the legislative model and rules unique to China’s patent legal system. It can be anticipated that, regardless of the outcome of everyone’s bets, the amended Patent Law will, to a certain extent, strengthen the current two-track system with parallel judicial and administrative systems. How to better understand and apply this patent legal system with unique Chinese characteristics is an issue companies will need to follow closely.

Wu Li and He Jing are senior consultants at AnJie Law Firm

(AnJie Law Firm)

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E-mail: wuli@anjielaw.com

hejing@anjielaw.com

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