Patent law 2020 to usher in new IP era in China

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    Patent laws are fast evolving across the world, and nowhere more so than Asia. Emerging case laws and new legislation are helping shape stronger intellectual property laws for regional players

    On 20 June 2020, the Standing Committee of the National People’s Congress (NPC) published its 2020 version of draft amendments to the Patent Law (2020 version) for comment. Millions of opinions were collected in the 15 months since last year’s (2019) version of draft amendments. So, what are the main changes in this draft, and what are the reasons behind these changes?

    (1) Compensation for the protection period of patent right

    The 2020 version proposes compensation for the protection period of patent right. Its article 42 includes two aspects – compensation for unreasonable delay of prosecution progress, and compensation for the administrative examination for a new drug.

    The former aspect is new. According to this article, applicants have the right to request an extended protection period for their patent when the patent takes them four years after the application date, or three years after the date of substantive examination request, unless the delay is caused by the applicants themselves. This provision offers compensation for unduly long prosecution.

    Xiao Jin CCPIT Patent
    Xiao Jin
    Assistant Director of Litigation Department at CCPIT Patent and Trademark Law Office in Beijing
    T: +86 10 6604 6247
    F: +86 10 6641 5678,
    E: [email protected]

    Nowadays, a patentee may receive an invention patent only about 22 months on average after filing the application, thanks to the long-term effort of the China National Intellectual Property Administration (CNIPA). That’s also a reason why the legislature proposes a compensation in the draft – if it takes 48 months to grant an invention patent in the context of the average 22-month prosecution cycle, it might be wrong.

    This change may also spur the CNIPA to keep the prosecution cycle constantly shorter than four years, because the CNIPA would not want to receive millions of compensation requests for unreasonable prosecution time.

    The latter aspect was introduced in the 2019 version, but several changes have been included this time. It is well understood that a new drug would take a long time to be approved for marketing. However, generic drug companies may use quality and efficacy-related data of the original drug through the consistency evaluation system to greatly save the review and marketing time for their generic products. This is unfair to pharmaceutical companies that made the original drug, and that do the innovative research.

    In the 2019 version, the compensation was only allowed to those drug patents that requested both domestic and foreign marketing, which means that compensation was not available if the new drug was only for the Chinese market. The 2020 version removes this restriction, which means a foreign marketing request is not necessary.

    Second, the term has been changed from “innovative drug” to “new drug”. The literal meaning implies the compensation may be awarded to not only innovative drugs, but also those new drugs that are improved based on some original drugs. Finally, the extended protection period shall not exceed five years, and the total protection period shall not exceed 14 years from approval for marketing.

    (2) Early-stage dispute resolution mechanism for drug patents

    In the past, the patent owner of a drug had less to do, even if they had found that a generic drug was applying for marketing. The patentee had to wait until the generic drug was commercially available to take action.

    Now, the 2020 version provides an early-stage dispute resolution mechanism. First, the patentee must register its patent(s) in the Chinese Marketed Drug Patent Information Registration Platform, which will be set up according to the draft. Then, the patentee may initiate a lawsuit if it thinks a new drug falls within the protection scope of this registered patent, even if the new drug is requesting the approval of the China Food and Drug Administration (CFDA).

    On the other hand, the owner of the new drug may also launch a lawsuit to confirm that its product is not infringing the patent, if the patentee does not sue. The court or the CNIPA must make a decision within nine months. Each party may appeal if they are not satisfied with the decision. Of course, the result of the CFDA review will be heavily dependent on the outcome of the lawsuit.

    This change provides an early-stage dispute resolution mechanism that intends to reduce potential patent disputes during the administrative approval of generic drugs. First, the patentee has the duty to announce its patents around its products, so that the patents can be well noted in advance, and the generic companies may take action correspondingly (design around, invalidity challenge, or licensing).

    Then, the patentee has the right to sue, even if the generic drug has not been approved by the CFDA, so that the patentee may enforce its patent and is able to stop the marketing of the generic drug much earlier than before. On the other hand, generic drug companies are also able to file a non-infringing lawsuit to reduce the risk of patent disputes during the marketing request.

    (3) Local design patent

    The current draft offers that the applicant may file a design patent for a local part of its product, for example, the brake of a bicycle, or a car door handle. The local design patent was once proposed in 2015, but was removed from the draft in 2019. Now the local design patent has appeared once again for public comment.

    One reason for this change is believed to be that China is trying to offer various IP rights in order to serve the increasing needs of the IP assets owner. Subsequent to the graphical user interface, local designs appear to be the next option, so that not only can the appearance of the whole car be a design patent, but its door handle can be a separate design patent.

    The author believes that reason for this amendment is that local designs are patentable in many other countries. After evaluating other running-design patent systems, China believes it is a good time to add local design patent into the IP assets so that IP owners may have more options to protect their IP.

    (4) Infringement damages

    (4.1) Calculation of damages

    Nowadays, the damages caused by infringement are determined with priority. Damages are determined firstly based on the actual losses caused by the infringement. The patentee can turn to the benefits acquired by the infringer through the infringement only when the actual losses are difficult to be proved. That is, the calculation based on the actual losses has higher priority than the infringing benefits. Now this statutory order is removed, and the patentee may claim the damages based on actual losses or the infringing benefits.

    The author believes this is a clear sign that China intends to strengthen its IP protection. The patentee may choose the best way to calculate its damages in order to receive monetary compensation as much as possible. This change also reduces the burden of proof for the patentee, since the patentee bears no burden to prove the difficulty to determine the actual losses if it wants to determine its damages based on the benefits caused by the infringement.

    (4.2) Removal of lower limit of statutory damages

    Statutory damages step in if the patentee fails to prove the actual losses or the benefits caused by the infringement, and there is no licensing fee for the court’s reference. In the 2019 version of the draft amendment, the statutory damages were lifted to RMB100,0000 (US$14,500) to RMB5 million (the current standard is from RMB10,000 to RMB1 million). In the 2020 version, the lower limit of RMB100,000 was removed. That is, the statutory damage will be up to the court, with an upper limit of RMB5 million, but with no lower limit.

    Considering an average GDP of RMB79,000 per person in 2019, some argue that the lower limit of RMB100,000 was a bit aggressive, because a substantial portion of infringement cases are only related to design or utility model patents, and the accused products are simple ones like children’s toys.

    The lower limit of RMB100,000 is too high for those simple cases. The removal of the lower limit leaves the judge more space to determine the damages at a reasonable level. On the other hand, the upper limit is still maintained at RMB5 million to match the economic development in recent decades.

    From these changes, we may sense from various aspects the public’s interest and concerns about ongoing amendments to the Patent Law. The opinions of the public will be continually absorbed and reflected in each version of the draft by the legislature. The draft is now open for public comment, and still far from enactment. We still have time to see if there are any more revisions or additions.

    Patent law China CCPIT Patent and Trademark Law Office

    CCPIT PATENT AND TRADEMARK LAW OFFICE
    10/F, Ocean Plaza,158 Fuxingmennei Street, Beijing 100031, China
    Tel: +86 10 6641 2345
    Fax: +86 10 6641 5678
    Email: [email protected]
    www.ccpit-patent.com.cn

     

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