The Development of the Chinese Patent Law Through Its Two Amendments

1
The Development of the Chinese Patent Law Through
Its Two Amendments
Dr. Lulin GAO East IP
John Marshall Law School Chicago, US September
1-5, 2008
2

• Introduction

3
Evolution of China patent system

• 1984 China acceded to Paris Convention
• 1985 First China patent law came into force
• 1993 First amendment of China patent law
• 1993 China acceded to PCT
• 1996 China acceded to Budapest Treaty
• 2000 China acceded to the WTO
• 2001 Second amendment of China patent law

4
Development of the Chinese Patent Law
5
History of Establishment of Patent System
6
Level of patent protection
7
Continually Growing of Patent Application in
China
8
Growing Application of Invention Patent from
Abroad
9
Top Ten Foreign Corporations filing patent in
China,2006

• No. INID Name of Corporation
  Number
• 1) South Korea Samsung
  4,355
• 2) JP Matsushita
  3,067
• 3) Netherlands Philips
  2,523
• 4) JP Sony
  1,648
• 5) South Korea LG
  1,506
• 6) US IBM
  1,435
• 7) JP Toshiba
  1,211
• 8) JP Seiko Epson
  1,144
• 9) Germany Siemens
  887
• 10) JP Hitachi
  836

10
Top 5 Countries Filing Patent in China
(2001-2006)
11
Growing patent grant in ChinaYellow
color-application from foreign countries
12
PCT Application in China
13
Volume of Substantive Examination (2001-2006)

• .

14
Examining Cycle in Months(2001-2006)

• .

15

• 1)Scope of Protection

16
Scope of Protection (1)

• Article 27 of the TRIPS Agreement
• Patents shall be available for any inventions,
  whether products or processes, in all fields of
  technology, provided that they are new, involve
  an inventive step and are capable of industrial
  application.

17
Scope of Protection (2)
18
Scope of Protection (3)

• Un-patentable items under the current Chinese
  Patent Law
• Scientific discoveries
• Rules and methods for mental activities
• Methods for the diagnosis or for the treatment of
  diseases
• Animal and plant varieties
• Substances obtained by means of nuclear
  transformation

19

• 2)Term of Protection

20
Term of Protection (1)

• Article 33 of the TRIPS Agreement
•  The term of protection available shall not
  end before the expiration of a period of twenty
  years counted from the filing date.

21
Term of Protection (2)
22

• 3)Exclusive Rights

23
Exclusive Rights (1)

• Article 33 of the TRIPS Agreement
•  The term of protection available shall not
  end before the expiration of a period of twenty
  years counted from the filing date.

24
Exclusive Rights (2)
25

• 4)Rationalization of Procedure

26
Rationalization of Revocation Procedure

• 1985 pre-grant opposition ( 3 months from
  publication date) invalidation after patent
  grant
• 1992 post-grant opposition ( 6 months from
  patent granting date) invalidation from the
  expiration of post-grant opposition period
• 2000 abolishment of opposition procedure
  invalidation after patent grant

27
Information on Prior Foreign Search (1)

• Paragraph 2, Article 9 of the TRIPS
  Agreement
• Members may require an applicant for a
  patent to provide information concerning the
  applicant's corresponding foreign applications
  and grants.

28
Information on Prior Foreign Search (2)
29
PRB Decisions Subject to Judicial Review
30
Starting Point of Patent Granting
31

• 5)Burden of Proof

32
Burden of Proof for Process Patent infringement

• 1) Before 1993, the plaintiff bear the burden of
  proof
• 2) After 1993, the burden of proof reversed to
  defendant
• 3) According to TRIPS Agreement there are two
  options for reverse burden of proof, China adopt
  the second one when the product obtained by
  the patented process is new

33
Burden of Proof in Patent infringement Case

• Usually on the plaintiff
• On the defendant to prove the alleged infringing
  process manufacturing identical products is
  different from the patented process
• Case Glaxo v. South-West Hecheng Pharmaceutical
  Factory
• Chongqing First Intermediate Peoples Court
  ordered the defendant to adduce evidence to prove
  its process for manufacturing Ondansetron is
  different from the plaintiffs patented process.

34

• 6)Service Invention

35
Service Invention (1)

• Definition
• An invention made by a person in execution of
  the tasks of the entity to which he belongs, or
  made by him mainly by using the material and
  technical means of the entity.

36
Service Invention (2)

• 1985 1992

State-owned enterprise Employees
non-service invention
Service Invention
Application right Ownership
Application right
Ownership
Entity
Inventor
Entity
37
Service Invention (3)

• 2000

Service Invention
non-service invention
Agreement
No agreement
Application right Ownership
Entity
In accordance with the agreement
Inventor
38

• 7)Foreign and International Application

39
Foreign Patent Application

• Procedure for filing foreign patent application
  using an invention accomplished in China
• 1985 1992
• Applying for a Chinese patent first
• Applying for approval of the relevant
  administrative organ under the State Council
• Entrusting an agency designated by the State
  Council
• 2000
• Eliminating the government approval procedure
  (except for those relating to national security
  major interests)

40
International Application for Patent

• China became a member of PCT in 1994
• The 2000 amendment provides for international
  application of patents
• Chinese entities and individuals are entitled to
  file international application for patent.
• The Chinese patent administrative authority shall
  handle international application for patent in
  accordance with relevant international
  conventions/treaties to which China is a party,
  the Chinese Patent Law and other provisions
  promulgated by the State Council

41
Significance of Allowing Foreign and
International Application

• The Chinese governments recognition of patent
  right as private right
• Making the Chinese patent system in line with the
  international standard

42

• 8)Compulsory License

43
Compulsory License (1)

• Conditions for granting compulsory license
• National emergency or public interest
• For the implementation of the dependent patent
• A third partys request for a license on
  reasonable terms and conditions and within a
  reasonable period of time
• License fee must be paid, non-exclusive, non
  sub-licensable
• Never granted compulsory license so far since
  1985

44
Compulsory License (2)

• At the Doha negotiation, WTO General Council made
  decision for amending the TRIPS Agreement in
  field of public health August 30, 2003
• Some unauthorized licenses are necessary in order
  to defeat AIDS, TB, Malaria and some other
  diseases
• The export of drags produced by unauthorized
  licensee to other developing countries and least
  developed countries should also be permitted

45
Compulsory License (3)

• According to the resolution of Ministerial
  Conference in Hong Kong December 6,2005,
  amendment of TRIPS Agreement should be
  accomplished before December 1,2007
• SIPO is drafting the Regulations on
  Implementation of compulsory Patent License in
  accordance with the decision of General Council
  of WTO August 30, 2003

46

• 9)Patent Re-examination /Appeal and Invalidation
  Procedure

47
Patent Examination Procedure
48
Re-examination Procedure
49
Ground for Invalidation

• Non-patentable subject matter
• In contrary to the laws or social morality or
  detrimental to public interest
• No patentability (novelty, inventive step,
  industrial applicability )
• Description in not sufficiently clear and
  complete
• Claims are not clear or lack of essential
  technical features
• Claims are not supported by description
• Amendments beyond scope of disclosure of original
  application
• Duplication of grant

50
Invalidation procedure
51
Flow Chart for Patent Invalidation
Administrative Hearings
15 days
Request of the invalidation
Appeal to Beijing High Court
2 month statutory time limit
Hearing
PRB accepts
Decision for the appeal
Evidence exchange
Hearing
Decision
3 months
Appeal to the Beijing 1st Intermediate
Peoples Court TRB is the defendant
Court accepts
Set the evidence exchange period
3 month statutory time limit, longer if a
foreigner is involved
Evidence exchange
Hearing
Decision of the first instance
52
Patent Re-examination and Invalidation (1985
2001 2004)
53
Re-examination and invalidation cases (2003/2004)

• According to the Patent Law (2000), the decisions
  on re-examination and invalidation of Utility
  Model And Design Patents are no longer final.
• 1985-2002 total reexamination cases 3,803,
  invalidation cases 6,842
• The total appeal cases (1985-2001) 142, But
  appeal cases for 2003 alone boomed to 342

54
Re-examination and invalidation cases (2006)

• According to the Patent Law (2000), the decisions
  on re-examination and invalidation of Utility
  Model And Design Patents are no longer final.
• 1985-2002 total reexamination cases 3,803,
  invalidation cases 6,842
• The total appeal cases (1985-2001) 142, But
  appeal cases for 2003 alone boomed to 342

55
Judicial Procedure of Re-examination and
Invalidation
56
Judicial review of PRBs decisions ( 1 )

• Until July 1, 2001, there was no judicial review
  for utility model and industrial design
• During 1985 to 2001, there were 2,992
  re-examination cases for patent for invention,
  but only 87 required judicial review
• During 1985 to 2001, there were 482 invalidation
  cases for patent for invention, but only 147
  cases required judicial review

57
Judicial review of PRBs decisions ( 2 )
58

• 10)Administrative Judicial Routes in Dealing
  with Patent Infringement

59
Infringement procedure
60
Two ways of enforcing patent (1)

• 1, Administrative Procedure
• Governed by the Measures on Patent
  Enforcement issued by SIPO
• Remedies stop infringing act
  immediately, but cannot award damages
• Advantages low cost, simplicity of the
  procedure,quick decision
• Appeal to Intermediate Court and High
  Court

61
Two ways of enforcing patent (2)

• 2, Judicial Procedure
• Remedies Stop infringement act, Award
  damages and all legal means
• Advantages Less expensive than US, No
  discovery procedure
• Criminal penalty Where infringement
  constitute a crime, criminal liability recently
  increased from 2-5 years to 3-7 years

62
Comparison of Administrative with Judicial
Enforcement
63
Administrative Enforcement by Local Patent
Authority(2000 2005)
64
Administrative Procedure in China
Patentee or interested party (e.g. exclusive
licensee)
Applicant
File a complaint
Local Patent Administrative Authority
Administrative Decision
Judicial Review
65
Administrative Remedies

• Cessation of the following infringing acts
• Manufacturing the infringing products
• Use of a patented process
• The selling/offering for sale/import of the
  infringing products or products directly obtained
  by the patented process
• Note damages can not be awarded through
  administrative procedure

66
Special IP Protection in Borders

• Prior registration with Chinese Customs is not a
  prerequisite
• Chinese Customs may seize/dispose infringing
  products as well as impose fines in the process
  of import and export
• Unlike the US approach, Chinese Customs may stop
  the export of infringe goods
• Customs protection hardly applies to invention
  and utility model patents

67
Border measures of China customs
68
New development of IP protection for customs in
China ( 1 )

• Recordal of patent cases with customs rapidly
  increasing 1998-44 1999-102 2000-180
  2001-227 2002-302 2003.4-203, however, in
  fact patent seizure cases much less, constitute
  from 10 to 20 of recordal cases
• MoU on Cooperation of IP Protection with US Movie
  Association May 29,1997
• MoU on Cooperation Against Counterfeit in Import
  and Export with Chinese Association of Foreign
  Investment Companies Feb.27,2002
• Total IP infringement cases handled by customs
  reached 4,000 during last 10 years. In 2005,
  1,106 cases

69
Customs Seizure of Infringing Goods (1997-2005)

• .

70
New development of IP protection for customs in
China ( 2 )

• IP cases predominated in export (80)
• Customs IP cases 1,210 cases in 2005, 75 are
  counterfeit , 20 are piracy 5 patent
  infringement, seized infringing goods,worth RMB
  99.87 million yuan 18.5 higher then 2004
• Counterfeit 2001-308 2002-557 2003-741
  2004-1,009 2005-1,106 including Levis, Hitach,
  Nokia, Adidas, Nike etc.
• Ninbo and Shanghai customs office seized 8,600
  sewing machines counterfeiting the Butterfly,
  valued RMB 1.8 million in 2005
• Chinese customs seized 4.40 million fake CD,VCD
  October 1,1999

71
New regulation of IP protection for customs in
China (March 1, 2004)-1

• New regulation for customs IP protection 8
  Chapters, 36 Articles. Main features are
  followings
• 1) Extend the term of the recordal from 7 to 10
  years
• 2) Withdrawn the obligatory requirement to
  record, keeping the application for
  administrative enforcement before taking an
  action
• 3) Customs power for investigation strengthened
• 4) Cancel opposition time limit (7 days) and need
  to submit the evidence

72
New Regulation of IP protection for customs in
China (March 1, 2004)-2

• 5)Cancel retaining and disposing the accused
  goods when the case transfer to the court
• 6)Flexible system of providing the bond, instead
  of the bond the right holder can also use the
  credit guaranty letter
• 7)Flexible system disposing infringing goods

73

• 12) Judicial Route

74
The Chinese Court System

• Four levels and two instances

The Supreme Peoples Court
The High Peoples Court
(Provincial Level)
The Intermediate Peoples Court
Local Peoples Court
(City Level)
The Basic Peoples Court
(County Level)
75
China Court System for Patent Litigation
76
Jurisdiction Venue in Patent-Related Cases
Defendants Domicile
Where the infringing product Is made/used/offered
for sale/ sold or imported
Civil Lawsuits against Patent Infringement
Where the infringing acts are committed
Where the patented process is implemented
Where the damaging effect occurs
Administrative Lawsuits Against PRB
Beijing First Intermediate Peoples Court
77
Pre-filing Investigation

• No discovery Procedure Pre-filing investigation
  is necessary
• Typically accomplished by using a local agent or
  a private investigator through a local law firm
• Common practice purchasing a sample of the
  infringing product in a notarized procedure

78
Pretrial Measures (1)

• Provide evidence of infringing act
• Produce irreparable harm
• Provide the appropriate bond
• Request court to order the suspension of relevant
  acts of infringement and preservation of property
• Abide by the Civil Proceeding Law Article 93 to
  96, Article 99

79
Pre-trial Measures (2)

• Having evidence to prove the infringement
  /imminent infringement fact and irreparable harm
• Posting a security bond
• Case Eli Lilly v. Haosen Pharmaceuticals
• Eli Lilly applied to Shanghai Second
  Intermediate Peoples Court for pre-trial
  injunction and evidence preservation on the
  grounds that Haosen had completed all
  preparations for the alleged infringement of two
  patents owned by Eli Lilly. Both petitions were
  granted.

80
Infringement and invalidation
81
Invalidation Applications Filed during Court
Proceedings (1)

• The defendant of a patent infringement case may
  file invalidation application with PRB
• The local Court may suspend the trial of the
  infringement case
• PRB decision-subject of judicial review for
  Beijing First Intermediate Peoples Court and
  then may be appealed Beijing High Peoples Court
• Different Courts for Infringement Case and
  Invalidation Case

82
Invalidation Applications Filed during Court
Proceedings (2)

• Case 1
• Shenzhen Chuangge Science and Technology Co.
  Ltd. v. Compaq
• The defendant successfully suspended the
  trial before Beijing High Peoples Court by
  filing an invalidation application against the
  plaintiffs utility model patent and was found
  not infringing in the subsequent Court decisions.

83
Invalidation Applications Filed during Court
Proceedings (3)

• Case 2 a pending case between a Chinese patentee
  and a Chinese subsidiary (located in Jiangsu
  province) of a US company
• Invalidation application filed during the
  second-instance trial of the patent infringement
  case before Jiangsu High Peoples Court trial
  suspended
• The invalidation decision of PRB appealed to
  Beijing First Intermediate Peoples Court and
  then Beijing High Peoples Court
• Jiangsu High Peoples Court awaiting the decision
  of Beijing High Peoples Court

84
Flow Chart for Patent Infringement Procedures
Infringement analysis
Evidence collection and notarization
Investigation
Jurisdiction issue
Pre-filing preparation
Pre-filing property or Evidence attachment
Preliminary Injunction?
File the lawsuit
7 days
Appeal (foreigner 30 days, other 15 days)
Court accepts, pay the court fee
3 month statutory time limit, longer if
foreigner involved
6 month statutory time limit. Longer, if
foreigner is involved. Does not include time
required for resolving jurisdiction
or authentication
Serving process 15 days for response
With or without hearing
Trail of the First Instance
Set the evidence exchange period Apply for
investigation by the court Apply for
authentication Counter claims Apply for witness
attendance
Appeal
Appeal decision
Evidence exchange, Usually no more than twice
Apply for enforcement
Hearing (maybe more than once) Plaintiff,
defendant make their opening statement Evidence
examination Arguments Closing statements
Decision of the first instance
85
Suggestion for Judicial review

• Shortcomings of judicial review procedure
• Instead of previous plaintiff and defendant, PRB
  unreasonably become a defendant
• Long procedure for infringement cases if
  infringer for protecting himself raised
  invalidation case with the PRB
• Suggestion
• 1, Create a special IP appeal court both for
  infringement and for invalidation
• 2, Both parties remain unchanged during the
  administrative appeal

86
Statistics of infringement cases handled by the
courts and local administrative patent organs
87
Passing off procedure
OK
Local Administrative Authority (In total, 9800
cases 2004)
Passing off
Not OK

• Infringement act --- stopped
• Illegal earning --- confiscated
• A Fine --- imposed

Intermediate Court
High Court
88
Improvement of patent litigation (1)

• Preliminary injunction (ex-parte action) for
  preservation of evidence, property or of the both
  (Article 61)
• Judicial review of the decision made by the PRB
  for utility model and design patents (Article 46)
• Peoples court may require right holder of
  utility model patent furnish a search report
  made by SIPO when file a infringement case
  (Article 57)
• Reverse burden of proof in infringement case for
  patented process the accused infringer shall
  furnish proof of using a different method from
  patented one ( Article 57)

89
Improvement of patent litigation(2)

• Producing, selling or using a patented product or
  a product obtained directly by a patented method
  deemed as infringement but not liable for
  compensation, if legitimate source is proved
  (Article 63)
• Three statutory forms for determining the damage
  (Article 60)
• Patent Appraisal Committees, designated by
  judicial organ

90
Patent Appraisal Procedure

• Select Appraisal Committee among the members
  accredited by judicial organs
• Select 5 technical and legal experts to set up a
  panel
• Panel experts study all materials submitted by
  plaintiff and defendant
• Panel hearing arranged separately for plaintiff
  and defendant
• Draft final technical appraisal report by panel
• Interrogate the report under the chair of judge
• The court made final judgment

91
Damages

• Monetary loss to the patent owner
• Monetary profits to the infringer as a result of
  the infringement
• Up to 3 times a reasonable royalty or
• RMB 5,000 to RMB 500,000 (600 to 60,000)
• In practice, damages are often decided by the
  first or the fourth method

92
Criminal Remedies

• The Chinese Criminal Law as amended in 1997 sets
  out 7 types of IP-related crimes.
• 2004 Supreme Court Supreme Procuratorate
  Interpretation of Some Issues Concerning the
  Concrete Application of Laws in the Handling of
  Criminal Cases of Infringing Intellectual
  Property Rights greatly lowered the threshold for
  imposing criminal liability.

93
Statistics on IP-related Criminal Cases handed by
the Courts in 2004 2005
94
Infringement cases related to Chinese Companies

• Intel vs. Via
• Seagate vs. Nanjing patentees
• Cisco vs. HW
• TSMC vs. SMIC
• DSP in mobile phones (China market)
• Motorola vs. Beijing patentees
• Pfizer vs. Chinese companies

95
Conclusion

• With only 20 plus years of patent history,
  China has made remarkable progress in putting in
  place a transparent, fair and open patent system
  fully compatible with the international practice.
  However, the Chinese patent system still has
  certain imperfections that need to be improved
  and, especially enforcement of the already
  existing laws and regulations needs to be
  reinforced.

96
.

• THANKS!
• Website www.eastip.com
• Emaillulin.gao_at_eastip.com