The State Intellectual Property Office (“SIPO”) is reviving its effort to amend the patent law. A new version of the proposed amendment was released for public comments with a deadline of the end of April 2014.
The earlier draft as released in 2013 attracted some criticism because of the administrative enforcement powers related to patent infringement cases. People were worried about the creation of a separate patent adjudication system. The new version still retains the administrative enforcement powers and also addresses delicate issues such as standard essential patents. Predictably, the new draft will lead to new rounds of heated debates.
In the latest draft, SIPO asks to extend its enforcement powers to patent infringement cases, allowing patent offices of county-level and above to handle such cases. Article 60 and 64 give patent offices rights to conduct investigation, and to confiscate or destroy infringing products and tools used for infringement. If the draft is passed, local patent offices will be able to conduct raid actions.
One additional matter that is retained in the draft is the power to combat willful infringement that disturbs market order such as group infringement and repetitive infringement. What is exactly “group infringement and repetitive infringement” will surely be a focus of the discussion in the commenting process.
Apparently learning from online trademark and copyright enforcement practices, SIPO introduces a similar mechanism of enforcing patent rights through the online training platforms (ISPs). Joint liability is established if the ISPs fail to act properly in response to take-down notices. This new system may be of particular interest to design patent owners, but to what extent a patent owner must provide an effective take-down notice is likely to attract significant discussions. It will also be interesting to find out how online training platforms such as Taobao or Alibaba.com react to the proposal.
With respect to remedies, SIPO’s new draft adds a presumption against the defendant if it refuses to provide its evidence on caused damage like account books (Article 61.3). Further, punitive damage is brought into the law for willingful infringement. Two or three times of compensatory damage could be rewarded based on factors including circumstances, scale and consequences of infringement (Article 65.3). The two provisions follow what was recently adopted in the Trademark Law and will help to promote patentee’s confidence in enforcing its patent in China.
Another major feature in this proposal relates to design patent. As China plans to sign up the Hague Agreement Concerning the International Registration of Industrial Designs (“Hague Agreement”), the protection term of a design patent is extended to 15 years as required by Hague Agreement (Article 42). In addition, domestic design patent application is entitled to enjoy 6 month priority, which gives foreign and domestic applications equal treatment (Article 29.2).
The most significant improvement is partial design. Under the proposed changes to the definition of design patent, the scope of design patent is expanded to partial design of a product. (Article 2.4) This change, if passed, will be a tremendous victory to the industry.
Service invention has been heavily debated in recent years on its scope and inventor’s rewards and compensation. In this proposal, the scope of service invention is narrowed into an invention derived from the execution of an employer’s tasks. The ownership of an invention made by using an employer’s resources is left to the contractual relationship between employers and employees. But inventors will have the ownership by default. (Article 6). This amendment is somewhat contradictory to a new draft regarding service invention regulation released one day after the patent law draft was issued.
University professors may welcome at least one rule related to service invention. Under the new draft, an inventor is entitled to negotiate with state-owned universities or research institutions to exploit or license the patent, when the universities or research institutions fail to do so within a reasonable period (Article 78).
Automatic licensing and Standard Essential Patent
One noticeable phrase in the new draft, which never appeared in the Chinese laws or regulations is “automatic licensing (dang ran xu ke)”, which is more or less related to licensing of standard essential patents. Article 79-81 lay out the details of automatic licensing. A patentee can file a statement in writing with SIPO to grant an automatic license to anyone with a pre-determined royalty fee. The patentee can withdraw its automatic license in writing through SIPO as well, but is not allowed to make exclusive or sole licensing or ask for pre-suit injunction during the period of automatic license. Anyone who wants to obtain the license shall send a writing notice with its payment to the patentee. According to SIPO, the automatic licensing scheme provides SEP owners a way to follow fair, reasonable, and non-discriminatory (“FRAND”) principle.
Article 82 deals with the situation where a SEP is undisclosed by a patentee during its participation in national standard formation. Such SEPs will be deemed to be licensed to a standard implementer. Royalty may be negotiated between the patentee and implementers, and if negotiation fails, the royalty will be determined by local patent offices. The proposed rule in this aspect will predictably become another big controversy.
Reexamination and Invalidation
A noticeable proposal in the draft amendment is that the Patent Reexamination Board (“PRB”) will be allowed to bring in additional grounds in examining patentability or reviewing validity of an application/patent during a reexamination/invalidation action (Article 41.2 and 46.1). This proposal is apparently intended to improve the quality of patents in China. But it is likely that many patent applicants or patentees will question whether the “proactive” examination and review is justifiable.
At last but not least, a method for diagnosis or treatment of diseases concerning farm animals becomes a patentable matter (Article 25). Deadline of claiming priority is removed from the law, which leaves the flexibility to SIPO to come up with applicant friendly rules (Article 30).
SIPO is now said to actively seek public comments by reaching out to local industries, academia, and international business communities. After it collects sufficient amount of comments, it may send the revised draft to the State Council Legislative Affairs Office (SCLAO) for review. SCLAO will come up a final draft and send to the national people’s congress for ratification. This whole process may take 1-2 years.