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The Unpatentables
date: 2018-07-31Ellis Davies

In recent years China has become a prolific patent-filing region. So much so that in 2016 official filing statistics from the World Intellectual Property Office (WIPO) showed that filings for patents (in addition to trademarks and designs) were at a higher level in China than in the US, EU, Japan and South Korea combined. It is also interesting to note that the year before the State Council published their new draft amendments to the Chinese Patent Law which, when it comes into force, seeks to put into effect China’s intention to provide stronger enforcement and broader protection for patentees in China. This, amongst other developments, indicates a significant shift from what was once considered the Wild West of IP to a China which is a modern and effective forum for patent filing and protection.  However, despite the increase in filings and an improved environment for patentees, as with jurisdictions the world over, there are certain limitations on what can and can’t be patented in China, and exceptions and limitations to the exclusivity rights of granted patents. In an increasingly innovative world, and a rapidly developing Chinese market, it is useful for inventors and patentees to understand these limitations and exceptions before filing for patents in China.

As a starting point, Article 5 of the Chinese Patent Law states that patents may not be granted for “inventions or creations that violate the law or social ethics, or harm public interests;” and that “patent rights shall not be granted for inventions that are accomplished by relying on genetic resources which are obtained or used in violation of the provisions of laws and administrative regulations.”

In addition to these somewhat obvious exceptions, Article 25 lists five types of inventions and works which cannot be patented, namely:

1.      Scientific discoveries;

2.      Rules and methods for intellectual activities;

3.      Methods for the diagnosis or treatment of diseases;

4.      Animal or plant varieties;

5.      Substances obtained by means of nuclear transformation; and Note that these exceptions apply to all three types of Chinese patent: inventions, utility models and designs.

Patents are granted in all jurisdictions for the purpose of encouraging innovation by granting inventors a temporary monopoly on the implementation and right to exploit the economic returns of their inventions.   On the other hand, governments encourage innovation in the hopes of benefiting and advancing technological, economic and social development, and in certain fields, this requires the balancing of public and private interests.  Therefore, whilst patents are generally considered as exclusive rights, there are certain situations, and certain types of patents, for which there are regulatory exemptions or limitations that affect this exclusivity.  The second part of this exposition will explore these conditions in depth and seek to provide an understanding of why the State Intellectual Property Office (SIPO) applies these exemptions and limitations on patent right exclusivity in China.     

There are seven regulatory exemptions in China, which are as follows: 

Private and non-commercial use (Article 11, Chinese Patent Law). This exemption is obvious since non-commercial use does not affect the economic rights of the patentee, and to claim infringement against the private implementation of the public at large would be unenforceable and significantly disrupt the balance between the rights and interests of inventors and users, and adversely affect the core value of improving society through innovation.

Experimentation and scientific research (Article 69, Chinese Patent Law). The use of patented inventions or processes in such circumstances is not considered infringement since doing so would impede the wider social benefits of such patented technology.  Scientific experimentation and research always requires the implementation of existing knowledge, and provided that the patented technology is only experimented on to see how it works or to find improvements or ways of inventing around it, it will not be considered infringement.

Prior use (Article 69, Chinese Patent Law). SIPO allows those who have invested time and resources into developing (but not patenting) intellectual property prior to another party filing a patent on the same product or process to continue to exploit the benefits of their intellectual property provided that their use or implementation remains within the original scope prior to the filing.

Use of articles on foreign vessels, aircraft and land vehicles (Article 69, Chinese Patent Law).  By allowing foreign vehicles to travel through China without incurring the liability of infringement through use of a patented process protected in China within the vehicle itself that is necessary to its function ensures the freedom of international transportation.  This exemption applies to vessels, aircraft, land vehicles and spacecraft which pass through Chinese territory.

Acts for obtaining regulatory approval from authorities (Article 69, Chinese Patent Law). This exemption is related to patented drugs or medical apparatus, which undergo often lengthy and rigorous approval processes before being allowed to enter the market and allows those that seek to make generic imitations after the period of patent protection has expired, to use the patented products in order to conduct the necessary research and preparation work required for market approval by the relevant authority.  This is particularly important in protecting public health interests since it ensures the continuation and availability of necessary drugs and medical apparatus to the public after their patents have expired.

Exhaustion of patent rights (Article 69, Chinese Patent Law). Once a patented product has been legally sold, then the patentee’s rights on that specific product are said to be exhausted, meaning that they cannot prohibit the customers who have purchased this product from reselling or leasing their purchased products.  This allows for the circulation of products in the market and ensures economic development.

Compulsory licenses (Chapter VI, Chinese Patent Law on “Compulsory License for Exploitation of a Patent”).  There are certain situations in which SIPO can issue a compulsory license of a patent to a third-party applicant with the conditions for exploitation.

 These are namely:

   Non-working or insufficient working of the patented invention: where the patent hasn’t been exploited for 3 years after its grant;

   Anti-competitive practices and/or unfair competition: where a patent right represents a monopoly and its compulsory license will mitigate the adverse market effects;

   Public health: the grant of a compulsory license to manufacture and export a patented medicine to a less developed country;

   National emergency and/or extreme urgency;

   Dependent patents: where a patented invention represents a significant advance in technology which is of considerable economic significance over a previous patent, and the exploitation of the new invention is dependent on using the previous patent, then SIPO may grant a compulsory license of the earlier patent to the patentee of the latter patent.

NB - It is important to note that, as of yet, no compulsory licenses have been granted in China.

As can be seen from this exposition, the limitations on what can be patented, and the exemptions to the exclusivity of patent rights, are somewhat narrow and are typically applied in the rarest of cases, or when the smooth functioning of the economy or society requires them to be.  However, it is useful for inventors to understand these limitations in the broader context of the Chinese patent system before filing and taking advantage of what China has to offer both as a filing region and a marketplace.