A New Response to Weak Patent Protection in China
date: 2013-09-24 George Y. Tang Read by:

In August 2012, China's State Intellectual Property Office published the amendment proposal for the Patent Law of the People's Republic of China (consultative draft), inviting opinions from the public. This consultation process has just been completed. This marks the fourth revision of the Patent Law. Previously, the Law, published in 1984, was altered three times, in 1992, 2000 and 2008. Based on the consultative draft, this amendment is a partial adjustment, highlighting the administrative protection of a patent, while emphasising the judicial protection of patent rights. 

In accordance with the consultative draft, the amendment involves a total of seven clauses, which fall into two sections, including the Invalidation of the Patent Right, and the Protection of the Patent Right. In terms of the clauses covered by the amendment, this is a partial adjustment, which differs from the previous three comprehensive changes.

Primary purpose of the amendment

In July 2008, the Chinese government promulgated and implemented strategic guidelines on intellectual property, defining IP protection as the state strategy. With the rapid development of the economy and increasing demand for innovation, the Chinese government is growing more aware of the need to protect intellectual property.

Following the third amendment to the Patent Law in 2008, insufficient patent protection has become the most pressing issue. As such, this amendment aims to enhance patent protection and the effectiveness of law enforcement.


Main contents of the amendment

In contrast to patent protection mechanisms practiced in other countries and regions around the globe, the key features of the Chinese patent protection mechanism lie in the two parallel routes of administrative protection and judicial protection. China attaches high importance to administrative protection in patent and IP rights protection due to its practical conditions. Its huge population, vast territory and limited judicial resources put administrative authorities in a unique advantageous position.

Judicial and administrative powers

The amendment specifically endows the judicial and administrative enforcement authorities with powers in investigation and evidence collection. The People's Court should, according to the application of the right owners, collect evidence such as the suspected infringing products, account books and other information; 2 where the offenders refuse to provide or transfer, and forge or destroy the evidence, the People's Court is authorised to take mandatory actions or initiate crime proceedings. The administrative enforcement authorities, meanwhile, are authorised to investigate the suspected act of patent infringement; where the offender refuses to cooperate with or interferes with the investigation, the administrative enforcement authorities will issue a warning or penalise accordingly. The active investigation and information collecting from the judiciary organs or administrative enforcement authorities will assist the patent owner to address difficulties in seeking and collecting evidence. Moreover, corresponding penalising measures will be taken in response to acts of refusing to comply with or interfering with the law enforcement missions of these authorities. Nevertheless, given the daunting number of cases and limited legal resources, there is still a long way to go for judges to voluntarily shoulder the responsibility of investigation and evidence seeking.

Determining compensation

The amendment empowers the administrative enforcement authorities to determine compensation amounts. Should the administrative enforcement authorities deem an act as patent infringement in the process of handling patent infringement disputes, they are authorised to request the offender to compensate for any losses, and the amount should be decided on the basis of the relevant regulations governing patent infringement suits. In accordance with the prevailing Patent Law, while handling the patent infringement disputes, the administrative enforcement authorities can, at the request of the involved parties, help to determine the compensation figure. As such a negotiation agreement does not carry mandatory enforcement power, the general scenario is that the parties involved often opt for launching legal suits to the People's Court, thus weakening the law enforcement functions of the administrative organs, and resulting in a waste of administrative enforcement resources. Endowing the administrative organs with the power of deciding compensation amounts is conducive to protecting the legitimate rights of the right owner, reducing the number of cases and saving public resources, and is consistent with the current practice of three legal processes combined into one as adopted in civil, administrative and criminal IP cases.


Case handling times

Furthermore, this amendment clarifies the effective date of the examination decision of the request for invalidation, and the relevant subsequent procedures (that 3 is, upon the announcement of an invalid patent right or maintaining of the patent right, the patent administrative departments of the State Council should register and publish the announcement in a timely manner, and the decision comes into effect on the day of announcement). Patent authorities and the People's Courts should investigate and handle the cases in line with this decision. In the prevailing Patent Law, there is no clear specification on the effective time of the examination decision of the request for invalidation. In practice, the effective date of the releasing of the judicial review result is usually regarded as the effective date of the examination decision of the request for invalidation. As such, the validity of the patent right is in an ambiguous status for a relatively long period of time, and patent infringement suits can only be proceeded after the final decision on patent administrative suits is made, leading to a long handling time of many cases. As the issue of judging the validity of the patent is highly technical, the Patent Reexamination Board is naturally in a position to handle the requests for patent invalidation, and the possibility of the judicial organs altering the examination decision of the Patent Reexamination Board is extremely low. And so, subject to compliance with the TRIPs agreement, and ensuring the timely review of the requests for patent invalidation being reviewed by the judicial organs, this provision plays a positive role in determining the legal status of the patent right at an early date and shortening the handling time of the cases.

Punitive compensation mechanism

In addition, the amendment sets up a punitive compensation mechanism on intentional infringements: for intentional patent infringements, the administrative enforcement authorities or the People's Court are authorised to triple the fine, depending on the details, scale and damages involved. In the prevailing Patent Law, compensation for patent infringement adopts the compensational principle. According to this principle, compensation for the right holder is used mainly for compensating the actual losses of the right holder, and the calculation method is as follows: actual losses for the right holder incurred by right infringement, gains obtained by the offenders for right infringement, a reasonable multiple of the patent right licensing fee, and legal compensation ranging between Rmb10,000 (,600) and 100 million. In practice, the compensation principle can neither compensate sufficiently for the full losses incurred by right infringements, nor curb the infringements effectively. As such, the amendment referred to the practice of such countries as the United States, and introduced a punitive compensation mechanism in a bid to deter patent infringements and protect the interests of the patent right owners.

However, a number of issues, including how to define intentional infringements, and whether the punitive compensation applies to legal compensation amounts, are yet to be clarified.


Greater power for patent authorities

Lastly, the amendment endows the patent authorities with the power to inspect and halt serious infringements. The administrative enforcement authorities are authorised to investigate patent infringements disturbing market order, and impose fines of up to quadruple of their illegal gains or up to Rmb200,000. The amendment referred to the relevant provisions from the Trademark Law, enlarging the enforcing scope of the administrative enforcement authorities and highlighting their functions, which will be conducive not only to crack down serious infringements (such as intentional infringement, repeated infringement and group infringement), but also to foster a healthy and orderly market environment.

It's all in the detail

The new amendment proposal has completed the public consultation process, and has been reported to the State Council. The proposal for approval might abandon or amend the power of administrative enforcement authorities to determine the amount of compensation, and extend the term of protection of design patents to 15 years. Since this proposal for approval is not available to the public, it remains to be seen what the exact final amendments to the Patent Law will be. Furthermore, the amended contents are mostly general principles, and even if passed smoothly, their implementation still requires detailed specifics and handling procedures before coming 4 into full play.