National People's Congress passes fourth amendment to Patent Law

Civil litigation
Administrative enforcement
Resolution of patent disputes during regulatory approval process
Patent term compensation
Design patents
Patent exploitation and use
Novelty grace period
Abuse of patent rights

On 17 October 2020 the National People's Congress passed the fourth amendment to the Patent Law, which will come into effect on 1 June 2021. It has been eight years since the first draft was released for public opinion. This article provides an overview of how the patent regime will be updated.

Civil litigation

Article 71 introduces the punitive damages regime in the context of wilful infringement. In serious cases, this enables the courts to grant, at their discretion, punitive damages of up to five times:

• the actual losses suffered by the patentee as a result of infringement;
• the proceeds gained by the infringer from the infringement; or
• a multiple of the patent royalties (with the multiple set at the court's discretion).

The amount of statutory damages that can be awarded has also increased and now ranges from Rmb30,000 to Rmb5 million. The burden of proof may be shifted from the patentee to the infringer, provided that the patentee has exhausted its efforts to fulfil such obligation and the account books and materials relating to the infringing acts are mainly controlled by the infringer.

Article 74 increases the statute of limitations for instituting legal proceedings against patent infringement from two years to three years, starting from the date on which the patentee or any interested party knew or should have known of the infringing act.

Administrative enforcement

More power has been vested in the China National Intellectual Property Administration (CNIPA) and the local patent administrative authorities to carry out patent administrative enforcement with regard to patent infringement disputes (Article 70). At the request of patentees or interested parties:

• the CNIPA may handle patent infringement disputes of significant national impact; and
• the local patent administrative authorities may handle patent infringement disputes by combining cases involving the same patent rights.

In cases of patent counterfeiting, the patent administrative enforcement authorities may impose fines of up to:

• five times the illegal gains; or
• Rmb250,000 if the illegal gains are less than Rmb50,000 (Article 68).

Resolution of patent disputes during regulatory approval process

Article 76 enables applicants for regulatory approval, patentees and interested parties to resolve patent disputes during the drug marketing approval process through various means, including patent litigation before the court or a petition for a CNIPA administrative ruling. Within the prescribed time, the National Medical Products Administration (NMPA) may decide whether to suspend the drug approval process based on the effective court judgment.

The NMPA and the CNIPA are responsible for formulating specific measures to link the regulatory approval process to the application stage of drug marketing licences should disputes over patent rights arise. On 11 September 2020 the NMPA and the CNIPA jointly published the Draft for the Implementation Measures for Early Resolution Mechanism of Pharmaceutical Patent Disputes (for Trial Implementation) for public opinion.

Patent term compensation

Article 42.2 enables the term of invention patents to be adjusted in case of an unreasonable examination delay during the patent granting procedure.

Article 42.3 further enables the term of new pharmaceutical product patents to be adjusted to compensate for the curtailment of the effective patent term as a result of the regulatory approval process. The adjustments are limited to five years, thus limiting the resulting effective patent term to 14 years from the date of regulatory approval in China.

Design patents

Article 42.1 extends the term of protection for design patents to 15 years. The new law also provides that partial designs are patentable subject matter (Article 2.4). For six months following the first filing date in China, applicants may enjoy priority for any design applications subsequently filed in China (known as 'domestic priority') (Article 29.2).

Patent exploitation and use

A new open licence system has been established to encourage the exploitation and use of patents. Patentees must file a statement before the CNIPA, permitting others to implement their patent and providing explicit licensing terms, including the fees and payment method. In return, the annuity paid by the patentee will be reduced or waived during the implementation period of the open licence (Articles 48 to 52).

Novelty grace period

In national emergencies or other extraordinary circumstances, Article 24 grants a six-month grace period with respect to inventions or creations first disclosed for public interest purposes, during which time the inventions will not lose their novelty for patent applications. This clause is believed to have been prompted by the COVID-19 pandemic.

Abuse of patent rights

The good faith principle has been introduced to the Patent Law to prevent abuse of patent rights. Patent applications and assertion of patent rights must not harm public interests, prejudice others' legitimate rights and interests or exclude or restrict competition (Article 20).

For further information on this topic please contact Xiaoling Duan at Wanhuida Intellectual Property's Beijing office by telephone (+86 10 6892 1000) or email (duanxiaoling@wanhuida.com). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.