Top 5 Changes in China’s Newly Amended Patent Law

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Per the “Decision of the Standing Committee of the National People’s Congress on Amending the ‘Patent Law of the People’s Republic of China’” (全国人民代表大会常务委员会关于修改〈中华人民共和国专利法〉的决定), China’s National People’s Congress has decided to amend China’s Patent Law.  The amendments will go into effect June 1, 2021.  The top five changes include increased patent term and damages, among other changes.

I. Increased Patent Term

The amended Patent Law increases design patent term from 10 to 15 years in Article 42.  Presumably, this is so China can sign on to the Hague System for the International Registration of Industrial Designs, which requires a 15-year term for designs. There are already 74 contracting parties to the Hague System including the U.S. and European Union. 

While the term for invention patents remains the same at 20 years from filing , Article 42 of the newly amended patent law also provides for both patent term extensions and adjustments.  Specifically, the two new paragraphs of Article 42 are as follows:

Where four years have passed since the application date of the invention patent and the patent right for the invention has been granted three years after the date of the request for substantive examination, the patentee may request compensation for the unreasonable delay in the granting process of the invention patent, but the validity period of the patent shall not be extended for unreasonable delay caused by the applicant.

In order to compensate for the time taken for the review and marketing approval of the a drug , the patent administration department of the State Council may, at the request of the patentee, grant compensation for a period of time for new drug invention patents that have been approved for marketing in China. The compensation period shall not exceed five years, and the total effective patent right period after the new drug is marketed shall not exceed 14 years.

Note that both adjustments and extensions are not automatic. The applicant must request them.

II. Increased Damages

The potential for increased damages is significant and patentees considering litigation may wish to delay suing until the new law comes into effect in June 2021.

Punitive Damages

Renumbered Article 71 (previously Article 65) provides for up to quintuple damages for intentional patent infringement if the circumstances are serious.  Punitive damages will already be available via the new Civil Code effective January 1, 2021 but the amended Patent Law codifies the amount.

Statutory Damages

Article 71 also increases statutory damages from 1 million RMB to 5 million RMB (~$748 thousand USD).  Statutory damages are applied when “it is difficult to determine the loss of the right holder, the benefits obtained by the infringer, and the patent license fee.”

Statute of Limitations

Article 74 (previously Article 68) increases the statute of limitations by 50% from two to three years to capture more damages.

Evidence

The People’s Court can also order an infringer to provide account books and other information to determine damages. If the infringer doesn’t provide the requested information or provides false information, the People’s Court can rely on the (presumably high) claims of the rights holder.

III. Patent Linkage

Article 76 introduces patent linkage for pharmaceutical patents. Details of how this might be implemented were detailed in the draft Implementing Measures for Drug Patent Dispute Early Resolution Mechanism (Trial for Implementation) (Draft for Public Opinions) (药品专利纠纷早期解决机制实施办法(试行)( 征求意见稿)).  Comments are due by October 25, 2020.

IV. Reduced or Eliminated Annuity Fees

Articles 50 – 52 introduce an open license system where a patentee can “voluntarily declare in writing to the Patent Administration Department of the State Council that it is willing to license any entity or individual to exploit his patent, and specifies the method and standard for payment of license fees.”  As reward for participating, “the annual patent fee paid by the patentee shall be reduced or exempted .”  Details on how the annuity fees will be calculated for participation will need to await amended Implementing Rules and Regulations.

V. Good Faith

New Article 20 reads,

Applying for patents and exercising patent rights shall follow the principle of good faith. The patent rights shall not be abused to harm public interests or the legitimate rights and interests of others.

Any misuse of patent rights, elimination or restriction of competition, which constitutes monopolistic behavior, shall be dealt with in accordance with the Anti-Monopoly Law of the People’s Republic of China.

It is unclear what this will apply to in practice but this will probably be used to regulate non-practicing entities and those licensing standard essential patents. In addition, it may be applied to those who sue companies registering for Initial Public Offerings (IPOs) to derail their IPOs.  For example, it was recently reported that Zhejiang Huakang Pharmaceutical Co., Ltd.’s (浙江华康药业股份有限公司) IPO prospects were damaged due to a suspiciously timed patent infringement lawsuit and police are investigating. 

Accordingly, the newly amended Patent Law strengthens patent rights in China.  However, we’ll need to await Implementing Regulations and Rules to see how the new Articles will be applied in actuality.

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.