Draft Amendment to the Patent Law of the People's Republic of China

In the past few years, the Chinese government has made a concerted effort to reshape the Chinese economy, supporting industries that provide higher-paying jobs and foster technological innovation. That effort is reflected in several pieces of legislation summarized by China Law Update in the past year, including the PRC Enterprise Income Tax Law (China Law Update, May 2007), which provides special incentives for high-tech enterprises; the Measures on Administration of the Recognition of High-Tech Enterprises, the Catalogue of High-Tech Sectors Supported by the State on a Priority Basis, and the Circular on Issuance of the Working Guideline for Recognition and Administration of High-Tech Enterprises (all in the July 2008 issue).

Similarly, in June 2008 China's State Council issued the Compendium of China's National Intellectual Property Strategy, which stated a goal of developing China into "a nation with an internationally top level of creating, using, protecting and managing [Intellectual Property Rights] by 2020."

Less than three months later, the Standing Committee of the National People's Congress completed its first reading of the Draft Amendment to the Patent Law of the People's Republic of China (Draft Patent Law Amendment). This draft aspires to foster technological innovation by making it easier—and more profitable—to register, own and enforce patents in China. If passed, it will be the third major revision to China's patent law, which was first enacted in 1985 and revised in 1992 and 2000.

According to Chinese government statistics, relatively few patent filings in China (about 20 percent) cover inventions. And of those invention patents, more than half—53 percent, according to the State Intellectual Property Office (SIPO)—are actually owned by foreigners. Thus, while some of the changes embodied in the Draft Patent Law Amendment are intended to bring Chinese patent law into conformance with international treaties, its overarching purpose is to encourage creativity and improve the innovative capacity of Chinese industry.

The Draft Patent Law Amendment has been made available to the general public and is expected to pass final review by early 2009, at the latest. We have summarized below the major changes contained in this draft.

• The "Absolute Novelty" Standard. The Draft Patent Law Amendment raises the standard for granting a Chinese patent, adopting the "absolute novelty" standard that is used internationally. This provision would require that the invention not be known publicly either inside or outside China.
• Where to File. The Draft Patent Law Amendment would for the first time allow Chinese citizens and businesses to file for a patent abroad before filing in China. However, the proposed law contains a provision requiring those who file abroad for a patent to submit the patent to SIPO under the guise of protecting security.
• Licensing of Patents. The Draft Patent Law Amendment would allow SIPO to grant a compulsory license to exploit a patent if the patent holder has not done so within three years of when the patent was issued. A compulsory license may also be granted if the patent holder is determined in legal or administrative proceedings to have used the patent in an anti-competitive manner. In addition, the law would allow a co-owner of a patent to act alone to practice, or license others to practice, a jointly owned patent.
• Protection Measures. The Draft Patent Law Amendment provides greater protection to patent holders in China. For example, it would increase penalties for infringing on a patent and provide for statutory damages (compensation defined by law) when the damage to the patent holder cannot be determined. In the present draft, those statutory damages range from RMB 10,000 to RMB 1 million, depending on the type of patent as well as the nature and extent of the patent infringement.
• Changes to Conform to International Treaties. Some of the changes contained in the Draft Patent Law Amendment bring Chinese law into conformance with international treaties. One provision, for example, provides for a compulsory license to manufacture and export patented drugs to certain countries for public health purposes. Another requires an applicant for a patent to disclose the source of genetic material for a gene-based patent.
• Stronger Protection for Design Patents. The Draft Patent Law Amendment grants to the holder of a design patent the right to restrict or prohibit use of the patented design for sales activity (such as in an advertisement or store display) without permission of the patent holder.