Editors note: This article was prepared by Charles C. Liu, PhD, JD, Partner, Director of US Practice, Unitalen Attorneys at Law and Jeanne J. Liu. It was originally published in China Intellectual Property, 20:44-51 (2007) and appears here with the authors’ permission. Unitalen, the largest private IP law firm in China (see website), is a partner of ChinaBio® Accelerator

This is the third of four installments, which are appearing on a weekly basis. In this section, Dr. Liu and Ms. Liu cover the subjects of “Foreign Filing License and Patent Export Control,” “Administrative Enforcement” and “Administrative Control.” In the next, and final, installment, the authors will present a discussion of “Patent Misuse and Unfaithful Proceedings,” “Compulsory Licenses,” “Disclosure of Genetic Resources” and “Designation of Patent Firms to Handle Foreign-Related Matters.” If you missed them, Part I is here and Part II is here.

Introduction

The Chinese patent system has recently experienced tidal waves of change in its statutes and administrative rules. Innovative industries that expect to obtain patent protection in China will continue to be profoundly touched by these waves of change. To stay on top of the changes, it is necessary to discuss certain issues related to the changes in law that are pertinent to global innovative industries and patent practitioners.

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FOREIGN FILING LICENSE AND PATENT EXPORT CONTROL

The current patent law requires Chinese individuals and entities to first file applications in China for inventions made in China. The Patent Law (Draft Revision 2006) extends this requirement to both Chinese and foreigners such that a foreign filing license from the state patent administration is required for “any individual or organization” to file a patent application in a foreign country if the application is based on “an invention made in China.” The implementation of more detailed rules is one of the important issues for the upcoming revision of the Patent Rules.

To reinforce the governmental control on foreign filing of patent applications based on inventions made in China, a penalty provision has been added in the draft revision of the patent law. Because of such penalty provision, if a person filed a patent application in a foreign country based on an invention made in China without permission from the Chinese patent administration, the person’s patent application filed later in China based the same subject matter will be denied approval in China.

On the related issue of patent export control, the Examination Guidelines (Revised 2006) prescribes that any legal entity, individual or organization, in China for the purpose of transferring its rights of a patent or of a patent application to a foreign entity shall obtain a permit for regulated technologies from the Ministry of Commerce, or a recordation for freely exportable technologies from either the Ministry of Commerce or a local administration of commerce.

ADMINISTRATIVE ENFORCEMENT

Enforcement of patent rights protection has been one of the major concerns for the effectiveness of China’s IPR system. The Chinese legislation intends to further empower the patent administration to handle patent disputes.

As reflected in a newly added clause to the Patent Law (Draft Revision 2006), the legislation intends to give the patent administration handling cases of patent infringement or patent counterfeiting, the power to examine the alleged infringing party and other relevant parties, to inspect the premises of the alleged infringing act, to inspect or copy relevant documents, and, if reasonable evidence of the illegal activities is provided, the power to seize or confiscate relevant products or equipment.

To curb patent counterfeiting, the legislature intends to build a more powerful patent administration to take action against such particularly egregious patent violations. For acts of forging another’s patent, the draft doubled the amount of administrative fines from CNY 50,000 to CNY 100,000. For acts of falsely representing a non-patented product or method as a patented product or method, the patent administration may confiscate any illegal gain and fine the patent violators for up to three times the sum of the illegal gain, or up to CNY 100,000 if no illegal gain can be found.

PATENT INFRINGEMENT

To enhance the deterrence against patent infringements, the Patent Law (Draft Revision 2006) provides more specific and stringent damages measures for patent infringement. The statutory damages are expected to be between CNY 5,000 and CNY 1,000,000 in cases where the actual loss of the patent owner, illegal gain of the infringer and reasonable royalties of a patent license are uncertain. Here, the statutory damages cap of CNY 1,000,000 is doubled from CNY 500,000 under the current law.

For willful infringement, the draft revision states that if a judgment is made, the patent administration has the power not only to order the infringing party to stop the infringement, but also to confiscate the illegal gain and impose a fine upon the infringing party. The fine could be up to three times the illegal gain or up to CNY 100,000 if no illegal gain can be found.

On the other hand, in keeping with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Patent Law (Draft Revision 2006) introduces two provisions of limited exceptions to the exclusive rights conferred by a patent. First, the draft revision provides that, after the first sale of a patented product or a product acquired directly through a patented method, either being marketed by the patent owner or with the patent owner’s permission, the “importation” of such a product is defined as not constituting infringement. Thus, under such provision, parallel or grey-market imports are permissible. Second, the draft revision newly introduced the “Bolar” exemption that the manufacture, use, or importation of patented pharmaceuticals or patented medical devices solely for obtaining and providing data required for regulatory approval of a drug or medical device is permissible.



Disclosure: none.