On October 17, 2020, the Chinese Legislature passed the Fourth Amendment to the China Patent Law, which will take effect on June 1, 2021. The Fourth Amendment marks the first major change in Chinese patent law since 2008. These changes will have a major impact on both prosecution and enforcement. Key amendments include those related to patent terms, damages, and licenses. Below is a summary of a few of these key amendments.
New Article 20 adds a “Good Faith” provision which reads, in part, “patent rights shall not be abused to harm public interests or the legitimate rights and interests of others.” This provision is a clear attempt by China to attempt to further regulate the assertion of patents. While it remains uncertain how the Chinese courts will apply this “Good Faith” provision, any corporation enforcing their patents right in China must be aware of this risk as it could be penalized if the court find it is acting against the public interest. This is especially true in one is enforcing its rights against a corporation based in China.
Under amended Article 24, an invention will not lose its novelty if it was “publicly disclosed for the first time for the public interest in the event of a national emergency or exceptional circumstance.” In particular, this provision is promising in that it encourages companies working on medical advancements – such as vaccines and therapeutics – to disclose their research promptly to the rest of the medical community without the danger of losing any patent rights. This is especially noteworthy during the COVID-19 pandemic.
Under old Article 42, the term of an “invention patent” (similar to a U.S. utility patent) was 20 years from the date of the application. Article 42 has now been amended such that if an invention patent application has been pending for more than four years from the filing date, or more than three years from the request for substantive patent examination, the applicant can request patent term compensation, that is, additional patent term can be granted (unless the delay was caused by the applicant). This is similar in concept to the provisions of the U.S. Patent Act allowing for patent term adjustment.
To licensees, one of the key amendments is to Article 50, which creates an “Open License System.” Under this system, a patentee can declare and record its intention to “open license” its patents to any entity or individual within the China Patent Office (CPO). Any entity wishing to practice a patented invention for which an open license is available can obtain a license after it notifies the patentee and pays the royalty. To further incentivize patentees to provide an open license, the CPO will reduce the annual maintenance fee. This provision, therefore, provides a simply way to expand patent licensing, at a pre-set proposed license fee.
Article 71 also received significant amendments. First, statutory damages have been increased from RMB one million to RMB five million (~$760K). It’s important to note that in China, statutory damages are granted in a majority of cases. Second, in a case of willful infringement, monetary damages may be increased up to five times the calculated damages. Third, the court can now order a defendant to disclose damages-related evidence. If the defendant refuses to do so, the court has the discretion to decide damages based on the plaintiff’s claim or request. This revision should encourage defendants to disclose relevant financial records early in the process.
In the end, the Fourth Amendment should open up more doors to U.S. companies looking to enforce their patent rights in China. One of the biggest questions remains how Chinese courts will enforce the “Good Faith” provision, but only time can answer that question. However, in the interim, U.S. companies should continue investing in their Chinese patent portfolios, as China continues to move to strengthen intellectual property rights.
Alok concentrates his practice on all aspects of intellectual property, including litigation, prosecution, licensing, valuation, and brokerage. He is also a registered patent agent with the USPTO.
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