the development of the chinese patent law through its two amendments

1. 1 The Development of the Chinese Patent Law Through Its Two Amendments

2. 2 Introduction

3. 3 Evolution of China patent system 1984 China acceded to Paris Convention 1985 First China patent law came into force 1993 First amendment of China patent law 1993 China acceded to PCT 1996 China acceded to Budapest Treaty 2000 China acceded to the WTO 2001 Second amendment of China patent law

4. 4 Development of the Chinese Patent Law

5. 5 History of Establishment of Patent System

6. 6 Level of patent protection

7. 7 Continually Growing of Patent Application in China

8. 8 Growing Application of Invention Patent from Abroad

9. 9 Top Ten Foreign Corporations filing patent in China,2006 No. INID Name of Corporation Number 1) South Korea Samsung 4,355 2) JP Matsushita 3,067 3) Netherlands Philips 2,523 4) JP Sony 1,648 5) South Korea LG 1,506 6) US IBM 1,435 7) JP Toshiba 1,211 8) JP Seiko Epson 1,144 9) Germany Siemens 887 10) JP Hitachi 836

10. 10 Top 5 Countries Filing Patent in China (2001-2006)

11. 11 Growing patent grant in ChinaYellow color-application from foreign countries

12. 12 PCT Application in China

13. 13 Volume of Substantive Examination (2001-2006) .

14. 14 Examining Cycle in Months(2001-2006) .

15. 15 1)Scope of Protection

16. 16 Scope of Protection (1) Article 27 of the TRIPS Agreement: Patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.

17. 17 Scope of Protection (2)

18. 18 Scope of Protection (3) Un-patentable items under the current Chinese Patent Law: Scientific discoveries; Rules and methods for mental activities; Methods for the diagnosis or for the treatment of diseases; Animal and plant varieties; Substances obtained by means of nuclear transformation

19. 19 2)Term of Protection

20. 20 Term of Protection (1) Article 33 of the TRIPS Agreement:  The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.

21. 21 Term of Protection (2)

22. 22 3)Exclusive Rights

23. 23 Exclusive Rights (1) Article 33 of the TRIPS Agreement:  The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.

24. 24 Exclusive Rights (2)

25. 25 4)Rationalization of Procedure

26. 26 Rationalization of Revocation Procedure 1985: pre-grant opposition ( 3 months from publication date); invalidation after patent grant 1992: post-grant opposition ( 6 months from patent granting date); invalidation from the expiration of post-grant opposition period 2000: abolishment of opposition procedure; invalidation after patent grant

27. 27 Information on Prior Foreign Search (1) Paragraph 2, Article 9 of the TRIPS Agreement: Members may require an applicant for a patent to provide information concerning the applicant's corresponding foreign applications and grants.

28. 28 Information on Prior Foreign Search (2)

29. 29 PRB Decisions Subject to Judicial Review

30. 30 Starting Point of Patent Granting

31. 31 5)Burden of Proof

32. 32 Burden of Proof for Process Patent infringement 1) Before 1993, the plaintiff bear the burden of proof 2) After 1993, the burden of proof reversed to defendant 3) According to TRIPS Agreement there are two options for reverse burden of proof, China adopt the second one: “ when the product obtained by the patented process is new”

33. 33 Burden of Proof in Patent infringement Case Usually on the plaintiff On the defendant to prove the alleged infringing process manufacturing identical products is different from the patented process Case: Glaxo v. South-West Hecheng Pharmaceutical Factory Chongqing First Intermediate People’s Court ordered the defendant to adduce evidence to prove its process for manufacturing Ondansetron is different from the plaintiff’s patented process.

34. 34 6)Service Invention

35. 35 Service Invention (1) Definition: An invention made by a person in execution of the tasks of the entity to which he belongs, or made by him mainly by using the material and technical means of the entity.

36. 36 Service Invention (2) 1985 & 1992

37. 37 Service Invention (3) 2000

38. 38 7)Foreign and International Application

39. 39 Foreign Patent Application Procedure for filing foreign patent application using an invention accomplished in China 1985 & 1992 Applying for a Chinese patent first Applying for approval of the relevant administrative organ under the State Council Entrusting an agency designated by the State Council 2000 Eliminating the government approval procedure (except for those relating to national security & major interests)

40. 40 International Application for Patent China became a member of PCT in 1994 The 2000 amendment provides for international application of patents: Chinese entities and individuals are entitled to file international application for patent. The Chinese patent administrative authority shall handle international application for patent in accordance with relevant international conventions/treaties to which China is a party, the Chinese Patent Law and other provisions promulgated by the State Council

41. 41 Significance of Allowing Foreign and International Application The Chinese government’s recognition of patent right as private right Making the Chinese patent system in line with the international standard

42. 42 8)Compulsory License

43. 43 Compulsory License (1) Conditions for granting compulsory license: National emergency or public interest For the implementation of the dependent patent A third party’s request for a license on reasonable terms and conditions and within a reasonable period of time License fee must be paid, non-exclusive, non sub-licensable Never granted compulsory license so far since 1985

44. 44 Compulsory License (2) At the Doha negotiation, WTO General Council made decision for amending the TRIPS Agreement in field of public health August 30, 2003 : Some unauthorized licenses are necessary in order to defeat AIDS, TB, Malaria and some other diseases; The export of drags produced by unauthorized licensee to other developing countries and least developed countries should also be permitted

45. 45 Compulsory License (3) According to the resolution of Ministerial Conference in Hong Kong December 6,2005, amendment of TRIPS Agreement should be accomplished before December 1,2007 SIPO is drafting the Regulations on Implementation of compulsory Patent License in accordance with the decision of General Council of WTO August 30, 2003

46. 46 9)Patent Re-examination /Appeal and Invalidation Procedure

47. 47 Patent Examination Procedure

48. 48 Re-examination Procedure

49. 49 Ground for Invalidation Non-patentable subject matter In contrary to the laws or social morality or detrimental to public interest No patentability (novelty, inventive step, industrial applicability ) Description in not sufficiently clear and complete Claims are not clear or lack of essential technical features Claims are not supported by description Amendments beyond scope of disclosure of original application Duplication of grant

50. 50 Invalidation procedure

51. 51 Flow Chart for Patent Invalidation Administrative Hearings

52. 52 Patent Re-examination and Invalidation (1985 – 2001 & 2004)

53. 53 Re-examination and invalidation cases (2003/2004) According to the Patent Law (2000), the decisions on re-examination and invalidation of Utility Model And Design Patents are no longer final. 1985-2002 total reexamination cases 3,803, invalidation cases 6,842 The total appeal cases (1985-2001) 142, But appeal cases for 2003 alone boomed to 342

54. 54 Re-examination and invalidation cases (2006) According to the Patent Law (2000), the decisions on re-examination and invalidation of Utility Model And Design Patents are no longer final. 1985-2002 total reexamination cases 3,803, invalidation cases 6,842 The total appeal cases (1985-2001) 142, But appeal cases for 2003 alone boomed to 342

55. 55 Judicial Procedure of Re-examination and Invalidation

56. 56 Judicial review of PRB’s decisions ( 1 ) Until July 1, 2001, there was no judicial review for utility model and industrial design During 1985 to 2001, there were 2,992 re-examination cases for patent for invention, but only 87 required judicial review During 1985 to 2001, there were 482 invalidation cases for patent for invention, but only 147 cases required judicial review

57. 57 Judicial review of PRB’s decisions ( 2 )

58. 58 10)Administrative & Judicial Routes in Dealing with Patent Infringement

59. 59 Infringement procedure

60. 60 Two ways of enforcing patent (1) 1, Administrative Procedure Governed by “the Measures on Patent Enforcement” issued by SIPO Remedies: stop infringing act immediately, but cannot award damages Advantages : low cost, simplicity of the procedure,quick decision Appeal: to Intermediate Court and High Court

61. 61 Two ways of enforcing patent (2) 2, Judicial Procedure Remedies: Stop infringement act, Award damages and all legal means Advantages : Less expensive than US, No discovery procedure Criminal penalty: Where infringement constitute a crime, criminal liability recently increased from 2-5 years to 3-7 years

62. 62 Comparison of Administrative with Judicial Enforcement

63. 63 Administrative Enforcement by Local Patent Authority(2000 – 2005)

64. 64 Administrative Procedure in China

65. 65 Administrative Remedies Cessation of the following infringing acts: Manufacturing the infringing products Use of a patented process The selling/offering for sale/import of the infringing products or products directly obtained by the patented process Note: damages can not be awarded through administrative procedure

66. 66 Special IP Protection in Borders Prior registration with Chinese Customs is not a prerequisite Chinese Customs may seize/dispose infringing products as well as impose fines in the process of import and export Unlike the US approach, Chinese Customs may stop the export of infringe goods Customs protection hardly applies to invention and utility model patents

67. 67 Border measures of China customs

68. 68 New development of IP protection for customs in China ( 1 ) Recordal of patent cases with customs rapidly increasing :1998-44; 1999-102; 2000-180; 2001-227; 2002-302; 2003.4-203, however, in fact patent seizure cases much less, constitute from 10 to 20 % of recordal cases MoU on Cooperation of IP Protection with US Movie Association May 29,1997 MoU on Cooperation Against Counterfeit in Import and Export with Chinese Association of Foreign Investment Companies Feb.27,2002 Total IP infringement cases handled by customs reached 4,000 during last 10 years. In 2005, 1,106 cases

69. 69 Customs Seizure of Infringing Goods (1997-2005) .

70. 70 New development of IP protection for customs in China ( 2 ) IP cases predominated in export (>80%) Customs IP cases : 1,210 cases in 2005, ~75% are counterfeit , ~20% are piracy; ~5% patent infringement, seized infringing goods,worth RMB 99.87 million yuan 18.5% higher then 2004 Counterfeit : 2001-308; 2002-557; 2003-741; 2004-1,009; 2005-1,106 including Levi’s, Hitach, Nokia, Adidas, Nike etc. Ninbo and Shanghai customs office seized 8,600 sewing machines counterfeiting the “Butterfly”, valued RMB 1.8 million in 2005 Chinese customs seized 4.40 million fake CD,VCD October 1,1999

71. 71 New regulation of IP protection for customs in China (March 1, 2004)-1 New regulation for customs IP protection : 8 Chapters, 36 Articles. Main features are followings: 1) Extend the term of the recordal from 7 to 10 years 2) Withdrawn the obligatory requirement to record, keeping the application for administrative enforcement before taking an action 3) Customs power for investigation strengthened 4) Cancel opposition time limit (7 days) and need to submit the evidence

72. 72 New Regulation of IP protection for customs in China (March 1, 2004)-2 5)Cancel retaining and disposing the accused goods when the case transfer to the court 6)Flexible system of providing the bond, instead of the bond the right holder can also use the credit guaranty letter 7)Flexible system disposing infringing goods

73. 73 12) Judicial Route

74. 74 The Chinese Court System Four levels and two instances

75. 75 China Court System for Patent Litigation

76. 76 Jurisdiction & Venue in Patent-Related Cases

77. 77 Pre-filing Investigation No discovery Procedure; Pre-filing investigation is necessary Typically accomplished by using a local agent or a private investigator through a local law firm Common practice: purchasing a sample of the infringing product in a notarized procedure

78. 78 Pretrial Measures (1) Provide evidence of infringing act Produce irreparable harm Provide the appropriate bond Request court to order the suspension of relevant acts of infringement and preservation of property Abide by the Civil Proceeding Law: Article 93 to 96, Article 99

79. 79 Pre-trial Measures (2) Having evidence to prove the infringement /imminent infringement fact and irreparable harm Posting a security bond Case: Eli Lilly v. Haosen Pharmaceuticals Eli Lilly applied to Shanghai Second Intermediate People’s Court for pre-trial injunction and evidence preservation on the grounds that Haosen had completed all preparations for the alleged infringement of two patents owned by Eli Lilly. Both petitions were granted.

80. 80 Infringement and invalidation

81. 81 Invalidation Applications Filed during Court Proceedings (1) The defendant of a patent infringement case may file invalidation application with PRB The local Court may suspend the trial of the infringement case PRB decision-subject of judicial review for Beijing First Intermediate People’s Court and then may be appealed Beijing High People’s Court Different Courts for Infringement Case and Invalidation Case

82. 82 Invalidation Applications Filed during Court Proceedings (2) Case 1: Shenzhen Chuangge Science and Technology Co. Ltd. v. Compaq The defendant successfully suspended the trial before Beijing High People’s Court by filing an invalidation application against the plaintiff’s utility model patent and was found not infringing in the subsequent Court decisions.

83. 83 Invalidation Applications Filed during Court Proceedings (3) Case 2: a pending case between a Chinese patentee and a Chinese subsidiary (located in Jiangsu province) of a US company Invalidation application filed during the second-instance trial of the patent infringement case before Jiangsu High People’s Court; trial suspended The invalidation decision of PRB appealed to Beijing First Intermediate People’s Court and then Beijing High People’s Court Jiangsu High People’s Court awaiting the decision of Beijing High People’s Court

84. 84 Flow Chart for Patent Infringement Procedures

85. 85 Suggestion for Judicial review Shortcomings of judicial review procedure: Instead of previous plaintiff and defendant, PRB unreasonably become a defendant Long procedure for infringement cases if infringer for protecting himself raised invalidation case with the PRB Suggestion: 1, Create a special IP appeal court both for infringement and for invalidation 2, Both parties remain unchanged during the administrative appeal

86. 86 Statistics of infringement cases handled by the courts and local administrative patent organs

87. 87 Passing off procedure

88. 88 Improvement of patent litigation (1) Preliminary injunction (ex-parte action) for preservation of evidence, property or of the both (Article 61) Judicial review of the decision made by the PRB for utility model and design patents (Article 46) People’s court may require right holder of utility model patent furnish a search report made by SIPO when file a infringement case (Article 57) Reverse burden of proof in infringement case for patented process : the accused infringer shall furnish proof of using a different method from patented one ( Article 57)

89. 89 Improvement of patent litigation(2) Producing, selling or using a patented product or a product obtained directly by a patented method deemed as infringement but not liable for compensation, if legitimate source is proved (Article 63) Three statutory forms for determining the damage (Article 60) Patent Appraisal Committees, designated by judicial organ

90. 90 Patent Appraisal Procedure Select Appraisal Committee among the members accredited by judicial organs Select 5 technical and legal experts to set up a panel Panel experts study all materials submitted by plaintiff and defendant Panel hearing arranged separately for plaintiff and defendant Draft final technical appraisal report by panel Interrogate the report under the chair of judge The court made final judgment

91. 91 Damages Monetary loss to the patent owner; Monetary profits to the infringer as a result of the infringement; Up to 3 times a reasonable royalty; or RMB 5,000 to RMB 500,000 ($600 to $60,000) In practice, damages are often decided by the first or the fourth method

92. 92 Criminal Remedies The Chinese Criminal Law as amended in 1997 sets out 7 types of IP-related crimes. 2004 Supreme Court & Supreme Procuratorate Interpretation of Some Issues Concerning the Concrete Application of Laws in the Handling of Criminal Cases of Infringing Intellectual Property Rights greatly lowered the threshold for imposing criminal liability.

93. 93 Statistics on IP-related Criminal Cases handed by the Courts in 2004 & 2005

94. 94 Infringement cases related to Chinese Companies Intel vs. Via Seagate vs. Nanjing patentees Cisco vs. HW TSMC vs. SMIC DSP in mobile phones (China market) Motorola vs. Beijing patentees Pfizer vs. Chinese companies

95. 95 Conclusion With only 20 plus years of patent history, China has made remarkable progress in putting in place a transparent, fair and open patent system fully compatible with the international practice. However, the Chinese patent system still has certain imperfections that need to be improved and, especially enforcement of the already existing laws and regulations needs to be reinforced.

96. 96 . THANKS! Website: www.eastip.com Email:lulin.gao@eastip.com