Highlights and Key Points of Newly Revised China’s Patent Law

On October 17, 2020, the 22nd meeting of the Standing Committee of the 13th National People's Congress of the People's Republic of China has reviewed and approved the "Decision of the Standing Committee of the National People's Congress on Amending the Patent Law of the People's Republic of China", which means that the new "Patent Law" will be officially implemented on June 1, 2021. This revision is the fourth revision of China's current "Patent Law" since its implementation in 1985. The main content is to safeguard the legitimate rights and interests of patentees, enhance the confidence of innovation entities in patent protection, and fully stimulate the entire society's innovation vitality.


By Zhang Cong China IP




The past ten years have not only been a period of the rapid development of domestic intellectual property innovation protection, but also a critical period of substantial improvement in the level of domestic intellectual property administrative and judicial protection. Due to the relatively long interval between amendments to the Patent Law, and China's socio-economic situations and technological innovation capabilities have undergone tremendous changes in recent years, the newly amended Patent Law has made significant changes in many aspects. The patent protection intensity has been unprecedented increased, and it will surely form a new patent protection situation after implementing the new Patent Law.


It is against this background that on June 28, 2020, the "Amendment to the Patent Law of the People's Republic of China (Second Draft)" was submitted to the 20th meeting of the 13th National People's Congress for deliberation and submitted to the public. The public solicits opinions. Some problems were revealed during the old law's implementation, such as long patent review period, failure to integrate with relevant laws, long period of corporate rights protection, difficulty in obtaining evidence, and poor results. For this reason, a series of new requirements have been made after the amendment of the Patent Law. So, what changes have been made in the newly revised Patent Law? What impact will the revised part have on the company's patent asset management? ChinaIP reporters interviewed intellectual property professionals in the academic and business circles to interpret the highlights of the new "Patent Law", share opinions and make suggestions.


Strengthen the protection of the legitimate rights and interests of patentees


This revision of the "Patent Law" will increase compensation for patent infringement, improve the burden of proof, improve pre-litigation behavior preservation measures, improve patent administrative protection, add the principle of good faith, and added the relevant clauses of new patent right term compensation system and drugs patent disputes early settlement procedure. The patent infringement's technical nature, the high cost of rights protection, and the low amount of compensation are the main obstacles to patent protection. The most critical issue is the low amount of compensation. The old "Patent Law" lacks a punishment mechanism for malicious infringement, and the statutory compensation limit was only 1 million yuan, which has caused many right holders to neglect to exercise their rights and lack sufficient motivation for independent innovation.


Song Hefa, a researcher at the Academy of Science and Technology Strategy Consulting of the Chinese Academy of Sciences, said that the repayable compensation system established after the publication of the Patent Law would determine the amount of compensation for infringers who intentionally infringe on patent rights at more than one and five times the fixed amount. If it is difficult to determine the loss of the right holder, the benefits obtained by the infringer, and the patent license fee, it is determined that compensation of 30,000 yuan to 5 million yuan will be given. This may play a critical role in deterring intentional infringement.


Song Hefa pointed out that although China has continuously strengthened the protection of intellectual property rights in recent years, the amount of infringement compensation in patent, trademark, and copyright cases, especially the statutory compensation, has also been increased. However, the control of infringement is still not strict enough. According to the 2015 China Patent Survey data released by the Development Center of the China National Intellectual Property Administration, in China's intellectual property infringement cases, the compensation amount of less than 100,000 still accounts for more than 30%. This shows that the overall amount of infringement compensation in China's intellectual property cases is still relatively low. The amount of compensation for infringement in intellectual property cases in developed countries is relatively high, and at the same time, it will not hinder innovation. This is worth learning. In fact, increasing the crackdown on deliberate infringements will not hinder innovation. The reason is that the price of technology transfer is a market behavior, especially for patented technology. Its supply and demand in the market have not reached a state of full competition. Therefore, after increasing the protection of intellectual property rights, the situations of patentee raising the price would be reduced. From this point of view, strengthening the protection of intellectual property rights does not necessarily hinder innovation.


At the same time, Song Hefa also proposed the definition of "intentional infringement". In judicial practice, the definition of "intentional" is an issue worth noting. With the current technological achievements becoming more and more complex, technology often involves multiple patentees. If a generalized understanding of intentional infringement is carried out, it may not be conducive to technical implementation, especially in the field of communications. Therefore, he suggested that, except in the field of standard-essential patents, the identification of "intentional infringement" shall be strictly restricted.


Reduce the burden of proof


The common calculation basis of patent infringement compensation is based on the infringer's interests due to the infringement. However, under the basic proof rule of "who asserts, who presents evidence", it is difficult for the right holder to prove the infringing party's actual profit. It is often difficult to obtain high infringement compensation in litigation, and it is difficult to form an effective blow to the infringing party. Patent holders should actively provide evidence to prove their actual losses or the infringer's profit from infringement to obtain legal relief fully. This revision of the Patent Law also improved the relevant provisions on distributing the burden of proof and the calculation method of damages. It reduced the difficulty of proof for patentees.


Article 71 of the new "Patent Law" stipulates: "in order to determine the amount of compensation, the People's Court may order the infringer to provide it if the right holder has tried its best to provide evidence and the account books and information related to the infringement are mainly in the hands of the infringer. Account books and materials related to the infringement; if the infringer does not provide or provides false account books and materials, the People's Court may refer to the claims and evidence provided by the right holder to determine the amount of compensation." In fact, the rules of proof have been written into the "Maximum Interpretation of the People's Court on Several Issues Concerning the Application of the Trial of Patent Infringement Disputes (2)". This amendment clearly writes this rule into the "Patent Law", which is conducive to further reducing the burden of proof of the right holder, and thus strives for a higher amount of infringement compensation. Song Hefa believes that in addition to the burden of proof, the source of evidence is also one of the main problems faced by right holders in patent infringement cases. To truly solve this problem and establish a punitive damages system and significantly increase statutory damages, it is necessary to improve the rules of evidence further. For example, evaluations provided by independent third parties, experts, technical investigators, and people's assessors can be used as evidence. It is not limited to the claims of the right holder.


Promote patent implementation and application


This revision of the law focuses on promoting the implementation and application of patents, including improving the service invention system, the open licensing system for new patents, and the strengthening of patent conversion services. The first paragraph of Article 6 of the new "Patent Law" is amended to recite: "an inventioncreation made by a person in the execution of tasks of the entity employing the person or mainly by taking advantage of the entity's material and technical conditions is a service invention-creation. The right to apply for a patent for a service invention-creation belongs to the entity; and after the application is granted, the entity is the patentee. By the law, the entity may dispose of its right to apply for patents for service invention-creation and the patent right and promote the exploitation and application of the inventioncreation."


Although the number of patent applications and grants in China is relatively high, the phenomenon of "appreciating application and neglecting application" of patent rights has always existed. In this regard, Wang Zhenkai, an expert in the legal team of the China Patent Protection Association and former director of Intellectual Property Rights of Dana Technology, pointed out that there is still a lot of room for development in the domestic patent licensing market, which affects the performance of the primary market for patent creation. In this regard, the introduction of the patent open licensing system is a useful attempt. "From the perspective of public power intervention, the system is similar to the packaged, one-stop licensing of patent pools, which helps promote technology flows. Compared with the higher cost of one-to-one negotiations in the past, open licensing may help reduce access to the cost of patent licensing." From the perspective of transformation and application, making intellectual property rights truly become a carrier of technology transformation and application is also a question that patent-powered companies must think. In this regard, Wang Zhenkai believes: "At present, Chinese people are not accustomed to realizing technology transactions through licensing. Open licensing will help patent technology better transform into productivity, and it will also help patentees to recover the investment in innovation and R&D better, and therefore stimulate the innovation vitality of enterprises and individuals."


"In China, intellectual property rights are currently owned by the state, and institutions can be the holder, patentee or intellectual property right owner, but there is no right to copy intangible assets such as intellectual property owned by the state. This amendment solves the problem. After the law is amended, the principle of priority for service inventions remains unchanged, but the new law clarifies that institutions can deal with the right of applying for patents and patent rights. It is significant." Song Hefa pointed out in an interview, "After Southwest Jiaotong University implemented the mixed ownership, the science and technology system has introduced new scientific and technological achievements. The important policy of decentralization of ownership and decentralization of use rights has further stimulated the enthusiasm of originator of the on-duty invention. Nowadays, the Ministry of Science and Technology has selected forty university scientific research institutions to carry out pilot projects. The inventors can own intellectual property rights and the resulting corporate equity. This amendment is consistent with the new policy of the Ministry of Science and Technology."


Encourage and enrich the reward system


In this interview, both experts agreed with Article 15 (former Article 16) of the new "Patent Law". The new "Patent Law" changes Article 16 of the old law to Article 15 and adds a paragraph as the second paragraph: "The state encourages entities to which patent rights are granted to implement property right incentives, and enable inventors or designers to rationally share the benefits of innovation in forms such as equities, options, and dividends." Institutions can use equity options, dividend rights, etc., to incentivize scientific researchers, which is a critical measure introduced by the new Patent Law.


Song Hefa pointed out in the interview that the equity formed after the institution's intellectual property rights are priced into shares should be rewarded equity, and the owner does not become a shareholder. This will raise a series of corresponding legal issues: What is the attribute of reward equity? Can scientific researchers who have been awarded equity shares become shareholders of the company? To solve the above problems, it is necessary to decentralize intellectual property rights so that the rights owners can become shareholders. This will significantly improve the conversion efficiency of the less complicated results in the patent right.


In recent years, the positive progress in the reform of China's scientific and technological innovation incentive measures has laid a solid institutional foundation for creating an excellent scientific research ecology and building a strong country in science and technology. This amendment has further enriched the content of the ownership of job innovation achievements. How should property rights incentives be implemented? Wang Zhenkai believes that the "Dana Technology Patent Partner Model" is a typical case for implementing the requirements of the new Patent Law. He believes that the rewards and remunerations of patent rights should not be regarded as one-way corporate burdens, but should be considered from the integrity of the intellectual property system and regarded as "spending small amounts of money to earn a large amount of money". According to reports, the "patent partner model" as an important part of the company's intellectual property strategy includes rewards for service inventions, high-quality patents, and patent utilization. The company will receive 10% of the amount of compensation from external patent litigations and patent sales. Or more as a bonus, and it has the characteristics of no capping and lifetime enjoyment; in the scope of the award, the model has also made a breakthrough attempt. In addition to rewarding inventors, it also covers related interests that contribute to the conversion and application of patents. In addition, corporate intellectual property engineers are also included. "Patent equity and listed stock equity are equal. Repaying the knowledge-creating employees within the enterprise can enhance their sense of ownership." Wang Zhenkai agrees that patents should become a means of carrying out the reform of scientific research institutions and the remuneration of scientific researchers, forming the closed-loop of intellectual property creation, protection, application and return. "The patent reward mechanism is the underlying logic in the operation of intellectual property rights in a commercial society and is strongly related to employee compensation. The past Patent Law paid more attention to patent use and patent infringement judgments, etc., but this draft revision intends to clarify the institution's creation of disposal rights towards onduty invention, and will strengthen and enhance the high value of patents in the management and operation of enterprises.”


In response to the new Patent Law's encouraging attitude to the implementation of property rights incentives for institutions, the industry has expressed their praise. "Economic law is not as compulsory as criminal law or civil law, but more consideration should be given to the role of market reconciliation." Wang Zhenkai proposed to create a pilot case to encourage more enterprises to devote themselves to the construction and practice of innovative income systems by modelling the first achievements of enterprises. "Enterprises are the smartest. Once they can see the boosting effect of the new regulations on their own high-quality development, and the reward mechanism's positive promotion of patent creation, protection, application and commercialization, the companies will implement the target independently."

In addition to the above, the new "Patent Law" also contains key points and highlights such as further improving the design protection system, increasing the application of the novelty grace period, and improving the patent right evaluation report system. The new Patent Law extended the protection period of design patents to 15 years and stipulated that design patents can claim domestic priority; established a patent right period compensation system to extend the actual protection period; and has established an open licensing system to promote the transformation of results.