The Fourth Amendments to the Chinese Patent Law (the “Amendments”) were announced and approved on 17 October 2020, 12 years after the last set of amendments. The Amendments will come into effect on 1 June 2021.

Five key points of the Amendments are outlined below:

A. Strengthening the protection of IP rights-holders

• Introduction of punitive compensation for intentional patent infringement.

The amount of compensation ranges from one to five times the amount of losses suffered by patent holders, profits earned by patent infringers, or exploitation fees of a patent under a license.

• Increase in both the minimum and maximum limits of statutory compensation from RMB 30,000 to RMB 5 million. The compensation range was previously from RMB 10,000 to RMB 1 million.
• Relief of evidential burden on IP right holders.

In certain situations, the Court may order accused infringers to provide accounts and materials in relation to the infringing activities.

The Amendments are aimed at solving problems of collecting evidence, low compensation and the high cost for patent enforcement to significantly increase the cost of infringing the law and offering benefits to patent holders.

B. Establishment of an open-licensing scheme

• Introduction of an open licensing scheme with the following features:
• Patent holders can make an application for an open license and submit it to the Patent Administrative Department of the State Council, clarifying the cost and payment in the statement;
• A patent evaluation report must be provided for an open license of utility models and design patents;
• Annuity deduction during the open licensing term;
• No sole or exclusive licenses will be granted during the term of the open license; and
• Patent holders and licensees should resolve disputes among themselves.

The open-licensing scheme is designed to promote the implementation of patents with lower costs, increasing the number of active patent licenses to extract their value and aimed to solve imbalances between supply and demand for patented technologies through public services.

C. Stimulating innovations in the pharmaceutical industry

• Compensation for the duration of drug patents.

Compensation period for drug patents cannot exceed 5 years, and effective patent terms cannot exceed 14 years after a new drug is approved for launching.

• The addition of an early dispute resolution mechanism for drug patents to solve potential patent disputes before the drug launches in the market.

A lawsuit may be initiated with the Court by claiming that the technology of a drug for market approval falls into the scope of a patent right. Alternatively, a decision can be requested by applying for an administrative ruling to the Patent Administrative Department of the State Council.

The Amendments introduces the concept of a pharmaceutical patent linkage system but does not state details such as timelines and procedures. Meanwhile, the draft “Measures for Implementing Early Dispute Resolution Mechanism of Pharmaceutical Patent Disputes” released in September 2020 by the National Medical Products Administration and the China National Intellectual Property Administration (the “Implementations”) outlines a more comprehensive pharmaceutical patent linkage system.

The Amendments of the Patent Law and the draft Implementations around drug patents and market approval are aimed to protect the legal rights of holders of drug patents, encourages drug innovation and promotes the development of generic drugs.

D. Extend the protection of design patents

• Extending the scope of protection of a design patent to the part of a product.

This amendment allows better protection of a product’s innovative design elements and aids in design patent enforcement.

• Addition of a domestic priority system for design patent applications.

The new provision offers the same priority choices to patent holders for design applications filed in China or in other jurisdictions.

• Extension of the duration of a design patent from ten years to fifteen years.

The extension of the protection period under the Amendments will facilitate China’s accession to the Hague Agreement.

E. Prohibition principle of abuse of patent rights

• Addition of the term on abuse of patent rights.

Any abuse of patent rights for excluding or restricting competition leading to monopolies will be dealt with in accordance with the Chinese Anti-Monopoly Law.

This section establishes the prohibition principle in the Chinese Patent Law and aims to solve the practical issues occurring when patents are used as a weapon to achieve a monopoly in the market.

In general, the Fourth Amendments of the Patent Law makes a series of modifications and improvements to the existing patent system. The new Patent Law reflects the intention and practical actions taken by the Chinese government to continuously strengthen intellectual property rights, provides a strong legal guarantee to further stimulate the innovation of the whole society, and will further enhance the effect and efficiency of patent protection.

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Should you have any questions, please feel free to reach out to the patent team via PatentsChina@lushenglawyers.com or mli@rouse.com.

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