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Fourth Amendment to the Chinese Patent Law

I. Background

Since its implementation on April 1, 1985, three major revisions have been made to the Chinese Patent Law,in 1992, 2000 and 2008, respectively. The Standing Committee initiated its preparation for the 4th amendment in November 2011. After numerous discussions and extensive consultation, adopted by the Standing Committee of the National People's Congress on October 17, 2020, the amended Patent Law (hereinafter referred to as the new law) will come into effect on June 1, 2021.  The following is a brief description of the major changes.

II. Major Revisions

1. Strengthening the right to exercise patent rights (Article 71.1)

(1) Newly added punitive damages to intentional patent infringement (Article 71.1)

Per the current patent law, the amount of compensation for infringement of patent rights is mainly based on the principle of making up for the loss of the patentee, without any provision regarding punitive damages.  Upon revision, in the case of a serious and intentional patent infringement, the people’s court may increase the amount of compensation up to five times of that suffered by the right holder or the benefit obtained by the infringer.

(2) Increasing the amount of legal compensation (Article 71.2)

Where it is difficult to determine the loss suffered by the right holder, the benefits obtained by the infringer, and the patent royalty, the people's court may determine the damages (i.e., legal compensation amount) by taking into account various factors. In comparison, under the new law, the legal compensation amount is raised from between 10,000 yuan and one million yuan to a range of 30,000 yuan to five million yuan.

(3) Granting the China National Intellectual Property Administration (CNIPA) the power of law enforcement (Article 70 (newly added))

Under the current law, there are two ways to resolve patent infringement cases: namely, the administrative way through the intellectual property management department and the judicial way by filing a lawsuit in court.  The recent revision gives the CNIPA the power to penalize infringements that have a significant impact in the country.  

Furthermore, in handling patent infringement disputes at the request of the patentee or interested party, the department in charge of the administration of patents of a local people's government may concurrently handle cases in which the same patent is infringed upon within its administrative region. For cross-regional cases of infringing the same patent, one may request the cases to be handled by patent administration departments of a local people's government at a superior level.

(4) Clarification on the handling of patent counterfeits and infringement by different administrative departments (Articles 68 and 69)

The new law provides that the CNIPA and local intellectual property offices shall impose administrative sanctions for patent infringement, and the department responsible for patent enforcement shall impose administrative sanctions for patent counterfeits.

(5) Strengthening penalties for patent counterfeits (Article 68)

The maximum amount of fines for patent counterfeits has been increased from less than four times the illegal income to less than five times; if there is no illegal income or the illegal income is not more than 50,000 yuan, the fines imposed shall not exceed 250,000 yuan.

(6) Order to provide documents (Article 71.4 (newly added))

In order to address challenges associated with proof of the patent owner, the new law provides that, in order to determine the damages, the people's court may order the infringer to provide supporting documents under certain circumstances. If the infringer fails to provide them or provides any falsified ones, the people's court may impose damages by reference to the claims of and the evidence provided by the right holder.

The amendment is based on Article 27 of “The Supreme People's Court’s Explanation on Issues Concerning the Application of Law in the Trial of Patent Infringement Disputes (2)”. The document published in 2016 first included the content of judicial interpretations in legal provisions.

(7) Clarification of provisions of pre-litigation preservation measures (Articles 72 and 73)

In keeping with the relevant provisions of the Code of Civil Procedure (Article 81, Article 100, etc.), the new law adjusted the relevant provisions of pre-litigation preservation measures (temporary injunction, property preservation, evidence preservation), and removed the provisions on pre-litigation property preservation, temporary injunction, security for evidence preservation and the court's ruling period.

(8) Submission of patent evaluation report (Article 66.2)

The current patent law provides that in the event of infringement cases involving utility models or designs, the court or patent administrative department may require the patentee or interested party to submit an evaluation report of the patent right.   In the new law, in addition to the above, it is also stipulated that the patentee, interested party or alleged infringer can take the initiative to submit a patent right evaluation report.

(9) Extension of prescriptive period for infringement actions to 3 years (Article 74)

To complement the 3-year eligibility for civil actions in the Civil Code, under the new law, the prescriptive period for infringement of patent rights is changed to 3 years from the date when the infringement and the infringer were known or should have been known.  Further, the prescriptive period for the patentee to claim the payment of such royalties (i.e., user fees for temporary protection) is also extended to 3 years.

(10) Introduction of provisions prohibiting abuse of rights (Article 20 (newly added))

While the new law makes it easier for rights holders to exercise their rights, it also includes provisions against abuse of rights.  Further, in the new law, it clearly stipulates that any abuse of patent rights to preclude or restrict competition, which constitutes a monopolistic act, shall be handled in accordance with the Anti-monopoly Law.

2. Strengthening the protection of design patent rights

(1) Introduction of partial design system (Article 2.4)

The provision of the object protected by the design is amended as follows: “‘Design’ means a new design of the shape, pattern, or a combination thereof, as well as a combination of the color, shape and pattern, of the entirety or a portion of a product”, thereby incorporating the portion design system. That is, the new law clearly stipulates that one not only can apply for patents for the overall design of the product, they may do so for partial design as well.

(2) Extension of the terms of protection of design patent rights (Article 42.1)

To meet the requirements of the Hague Agreement to which China is discussing accession, the term of design patent rights has been extended from the current 10 years from the filing date to 15 years from the filing date.

(3) Incorporation of domestic priority of designs (Article 29.2)

The new law incorporates a domestic priority system for designs, which stipulates that the period of priority is within 6 months from the date of initial filing of the design in China.

3. Regarding the protection of pharmaceutical patents

(1) Extending the terms of protection of pharmaceutical patents (Article 42.3)

Under the new law, for the purpose of making up the time required for the assessment and approval of marketing a new drug, the patent administrative department of the State Council may, at the request of the patentee, provide patent term extension for an invention patent relating to the new drug approved for marketing in China.  The extension may not exceed five years, and the total effective term of the patent after the new drug is approved for marketing shall not exceed 14 years.

(2) Introducing patent linkage system (Article 76)

Under the new law, where, in the assessment and approval for the marketing of a drug, any dispute arises between the applicant for the marketing of a drug and the relevant patentee or interested party over the patent right related to the drug of which an application for registration is filed, the relevant party may file a lawsuit with the people's court or apply to the CNIPA for an administrative adjudication.

The State Drug Administration may, within the prescribed time limit, make a decision on whether to suspend the approval of marketing of the relevant drug according to the effective judgment of the people's court.  Further, the State Drug Administration shall, in conjunction with the CNIPA, develop specific measures for resolving patent disputes in the stages of approval of drug marketing and application for the marketing of a drug.

 Adjustments on the patent application system

(1) Additional exceptions to loss of novelty (Article 24.1)

The new law added a stipulation to the loss of novelty in light of the possibility that pandemics caused by transmittable viruses such as SARS, Covid-19 among other national extraordinary events that may occur in the future. The stipulation reads that “it is disclosed to the public for the first time in the public interest, when a state of emergency or any extraordinary circumstance occurs in the country “ is added in the exceptions of losing novelty .

(2) Introduction of patent term on compensation system (Article 42.2)  

Under the new law, where a patent for an invention is granted four years from the date of application and three years from the date of request for substantial examination, the patentee could provide patent term extension for unreasonable delay in the patenting process for the invention which is not attributable to the applicant.

(3) Stipulation on the nuclear transformation methods no longer belonging to the objection protected by the Patent Law (Article 25.1)

Under the new law, it stipulates that in addition to the "substances obtained in the method of nuclear transformation,” which is excluded from protection, the "nuclear transformation method" itself is not the subject of a patent.

(4) Relaxation of the deadline for submission of priority documents (Article 30)

The period for filing priority documents for claiming priority in patents and utility models was extended from 3 months from the original filing date to within 16 months from the priority date. In addition, the deadline for filing priority documents for designs remain unchanged, i.e., they need to be filed within 3 months from the date of claiming the priority application.

 On promoting the implementation and application of patent technologies

(1) Clarifying the rights and obligations of units in service inventions (Article 6)

The new law clearly stipulates that for the right to apply for patent and patent right based on service invention-creation, the unit shall promote the implementation and application of service invention-creation, and may dispose of the said right according to the law.

(2) Diversification of the payment of remuneration for service inventions (Article 15.2)

For the remuneration of service invention-creation, it is added that the inventor and designer are encouraged to be given reasonable remuneration through equity, options, dividends and other means.

(3) Introduction of patent open licensing system (Articles 50, 51 and 52)

Where a patentee voluntarily files a written declaration indicating its willingness to permit any entity or individual to exploit its patent and specifying the royalty payment methods and rates, the CNIPA shall make an announcement and implement an open license.  If an open license declaration is filed for a utility model or design patent, a patent evaluation report shall be provided.

Any entity or individual intending to exploit a patent under an open license shall obtain the patent exploitation license immediately after notifying the patentee in writing and paying the royalty according to the announced royalty payment methods and rates.

As an incentive to promote the development of licenses, a reduction in annual patent fees is granted to patent owners who declare open licenses during the license term.  Further, the patentee implementing an open license may grant an ordinary license after negotiating with the licensee over royalties, but shall not grant a sole license or exclusive license for the patent.

(4) Promoting the disclosure of patent information (Article 21.2)

The new law stipulates that the CNIPA shall be committed to the construction of a system for providing patent information to the public, providing basic data on patents, and promoting the dissemination and utilization of patent information.

Compared with the previous three amendments, the fourth patent law amendment has the longest interval from its predecessor.  In the twelve years between the third and the fourth amendment, China has become the country with the largest number of patent applications.  With the proliferation of patent applications, many new situations and issues have emerged in the patent field, and many changes have occurred in the domestic and international arenas. The fourth amendment to the Patent Law is intended to respond to such changing circumstances in the field. It aims to address existing issues in practice, strengthen the protection of the legitimate rights and the interests of patent owners as well as promoting the use of patents.