The formal adoption of the National Intellectual Property Strategy has quickened the amendment of the Chinese Patent Law that seeks to enhance IPR protection and to revamp the application process.

Less than three months after the State Council put its stamp on the patent law reform blueprint, the government, on August 25, submitted the draft amendment to the National People's Congress (NPC) Standing Committee, the top legislative agency, for first reading. A draft law requires three readings before it can be adopted.

If passed, this amendment will be the third revision to the law that was promulgated 25 years ago.

The previous two amendments were enacted in 1992 and 2000. The first amendment added pharmaceutical compositions to the list of patentable subject matter and inaugurated China's membership in the Patent Cooperation Treaty (PCT). The second amendment brought China's Patent Law into compliance with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement.

The latest amendment is expected to bring the law and processes up to international standards and best practices. Tian Lipu, director general of the State Intellectual Property Office, told reporters that the proposed amendments to the Patent Law would make several important changes to the law's application process and enforcement.

One change involves the adoption of the so-called "absolute novelty" standard that is applied internationally. Under this standard, patent examiners are required to consider public use evidence both inside and outside China when processing patent applications. Adoption of an absolute novelty standard will have the effect of reducing patent infringements, legal experts say.

The draft does not state whether this absolute novelty requirement would be made retroactive.

Lu Yongxiang, vice-chairman of the Standing Committee of the National People's Congress, says: "Since the implementation of the Patent Law, among China's patent applications, including invention patents, utility model patents and design patents, invention patents only accounted for 19.9 percent, while foreign invention patent applications accounted for 86.6 percent. Furthermore, domestic invention patent applications, were mainly in traditional Chinese medicine, food and beverages and Chinese character input methods."

Because of the lack of domestic core technology patents, 20 to 40 percent of sales revenue in China's mobile phone and computer industries was paid to foreign patent holders. The draft amendments seek to address this issue by streamlining the application process to encourage Chinese inventors to file for patent rights.

"The newly revised draft of the Patent Law reflects the trend that China is becoming more global and the desire by the authorities to comply with the international IPR standards," says Jessica Zhu, patent specialist of Jones Day, a US-based international law firm.

For example, the "absolute novelty" standard has long been adopted in Europe and the US. "The application of this standard in China can provide better protection for foreign applicants in China," Zhu says.

Another important change is the proposed removal of the statutory requirement for all Chinese individuals and entiles them to first file applications in China for inventions made in China. The revision would allow Chinese individuals and entities to file their patents for the first time in other countries, not necessarily China. In other words, under the draft amendments, applicants could apply for foreign patents even before obtaining Chinese patents.

But the applicants are supposed to go through checks held by patent authorities of the State Council, China's Cabinet, for the sake of state security, says Tian.

The checks are to prevent leaks to some foreigners or by foreign-owned research labs in China that apply for patents to an entity outside of China and circumvent the foreign filing requirement of the current Chinese patent law. This foreign filing license regime is the same as the system in the United States.

"For the Chinese applicants, we still advise them first to file their patents in China which can better protect applicants' intellectual property rights because patents have a strong regional character," Zhu says.

To ensure the patent has economic benefits, the draft also provides a "compulsory license". That means the government may grant a compulsory license to a party qualified to exploit the patent if the patent owner, without justification, has not exploited or sufficiently exploited the patent three years after the patent was granted. The draft also provides for a compulsory license to be granted if it is judicially or administratively determined that the patent owner used the patent right in an anti-competitive fashion.

From 2001 to 2008 April, the State Intellectual Property Office had processed 9,571 cases of patent disputes, and investigated 11,639 cases of patent infringement. To better protect the intellectual property rights of patent holders, the revision includes more detailed and specific patent protection measures than the old ones.

The draft amendment increased the penalty for IPR infringement from 300 percent to 400 percent of the illicit profits and raised the damage payment from 50,000 yuan to 200,000 yuan even if there is no profit from infringement. And the draft for the first time makes a definitive statute that the People's Court can order the infringer to pay from 10,000 yuan to 1,000,000 yuan in compensation when the damage cannot specifically identified.

(China Daily September 8, 2008)