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How to Protect Your Patent Right in China

Brief Introduction

In China, there are three kinds of patents, i.e. invention, utility model, and design. According to Chinese Patent Law [1], “After the grant of the patent right for an invention or utility model, except where otherwise provided for in this Law, no entity or individual may, without the authorization of the patentee, exploit the patent, that is, make, use, offer to sell, sell or import the patented product, or use the patented process, and use, offer to sell, sell or import the product directly obtained by the patented process, for production or business purposes.  After the grant of the patent for a design, no entity or individual may, without the authorization of the patentee, exploit the patent, that is, make, offer to sell, sell or import the product incorporating its or his patented design, for production or business purposes.”

 

When an infringement occurs, the patentee or any interested party may institute legal proceedings in the people's court (judicial patent enforcement, patent litigation in China), or request the administrative authority for patent affairs to handle the matter (administrative patent enforcement).

 

This paper would like to give people an overview of the two patent right infringement remedies.

 

How to Protect Your Patent Right in China-Administrative Patent Enforcement

 

The local IP Offices are responsible for the administrative patent enforcement.

 

When the IP Offices handling the matter considers that the infringement is establishedit may order the infringer to stop the infringing act immediately. If the infringer is not satisfied with the order, he may, within 15 days from the date of receipt of the notification of the order, institutes legal proceedings in the people's court in accordance with the Administrative Procedure Law of the People’ s Republic of China. If, within the said time limit, such proceedings are not instituted and the order is not complied with, the IP Office may approach the people's court for compulsory execution.

 

The said IP Offices handling the matter may, upon the request of the parties, mediate in the amount of compensation for the damage caused by the infringement of the patent right. If the mediation fails, the parties may institute legal proceedings in the people's court in accordance with the Civil Procedure Law of the People's Republic of China.

 

That is, the advantages of the administrative patent enforcement are

 

1. The procedure of the request and the administrative response is simple, and the handling is quick.

2. It is less costly than Judicial means.

 

The advantages of the administrative patent enforcement are

1. The power of the local IP Offices is weak. They can not decide the damage and order the infringer to pay the damage. They can only mediate in the amount of compensation for the damage. And they have limited power to investigate the infringement.

2. The judicial means is final.

 

How to Protect Your Patent Right in China-Judicial Patent Enforcement (Patent litigation in China)

 

According to “Several Provisions of the Supreme People's Court on Issues Concerning Applicable Laws to the Trial of Patent Controversies” [2] came into force as of July 1, 2001, “The first instance case of patent controversy shall be under the jurisdiction of the intermediate people's courts of the places where the people's governments of provinces, autonomous regions and municipalities directly under the Central Government are located, and of the intermediate people's courts appointed by the Supreme People's Court.”

 

A lawsuit brought for infringement of patent rights shall be under the jurisdiction of the people’s court located in the place where the infringing act took place or where the defendant has his domicile.

 

If the plaintiff only sues the manufacturer of the infringing products, the seller is not sued, and the places of the production and sales of the infringing products are inconsistent, the people's court located in the production place has jurisdiction; if the plaintiff sues both of the manufacturer and the seller, the People's Court located in the sales place has jurisdiction.

 

The amount of compensation for the damage caused by the infringement of the patent right shall be assessed on the basis of the actual losses suffered by the right holder because of the infringement; where it is difficult to determine the actual losses, the amount may be assessed on the basis of the profits the infringer has earned because of the infringement. Where it is difficult to determine the losses the right holder has suffered or the profits the infringer has earned, the amount may be assessed by reference to the appropriate multiple of the amount of the exploitation fee of that patent under a contractual license. The amount of compensation for the damage shall also include the reasonable expenses of the right holder incurred for stopping the infringing act.

 

Where it is difficult to determine the losses suffered by the right holder, the profits the infringer has earned and the exploitation fee of that patent under a contractual license, the people's court may award the damages of not less than RMB 10000 Yuan and not more than RMB 1000000 Yuan in light of such factors, as the type of the patent right, the nature and the circumstances of the infringing act.

 

How to Protect Your Patent Right in China-The update of the Chinese Patent Protection (patent litigation in China)

 

The numbers of the patent applications and the grant numbers in China maintained a rapid growth in these years.

 

According to the white paper “China’s Intellectual Property Protection in 2011” [3], in 2011, patent application numbers in China is 1, 633, 000 patent applications in total. Among them, 526,000 were patents for invention, a year-on-year increase of 34. 5% ; 585, 000 were patents for utility model, a year-on-year increase of 42. 7% ; 521,000 were patents for industrial designa year-on-year increase of 23. 8% .

 

By the end of 2011, there were 2,740,000 valid patents in total granted and maintained by China State IP Office (SIPO). Among them, 697, 000 were patents for invention, accounting for 25.4% of the total; 1, 121, 000 of which were patents for utility model, representing 40.9% of the total; 922, 000 of which were patents for industrial design, representing 33.7% of the total. Among the valid patents maintained by SIPO, 2, 303, 000 were owned by domestic right holders, amount to 84. 1 % of the total; 437, 000 were from abroad, amount to 15.9 % of the total. With regard to the valid patents for invention, 351,000 pieces or 50.4% were owned by domestic right holders, exceeding for the first time the total number by foreign owners in China.

 

With this large amount of the valid patents in China, the patent infringement disputes increased rapidly. In 2011, local People's Courts received 7819 patent cases, an increase of 35.16% over the previous year. The technology involved in the cases of the disputes is higher and higher. The invention patent cases and cases involving high-tech fields such as medicine, communications and environmental protection increased significantly. At the same time, the local courts feel that the cases are becoming increasingly difficult.

 

In 2011, nationwide IP offices settled 3, 017 patent cases, a year-on-year increase of 65.5%.

 

Currently, Chinese and foreign patent right holders generally feel that the patent infringement in China is low cost with high cost of protecting the rights, and it is very difficult to prove the infringement. Meanwhile, the enforcement means is not enough.

 

Now, China is amending the Patent Law for the fourth time, aiming to enhance the patent protection greatly. The draft of the amendments to the Patent Law [4] has been open for public advice.

 

The main amendments are as follows:

 

(1) giving the judicial and the administrative enforcement organs the right to investigate and collect evidence to solve the problem of “the difficulty of the burden of proof”.

 

The following paragraph is added to the Article 61 of the Patent Law, “In the patent infringement litigation,  for the alleged infringement products as well as account books, materials, and other evidence held by the accused infringer, the people's court shall, in accordance with the application of the plaintiff or his legal agent, survey and collect. If the accused infringer does not provide or transfers, forges, destructs the evidence, the people's court, in accordance with the law, shall take compulsory measures to stop the obstruction of proceedings; if the behavior constitutes a crime, the infringer may have criminal responsibility.”

 

The Article 64 of the Patent Law is amended as “When investigating and prosecuting the suspected act of passing off a pa­tent or infringing a patent, the administrative authority for patent affairs may, based on the evidence obtained, query the parties concerned, and investigate the relevant circumstances of the suspected illegal act; carry out an on-the-spot inspection of the site where the party’ s suspected illegal acts took place; review and reproduce the contracts, invoices, account books and other rele­vant materials related to the suspected illegal act; examine the products relevant to the sus­pected illegal act and may seal up or withhold the products proved to be passing off the pa­tented product or infringing the patent.

When the administrative authority for patent affairs performs its functions and duties specified in the preceding paragraph in accordance with the law, the interested party shall assist and cooperate and shall not refuse or interfere the performance. If the investigated party refuses or obstructs the exercise of the powers as the patent administrative authority, he shall be given a warning by the administrative authority for patent affairs; if the circumstances are severe, he shall be given administrative penalties for public security.”

 

(2) giving the patent administrative enforcement authorities the function of the determination of the amount of infringement compensation to solve the problem of "long cycle" of patent right remedy. Related amendments are shown in Articles 60 and 65.

 

According to Article 60 of the Draft (amendments are underlined), “Where a dispute arises as a result of the exploitation of a patent without the authorization of the patentee, that is, the infringement of the patent right of the paten­tee, it shall be settled through consultation by the parties. Where the parties are not willing to consult with each other or where the consultation fails, the patentee or any interested par­ty may institute legal proceedings in the people's court, or request the administrative author­ity for patent affairs to handle the matter.

 When the administrative authority for patent af­fairs handling the matter considers that the infringement is establishedit may order the in­fringer to stop the infringing act immediately, and compensate for the losses. If the infringer is not satisfied with the order, he may, within 15 days from the date of receipt of the notification of the order, institutes le­gal proceedings in the people's court in accordance with the Administrative Procedure Law of the People’ s Republic of China. If, within the said time limit, such proceedings are not instituted and the order is not complied with, the administrative authority for patent affairs may approach the people's court for compulsory execution.

 To the infringement of the patent allegedly disrupting the market order, the patent administrative authority has the right to investigate and punish; for those that have significant impact in the country, the patent administration department under the State Council organizes the investigation. If the patent administrative authority regards that the patent infringement and the disruption of the market order are established, they can order to stop the infringement, confiscate the illegal income, and can confiscate, destruct the infringing products or special equipment for the implementation of the violations, and can order a penalty of four times the illegal income, and impose a fine of not more than 200,000 yuan if there is no illegal income or the illegal income is difficult to calculate,

After the Decision of declaring the patent right invalid or upholding the patent right enters into force, the patent administrative authority and the people's court shall timely handle the patent infringement case, according to the decision.”

 

According to Article 65 of the Draft, “The amount of compensation for the damage caused by the infringement of the patent right shall be assessed on the basis of the actual losses suffered by the right holder because of the infringement; where it is difficult to determine the actual losses, the amount may be assessed on the basis of the profits the infringer has earned because of the infringement. Where it is difficult to determine the losses the right holder has suffered or the profits the infringer has earned, the amount may be assessed by reference to the appro­priate multiple of the amount of the exploitation fee of that patent under a contractual li­cense. The amount of compensation for the damage shall also include the reasonable expen­ses of the right holder incurred for stopping the infringing act.

Where it is difficult to determine the losses suffered by the right holder, the profits the infringer has earned and the exploitation fee of that patent under a contractual license, the people's court or the administrative authority for patent affairs may award the damages of not less than RMB 10000 Yuan and not more than RMB 1000000 Yuan in light of such factors, as the type of the patent right, the na­ture and the circumstances of the infringing act.

For intentional patent infringement, the patent administrative authority or the People's Court shall, according to the circumstances of the infringement, the damage scale and damage results, will increase the amount of compensation determined in accordance with the preceding two paragraphs up to three times.”

 

(3) defining the time of the decision on the invalidation request taking into effect and follow-up procedures, to solve the problem of "long cycle" of patent right remedy. Related amendments are shown in Articles 46 and 60.

 

According to the Article 46 of the Draft, “The Patent Reexamination Board shall examine the request for invalidation of the patent right promptly, make a decision on it and notify the person who made the request and the patentee.

The decision declaring the patent right invalid or upholding the patent right shall be registered and announced timely by the patent administration department under the State Council after the decision is made. The decision come into force when it is announced.

Where the patentee or the person who made the request for invalidation is not satisfied with the decision of the Patent Reexamination Board declaring the patent right invalid or upholding the patent right, such party may, within three months from receipt of the notification of the decision, institute legal proceedings in the people's court. The people's court shall notify the person that is the opponent party of that party in the invalidation procedure to appear as a third party in the legal proceedings.”

 

The following paragraph is added to Article 60, “After the Decision of declaring the patent right invalid or upholding the patent right enters into force, the patent administrative authority and the people's court shall timely handle the patent infringement case, according to the decision.”

 

(4) establishing a system of punitive damages for intentional infringement, solve the problem of "low compensation".

 

The following paragraph is added to Article 65, “For intentional patent infringement, the patent administrative authority or the People's Court shall, according to the circumstances of the infringement, the damage scale and damage results, will increase the amount of compensation determined in accordance with the preceding two paragraphs up to three times.”

 

(5) giving to the patent administrative departments the function of investigating, handling and deterring the vicious infringements to resolve the problem of "the high cost, poor results" of patent right protection. The related amendments are shown in Articles 64 and 60.

 

The following paragraph is added to Article 60, “To the infringement of the patent allegedly disrupting the market order, the patent administrative authority has the right to investigate and punish; for those that have significant impact in the country, the patent administration department under the State Council organizes the investigation. If the patent administrative authority regards that the patent infringement and the disruption of the market order are established, they can order to stop the infringement, confiscate the illegal income, and can confiscate, destruct the infringing products or special equipment for the implementation of the violations, and can order a penalty of four times the illegal income, and impose a fine of not more than 200,000 yuan if there is no illegal income or the illegal income is difficult to calculate.”

 

According to  Article 64 of the Draft, “When investigating and prosecuting the suspected act of passing off a pa­tent or infringing a patent, the administrative authority for patent affairs may, based on the evidence obtained, query the parties concerned, and investigate the relevant circumstances of the suspected illegal act; carry out an on-the-spot inspection of the site where the party’ s suspected illegal acts took place; review and reproduce the contracts, invoices, account books and other rele­vant materials related to the suspected illegal act; examine the products relevant to the sus­pected illegal act and may seal up or withhold the products proved to be passing off the pa­tented product or infringing the patent.

When the administrative authority for patent affairs performs its functions and duties specified in the preceding paragraph in accordance with the law, the interested party shall assist and cooperate and shall not refuse or interfere the performance. If the investigated party refuses or obstructs the exercise of the powers as the patent administrative authority, he shall be given a warning by the administrative authority for patent affairs; if the circumstances are severe, he shall be given administrative penalties for public security.”

 

(6) defining the function of the patent administration department under the State Council to investigate and handle the patent infringement cases that have a significant nation-wide impact.

 

The draft Article 60 provides “For those that have significant impact in the country, the patent administration department under the State Council organizes the investigation.”

 

How to Protect Your Patent Right in China-Conclusion:

 

As the Chinese government has been trying hard to enhance the patent right protection, we can see much improvement in the patent enforcement environment, and it is more and more worthwhile to file patent applications in China, and the patent enforcement action may get more reward.

 

 

Abstract: How to Protect Your Patent Right in China. When an infringement occurs, the patentee or any interested party may institute legal proceedings in the people's court (judicial patent enforcement), or request the administrative authority for patent affairs to handle the matter (administrative patent enforcement).

Key words: How to Protect Your Patent Right in China_judicial patent enforcement_administrative patent enforcement_China patent litigation_patent litigation in China.



China Resources:

 

[1] Chinese Patent Law:

http://www.lawinfochina.com/display.aspx?lib=law&id=7289&CGid=

 

[2] Several Provisions of the Supreme People's Court on Issues Concerning Applicable Laws to the Trial of Patent Controversies:

http://www.lawinfochina.com/display.aspx?lib=law&id=1853&CGid=

 

[3] China’s Intellectual Property Protection in 2011:

Please refer to: http://www.yqlaw.cn, then select English version- News & Info.

 

[4] The draft of the amendments to the Patent Law

We translated the amendments for your reference, please refer to: http://www.yqlaw.cn, then select English version- News & Info.

 

 

About the Author and editor:

 

The paper was written by Ma Gaoping, Chinese lawyer and patent attorney, the founder of Beijing YOUQI Law firm. Beijing YOUQI Law Firm is a leading Chinese boutique law firm focused on Intellectual Property, Anti-Trust and emerging Data Privacy/Data Protection legal services. This paper was edited by Mr. Todd King, founder of Amer Asia Law LLC. For a full legal opinion on a specific issue please contact Beijing YOUQI Law Firm or Amer Asia Law LLC. 

 

 

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