The Chinese government (the General Offices of the Communist Party of China (CPC) Central Committee and the State Council) recently issued Guidelines for Strengthening Intellectual Property Protection. With the current bilateral trade issue discussions between the People’s Republic of China and the United States of America highlighting the importance of Intellectual Property, the new Guidelines include planned amendments that could alleviate concerns raised by the U.S.A once implemented.
In the Guidelines, the Chinese government makes a strong calling for intensified protection of intellectual property rights (IPR). Two essential changes appear to be of particular relevance: 1) introduction of a punitive compensation system for patent and copyright infringement; and 2) exploring the establishment of a drug patent linkage system and a drug patent term compensation system.
1. “speeding up the introduction of a punitive compensation system for patent and copyright infringement” (Section II of the Guidelines)
A punitive compensation system is already in place for trade marks. In the latest amendments to the Trademark Law of the People’s Republic of China, the upper limit of the punitive compensation for bad faith infringement was increased from ￥3,000,000 to ￥5,000,000 (approximately US$700,000). In a recent ruling for malicious infringement made by Shanghai Pudong People’s court, the plaintiff’s claim for￥3,000,000 in compensation was supported.
As for patents, in the draft for the 4th amendment of the Patent Law, the upper limit of compensation is significantly increased, especially for a willful infringement. While for copyright, an intention to introduce punitive compensation into the Copyright Law was mentioned in a government document.
The Guidelines’ request to expedite the introduction of a punitive compensation system for both patent and copyright infringement, demonstrates the Chinese government’s determination to strictly curb malicious infringement.
2. “exploring the establishment of drug patent linkage system and drug patent term compensation system” (Section II of the Guidelines)
The establishment of a drug patent linkage system and a drug patent term compensation system has been speculated about for several years. The Opinions on Deepening the Reform of the Evaluation and Approval Systems to Encourage Innovation on Drugs and Medical Devices issued by the General Offices of CPC Central Committee and the State Council in 2017, explicitly mentions exploring the establishment of a drug patent linkage system, and conducting trials for a drug patent term compensation system. In the same year, CFDA issued Provisions for Drug Registration (revised version), which prescribed that the applicant shall make clear clarification indicating the related patent, the status thereof, and whether there is any infringement, and inform the patentee. However, to date, China still lacks the modified law system to ensure the effective implementation of the policy announcements.
The new Guidelines now confirm the intention to establish the necessary legal framework to implement policy amendments. Both innovative drug companies and competitive generic drug companies can expect new, explicit regulations to build the proposed strengthened drug patent linkage system and the patent term extension system. It will be interesting to see how the Chinese system is built in order to encourage both the development of innovative drugs and protect the rights of innovators whilst promoting a balanced development of innovative drugs and generic drugs. According to the Guidelines this development of the legal framework is a priority.
Further to above two essential changes, a brief summary of the Guidelines are provided below:
I. General Goals
The document sets general targets for effectively curbing IPR infringements by 2022 and reaching a high level of satisfaction with the IPR protection system in China by 2025.
II. Strengthening Institutional Constraints and Establishing Strict Policy Guidance for IPR Protection
The Guidelines outline that China plans to strengthen the punishment for infringements and counterfeiting, accelerating the introduction of a compensation system for patent and copyright infringement, significantly increase the upper limit of the statutory compensation for infringement and effectively implement a punitive compensation system. In addition, China will introduce a strict standard for evidence by issuing judicial interpretation of evidence rules for civil litigation of intellectual property, and reduce the burden of proof imposed on rights holders.
The protection system for new business forms will be developed and completed, including: exploring the establishment of a drug patent linkage system and a drug patent term compensation system; strengthening IPR protection relating to live sports broadcasts; establishing new standards for IPR protection in e-commerce platforms and cross-border e-commerce IPR protection rules, etc.
III. Strengthening Social Supervision and Co-governance and Constructing a National pattern for IPR protection
China will strengthen supervision of law enforcement, and establish an infringement damage assessment system.
IV. Optimising the Cooperation between Different Departments and Establishing Rapid Protection of IPR
Cross-departments/cross-regional cooperation will be optimised. The handling of simple cases and disputes will be accelerated.
V. Improving international communication, establishing superior environment for Providing Coordinative IPR protection
International cooperation and communication will be strengthened, and aid for IPR protection overseas will be further improved. An overseas IPR protection expert advisory mechanism will be established to seek coordinative protection of the legitimate rights of Chinese IPR holders overseas.
VI. Strengthen fundamental conditions to effectively support IPR protection
A national IP big data center and monitoring information network for protection will be established.
VII. Strengthen the organisation and implementation efforts
The Guidelines discusses how major issues for IPR protection must be reported to the Party Central Committee and the State Council in a timely manner. Performance in IP enforcement will be included in appraisal systems for the local party committees and governments.
In summary, the Chinese government indicates their intention for more intense IPR protection across all aspects of IP. Our China team will continue to monitor these proposed developments and update in due course.