China update: eagerly awaited new patent law amendment draft now available for discussion

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Changes to the China patent law have been eagerly awaited following several announcements mentioning reform. An “Amendment to the Patent Law of the People’s Republic of China (Second Review Draft)” has now been published online by the National People’s Congress on 3 July 2020, and seeks further opinions by 16 August 2020. Key items include the link between the regulatory and the patent office with regards to pharmaceutical patents, as well as entering into several patent law-related commitments in the China-US Trade Agreement (see related articles below).

As anticipated, core parts of the proposed changes relate to the pharmaceutical sector with the aim to create a patent linkage and patent term extension system in the patent law.

The following summarises the key points from selected amendments:

  1. Preliminary drug patent linkage terms

    New and additional terms for the handling of disputes of new drug applicants and patent right holders of related pharmaceutical patents (listed in the Chinese Marketed Drug Patent Information Record Platform, of a U.S.  “Orange Book”type) are further proposed. Compared to earlier discussions in May 2017, it is now stated that a patentee (or an interested party) shall bring action against the new drug applicant based on a relevant patent within 30 days after the application as the new market authorisation was published by the National Medical Products Administration (NMPA). This is longer than the 20 days after a notice mentioned in 2017, but the time frame will still put time pressure on patentees to bring forward a complaint. Interestingly, an action can not only be an infringement lawsuit before the courts, but can also be an application for an administrative ruling by the China National Intellectual Property Administration (CNIPA). Therefore, a choice of venue  has to be established. Failure to take action within the 30-day deadline will result in an opportunity for the applicant of the drug authorisation to request for a declaration of non-infringement of the relevant patents from a court or from the CNIPA.

    The provisions on the mechanism of the patent linkage after filing the infringement actions are not fully finalised and need to be further defined between the CNIPA and NMPA according to the draft amendment’s wording. It currently states that the NMPA can make a decision on the approval of drug authorisation of a new chemical drug if the court or CNIPA decided on the infringement within nince months after acceptance of the infringement complaint. The amendment appears to indicate that technical review is not delayed by the proposed mechanism and that a first decision point is usually expected at around nine months after the infringement complaint has been accepted. It is further stated that appeals to the courts against CNIPA’s administrative rulings have a very short deadline of only 15 days.

  2. Patent terms and their extension
  3. The extension of a design patent to a 15-year term has again been confirmed.

    For the first-time, delays in the granting procedure that are not related to the applicant will be compensated, but only if the patent is granted later than four years after filing and three years after entering into substantial examination. Patent term adjustments can then be obtained under rules that are yet to be defined.

    In the pharmaceutical field, patent term extensions are established in the draft text that compensate for patent term loss during the regulatory approval period  when the drug cannot yet be marketed. It is stated that the compensation term shall not exceed five years, and the total effective patent term after the new drug is authorised on market shall not exceed 14 years. In this regard, there is no clarity on the definition of a “new drug” for which these extensions are available. As previously reported, in the context of the Chinese reforms in the pharmaceutical sector, it may be defined only as a drug that has synchronously applied for marketing authorisation in China compared to other jurisdictions. It may not allow more than a year of delay to apply for marketing authorisation in China after applying in the US, Europe or Japan. This is all speculative, but the definition needs to be discussed and any clarification watched for.

  4. New condition for novelty grace period
  5. Any disclosure of an invention six months before filing of a patent application for meeting a public interest during an emergency situation in the country can be exempted from novelty-destroying prior art under certain conditions. This seems to be a “Lex COVID 19” to not hold back publications on important findings when a health care emergency has developed in order to file patents first. Note that “the country” would be the PRC and this is only applicable to emergency situations occurring in China.

  6. Enforcement related amendments
  7. There is also a change in the preferred methods for calculating awards for damages. It is proposed that the award shall first be assessed on the basis of the actual loss of the patentee because of the infringement, or the profits the infringer has earned because of the infringement. Both methods are now equally preferred to start a damage award evaluation.

    Statutory awards can still be issued as compensation, if the preferred calculations are not possible in view of a lack of evidence. The maximum statutory damage award has been increased to RMB 5 million (approx. USD 700,000). A minimum amount mentioned in the previous draft has been removed.

    In this regard, as in the amendments of the previous draft, the damage award will still include punitive damages for willful infringements (one to five times the normal compensation amount). Further, there is a shift of burden to provide evidence on the scope of infringing activities to the defendant if the plaintiff is successful in showing a certain likelihood of the existence of evidence on the accused infringers end. Then if the accused infringer does not provide the respective evidence, the plaintiff’s assumptions can be considered as facts by the court.

    Joint liability for internet service providers in matters involving infringement by online offers is no longer mentioned. This is a notable change from the previous draft.

    Plaintiffs can now file claims for infringements that are three years (instead of two) before the date when the patentee or any interested party knows or should be informed of the infringement and the infringer. The time period is now only triggered when knowledge of the infringer exists in addition to the infringement act.

  8. Abuse of patent rights
  9. The amendments confirm that a good faith approach is needed for a patentee to enforce its patents. It now further refers to an additional treatment of patent abuse situations under the Anti-Trust Law of the People’s Republic of China. This amendment will increase sanctions for such alleged behaviour.

  10. Patentable matter for Design Patents

    It becomes clear again in this draft that partial design will be protectable in the future by including them in the patentable scope of design patents. This will give more opportunities to extend global filings of foreign priority based design filings of this type into China.

In summary, it can be seen that many provisions are still being resolved and amended. We will continue to monitor any additional drafts and amendments and provide further updates. If you need additional information on patent law reform in China please contact Oliver Lutze: oliver.lutze@spruson.com.

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