On October 17th, the Standing Committee of the National People’s Congress of the People’s Republic of China passed the 4th amendment with revisions to most recent draft for reform of the patent law (see our previous related article). The new patent law will come into effect on June 1, 2021. Confirmation of the long-desired patent term extensions and patent linkage provisions has also been provided. Although details of the changes are not yet fully shaped, it gives certainty for the implementation in 2021 and also fulfills the basic obligations set out in the US-China trade agreement’s IP Section. Besides these major developments other provisions have also passed with further amendments.
The following is a condensed summary of points that we believe are important to note:
(a) Basic drug patent linkage terms
The amended patent law states that the drug applicant and a relevant patentee (or an interested party) can bring an action on a patent dispute on a relevant patent in a People’s Court during the drug marketing review and approval process. If the patentee is successful with the action and receives a decision within a prescribed time limit, the regulatory authority may issue a decision to suspend the regulatory approval.
It is very important to note that further details, such as the establishment of a Chinese Marketed Drug Patent Information Record Platform, similar to that of the U.S. “Orange Book”, or applicable time limits and the duration of proposed suspension terms, are not mentioned in the law and will require further clarification. The amended law specifically points out to determine further details in the joint law development by the regulatory authority and the China National Intellectual Property Administration (CNIPA) (which already jointly released, on 11 September 2019, a Draft for Measures for the Implementation of the Early Resolution Mechanism for Drug Patent Disputes, in which the suspension term is proposed to be 9 months). The still to be drafted implementing rules to the new patent law may become important beside the regulatory laws to be approved later by the State Council.
As mentioned in the July draft, a decision can also be requested by applying for an administrative ruling by the China National Intellectual Property Administration (CNIPA). Again, besides the patentee (or an interested party) the drug applicant can also apply for it.
(b) Patent terms and their extension
Furthermore, it is confirmed that patent term adjustments can be applied for a patent, if a patent is granted later than 4 years after filing and 3 years after entering substantial examination. Only unreasonable delays not caused by the patent applicant can be claimed for compensation.
Moreover, in the pharmaceutical field patent term extensions that compensate for patent term loss during regulatory approval times are becoming law. Besides a maximum extension term of 5 years and maximum patent life of 14 years after regulatory approval, no further details are provided. As for the patent linkage terms, details are still being eagerly awaited. The used term “new drug” for which these extensions are available is not specified.
(c) New condition for novelty grace period
As reported earlier the 6 months grace periods for non-novelty destroying publications will be extended to cover early publications made for public interest in a health emergency. Only emergency situations occurring in China are covered by the special grace period.
(d) Enforcement related amendments
The methods for calculating damage awards in enforcement actions in the revised law state that the award shall be assessed first on the basis of the actual loss of the patentee or the profits the infringer has earned because of the infringement and only if this fails by reference to the appropriate times of the amount of royalty.
Statutory awards can be issued as compensation, if no other calculations are possible and they have been increased to be in a RMB 30,000 (minimum, approx. USD 4,500) to RMB 5 million (maximum approx. USD 750,000) range. Punitive damages for willful infringements (1 to 5 times of a normal compensation amount) will be additionally obtainable. Where the patentee took its best efforts to produce evidence and the accused infringers provided false or no relevant records including accounting records, while being ordered to handover such materials which are only available to them, they can be sentenced to pay damages which are determined by reference to the claim and evidences of the patentee (shift of evidence burden) as seen already in the earlier drafts.
Preliminary injunctive relief can now also be directed to preserve property or other actions by the court besides stopping the infringement. The requirement to post a guarantee and time requirements (e.g. deciding in 48 hours and following up with a regular lawsuit within 15 days) are removed from the law.
The administrative authority for patent infringement affairs will have rights to act against non-collaborating or deceptive defendants by doing investigations on the parties concerned and the circumstances related to the suspected illegal act, conducting on-the-spot inspection of the places where the suspected illegal act is committed and check the products related to the suspected illegal act.
The statute of limitations for patent infringements is three years as in the earlier draft and the bar for not being able to claim rights from infringement more than three years before the lawsuit will now only apply if the infringing act and the infringer are known.
(e) Abuse of patent rights
Again, it is confirmed that a good faith approach is needed for a patentee to enforce its patents and reference made to the patent abuse situations under the Anti-Trust Law of the People’s Republic of China. Caution is therefore to be advised in filing high numbers of potentially unpatentable patents or knowingly filing invalid patents.
(f) Changes for Design Patents
The extension of design patent to a 15 year term is confirmed as well as that partial designs will be protectable. This is a relief to many foreign applicants that filed such design patents. A domestic priority can now be claimed in Chinese design patent filings.
There are other changes in the new patent law which we will address in upcoming alerts shortly such as the local innovation fostering measures relating to a license offering system, inventor remuneration conditions and additional services of the authorities.
If you need additional information on the patent law reform in China please contact Oliver Lutze.