The year 2008 has seen some major moves in IP regime in China. Significant changes to the IP legislation, particularly the third amendment to the Chinese Patent Law, were made. Anti-Monopoly Law came into effect. Outline of National Intellectual Property Strategy was published. All these activities reflect Chinese government’s determination of improving IP protection and building up an innovative country.

Outline of National Intellectual Property Strategy

On June 5, 2008, the State Council issued Outline of National Intellectual Property Strategy, hereinafter referred to as “the Outline”. The Outline was formulated for the purpose of improving China's capacity to create, utilize, protect and administer IP, and making China an innovative country.

The Outline has strategic focus in five aspects: improving the IP regime, promoting the creation and utilization of IP, strengthening the protection of IPR, preventing abuses of IPR and fostering a culture of IP.

Not surprisingly, the Outline talked about improving IP laws and regulations, and strengthening IP law enforcement and administration systems. In particular, this includes lowering the cost of enforcement and increasing the cost of infringements.

What’s more worth mentioning is that the Outline explicitly mentioned the role of the government in this strategy. Specifically, the Outline mentioned that the government’s policy shall promote the guiding role of IP. Industrial, regional, technological and trading policies shall be made consistent with IP policies. It also explicitly mentioned that the government is to guide and support market entities to create and utilize IP through the use of policies related to finance, investment, government procurement, industrial development, energy and environmental protection.

As a matter of fact, we have seen efforts from various governments in different levels in promoting IP procurement and protection after or even before the Outline was published. Governments in charge of particular geographic areas or technical sectors, have their own incentive programs for entities to obtain or protect IP. The incentive programs may be in various forms, among which the most common is subsidies for patent applications which cover official fees or even attorney fees, or tax credits for high tech enterprises.

On a more practical level, the Outline also comprises specific tasks to be completed for virtually each type of IP, namely patent, trademark, copyright, trade secret, new varieties of plants, geographical indications, genetic resources, traditional knowledge, folklores, and layout-designs of integrated circuits. The Outline also has a section dedicated to IP related to national defense.

The Outline is the first of its kind that regards IP as national strategy. As can be seen from the content of the Outline, China is determined to become an innovative, particularly a high tech country and the Chinese government is determined to play an active role in the implementation of China’s national IP strategy to make this happen. It is fair to say that the issuance of “the Outline” marked the beginning of the shift of this country from a world factory to an innovative power house.

Third Amendment to the Chinese Patent Law

On December 27, 2008 the Standing Committee of the National People’s Congress approved the third amendment to the Chinese Patent Law. The amending process actually began in August 2006 and numerous drafts had been proposed before final version was determined which actually incorporated further changes to the latest version made available to the public in August 2008. The new Chinese Patent Law will come into effect on October 1, 2009.

This was probably the most significant change made in the year 2008 to the Chinese IP regime. The changes made to the provisions were pretty much in line with the specific tasks put forward in the Outline.

The first aspect of the changes is directed to improving the quality of Chinese patents. In the new Patent Law, absolute novelty standard is adopted. According to the current Patent Law, only public use in China is novelty destroying. The new Patent Law raised the patentability standard which makes the Chinese Patent Law more compatible with patent laws in other major jurisdictions.

The concept of conflicting applications for the purpose of assessing novelty is also revised in the new Patent Law. Currently a conflicting application means one that discloses the same invention but is filed by others before the filing date and published after the filing date and is only applicable to applications for patent for invention or utility model. In the new Patent law, an application filed by anyone before the filing date and published after can be used as a conflicting application against novelty. In addition, the concept of conflicting applications is now also applicable to design applications. All these raise the bar of granting patents.

In order to further improve the quality of design patents in China, the new Patent Law prohibits granting design patents to designs of planar printed matter primarily for identification purpose.

The second aspect of the changes is directed to enforcement. Article 65 of the new Patent Law prescribes the methods of calculating damages and the sequence of applying the methods. The upper limit of the statutory damage awarded by courts is now doubled to 1,000,000RMB. Article 65 further prescribed that the damages should include reasonable expensed by the right holder in stopping the infringement. This means that the patentee may get compensation for reasonable attorney fees. In addition, new Article 67 provides for pre-trial evidence preservation.

The power of Administrative authority’s power is strengthened in the new Patent Law. Article 64 provides for the power of administrative authority in dealing with patent passing-off, including questioning, investigation, onsite inspection, access to the contracts, accounting records, inspecting and confiscating products. Article 63 prescribes fine imposed on patent passing-off which may amount to 4 times of illegal gain with an upper limit of 200,000 RMB, 4 times the current limit.

A possibly controversial amendment is that the new Patent Law now makes clear in Article 69 that parallel import is exception to infringement. In other words, once a patented product is sold, importing the sold product is not infringement. Bolar type exemption is also included in Article 69, i.e. make, use or import patent medicament or medical devices required for regulatory approval is not patent infringement.

An even more controversial amendment is related to genetic resources. Article 5 of the new Patent Law prescribes that if completion of an invention is relied on certain genetic resources but the genetic resources is acquired or used in violation of laws and regulations, no patent shall be granted. Furthermore, Article 26 prescribes that the direct source and the original source of the genetic resource shall be indicated in a patent application and if the applicant cannot provide original source, it must give reasons.

A change that affects multi-national companies in particular is the abandonment of the so called first filing requirement. According to the new Patent Law, if an applicant wants to file a patent application in foreign countries for his invention made in China, he does not need to file a Chinese application first, as is now required. Instead, the applicant shall report to SIPO for security check. If the applicant violates this provision, he will not get a Chinese patent if he decides to file in China.

Foreign applicants do not have to use specially designated patent firms in order to file patent applications in China. According to the new Patent Law, any legitimately established patent firm is allowed to represent foreign applicant.

Furthermore, the new Patent Law incorporates new provisions on compulsory license. If the patentee’s activity is ruled as monopoly, a compulsory license may be granted. A possibly controversial new provision is that the SIPO may also grant compulsory license for making patented medicament and exporting the same to certain countries or regions that meet certain requirement of the international treaties to which China is a member.

Other significant changes include the unity requirement for design applications. According to the new Patent Law, multiple similar designs for a same product are allowed to be put in a single application. Currently, they have to be filed in separate applications creating problems of double patenting. This change is almost universally regarded as a step forward.

The new Patent Law improved Chinese patent regime in many aspects. However, it does bring in provisions that may be controversial. It will be interesting to see the Implementing Regulations to be drafted and enacted according to the new Patent Law which prescribes how the new provisions shall be implemented.

Anti-Monopoly Law

China’s Anti-Monopoly Law which was approved last year came into effect on August 1, 2008. The 57-article Anti-Monopoly Law, addressing issues related to monopoly behaviors that have impact or possible impact on excluding or restricting competition, such as: monopoly agreements, abuse of dominant market position, operators concentration, is to be enforced by three different departments: National Development & Reform Commission, Ministry of Commerce and State Administration for Industry & Commerce (SAIC).

The Supreme People's Court recently issued a circular, which clearly regulates that all types of anti-monopoly civil cases shall be heard by IP Tribunals of Courts at all levels.

Other Laws

Revision to another major IP law, the Trademark Law has also gone through a lot of discussion all year long. However, it is still difficult to say when a new amendment will be approved.

Leading Cases

Validity litigation of Pfizer’s Viagra patent caused a lot of attention domestically and overseas. Oral hearing was held at Patent Re-examination Board (PRB) on July 9-10, 2008. This was actually the beginning of the second round of validity litigation. In the first round of litigation, 13 Chinese generic companies attacked the validity of Viagra patent at PRB in order to apply from Chinese FDA’s approval to produce generic versions of Viagra. Then PRB’s decision No.6228 determined that Pfizer’s ‘Viagra patent’ was invalid based on insufficiency. However, this decision was overturned in Beijing No.1 Intermediate Court and again at Beijing Higher People’s Court. Then the case was remanded back to PRB to examine the validity of the Viagra patent based on other grounds that were not addressed in its decision No. 6228.

The case clearly shows the inadequacy of China’s judicial system to determine validity efficiently due to the fact that on one hand, PRB does not examine validity based on all possible grounds once it satisfies itself with a ground which they think is sufficient to invalidate a patent, and on the other hand, Chinese courts will not rule directly on validity but simply make a judgment on whether the PRB’s or the lower level court’s decision is correct. Hence, the Viagra litigation has been on-going for years.

It can be seen that a lot has occurred in 2008. It has been a busy and dynamic year in terms of IP development. The past year will for sure be remembered as a milestone year in China’s IP history.