New Patent Law implementing rules to have

a deep impact
CLP asked a range of lawyers from international firms to submit their comments and
opinions on the revised Implementing Rules for the updated PRC Patent Law. Here is a
selection of their comments

Issue: March 2010

As Jonathan Yuan of Liu Shen & Associates writes, intellectual property in China has always
been an area of extreme interest for foreign companies. Any revisions to the patent, trade mark
or copyright laws are watched closely, and analysed tortuously for any positive or negative
business implications.

CLP spoke to four specialists: Alison Wong of Bird & Bird, Chloe Lee of Stephenson Harwood,
Howard Tsang of Wilkinson & Grist (Beijing) Intellectual Property Agency, and Ronald Chu
of Deacons. In general, practitioners seem to agree that the changes made in the Implementing
Rules (and the earlier amendment to the Patent Law) help bring Chinese patent law more into
line with that found in many developed countries.

“In particular, one of the biggest changes is the move to an absolute novelty standard, in line
with ... most developed countries,” says Alison Wong.

[ It is clear that activity in the IP field will be significant this year: the PRC Copyright Law (2nd
Revision) (中华人民共和国著作权法 (第二次修正)) has recently been published, and
amendments can be seen online at www.chinalawandpractice.com ]

First filing
The new Implementing Rules’ clarification of the first filing rules is particularly significant. Wong
labels the onerous foreign filing secrecy review requirements as a possible “step back”.

“The new regulations relating to foreign filing secrecy examination present perhaps the single
biggest problem for foreign companies who have R&D activities in China,” Wong says. “Gone is
the previous requirement for ‘first filing’ in China for inventions made in China. Instead, under
the new patent law all foreign applications for inventions deemed to have been made in China
require prior clearance before they can be filed outside China. Failure to comply with this
requirement is drastic – loss of the right to have a Chinese patent for the invention concerned.”

“In consideration of the consequence of failure to submit a patent application for security
examination before filing abroad … foreign companies may tend to adopt a more conservative
approach when interpreting whether an invention or utility model is completed in China,” says
Ronald Chu.

“Unlike the past, for inventions or utility models accomplished in China, it will no longer be
mandatory for Chinese applicants to first file the applications in China, provided a prior security
examination is conducted by the Chinese Patent Office,” says Howard Tsang. “As Chinese
applicants include foreign investment enterprises, the Rules would encourage foreign companies
to devote more R&D resources [to] China.”

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Wong says that foreign companies often ask how to determine whether the substantive contents
of an invention are accomplished in China when they have multiple teams in several countries
working on a common technical problem.

“Unfortunately there is no straightforward answer to this and each case will have to be addressed
on its own facts,” she says. “Foreign companies are well advised to keep detailed records of their
R&D activities in China, in case this becomes an issue at a later stage.”

Meanwhile, Chloe Lee highlights the fact that Article 9 of the new Rules provides the procedures
for confidentiality examinations, and dictates that an applicant may need to wait six months or
more after filing the request before he can make a foreign patent application.

“If clients have substantial R&D in China, and to avoid the adverse consequence of losing patent
protection in China, clients should better seek to first apply for patent registration in China or
submit [the confidentiality examination] request as soon as possible before making a foreign
patent application,” Lee says.

Passing off
Under the revised Patent Law and the new Implementing Rules, patent passing off includes both
passing off others’ patents and non-patented products or methods.

“The provisions relating to patent passing off have been rewritten and simplified,” says Chu.

Lee says that Article 84 of the Implementing Rules makes a clarification which “helps to better
protect the general consumers and to some extent strengthens patent owners’ rights”. This
Article concerns passing off of patents under Article 63 of the Patent Law, through means
including affixing invalid patent markings on products or packaging.

Although he says the new Rules “make minimum amendments”, Tsang points out that they also
newly exempt “infringers selling goods being passed off as patented goods from payment of
penalty fine in an administrative action where their innocence can be established and they can
provide proof as to the legitimate source of the goods”.

Compulsory licensing
The new Implementing Rules have further expanded the grounds on which compulsory licensing
is available.

“These have been introduced primarily in response to the public health aspects of the Doha
Declaration under TRIPs,” says Wong. The definition of a “patented pharmaceutical product” in
the Implementing Rules bring the provisions in line with the World Health Organisation’s Doha
Declaration on the TRIPs Agreement and Public Health (2001), the WTO Decision of 2003 on the
Doha Declaration, and the 2005 Decisions on Amendment of the TRIPs Agreement.

“The intention is to make it easier to obtain access to generic versions of patented drugs when
public health problems issues are at stake,” Chu says.

The Implementing Rules do not, however, include detailed provisions on restrictive conditions in
connection with compulsory licensing, as are found in TRIPs. They instead contain a provision
which requires the Patent Office to ensure its decisions on compulsory licence for resolving

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public health issues conform with the relevant provisions of international treaties to which China
has acceded.

“As of today, China has yet to grant any compulsory license of patented pharmaceutical products
in connection with public health issues,” Chu points out.

“It remains to be seen whether the newly expanded grounds will actually result in an increase of
compulsory licensing activity,” adds Wong. “There have not been any indications to say that
Chinese authorities will not continue to proceed with the same caution as under the previous
patent law when it comes to awarding compulsory licences.”

As for the grounds on which a licence may be granted: “As in the past … it has to be established
that the patent has not been exploited, or fully exploited, by the patentee for a certain period of
time without justified reason,” says Tsang. “As it is usually the case that foreign companies are
the patentees, there are higher chances for their patents being subject to compulsory licence in
China,” he adds.

Novelty
Wong says the move to an absolute novelty regime is “well overdue”, while Tsang notes that the
revised Patent Law has brought China in line with patent practice worldwide, as regards novelty
requirements: “the absolute novelty standard is now adopted such that novelty is lost if it forms
part of the prior art anywhere in the world”.

And the result of this improved alignment?

“This higher standard may assist the elevation of the quality of Chinese patents which has often
been criticised. As a consequence, there may be a higher level of innovation drive which is a main
objective the new Law wants to achieve.”

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