On December 3, 2015, the Legislative Affair Office of the State Council released the newest draft amendments to the Patent Law of the People's Republic of China ("Fourth Amendment") soliciting public comments. In contrast to the original perception that the Fourth Amendment would be rather insignificant, the draft appears to address a few key subjects which are summarized below.
Indirect infringement has been a controversial issue in China and it failed to be categorized in the Third Amendment. The Chinese Courts have since adopted this concept in practice, although a higher standard is imposed in that they require both inducement and contributory infringements in the finding of an indirect infringement.
The draft Fourth Amendment now codifies two types of indirect infringement, inducement of infringement and contributory infringement which are in line with practices in the United States.
In addition, similarly to the Copyright Law, the draft will also hold the Internet Service Provider ("ISP") jointly liable if such ISP has known or should have known that its user is engaged in patent infringement activities through its Internet service. For example, if an ISP fails to take timely action [to stop the infringement] upon receipt of a well-grounded notification from the patentee, the ISP will be held jointly liable for the damages caused subsequently.
Noticeably, treble damages for wilful patent infringement have been introduced in the newest draft. Although there lacks clear definition of wilful infringement, this concept will supposedly be further developed by the judicial bodies.
In addition, the maximum of statutory damages, which is awarded at the Court's discretion is proposed to increase from RMB one million to RMB five millions. based on lost profit or reasonable royalty.
The draft Fourth Amendment introduces a new concept of open license, that is, the patentee may declare that it is willing to grant a non-exclusive license to any third party at a pre-set royalty rate. As such, an "open" licensor shall refrain from granting an exclusive license or seeking preliminary injunctions during the term of the open license.
Undisclosed Standard-Essential Patent
New Article under the Fourth Amendment stipulates that "if a patentee who participated in the enacting of a national standard failed to disclose a standard-essential patent during the process of enacting the standard, it is deemed that the patentee would grant a license to allow the implementer of the standard to use such patent," while the license fee is to be "negotiated" by the parties with the possibility of litigating before the Court.
The Fourth Amendment has gone through rounds of drafts over the past few years and now appears to incorporate certain significant changes in contrast to the first draft. Some clauses such as treble damages will certainly enhance patent protections in China, while the effect of or controversy over some other clauses are worth monitoring in subsequent legislation activities as well as future judicial development.