38 July 2017
Enhancing "the Belt and Road" construction with professional services..............................................2
China's trademark registration applications hit 3.691 million in 2016.......................................................2
China's courts concluded 147,000 first-instance IPR cases in 2016.......................................................3
CCPIT lends expertise to companies at home and abroad.................................................................4
China's new patent infringement trial rules become effective - introduction to the Judicial Interpretation (II) regarding Patent Infringement (III).............................5
Patent litigation in China (II)......................................8
Obtaining patents for software-related inventions in China.................................................................11
Beijing High People' Court issued new "Guidelines for Patent Infringement Determination"..........................15
Practical guidance on license agreement recordal at SIPO.................................................................17
OEM in China: trademark tips for international traders.21
Protecting geographical indications in China................23
Michael Jordan wins the trademark disputes over his Chinese name.....................................................26
From the Editor
The year of 2017 marks the 60th anniversary of the firm. On May 15, 2017, we released our English slogan "enriching your ideas", a series of souvenirs and a 6-minute microfilm in memory of the history of the firm and looking forward to the future. Details of this event can be found in the news.
Besides, we reported on the data relating to trademark registration applications and court cases in 2016, which illustrates a trend of growth continues in China.
In the articles, we went on with the introduction of the Judicial Interpretation (II) regarding patent infringement issued by the Supreme Court, the patent litigation practice in China. We also updated the practices in relation to prosecution of softwarerelated inventions and summarized the main contents of the Guidelines for Patent Infringement Determination issued by the Beijing High Court. Our expert further gave some guidance on how to record a license agreement before SIPO.
At the trademark side, the Supreme Court had handed down its decision in a retrial case in relation to OEM, which essentially held that OEM for pure export purpose doesn't infringe on Chinese trademark right. This, of course, may upset certain Chinese trademark holders. Another remarkable case in the trademark arena is that Michael Jordan eventually won the trademark disputes over his Chinese name.
Finally, we introduced protection of geographical indication, the special practices thereof, in China.
Enhancing "the Belt and Road" construction with professional services
On May 15, 2017, CCPIT Patent and Trademark Law Office held the Commemorative Achievement Release Event of the 60th Anniversary in Beijing.
During the release event, the firm released its English slogan "Enriching your ideas", the 60th anniversary celebrating microfilm and a series of souvenirs, endowing the participants with more perceptual information of the firm's sixty years' development as well as the development course of Chinese IP undertaking.
Mr. Hao Ma, the President, remarked that, with six decades of unremitting endeavor since the year of 1957, the firm gradually developed from a trio panel of trademark professionals to one of the largest-scale comprehensive IP law firm in China, and has proceeded with a number of influential cases that were respectively elected in "Top 10 IP Case of China Courts", "Top 10 IP Innovative Cases of China Courts", "IP Judicial Protection Top 10 Cases of China Courts", "Patent Reexamination Invalidation Top 10 Cases", "Trademark Review Typical Cases", "IP Judicial Protection Top 10 Typical Cases of Beijing Courts", "IP Judicial Protection Top 10 Innovative Cases of Beijing Courts" of the relevant years issued by the Courts, the Patent Reexamination Board of SIPO or the Trademark Review and Adjudication Board of SAIC.
Since "the Belt and Road" initiative was set forth, CCPIT Patent and Trademark Law Office has actively enhanced IP services for "the Belt and Road" countries by adopting multiple effective measures, such as earnestly conducting collection and release of IP information of key countries alongside, positively assisting enterprises home and abroad in IP strategy in the countries along "the Belt and Road" and strengthening the efforts in overseas IP training for enterprises.
Mr. Hao Ma further remarked that the firm will, by cherishing the opportunity of holding the Belt and Road Forum for International Cooperation, continually reinforce the IP information services, strengthen and improve IP services, and accelerate development in broadening emerging IP
affairs, to provide more professional and efficient services for enterprises of the countries along "the Belt and Road". The firm will continue to strengthen business cooperation with IP professionals of the countries alongside, to help enterprises in steadily raising their ability in IP creation, usage, protection, and management.
"CCPIT Patent and Trademark Law Office will always be diligent in "enriching your ideas", and stay true to the mission to contribute more to the magnificent development of IP undertaking," Mr. Hao Ma concluded.
China's trademark registration applications hit 3.691 million in 2016
Latest statistics from the State Administration for Industry and Commerce (SAIC) show that China handled 3.691 million trademark registration applications in 2016, securing its place as the world's largest for 15 consecutive years.
According to the China Intellectual Property News, trademark registration applications increased by 28.4% in 2016, compared with 26.9% in 2015. Among which, 3.001 million were filed online, representing 81.3% of the total. By the end of 2016, valid trademark registrations amounted to 12.376 million.
The top five areas, from which trademark applicants came, were Guangdong province (689,434), Beijing (372,387), Zhejiang province (327,572), Shanghai (257,616) and Jiangsu province (209,900).
Since Chinese Trademark Law was amended in 2014, sounds and colors became eligible subject matters for registration as trademarks, giving great momentum to the rapid growth of trademark registration applications in China.
SAIC has approved 13 industrial and commercial administrative departments and market supervision departments to set up contact points for accepting trademark registration applications, so that applicants can file trademark registration applications without making a trek.
In December 2016, the Guangzhou Center for Trademark Examination Cooperation came into operation.The centre is responsible for accepting trademark registration applications, consulting, examining trademark registration applications and promoting trademark strategy etc.
China's courts concluded 147,000 first-instance IPR cases in 2016
According to the latest statistics by the Supreme People's Court (SPC) of China, China's courts concluded totally 147,000 IPR cases in the first instance in 2016.
In 2016, the SPC formulated new judicial interpretations for hearing patent disputes as a way to facilitate the innovationdriven development strategy and concluded several IPR cases with great social impact, including the Jordan trademark dispute, the closure of which has shown China's determination to protect IPR and fight against infringement.
The chief justice of the SPC, Qiang ZHOU, addressed in the annual work report of the SPC that, the court will give full play to the functions of the trial to sustain steadiness,
stimulate innovation and encourage business startups for further development in 2017.
Meanwhile, the prosecutorial system nationwide issued 15 opinions to guarantee scientific innovation and instituted public prosecutions against 21,505 suspects in 2016. 29 provinces, regions and municipalities, including Hubei province, Yunnan province and Ningxia Hui Autonomous Region, had set administrative enforcement and criminal justice information sharing platforms against infringement and counterfeit.
CCPIT lends expertise to companies at home and abroad
Rich human resources are among the cornerstones of CCPIT Patent and Trademark Law Office's steady development and success in handling international intellectual property affairs in the past 60 years. The firm began to offer trademark services in 1957 and patent services in 1984. It has been chosen as a top intellectual property agency by Chinese and foreign organizations for several consecutive years.
"One of our main strengths is that we have a strong expert team," said Long Chuanhong, deputy head of the firm. "Nearly 300 patent and trademark attorneys work with our office and their average practicing time exceeds a decade." Many of the attorneys have trained in overseas IP law, to learn about related foreign practices and handled foreign cases.
The firm helped a large Chinese oil company to win its trademark registration in Africa and the case changed local juridical practice related to trademark application principles, Long said.
With the firm's aid, a large automobile enterprise succeeded in a trademark scramble with noted foreign companies in Europe and Australia.
The firm's large expert team also ensures comprehensive solutions and excellent services are provided to companies, Long said.
Shouldering social responsibilities is a key component of the firm's values, he said. It has assumed secretariat responsibilities for Chinese branches of two international organizations: the International Association for the Protection of Intellectual Property and the Licensing Executives Society International. The firm has cooperated with other organizations under the CCPIT system, offering IP training to Chinese companies.
With the ongoing Belt and Road Forum for International Cooperation in Beijing, Long said that Chinese enterprises and individuals have increased their patent filings in countries and regions involved in the Belt and Road Initiative in recent
Chinese people filed 4,834 patent applications in Belt and Road economies in 2016, a year-on-year increase of 47.1 percent. With 3,017 patent filings from China last year - up 131.5 percent year-on-year - India was the top destination, followed by Russia, Singapore, Vietnam and the Philippines, in terms of the number of Chinese applications.
In comparison, China received 3,697 patent filings from applicants in 37 economies along the Belt and Road in 2016, a year-on-year rise of 18.2 percent. Singapore, Israel, India, Saudi Arabia and Russia were the top five sources of filings.
Long said that many of the countries and regions involved in the Belt and Road adopted important international treaties relating to IP, such as the Paris Convention for the Protection of Industrial Property, which makes it convenient for companies to file patent and trademark applications abroad.
The High-level Conference on Intellectual Property for Countries along the Belt and Road was hosted in Beijing in July 2016 to strengthen IP cooperation among involved countries and regions. At a roundtable meeting during the conference, IP organizations from different countries agreed on an initiative to promote cooperation.
As more Chinese companies develop in the markets involved in the Belt and Road, Long suggested the businesses apply for patents and trademarks before exporting products.
In many cases where noted Chinese brands had been registered by others abroad, the Chinese companies had to abandon their well-established brands or to pay a high price to take them back, he said.
Long also advised that Chinese enterprises pay attention to preventing IP risks and avoiding IP infringements while doing business overseas, whether they be participating in exhibitions, producing and selling products or building factories with partners.
Source: China Daily.
China's new patent infringement trial rules become effective introduction to the Judicial Interpretation (II) regarding Patent Infringement of the China's Supreme People's Court (III)
By Xiaojun Guo, Weiwei Han (Ms.)
V. Procedural Aspects
1. Burden of Proof in Determining Damages
Article 27 of the Judicial Interpretation (II) reads,
Where it is difficult to determine the actual loss suffered by a right holder, the people's court shall require the right holder to proffer evidence to prove the gains obtained by the infringer from the infringement in accordance with Paragraph 1 of Article 65 of the Patent Law. Where the right holder has proffered the prima facie evidence in relation to the gains obtained by the infringer but the account books and materials related to the acts of patent infringement are mainly under the control of the infringer, the people's court may order the infringer to submit such account books and materials; where the infringer refuses to provide such account books and materials without justification or submits false account books and materials, the people's court may determine the gains obtained by the infringer from the infringement based on the claims of the right holder and the evidence proffered thereby.
Since there is no discovery procedure in China, it is usually difficult to collect evidence, especially evidence of damages. This article aims at easing collection of evidence of damages by shifting the burden of proof to the defendant when the plaintiff has proffered preliminary evidence as required. However, there are some concerns: 1) the accounting books and relevant materials of the defendant might not be so canonical and complete; and 2) the patentee may abuse his right and try to obtain the trade secrets of the defendant by litigation. So, how to allocate the burden of proof shall be made on a case-by-case basis.
Whatever, the above provision is a good indicator to patent holders. Hopefully, increased damages may be obtained in a patent infringement litigation in the future.
By the way, the "materials" mentioned in this article shall be the materials relating to finding damages caused or gains of
the defendant by infringement.
2. Agreement on Damages
Article 28 of the Judicial Interpretation (II) reads,
Where a right holder and the infringer have legally agreed on the amount of damages for patent infringement or the methods for calculating the amount of damages, and one of them claims during a patent infringement lawsuit that the amount of damages shall be determined in accordance with such an agreement, the people's court shall uphold such a claim.
This article affirms the efficacy of an agreement on damages either before or after infringement between the right holder and the accused infringer. To accurately determine the possible damages, it might be better for the parties to determine the damages based on a unit price instead of a lump sum under this article.
Further, whether the agreed damages can be revoked by introducing the Contractual Law, for example where an obviously unfair civil act is found, is not clear yet. It is expected that, in most cases, the courts will respect such agreed damages.
In Zhongshan Longcheng Commodity Co. Ltd. v. Hubei Tongba Children's Commodity Co. Ltd., Longcheng brought a lawsuit against Tongba asserting that Tongba continued infringing its patent after signing a mediation agreement and claiming damages of RMB 1,000,000 for patent infringement, not for violation
of the agreement. Since the amount of compensation was not supported by the first and second instance courts, Longcheng requested retrial with the Supreme Court.
Said mediation agreement was reached by the two parties in a previous action initiated by Longcheng during the second instance before the Hubei High Court, in which Tongba warranted that it will not infringe any more and it shall voluntarily compensate Longcheng for RMB 1,000,000 if infringement upon the patent is found again.
The Supreme Court found that Tongba offered to sell the infringing products after signing the mediation agreement and held that,
Since there is no basic business contract between the two parties, Tongba shall bear the liability for tort instead of the liability for violating an agreement. The mediation agreement, which solely clarifies the liability of Tongba non-infringing, was reached by the two parties voluntarily and shall be binding to the two parties in determining the amount of compensation.
3. Termination of a Lawsuit based on an Invalidation Decision
Article 2 of the Judicial Interpretation (II) reads,
Where the claims of a patent on the basis of which the right holder asserts patent infringement in a lawsuit are declared invalid by the Patent Re-examination Board, the people's court trying the patent infringement dispute may render a ruling to dismiss the lawsuit filed by the right holder on the basis of the invalid claims.
The right holder may file a lawsuit separately if there is evidence showing that the decision to declare the claims invalid is revoked by a binding administrative judgment.
If the patentee files a lawsuit separately, the period for limitation of action shall be calculated from the date of service of the administrative judgment mentioned in Paragraph 2 of this Article.
The basic purpose of this article is to accelerate the legal proceedings of a patent infringement case with a view that only a small percentage of decisions regarding the validity of a patent made by the Patent Reexamination Board were revoked by the courts.
Several points shall be mentioned regarding this article: 1) A court may rule to dismiss a lawsuit either in the first or in the
second instance whenever the claims of the patent in dispute are announced invalid by the Patent Reexamination Board; 2) Only when all of the claims of the patent forming the basis of the complaint are announced invalid by the Patent Reexamination Board, can the court adjudicating the infringement lawsuit render a ruling to dismiss the lawsuit; 3) Will the damages be affected by the interruption of the lawsuit or can the damages incurring during the period the patent is announced invalid be calculated? There is no clear answer as to how the second lawsuit is connected to the first lawsuit and how the damages are calculated yet.
4. Designation of Specific Claims for Pleading
Article 1 of the Judicial Interpretation (II) reads,
Where the claims of a patent contains two or more claims, the right holder shall specify in the complaint the claims based on which the accused infringer is being sued for patent infringement. Where such claims are not specified or not clearly stated in the complaint, the people's court shall require the right holder to specify the claims; where the right holder refuses to do so upon requirement of the people's court, the later may rule to dismiss the lawsuit.
In the past, in a patent infringement litigation, many plaintiffs made infringement analysis only on the basis of the independent claims. Should the independent claims be announced invalid by the Patent Reexamination Board, the court would have to ask the plaintiffs to make further comparison between the accused products or processes and the asserted claims which are maintained valid during the invalidation proceedings. This will inevitably prolong the legal proceedings and is not fair to the defendants. This article requires the plaintiff to define the claims on the basis which the complaint is based initially and is in favor of accelerating the proceedings.
The Judicial Interpretation (II) is a law which the courts of all levels shall comply with. Any person who is intending to seek patent protection in China shall keep the above provisions in mind from both the procedural aspects and the substantive aspects. The Interpretation reflects the spirit of the Supreme People's Court in the ruling of patent infringement cases in recent years, and clarifies certain debating issues.
Even though the Judicial Interpretation are coordinating issues concerning the application of law in the trial of patent
infringement cases, it also has meaning in the guidance of applicants during the drafting and prosecution of patent applications. For instance, where not necessary, it would be better not to incorporate the close-ended expressions into a claim, and to avoid emphasis of the terms such as "at least" and "not more than" plus a number or a numeric range on technical effects in the description, so as to prevent the negative effect exerted by such limitation on protection scope during the enforcement and exploitation of a patent. Also, an applicant shall pay more attention to the observations made in the prosecution and look into the file of a related divisional if any, since these materials would have relation to the principles of file wrapper estoppels. Further, considering the higher level for the establishment of equivalent infringement and the interpretation on functional features, it would be favorable to include more embodiments and/or working examples in the description.
Further, the Interpretation provides more measures to lower the burden of proof for a patent righter holder, especially for a foreign patent righter holder who may encounter more obstacles in collecting evidence, and may increase damages in the future, and also shorten the cycle of the legal proceedings, which are in favor for a patent right holder and
may encourage innovation in a long term. The effect of the Interpretation will be more clearly reflected with the judgement of more cases by the courts.
Patent litigation in China (II)
By Chuanhong Long, Guoxu Yang
4.1 Reasons and Remedies for Revocation/ Cancellation
According to Article 45 of Chinese Patent Law, after a patent is granted, if any entity or individual considers that the granting of said patent does not conform to the relevant provisions of this law, they may request that the Patent Reexamination Board invalidate the patent right.
According to Article 65 of Implementing Regulations of the Chinese Patent Law, the reasons for the request for invalidation refers to when the invention or creation on which the patent right is granted is not in conformity with the following:
- Article 2 (concepts of the three kind of patents);
- Paragraph 1 of Article 20 (security examination);
- Article 22 (novelty or inventiveness for inventions and utility models);
- Article 23 (novelty of design);
- Paragraph 3 (enablement) and Paragraph 4 (fairly base) of Article 26;
- Paragraph 2 of Article 27 (clarity of design); and
- Article 33 (exceeding the original scope) of Patent Law;
- Paragraph 2 of Article 20 (indispensable feature);
- Paragraph 1 of Article 43 (exceeding the original scope for divisional application) of these Rules, or falls under Article 5, Article 25 (prohibited by the law) of Patent Law, or the applicant is not entitled to a patent right in accordance with Article 9 (double patenting) of Patent Law.
4.2 Partial Revocation/Cancellation
Partial invalidation is possible. For example, an independent claim of patent is invalidated in view of the prior art, but some of the defendant's claims may still survive after they are combined with an independent claim in view of the prior art.
4.3 Amendments in Revocation/Cancellation Proceedings
Amendment is possible during the invalidation proceedings before the Patent Re-examination Board. The amendment may be limited to the cancellation or combination of the claims or cancellation of certain technical solutions, but the protection scope of the claims cannot be broadened.
4.4 Revocation/Cancellation and Infringement
Invalidation and infringement are heard separately in China. Invalidation is heard by the Patent Re-examination Board, which may be appealed to the Beijing Intellectual Property Court, and the infringement is heard by a court that has power and jurisdiction over infringement cases. The timing between decisions in the infringement and revocation cases may be different. If the patent in dispute is a utility model or design, the infringement proceeding may be stayed upon the petition of the defendant if they file an invalidation petition with the Patent Re-examination Board within the term for response in the infringement proceedings. Where the patent concerned is a patent for invention, the infringement proceeding is not normally stayed even if the defendant
makes a request to the court to stay the infringement proceeding, by filing an invalidation petition with the Patent Re-examination Board, within the term for response in the infringement proceedings.
5. Trial & Settlement
5.1 Special Procedural Provisions for Intellectual Property Rights
There is no significant difference in procedural provisions for IP rights proceedings and general civil dispute proceedings. The invalidation and infringement are heard separately in China. There is a staying procedure for patent infringement cases. If the patent in dispute is a utility model or design, the infringement proceeding may generally be stayed upon the petition of the defendant if they file an invalidation petition with the Patent Re-examination Board within the term for response of the infringement proceedings. Where the patent concerned is a patent for invention, the infringement proceeding would not normally be stayed even if the
defendant were to request the court to stay the infringement proceeding by filing an invalidation petition with the Patent Re-examination Board within the term for response in the infringement proceedings.
5.2 Decision Makers
A case will be determined by legal and/or technical judges. There are no juries in China. The parties must have no influence on who the decision maker will be.
5.3 Settling the Case
From the very beginning of a case until the point at which the court makes a decision, the parties have the opportunity to settle the case. The court may set up a mediation if both parties agreed to have a mediation.
5.4 Other Court Proceedings
The parallel invalidation petition may have an influence on the current proceedings. An infringement case could be stayed if the patent is a utility model or design and an invalidation petition has been initiated. Please refer to 4.4 Revocation Cancellation and Infringement.
6.1 Remedies for the Patentee
Except in the case of interim and permanent injunctions, the patentee may claim damages. So far, no enhanced damages are available for wilful infringement in China for patent infringement. The judges have discretion in ordering remedies, especially in ordering statutory damages, which can range from CNY10,000 to CNY1 million for patent infringement.
6.2 Rights of Prevailing Defendants
In China, a prevailing defendant generally absorbs their own expenses, including the attorney fees. However, if the plaintiff requested an interim injunction, evidence preservation or property preservation and it was granted by the court, the prevailing defendant can claim damages against the plaintiff by means of the foregoing measures.
6.3 Types of Remedy
The remedies are substantially the same for all technical intellectual property in the Chinese legal system.
6.4 Injunctions Pending Appeal
In China, the first instance judgment does not come into force if either party appeals to the higher court within the time limit. Any injunction granted in the first instance cannot be enforced at this stage. It can only be enforced after the second instance judgment has been made and come into effect.
7.1 Special Provisions for Intellectual Property Proceedings
The appellate procedure for IP rights proceedings is the same as for other civil rights proceedings; there are no special provisions.
7.2 Type of Review
The appeal is generally limited to the facts and a legal review as laid out in the appeal.
8.1 Costs Before Filing a Lawsuit
The costs arising before filing a lawsuit mainly include fees for the collecting of evidence of infringement and evidence for damages, as warning letters are not required for filing a lawsuit. The costs for collecting evidence depend on the difficulties encountered in obtaining the evidence. The costs may be relatively low if the evidence can be purchased through a publicly available channel, eg the open market. The costs may be relatively high if it cannot be purchased through the open market. In addition, the cost may also include the notarisation fees, as the evidence may be easily acceptable by the court if it is obtained under witness of the notary public.
8.2 Responsibility for Paying Costs of Litigation
Each party is responsible for paying their own litigation costs, such as court fees, expenses and attorney fees. If the plaintiff wins, the defendant reimburses the court fees or at least part of the court fees, the necessary expenses for stopping the infringement carried out by the defendant, and reasonable attorney fees. The plaintiff need not reimburse the defendant attorney fees etc even if the plaintiff loses the case and there is no evidence to prove that the patentee had
abused their patent right.
9. Alternative Dispute Resolution
9.1 Type of Actions for Intellectual Property
Alternative dispute resolution, such as arbitration or mediation, is not a common way of settling an intellectual property case, such as a patent infringement case, because arbitration or mediation requires both parties to be willing to settle the case by an arbitration clause in a contract or an agreement reached later on. A domain name dispute can usually be settled through alternative dispute resolution such as arbitration because, when the party registers the domain name, they agree to settle any dispute through arbitration.
10. Assignment & Licensing
10.1 Requirements or Restrictions for Assignment of Intellectual Property Rights
According to Article 10 of Chinese Patent Law, the right to apply for a patent and the patent rights may be assigned. Where a Chinese entity or individual is to assign the right to apply for a patent or a patent right to a foreigner or foreign enterprise or any foreign organisation, they will go through the formalities under relevant laws and administrative regulations. Where the right to apply for a patent or a patent right is assigned, the parties concerned are to conclude a written contract, and have the contract registered in the Intellectual Property Office. That contract will be announced by the Intellectual Property Office. The assignment of the right to apply for the patent or the patent right is to come into force as of the date of registration.
In addition, where a Chinese entity or individual is to assign a patent right to a foreigner or foreign enterprise or any foreign organisation, they are to go through the formalities under relevant laws and administrative regulations.
Moreover, if the assignment is between a Chinese individual or entity and a foreign individual or entity, the Technical Import and Export Administration Regulations will apply. According to the nature of the technology to be assigned (prohibited for transfer, restrict for transfer, free to transfer), an approval or recordation procedure will be requested by competent departments.
10.2 Procedure for Assigning an Intellectual Property Right
For the assignment of an IP right, such as a patent right, the assignor and assignee are required to enter into a written contract, and to have the contract registered at the Intellectual Property Office, who announces the contract. The assignment of the patent right is to come into force as of
the date of registration.
10.3 Requirements for Restrictions to License an Intellectual Property Right
The assignment contract should be in writing and should be registered at the Intellectual Property Office, who announces the contract. The assignment of the patent right is to come into force as of the date of registration.
In addition, where a Chinese entity or individual is to assign a patent right to a foreigner or foreign enterprise or any foreign organisation, they are to go through the formalities under relevant laws and administrative regulations.
In particular, when a Chinese entity or individual is to assign a patent right to a foreigner or foreign enterprise or any foreign organisation, they are to go through the formalities under relevant laws and administrative regulations.
Moreover, if the assignment is between a Chinese individual or entity and a foreign individual or entity, the Technical Import and Export Administration Regulations will apply. According to the nature of the technology to be assigned (prohibited for transfer, restrict for transfer, free to transfer), an approval or recordation procedure will be requested by competent departments.
10.4 Procedure for Licensing an Intellectual Property Right
In order to license an IP right, such as a patent right, the licensor and the licensee are required to enter into a licence agreement, and to have the licence agreement recorded in the patent administrative department of the State Council, ie the Intellectual Property Office of China, within three months from the date that the licence agreement is entered into. Recordation of the licence agreement, or not, will not affect the effectiveness of the licence agreement.
If the licence is between a Chinese individual or entity and a foreign individual or entity, the Technical Import and Export Administration Regulations will apply. According to the nature of the technology to be assigned (prohibited for transfer, restrict for transfer, free to transfer), an approval or recordation procedure will be requested by competent departments.
Obtaining patents for software-related inventions in China
By Xiaowei Wei (Ms.)
As more and more innovators in China have developed new business models by making use of computer science and internet technology, patent protection of software-related inventions has become one of the hottest topics in the intellectual property field in this country. For example, the concept of "Internet Plus" has been very popular in the recent two years, which means utilizing internet technology to improve the business models of traditional services, and whether to and how to protect such new business models with patents has caused many discussions in China. On this background, the Guidelines for Patent Examination and related patent examination practice have been updated to meet the increasing demands for protecting software-related inventions, and now there is an unprecedented friendly environment for patent applications involving software and especially business methods.
In this article, we will introduce the latest updates of the patent examination practice for software-related inventions, and will discuss some useful tips in drafting and prosecuting software-related inventions in China.
1. Relaxed requirements for formal subject matters and for ways of drafting claims for software-related inventions - get prepared for future enforcement by drafting varieties of claims
According to the Guidelines for Patent Examination, "a computer program per se" falls within the category of "rules and methods for mental activities" which are excluded form patent protection as provided in Article 25 of the Patent Law (see Part II, Chapter 1, Section 4.2 of the Guidelines for Patent Examination).
For a long time until April 1, 2017, claims having subject matters of computer programs or computer-readable mediums characterized merely by computer programs stored thereon had been rejected as seeking to protect "rules and methods for mental activities". At that time, a claim seeking to protect a software-related invention could be allowed only if it was drafted as a method comprising steps or an apparatus comprising modules for performing steps in strict correspondence with the method claim or a
process flow recited in the description.
However, method claims would encounter many difficulties in enforcing the patent right, and "apparatus comprising modules" claims would also lead to restricted enforcement because some court judges thought it was unclear what kind of hardware components the "modules" actually referred to. In addition, if computer programs were distributed in the form of computer-readable mediums, it would be possible that the manufacturer of the computer-readable mediums would not infringe either of the above method and apparatus claims. Due to these concerns, there had been a strong demand in the software industry to relax the exclusion of the formal subject matters and the formal requirements for drafting software-related inventions so that it could be easier for innovators to enforce their patent rights.
As of April 1, 2017, the revised Guidelines for Patent Examination came into force, in which a very subtle revision was made as follows (see Part II, Chapter 9, Section 2 of the revised Guidelines for Patent Examination):
"If a claim merely relates to an algorithm, or mathematical computing rules, or computer programs per se, or computer programs per se recorded in mediums (such as tapes, discs, optical discs, magnetic optical discs, ROM, PROM, VCD, DVD, or other computer-readable mediums), or rules or methods for games, etc., it falls into the scope of the rules and methods for mental activities and does not constitute the subject matter for which patent protection may be sought."
Although the addition of the word "per se" looks like a small revision, the State Intellectual Property Office of China (SIPO) explained that it was intended to distinguish a sequence of machine-readable code which should be protected by copyright from the technical solution based wholly or partially on process flow of computer programs. In this way, the revised Guidelines for Patent Examination have clarified that what cannot be protected is a computer-readable medium with the program code "per se", but a computer-readable medium having instructions for performing a technical method is not anymore excluded from patent protection. In other words, since April 1, 2017, a computer readable
medium characterized in the instructions recorded thereon is no more rejected simply because of its title of the subject matter.
It is also worth noting that although the revised Guidelines for Patent Examination also use the word "per se" after the term "computer programs" even when no computer medium is mentioned, what has become allowed in the current patent examination practice is only the computer readable medium, but a computer program alone without a tangible carrier is still excluded from patent protection according to the current patent examination practice.
In addition, the revised Guidelines for Patent Examination also include the following (see Part II, Chapter 9, Section 5.2 of the revised Guidelines for Patent Examination):
"If it is drafted as an apparatus claim, the various component parts and the connections among them shall be specified, wherein the component parts may comprise not only hardware but also programs."
SIPO explained that this revision intended to clarify that the way of drafting an apparatus involving software features would not be limited to "apparatus comprising modules" as described above, but the claims may be drafted as an apparatus comprising a memory having computer programs stored thereon and a processor configured to perform several steps when executing the computer programs. This way of drafting will enable the claim to recite actual components such as memories and processors and other hardware which are contained in an apparatus, instead of "modules" with vague meanings.
According to the revised Guidelines for Patent Examination, now there may be the following ways of drafting a claim to seek protection of a software-related invention:
- a method comprising steps of ...;
- an apparatus comprising modules for ...;
- an apparatus comprising a memory having computer programs stored thereon and a processor configured to perform, when executing the computer programs, steps of
... - a computer readable storage medium having computer programs stored thereon, the computer programs being configured to perform, when executed on a processor, steps of ... . Since the revised Guidelines for Patent Examination came into force just recently, there has not yet been many court cases to tell which of the above four kinds of claims would be more useful in enforcement, and thus it may be better to keep all these types of claims, especially for inventions of high value. In addition, in order to avoid the possibility that the court judges would have difficulty in understanding and interpreting how the software actually works, it is advisable to add some general description of hardware and software environment in which the invention could be implemented.
2. More friendliness to inventions involving business methods - patent your novel business models
It is provided in Article 2 of the Patent Law that "invention" means a new "technical solution". According to the Guidelines for Patent Examination, a technical solution is a set of technical means which adopt laws of nature for solving a technical problem (see Part II, Chapter 1, Section 2 of the Guidelines for Patent Examination). According to the patent examination practice, if a claim does not involve technical means, does not address a technical problem, and does not achieve a technical effect (note that the key point is the word "technical"), the claim would be deemed as seeking to protect a patent-ineligible subject matter. On the other hand, Article 25 of the Patent Law provides that no patent right shall be granted for "rules and methods for mental activities" as we mentioned above, and the examples of "rules and methods for mental activities" given in the Guidelines for Patent Examination include "methods and systems for management in respect of organization, manufacture, business implementation and economy etc." (see Part II, Chapter 1, Section 4.2 of the Guidelines for Patent Examination). In a nutshell, Both Article 2 and Article 25 of the Patent Law can function as the legal ground to reject an invention involving business methods.
Many Chinese patent attorneys still have the memory of receiving rejections of patent applications from SIPO only because the claims involve business purpose such as advertising or marketing. At that time, in spite of technical features contained in the claims, the examiners from SIPO sometimes would still assert, without support of any prior art evidence, that the claims were patent ineligible because these technical features were "common knowledge in the art". In addition, even if some technical features did function to solve a certain technical problem occurring in the business method, the examiners sometimes would still assert that the problem to be solved by the invention was the business problem instead of the technical problem.
Since two years ago, we have observed a pleasant change in the examination practice. For a claim which comprises both technical features and non-technical features, the examiners have no longer asserted such claims as patent ineligible, but would first do prior art search, and then consider, during inventiveness assessment, whether the problem to be solved by the invention on the basis of the distinguishing features is "technical". If the problem to be solved by the invention on the basis of the distinguishing features is not "technical" but merely business related, the claim would be rejected as lacking inventiveness. In this way,
the rejection must be made on the basis of prior art evidence, and the whole solution would be considered, but no ineligibility rejection could be made simply on the basis of an intuitive identification of a business purpose or a careless assertion of "common knowledge". Since this change of examination practice, we have noticed that many ineligibility rejections have been revoked and more inventions involving business methods have been allowed.
This change of examination practice is also embodied more or less in the revised Guidelines for Patent Examination that came into force since April 1, 2017, with the addition of the following paragraph (see Part II, Chapter 1, Section 4.2 of the revised Guidelines for Patent Examination):
"If a claim related to a business model involves not only content of business rules and methods but also a technical feature, it shall not be excluded from the possibility of being granted a patent right according to Article 25 of the patent law."
According to the current examination practice, if a claim has a technical feature, even if it also contains some nontechnical features, the technical solution as a whole should be deemed as patent eligible. In other words, a patent application involving business methods will more possibly encounter an inventiveness rejection than a patent ineligibility rejection.
To give just one example, Chinese Patent Application No. 201310105464.4 filed by Tencent relates to a method for collaborative order. Although this patent application aims to protect a trading process including sending an collaborative order invitation to selected relational users of a subscriber, and combining order information sent by the subscriber and sub-order information returned by the relational users so that a trading platform can process combined order information, no patent ineligibility rejection was raised in the first Office Action issued for this patent application, but instead inventiveness rejection was raised based on prior art reference documents. This patent application was allowed in June 2016, and the claims of the allowed claims are as follows.
"1. A method for collaborative order, comprising:
receiving a collaborative order request sent by a subscriber, wherein the collaborative order request carries commodity information;
acquiring a relational user of the subscriber from a relational user set of the subscriber in response to the collaborative order request;
sending a collaborative order invitation of the commodity information to the relational user of the subscriber, to invite the relational user of the subscriber to send sub-order information of the commodity information in response to the collaborative order invitation;
receiving order information of the commodity information sent by the subscriber and the sub-order information of the commodity information sent by the relational user of the subscriber, and combining the order information of the commodity information sent by the subscriber and the suborder information of the commodity information returned by the relational user, to obtain combined order information;
sending the combined order information to a trading platform of the commodity information for processing;
updating a state of the combined order information and sending the combined order information with the state to the subscriber and the relational user of the subscriber who returns the sub-order information of the commodity information."
From the above example, you may have an idea of how friendly the current examination is for inventions involving business methods.
Although the examination for inventions involving business methods have been relaxed, it should be noted that pure business method without any technical element is still patent ineligible. Therefore, in order to obtain allowance of your patent applications involving business methods, it is still advisable to include a detailed description of technical features, technical problem and technical effects in the specification.
Until now, we have seen that the updated patent practice and the latest revised Guidelines for Patent Examination have provided a better environment for software-related inventions than ever, and innovators who create new business models based on computer technology can have more opportunities to protect their business solutions. In addition, as some large Internet companies have emerged and grown even larger in China in the recent years, the domestic innovators in China are even asking more protections from patents, and thus people are expecting to
see whether the SIPO might even ferment another revolution in the future to further relax the patent examinations of software-related inventions. For example, everyone is eager to know whether even computer programs may become allowable subject matter in the future, so that enforcement against software provided and distributed via the Internet may become even easier. Let us wait and see whether this will finally come true.
Beijing High People' Court issued new "Guidelines for Patent Infringement Determination"
By Yue Yuan (Ms.)
On April 20, 2017, Beijing High People' Court issued new "Guidelines for Patent Infringement Determination".
The newly issued "Guidelines for Patent Infringement Determination" made revisions based on the "Guidelines for Patent Infringement Determination" issued in 2013 in order to solve outstanding problems in judgment, unify judgment standards, combine summaries of the judgment experience by Beijing High People' Court and adapt to the latest laws, regulations and judicial interpretations.
The new "Guidelines for Patent Infringement Determination" includes 153 articles and about 21, 000 Chinese characters, which relate to six parts, including determination of protection scope of the patent for invention or utility model, determination of infringement on the patent for invention and utility model, determination of protection scope of the patent for design, determination of infringement of patent for design, determination of acts of patent infringement, and defense of patent infringement. It systematically and completely makes provisions on principles, objects and methods for claim interpretation as well as rules for infringement determination, determination of acts of infringement and defense of infringement, and makes provisions for the first time on hot issues like standard essential patent and graphical user interface in current patent judicial practice in China. In addition to the Chinese version, the Beijing High People's Court also issued an English version and a Japanese version of the Guidelines for Determination.
We combed the newly issued determination guidelines, and, by generalization according to the six aspects of the new determination guidelines, concluded the following notable information.
I. Determination of Protection Scope of the Patent for Invention or Utility Model
Articles 2 and 4 respectively stipulate fairness principle and the principle of compliance with the object of invention, indicating the contents ineligible for the protection scope include a technical solution containing a technical defect to
be overcome by the patent, a technical solution, which, in its entirety, belongs to the prior art, technical solutions incapable of solving the technical problem of the patent or realizing the technical effect of the patent.
Article 10 stipulates where the patent right is declared invalid during a second instance, the first-instance judgment generally shall be revoked, but alternatively, the trial of the second-instance case may also be suspended.
Article 24 stipulates a delimiting role of usage environment features in a claim.
II. Determination of Infringement on the Patent for Invention and Utility Model
Articles 42 and 56 stipulate the meaning of equivalent
features of functional features in a claim and the time point for the determination thereof.
Article 57 stipulates where the claim adopts such terms as "at least" or "no more than" to limit the numerical feature, the principle of equivalent is not adaptive.
III. Determination of Protection Scope of Patent for Design
Article 66 stipulates in the determination of the protection scope of a design, the overall comparison principle is adopted.
Article 67 stipulates the right holder may submit written material explaining the essential feature of the design patent, the part of innovation of the design and the design contents thereof; where the brief description states the essential feature, it can be used for reference; an essential feature refers to the design feature distinguishing the design from the prior design and that can produce notable visual influence on a normal consumer.
Article 73 stipulates the protection scope of a graphical user interface design shall be determined by the product design views in combination with the essential feature; the protection scope of a dynamic graphical user interface design shall be jointly determined by product design views that can determine the dynamic change process in conjunction with a description of the dynamic change process by the brief description.
IV. Determination of Infringement of Patent for Design
Article 77 stipulates the category of a graphical user interface design product shall be determined by a product using the graphical user interface.
Article 83 stipulates upon judgment of whether the design is the same or similar, the party concerned may be requested to submit evidence to prove the design space and the prior design condition of the relevant design feature. Moreover, the meanings of design space and the prior design condition are specifically defined in said article.
Articles 86 and 87 respectively stipulate the principle for the determination of infringement of a static graphical user interface design and a dynamic graphical user interface design.
V. Determination of Acts of Patent Infringement
Article 117 stipulates an entrusting party with a supervision act clearly knowing the entrusted party's infringement is a joint infringer.
Article 121 stipulates where, one, for production or business purposes, actively induces another party to implement a specific technical solution, with the actual occurrence of the commitment of patent infringement by the another party, the actor is a joint infringer that shall bear a joint responsibility.
VI. Defense of Patent Infringement
Articles 126-127 stipulate cases of acquisition of a patent in bad faith, and that in case of acquisition of the patent in bad faith, the plaintiff's claim may be rejected.
Articles 149-153 stipulate in a case where a standard essential patent is concerned, obligations of the patentee and the accused infringer and consequences of breach of the obligations.
Practical guidance on license agreement recordal at SIPO
By Qi Liu (Ms.)
Along with the rapid growth of the Chinese patent filings, attention is to be focused on how to exploit the patent right in order to realize its utmost value in business. In the recent years, the Chinese government enacted and renewed the Laws and Regulations in succession, in order to propel the commercialization of the scientific and technological achievements and boost the economy in China. As one of the most-frequently used methods to enforce the Chinese patent rights, patent licensing in China is becoming more and more active in the business operations.
In order to protect a patent right, regulate the license acts and promote the proper usage of the patent right, the State Intellectual Property Office of China (i.e. the "SIPO") enacted, under the Chinese Patent Law and Contract Law, and released the Administrative Measures for Recording a License Agreement ("Measures"), which took effect as of August 1, 2011. According to the Measures, the patent owners could record license agreements officially in order to safeguard their interests over the licensed Chinese patents in China.
Nowadays, more and more license agreements are concluded due to the various transnational cooperation, and then may need to be recorded with the SIPO. Though the above Measures have been implemented for several years, there still exist some typical neglects by licensors in practice, leading to unsuccessful recordal acts before the SIPO. Taking those typical situations into consideration, we think the following points in recording a license agreement at the SIPO shall be kept in mind by all patent owners, especially by foreign companies and individuals.
1. The necessity to record a license agreement at the SIPO
First of all, we should mention that it is not compulsory for a licensor, typically a patent owner, to record his license agreement under the Chinese Patent Law. The license agreement shall be concluded under the Contract Law in China, and takes into effect as of the effective date of the agreement. The recordal is, by no means, the condition for the license to be valid in China.
Nevertheless, the recordal is beneficial for the sake of the licensor and licensee. For example, after the recordal, the SIPO will publish the basic data (exclusive of the text of the license agreement) of the recorded license agreement, and the publication would go against any third party with good faith. Another example is that, when a local Intellectual Property Office handles an administrative conciliation in a patent infringement dispute, the type, duration, royalty and payment methods etc. of the recorded license, would be taken as the reference for deciding the compensation. Moreover, according to the Some Provisions regarding the Applicable Laws for Injunction issued by the Supreme Court, Rule 4, Para 2, the Certificate of a license agreement recordal would be served as necessary proof for the interested party to request injunction. For some Chinese licensee, the recordal of exclusive license against the Chinese patents would be one of the necessary conditions to obtain the qualification as the High and New Technology Enterprises under the related Chinese laws and regulations, with which the Chinese licensee could enjoy many benefits, such as tax reduction and funding support from local governments.
We thus suggest foreign companies and individuals to
consider the benefits of the license agreement recordal in China, and to take the relevant procedures, for, with the recordal, the relevant parties are holding the obvious advantages, when their legalized rights in the license are violated.
2. Matters needed attention before the recordal of a license agreement
a. Time Frame: It is regulated under the Implementing Regulations of Chinese Patent Law, Rule 14, the recordal of a license agreement shall be made within three months from the effective date of the license agreement. In practice, if the time frame is overdue for a short time, usually less than 6 months, it is still possible for this license agreement to be recorded, but a Declaration announcing that the agreement is still valid should be further submitted with the SIPO. In case that the three-month time limit is out of date for a longer time, it is recommended that a new license agreement be signed to effectuate a new date for the recordal purpose.
b. Co-ownership status: In the situation of co-ownership, if there is an agreement concluded on exercising of the patent right, the agreement shall apply. In the absence of such an agreement, any co-owner may independently license another party to exploit the patent but only through the nonexclusive license. Nevertheless, the royalty fees obtained from licensing shall be distributed among the co-owners. In practice, when filing the recordal request for such a non-
exclusive license agreement at the SIPO, no document for attesting the consent of the other owner(s) is needed.
However, in case of an exclusive license agreement, the co-owner has to obtain the consent from the other co-owner(s), in order to grant the license to any third party. In practice, the Consent Letter from the other coowner is necessary when making the recordal of the license agreement at the SIPO.
c. No legal defects: a
Chinese patent or a patent application involved in a license agreement recordal, shall be attached with no legal defects. It is deemed that there are legal defects with the license agreement if:
- A Notification deeming as withdrawn, a Notification of Termination, a Notification of Non-Payment, or the like is issued by the SIPO to the patent or patent application, and no restoration request has been made yet;
- The patent is in the invalidation procedure;
- The patent is announced invalid or already expired or terminated;
- For the patent or patent application, the Court adopts preservation measures as to the ownership thereof; and,
- The patent or patent application is pledged to a third party, except that the pledgee consents to the license and authorizes the patentee or applicant to proceed with the license.
3. The necessary information to be involved in the license agreement
Generally speaking, a license agreement shall include the following elements when making the recordal at the SIPO:
- The detailed information of the licensor and licensee, i.e. their full names and addresses, and the Chinese patent (application) number(s) involved in the license agreement;
- The effective date and terminating date;
- The type of the license;
- The royalty and the practical way of the payment; and,
- The place to implement the license.
The examiners usually hold the following standards, when examining the above-mentioned elements:
a. As for licensor status: the licensor should be the patent owner; otherwise, further documents or procedures are needed. In case of a patent pool, in which various patent owners hand over their patents to one of them or a third party, in order to have the patents licensed among them or out to other entities, the licensor, usually the entity operating the patent pool, should be authorized by the patent owners, evidenced by the Letter of Authorization. Where the ownership of a patent is changed before the license
agreement, but yet to be recorded, the recordal of ownership change shall be attended and completed officially before proceeding with the recordal of the license agreement. In the latter case, the examiner requires that the effective date of the license agreement should be later than the effective date of the recordal of the ownership change.
b. As for effective date: the effective date of the license agreement refers to the effective date stipulated in the license agreement. However, the license acts could be traced to the past, and such understandings could be concluded in the license agreement.
The terminating date of the license agreement shall not exceed the expiration date of the licensed patent right. The expiration date refers to the end of the lifespan of a Chinese patent, which is 20 years for an invention or 10 years for a utility model and design, from their filing dates under the Chinese Patent Law. If there are a number of Chinese patents or patent applications, the terminating date of the license agreement shall not exceed the last expiration date of the patents or patent applications.
For most transnational license agreements, they not only include IP rights, but also a package of technologies and know-hows. The expiration date of the patents could, by no means, be stipulated as the benchmark of the whole license agreement. In this situation, our advice is to conclude the wordings for these different varieties of IP rights under the Terminating clauses, to meet the SIPO's requirements in formality. If the accurate date is hard or not desired to be indicated in the agreement, it is suggested that a description about the expiration date as the terminating date for the patent issues be added therein.
To finish this point, we would like to draw your specific attention to an important issue. That is, in the Chinese Patent Law, a Chinese patent is deemed as invalid on its expiration date. For example, if a Chinese patent's expiring date is Dec.30, 2015, legally, the patent right could not obtain the protection on this specific date and after. Therefore, if an accurate terminating date needs to be introduced in an agreement for a Chinese patent, it has to be a day prior to the patent's expiring date, taking the above example, the terminating date of the license agreement for that case would be Dec.29, 2015.
c. As for license types: generally speaking, there are three types of license in the Chinese Laws. One is the nonexclusive license. As for the exclusive license, the Chinese
Laws further divide it into two types as follows:
- The exclusive license, where only the licensee could exploit the licensed patent right, while the licensor and any third party could not make use thereof;
- The exclusive license, where both licensor and licensee could exploit the licensed patent right, while any third party could not make use thereof.
Before attending to the recordal, the licensor shall clarify which of the above-mentioned exclusive license it would like to record, since parts of the transnational license agreement is ambiguous on this issue, and the applicable laws are often foreign ones, which do not subdivide the exclusive license.
d. The royalty has to be put in the license agreement and should be reasonable, since it is one of the essential conditions to validate an agreement under the Contract Law. Without the royalty, the license agreement will be deemed as invalid and will NOT be accepted by the SIPO for the recordal purpose.
The royalty in a license agreement could be a fixed fee or a running royalty or the combination. It could also be free or a nominal amount, such as 1.00 dollar. When recording the license agreement, the SIPO will not examine the reasonability of the royalty, but requests the existence of such in the agreement. Furthermore, the SIPO demands a concrete amount of royalty in the requesting form, when making the recordal of the license agreement.
In a real license agreement, due to the unpredictable sales and profits, the running royalty is usually adopted by the licensor and licensee, on the basis of, e.g. gross sale, net revenue, net profits or per unit. It is quite normal and likely that the royalty base would not be available, when attending to the recordal at the SIPO, let alone a clear figure. However, under the current provisions, there is no workaround and this requirement has to be fulfilled strictly, if the license agreement needs to be recorded officially. In order to deal with this issue, when a running royalty is reached out by the licensor and license in an agreement, we summarize three ways for the readers' optional usage:
- Before the execution of the agreement, draft a clause, indicating the clear amount with the descriptions to limit this figure only for the recordal purpose in China;
- After the execution of the agreement, draft a confirmatory letter, indicating the clear amount, with the signatures of
both of the licensor and licensee;
- If a royalty base could be identified and predicted, and calculation methods could work out, it is possible to remain the agreement unchanged, but working out a figure on the basis of the royalty base and calculation methods to be submitted with the SIPO. And such figure should be evidenced by an explanation about how this figure is calculated out, which needs NOT to be signed by either licensor or licensee.
For all the efforts made above, what is on earth the importance of a concrete royalty amount for recordal? As we discussed the necessity to record a license agreement at the SIPO, at the beginning of this passage, the royalty has the legal force as the evidence, when the local Intellectual Property Office decides the compensation in an administrative conciliation. For another point, it was a necessary document when making the overseas remittance before Sept.1, 2013, under the "Notice on the Issues for Strengthening the Management for Remitting the Payments for the Imported Intangible Assets" stipulated by the State Administration of Foreign Exchange ("SAFE"). However, this regulation was abolished and replaced by the "Notice on issuance of the Management Regulations on the Service, Trade and Foreign Exchange" by SAFE on Sept.1, 2013, in which the Certificate for license agreement recordal was no longer necessary for the Chinese banks to make the foreign remittance for the Chinese entities. But, at present, some local banks may still require this document for prudence or local regulations.
4. The alteration and cancelation of the recordal of license agreement
a. Alternation: for a license agreement, which has been already recorded at the SIPO, if there are any changes on the involved Chinese patent(s), the type of the license, the royalty, the practical way of payment or the terminating date, the licensor and licensee could record the changes, with the revised agreements concluded by both of the licensor and licensee as well as the original Certificate of the license agreement recordal.
Among those alternations, in case the terminating date is desired to be prolonged, the licensor and licensee shall make recordal of the change, before two months from the terminating date of the original recorded license agreement. The necessary documents are the same as above.
b. With 30 days after the termination of the license agreement or early termination agreement, the licensor and licensee should make a request for the cancelation of the recordal at the SIPO.
If any Chinese patent involved in a license agreement terminated before the end of its lifespan or invalidated, the licensor and licensee should make a request for the cancelation of the recordal at the SIPO.
Nevertheless, at present the lateness or failure in making the request for the cancelation will not introduce any disadvantages or punishment under the Chinese laws.
5. Technology Exportation Involved in License Agreement
For Chinese entities, which license their patent rights to foreign entities, a Technology Exportation Certificate must be obtained under the Chinese Patent Law, before they record their license agreements over the Chinese patents at the SIPO.
The Technology Exportation Certificate shall be obtained by the Chinese entities at the local authority in charge of foreign trade and commerce under the "National Regulations on the Technology Importation and Exportation" promulgated by the State Council in 2002.
At present, the recordal of license agreement at the SIPO is still an examination emphasizing the formality over the content. When drafting the transnational license agreement, the above information is highly suggested for consideration, or a short-term license agreement specific to the recordal in China can be made as the supplementary documents to the master license agreement.
Hope our experiences, which have been accumulated during years of making the recordal of license agreements, could provide some helps to those who are involved in patent license in China.
OEM in China: trademark tips for international traders
By Yue Zheng (Ms.), Lei Fu (Ms.)
In China, a local original equipment manufacturer (OEM) will make products for a foreign trademark proprietor or entity with the authorisation to use its trademark and then export the finished products.
The products are processed and labelled according to the requirements of the foreign party. All the products will be delivered to the foreign party or designated consignees, who then pay processing fees to the Chinese manufacturers. Products under OEM for export do not enter the Chinese market.
Due to the thriving OEM business in China, trademark infringement issues arise. It happens that a foreign party who has the trademark rights in its local area and/or in other foreign countries may not have any trademark rights in China.
Chinese trademark law adopts the first-to-file principle. Therefore, when there is a registered trademark in China, the proprietor may claim that attaching the specific trademark on the OEM products constitutes trademark infringement. It may file an application for customs seizures, initiate administrative raid actions and/or civil litigations against the Chinese manufacturing enterprise, which will then seek support from the foreign party.
Whether OEM constitutes trademark infringement is not clearly set forth in the law and it remains controversial in judicial theories and practices. At the end of 2015, the Supreme Court handed down its decision in a retrial case and held that OEM for export does not infringe a Chinese trademark as long as the relevant products are exclusively for export.
The main basis for the Supreme Court's ruling is that attaching a trademark on the OEM products for export will not constitute trademark use under the trademark law. The reason being that as the products will not appear in the Chinese market, they cannot confuse Chinese consumers.
The Supreme Court's retrial case originates from a customs seizure. The trademark registrant in China initiated civil litigation after the seizure, while the foreign party had a prior registered trademark in the destination country of the OEM
"The Supreme Court handed down its decision in a retrial case and said OEM for export does not infringe a Chinese trademark as long as the relevant products are exclusively for export."
When handling litigation similar to the Supreme Court's case, we noticed that the following factual elements are taken into consideration by the courts in determining whether trademark infringement is constituted.
First, whether the business activity falls into the category of OEM for export. In OEM, the foreign party should provide designs and trademarks while the Chinese party processes the products and returns all the products to the foreign party.
In practice, in order to prove that the business activity falls into the category of OEM for export, Chinese manufacturers should file certain evidence with the court. This includes trademark registration certificates (notarised, legalised and translated copies) in the destination country; the entrusting contract/authorisation letter (notarised, legalised and translated); as well as information relating to the destination of the exported goods and the identity of the consignee.
If it is determined that the business activity belongs to OEM for export, it means that the products will not appear in the Chinese market. The trademark attached to the products does not "distinguish the origin of the products", and therefore does not have the "nature of a trademark".
In this way, attaching the trademark to the OEM products for export is not regarded as use of a trademark under Chinese law and would not constitute infringement.
Some courts will also look into another factual element: whether the Chinese party fulfils its duty of reasonable examination. This duty requires the Chinese party to a) check that the foreign party owns a valid trademark registration covering the OEM products in the destination country; b) check that the trademark attached on the OEM
products is identical with or very similar to the registered trademark owned by the foreign party; and c) obtain an authorisation letter issued by the foreign party.
Some courts also require that the trademark registration owned by the foreign party be registered before the Chinese trademark registration, to further prove that the foreign party has no bad faith registration in the trademark in the destination countries.
Tips for foreign parties
Taking into consideration of the above mentioned, we have made the following suggestions for foreign parties seeking to use a trademark for OEM purposes in China:
1. File trademark applications on time. Although recently the Chinese courts have been inclined to determine the trademark use in OEM would not constitute infringement, it is still necessary to file trademark registrations in China proactively. This better protects rights and prevents third parties from squatting and then taking legal actions against the foreign party's use of the trademark in OEM. The trademark registration in China will secure the use of the trademark in OEM.
2. Prepare documents for future trademark disputes. For example, while entrusting Chinese manufacturers for OEM,
the foreign party should ensure that the trademark registration in the destination country is valid, covers the OEM products and that the trademark used on the OEM products is very similar to or identical with the registered trademark.
3. If, unfortunately, the trademark proprietor in China initiates legal actions against the OEM for export, the foreign party should support the Chinese manufacturer and actively prepare for the legal actions to protect its own legal rights and interests.
The foreign party we refer to in this article should have trademarks registered in good faith in the destination countries. It is quite a different situation if the trademark registrations in the destination countries are obtained in bad faith.
Protecting geographical indications in China
By Yuncheng Li
As an important part of the intellectual property rights, geographical indications (GIs) have been paid more and more attention by the governments of various countries, and have become one of the focuses of negotiations on international intellectual property rights and negotiations on bilateral or multilateral trade.
There is no uniform definition for GIs or appellations of origin around the globe. The term was first mentioned in the 1883 Paris Convention for the Protection of Industrial Property, where, for the first time, GIs became an object of protection of industrial property rights. The first paragraph of Article 2 of the1958 Lisbon Agreement for the Protection of Appellations of Origin and their International Registration defines, for the first time, the connotation of appellations of origin, namely, a geographical denomination of a country, region, or locality, which serves to designate a product originating therein, the quality or characteristics of which are due exclusively or essentially to the geographic environment, including natural and human factors.
According to the first paragraph of Article 21 of the Agreement on Trade-related Aspects of Intellectual Property Rights (the TRIPS Agreement), reached in 1993 by the members of the General Agreement on Tariffs and Trade (GATT), GIs are "indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin."
In summary, GI is an indication formed by geographical name, which must be in actual objective existence; it can be the name of a place, locality, region or country, it can also be a historical name. But it must be a place which does exist. Most GIs in China are made up of two parts: the geographical name and the commodity name.
At present, there are two patterns for protection of GIs in the world: the special law protection system and the trademark law protection system. The special law protection is to protect geographical indications by legislation alone, and is mainly used in France and some countries in southern
Europe. The protection of trademark law is to protect the GIs by the registration of collective marks or certification marks.
Present Practice in China
On the administrative level in China, at present, the State Administration for Industry and Commerce/the Trademark Office (SAIC/TMO), the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), and the Ministry of Agriculture (MoA) have the power to protect and register geographical indications. The aforesaid three government agencies, however, supervise and protect GIs from different aspects or directions. The SAIC and TMO protect GIs as a trademark right; AQSIQ aims to certify the quality of production process and related production standards by means of registration of GIs; and the MoA focuses on the protection of primary agricultural products.
For further information, China, while a member of many international treaties on intellectual property, such as the Paris Convention, TRIPS, etc., is not a member of the Lisbon Agreement.
This author would herewith briefly introduce the registration/ certification mechanism and protection system provided by the aforementioned three governmental agencies in China.
China, through the SAIC and TMO, started to protect geographical indications since its accession to the Paris Convention for the Protection of Industrial Property in March, 1985.
In 1987 and in 1989, the SAIC, for the first time, protected the legitimate rights and interests of appellations of original items such as Danish Butter Cookies by means of two executive orders. In
December 1994, the SAIC issued the Measures for the Registration and Administration of Collective Marks and Certification Marks, under which GIs could be protected as certification marks henceforth. The Measures came into force as of March 1, 1995, and three foreign GIs were accepted as certification marks. On the second revision of the Trademark Law in 2001, new provisions regarding the protection of GIs as collective or certification marks were added to the law. In 2003, the SAIC issued new Measures for the Registration and Administration of Collective Marks and Certification Marks, which reinforced and strengthened the protection of GIs in China.
Many foreign GI right owners have started to register their GIs with the China Trademark Office (TMO) as certification marks or collective marks. Among them, in 2013, Le Conseil Interprofessionnel du Vin de Bordeaux the Bordeaux Wine Bureau filed certification mark applications for 53 winerelated GIs with the TMO.
By the end of 2015, China, through the TMO, has approved registration of a total of 2,984 GIs, including 83 foreign GIs. Domestically, the largest number of registered GIs of the five provinces were Shandong (425), Fujian (272), Hubei (249), Jiangsu (215) and Chongqing (201). Of the 83 foreign GIs registered, the largest number of filings was from France with a total of 33, followed by Italy (18 filings) and the United States (14 filings).
To register a GI with the TMO, the applicant shall apply for registration of a certification/collective mark furnishing the following documentations:
Application for trademark registration. Where an agency/attorney is entrusted, a power of attorney is required;
Copy of the certificate of legal identity, stamped or sealed by the applicant;
A document issued by the local government or competent department of the local government that authorizes the applicant to register and supervise the GI;
Documents and/or materials evidencing the existence and reputation of the GI goods or produce, including but not limited to the official county historical records, agricultural product records, or produce annals, with the official stamp sealed by the organ that
issues the same;
Relevant documents and materials regarding geographical areas and borderlines of the GI;
GI administration rules for using the certification/ collective mark;
Specification/explanation on the facts that the GI products have a specific geographical origin and possess qualities or a reputation that are due to that geographical environment or human factors; and,
Proof of materials that shows the applicant is capable or has the ability in the supervision and inspection of the GI.
Additionally, foreign GI applicants are required to furnish evidence that the GI has been registered or protected by the country of origin.
For more detailed information on the requirement of filing, please refer to TMO website.
The Trademark Office (TMO) of the SAIC is responsible for the examination of the applications for certification marks and collective marks whether the application is for a GI or not. During the substantive examination process, because of the uniqueness of a collective or certification mark, especially a GI, the absolute ground for refusal is substantially alleviated; but the relative ground of refusal, namely a search on prior similar trademark applications or registrations, is consistent in ordinary trademarks, which means a prior similar trademark will hinder the registration of a certification/ collective mark, and vice versa.
However, the court may have a different view on whether two marks are similar to each other when a GI certification or collective mark is involved in the judicial review on the grant and validation of a trademark. According to the Beijing High People's Court, which is the court of second instance/court of appeal for all trademark registration/granting related administrative cases in China, such a claim is not to be supported if any party claims that a GI, in the nature of a certification/collective mark, should not be granted because of the existence the claimant's prior similar ordinary trademark, whether its ordinary trademark is famous or not; similarly, such a claim is not to be supported if any party claims that an ordinary trademark should not be granted because of the existence of the claimant's prior GI. The court appears to regard GI, in the nature of a certification/collective
mark, as a different type of mark from an ordinary trademark.
In the case of an infringement of the trademark right of a GI that has been registered as a collective mark or a certification mark, the right owner may file a complaint with the SAIC or its national branch offices (the local AIC) or seek judicial protection with the court in accordance with the relevant provisions of the Trademark Law.
In August, 1999, the Administration of Entry-Exit Inspection and Quarantine (later incorporated into AQSIQ) issued the Regulations on the Protection of Appellations of Origin Products. Anyone who intended to seek AQSIQ protection of its GI or to use the AQSIQ Symbol of Appellation of Origin should obtain registration/approval of the GI with AQSIQ in accordance with the said regulations. In 2005, the AQSIQ issued new Regulations on the Protection of GI products, which abolished the previous regulations of 1999.
In light of the successful experience on international cooperation to protect GIs, the AQSIQ issued the Measures on the Protection of Foreign GI Products on March 28, 2016, to ensure that foreign GIs and the domestic GIs get equal protection in the territory of China.
Up to 2016, a total of 1,992 geographical indications have been approved by the AQSIQ, including 16 foreign ones.
Ministry of Agriculture (MoA)
In December 2007, the MoA began to carry out the certification of GIs. The MoA issued the Administrative Measures of GIs of Agricultural Products (hereinafter referred to as the measures) and is responsible for the registration of GIs of agricultural products. In particular, the Agri-product Quality Safety Center of the MoA is responsible for the work of examination and review.
In the measures issued by the MoA, GI refers to the mark where the agricultural products are from a specific region where the product quality and relevant features mainly depends on the natural ecological environment and historical and cultural factors of the region. Agricultural products as defined by the measures refer to the primary products derived from agriculture, namely, plants, animals, microorganisms and their products obtained from agricultural activities.
China enjoys a vast territory with abundant resources and long cultural history, hence has the need to establish an effective mechanism or system to protect geographical indications. In terms of administrative registration or certification of GIs, three governmental agencies have their respective administrative processes. The goal for establishing such administrative system is to prevent from unjustified use of GIs and to rapidly and effectively protect GIs. However, this multiple system sometimes leaves businesses and enterprises at loss, leading GIs protection and certification into an embarrassing position. Not many business or enterprises can tell the differences among these registration or certification systems; different parties or even competitors register identical GIs with different administrative systems and thus cause conflicts. It appears that this multiple system tends to cause unnecessary conflicts and misunderstanding and is not helpful to the improvement of administrative efficiency of governmental agencies in China. A geographical indication, according to the Beijing High People's court, is a private right; thus, it is not suitable for government agencies to intervene too much on the protection of a GI by means of administrative measures.
Because China's trademark administrative protection system (the SAIC) and judicial protection system are both complete and mature, it is this author's opinion that GI registration should adhere to the Trademark Law protection system, namely, under the norm of certification or collective mark registration, and that GI protection should also adhere to the Trademark Law system by way of protection by the SAIC system and judicial protection from the court. This hopefully can reduce unnecessary administrative costs and maximize the efficiency of the administrative organ, and also can provide GIs with powerful and effective judicial protection.
Continued from page 26
It should be noticed that an invalidation request over a prior name right is subjected to a five-year statutory period under the Trademark Law. For a celebrity well-known in China, not only his/her foreign name but also his/her Chinese name and his/her pinyin name are of great commercial value in China. It is therefore necessary to develop a proactive trademark strategy in China as early as possible.
Michael Jordan wins the trademark disputes over his Chinese name
By Xiaojun Guo
On December 8, 2016, the Supreme People's Court of China (the "Supreme Court") ruled on the disputes between the retrial petitioner (the plaintiff in the first instance), Michael Jordan, and the respondent (the defendant in the first instance), the China Trademark Review and Adjudication Board (the "TRAB") and the respondent (the third party in the first instance), Qiaodan Sports, Co. (the "Qiaodan Sports"), holding that three trademarks of Qiaodan Sports for the Chinese characters of the translation of "Jordan" are invalid as infringing upon the name rights of Michael Jordan, and reversed the relevant decisions made by the Beijing High Court.
The claim raised was that Qiaodan Sports had maliciously registered trademarks for the use of Jordan's surname under different classes in different ways and built its business almost entirely on that goodwill. Although Qiaodan Sports had significant investment in the brand for nearly a decade, Jordan prevailed over his name rights in Chinese characters. Elsewhere, the Supreme Court ruled in seven parallel cases that Michael Jordan had no rights over the Chinese pinyin transcription (i.e. Chinese phonetic spelling) of his surname, i.e., "QIAODAN" and "qiaodan;" and therefore upheld the decisions of the Beijing High Court regarding these seven cases.
Article 31 of the Trademark Law (2001) reads, "no trademark application shall infringe another party's prior existing rights". Said "prior existing rights" refer openly to any prior rights such as copyrights, design patent rights, trade dress. The Supreme Court held that a name right of Article 99 paragraph 1 of the General Principles of Civil Law could be such a prior right. Article 99 paragraph 1 of the General Principles of Civil Law recites that "citizens shall enjoy the rights of a name and shall be entitled to determine, use or change their personal names in accordance with relevant provisions. Interference with, usurpation of and false representation of personal names shall be prohibited." Further, the Court held that Article 2 of the Tort Law also supported that a name right could be a prior right.
The key point of the three cases essentially relates to
whether Michael Jordan enjoys the right to use the Chinese characters of the translation of his surname "Jordan" and the extent of such a right, if any.
The Supreme Court, when finding that the Chinese name for "Jordan" constitutes prior right in the context of the Trademark Law, considered the following factors:
(1) The specific name has a reputation in China and is well-known to the relevant public;
(2) The relevant public uses this specific name to refer to the natural person; and
(3) There is a stable correspondence between the specific name and the natural person.
Evidence showed that "Jordan" in its Chinese characters enjoyed wide popularity in China and had been used on various occasions to refer specifically to Michael Jordan. Two surveys submitted by the plaintiff showed that, 85% and 63.8% of the interviewees acknowledged that when the Chinese name of "Jordan" was mentioned, the first thought would be connected to the plaintiff himself, not the defendant. A stable correspondence between the plaintiff personally and the Chinese characters of the translation of the plaintiff's surname had been established. Therefore, the Supreme Court held that Jordan had the right to use the Chinese character translation for Jordan.
The Court found the name right of Jordan extended to the goods over which the three trademarks were registered, which would bring confusion to relevant consumers. The TRAB was ordered to reconsider the validity of the related trademarks and make new decisions.
The Supreme Court's ruling affirms that the right to use a name of a person is a prior existing right under the Trademark Law and a registered trademark shall not infringe another's right to use his name. It is clear that the extent of the right to use a name is variable and shall be determined on a case by case basis.
Continued on page 25
This publication is designed to provide our friends and clients with up-to-date information regarding intellectual property in China. It is not intended to provide legal advice. We welcome your suggestions and comments.