The Third Amendment to the Chinese Patent Law will come into effect on October 1, 2009. One of most significant amendments in the new Patent Law is the confidentiality review prior to filing a patent application outside of China.

The current Chinese Patent Law requires the invention creation (including invention, utility model, and design) made in China by a Chinese individual or entity to be filed first in China. That means an invention made in China by a foreign individual or entity is not subject to the first filing requirement. Therefore, in practice, a wholly owned foreign enterprise or joint venture in China often circumvents this first filing requirement by transferring the invention to a foreign affiliated company.

The new Patent Law has replaced the first filing requirement with confidentiality review, stating that “where an entity or individual intends to file an application in a foreign country for patenting an invention or utility model accomplished in China, it or he shall report in advance to State Intellectual Property Office (SIPO) for confidentiality review.” The confidentiality review requirement is based on the place of invention, irrespective of the nationality or residency of the applicant. Compared with the first filing requirement, the confidentiality review requirement retains the government's ability to control or restrict some technologies related to national security export through review prior to filing a patent application outside of China. The new Patent Law limits the confidentiality review to the patent application for invention and utility model and excludes design applications. Design applications are drawn to a product's shape, pattern, or combination of the two, and is viewed as unrelated to issues of national security.

The Rules for the Implementation of the Patent Law (Rules) proposed by the China State Council set forth details of the review procedure. At present, the Rules are in draft form and have not been finalized, as they are currently subject to a comment period. As further amendments could be introduced during the review of the Rules, it is advisable to pay close attention to the legislative update to the Rules.

Under the current draft of the Rules, there are three ways to file a confidentiality review application. First, an applicant may file a request to SIPO and describe the technical solution in detail if he wants to file a patent application or PCT application directly in a foreign country for his invention or utility model made in China. Second, if an applicant prepares to file a patent application or PCT application in a foreign country for his invention or utility model made in China following the China domestic patent application for the same invention or utility model, the applicant can file the request to SIPO while/after filing the China domestic patent application. Third, if an applicant files a PCT application at SIPO for his invention or utility model made in China, he will be deemed to have filed the request simultaneously.

In the first and second scenarios, SIPO will notify the applicant within three months from the date of receipt of the aforementioned request (three-month notice period) if SIPO thinks the invention or utility model may involve national security or significant public interests and is thus required to be kept secret. The notice aims to inform the applicant that his invention or utility model made in China may involve national security or significant public interests and SIPO needs further research to make a decision. Before expiration of the three-month notice period, an applicant should not file the patent application in a foreign country. If the notice has not been issued within the three-month notice period, the applicant can file a patent application or PCT application in a foreign country for his invention or utility model made in China. If the above notice has been timely issued, SIPO will, within five months from the date of receipt of the request, make a decision on whether the pending application needs to be kept secret and inform the applicant of the decision. If SIPO fails to inform the applicant of the decision within the specified period, the applicant can file a patent application or PCT application in a foreign country for his invention or utility model made in China.

As for the third scenario, the Draft of Guidelines for Examination (proposed by SIPO and setting forth details for examination of a patent application) suggests a shorter confidentiality review period. Specifically, if the PCT application filed at SIPO involves national security or significant public interest, within three months from the date of receipt of the PCT application, the examiner should issue a notice of stopping to transfer the registration document and the search document for national security reasons and notify the applicant and World Intellectual Property Office that the application will not be handled as a PCT application, thereby terminating the international phase. The applicant would be barred from filing a patent application or PCT application for the invention or utility model in a foreign country if he receives such notice.

In a global market, there is increasing opportunity to have international cooperation. Some invention or utility model, particularly for those made by multinational companies, will be made through international cooperation and may involve the exchange of ideas across borders. Whether such invention or utility model is still subject to China's confidential review procedure is yet unclear. Under the new Patent Law, if an invention or utility model made in China has not gone through confidentiality review prior to filing the patent application in a foreign country, no patent right will be granted to such invention or utility model in China.