On January 9, 2010, the State Council of the People's Republic of China (PRC) finally approved the long-awaited new Implementation Regulation of the Patent Law (Implementation Regulation), which primarily addresses procedural issues in connection with the recent changes to PRC Patent Law. The Implementation Regulation will become effective on February 1, 2010, and a Chinese version is available at http://www.gov.cn/zwgk/2010-01/18/content_1513398.htm. Certain important amendments are discussed in this alert.

1. National Security Review Procedure

In connection with the newly introduced national security review, applicants seeking to file either in a foreign country or a Patent Cooperation Treaty (PCT) application with a foreign receiving office must provide a detailed description of the invention together with the filing of a request for national security review, regardless of whether or not a Chinese application has been filed. The SIPO is required (1) to inform the applicant within four months of the filing of the request if it believes that a national security review is necessary, and (2) to decide within six months whether or not the invention relates to national security such that it shall be kept confidential. If within the four- or six-month statutory period the SIPO has not responded, favorable decisions are assumed, and the applicant is free to file the foreign or PCT patent application.

Furthermore, the filing of a PCT application with SIPO is tantamount to filing a request for a national security review. The Implementation Regulation fails to provide any further details about how the review will be conducted in such a scenario. More guidance is expected from the Guidelines for Examination, which are still being reviewed by SIPO, the current draft of which appears to suggest a shorter confidentiality review period, as we reported in our previous legal alert: http://www.foley.com/publications/pub_detail.aspx?pubid=6421.

The new Implementation Regulation merely provides a vague definition of “invention or utility model made in China”; that is, inventions where substantive contents of the technical solution are accomplished in China. As such, uncertainties exist with respect to inventions made through international cooperation.

2. Invalidation Grounds Expanded

The new Implementation Regulation has expanded the grounds for invalidating an issued patent in accordance with the new PRC Patent Law. Two major new invalidation grounds include (1) the violation of the national security review requirement by the applicant, and (2) the illegal obtaining or use of genetic resources to complete the invention-creation.

In addition, applicants have a duty to disclose the use of genetic resources during prosecution of an application, and no patent will be granted if an applicant does not comply with this duty. However, failure to disclose is not a ground to invalidate an issued patent.

3. Inventor Reward and Remuneration

Most significantly, the PRC Patent Law entitles the inventor to receive monetary rewards and remuneration, which remuneration can be represented by a certain percentage of the license fees or the patentee's profits that result from exploitation of the patented technology.

Standards of such rewards and remuneration set forth in the current implementation regulation are applicable only to PRC state-owned entities. However, under the new Implementation Regulation, such standards also would be applicable to private entities, unless it is otherwise decided in the company policy or individual contract. Companies with operations in China, especially R&D activities, should strongly consider taking appropriate steps in advance of the effective date to prepare for this change.

4. Significant Changes Relating to Multiple-Design Patents

Under the new PRC Patent Law, applicants may file a multiple-design application for more than one similar design of the same product. Accordingly, the new Implementation Regulation provides that (1) the applicant shall identify one primary design in the brief description, and (2) not more 10 similar designs can be included in one multiple-design application.

The new Implementation Regulation clarifies a number of issues raised by the Third Amendment to the PRC Patent Law and provides those in the intellectual property field with more guidance on various procedures, though some uncertainties remain.