On October 12, 2011, the State Intellectual Property Office (SIPO) released for public comment draft amendments to the Measures for Compulsory Licensing of Patents that were promulgated in 2003 (the “Draft Amended Measures”). According to SIPO, the Draft Amended Measures incorporate provisions in the Measures for Public Health Related Compulsory Licensing of Patents, published in 2005, into the 2003 Compulsory Licensing Measures. SIPO stated that the Draft Amended Measures are intended to facilitate the implementation of the amended Patent Law and associated regulations, which include compulsory licensing provisions.

As a matter of background, the Patent Law provides that compulsory licensing can be imposed where, among other things, “the use of patent rights is found to be monopolistic” . However, neither the Patent Law nor its implementing regulations define what conduct or use would be considered monopolistic in the compulsory licensing context. They also make no express reference to the Anti-Monopoly Law (AML) in this regard. The Draft Amended Measures are intended to fill the gap.

If adopted in the current form, the Draft Amended Measures will likely broaden the existing compulsory licensing regime. While the Draft Amended Measures do not depart significantly from the two sets of existing Measures, there are subtle changes that would allow for a broader interpretation of the grounds for compulsory licensing. For example, under the Draft Amended Measures, “monopoly conduct” will be a basis for imposing compulsory licensing. However, just like the Patent Law, the Draft Amended Measures fail to clearly define what the term means and does not make reference to the AML. Another ground for compulsory licensing is where “the patented invention represents a major technological advancement with remarkable economic significance.” The terms “major technological advancement” and “remarkable economic significance” are further examples of vague terms used in the Draft Amended Measures. Such ambiguity might give aggressive third parties more room to unfairly exploit the compulsory licensing provisions to seek access to patents technology without paying the patent owner reasonable compensation. It also leaves the government officials charged with handling compulsory licensing applications with too little guidance and too much discretion in reviewing and granting such applications.

The State Council Legislative Affairs Office is accepting public comments on the Draft Amended Measures on SIPO’s behalf until November 13, 2011. We will continue to monitor this legislative development and provide relevant updates in future issues of this bulletin.