On 1 October 2009 a new patent law came into effect in China bringing fundamental changes to the pre-existing law, and moving Chinese practice on patent prosecution and litigation further into line with current practice in other major countries.

On the prosecution side the main changes are a move to an absolute novelty standard and an overhaul of first-filing requirements and provisions concerning the assignment of patent rights. For patent enforcement and litigation, there are changes to compulsory licence provisions, a doubling of the maximum statutory damages available, confirmation of the doctrine of patent right exhaustion and codification in statute of the existing availability of pre-suit injunctions and evidence preservation orders.

As yet the accompanying new implementing regulations have not been finalised, but these are expected imminently. The below is a summary of the main changes brought about by the new law.

Absolute novelty requirement

The biggest change brought about by the new Chinese Patent Law (CPL) will be felt in the move to an absolute novelty standard compared to the current hybrid regime in which prior public use outside of China, and other non-publication forms of prior disclosure outside of China, do not count against the novelty of a Chinese patent. The change to an absolute novelty requirement will also have a profound effect on revocation actions against patents granted under the new regime.

First filing / secrecy examination

Under the new CPL all inventions completed in China are no longer required to be first filed in China. However, there is a new requirement for the application to be submitted for a secrecy examination before a foreign patent application can be filed, where that foreign patent application is the first patent application for that invention. As the penalty for noncompliance with this new requirement can be severe (the refusal to grant a patent for such an invention, and/or the possibility that the patentee would have to surrender any patent granted on such a patent application) it may be prudent to submit to the new secrecy examination procedure in all cases where there may be any doubt at all as to Chinese inventorship.

Approval for certain types of assignments

Under the new CPL, assignments of Chinese patents or patent applications from a Chinese assignor to a foreign assignee must now follow prescribed rules and procedures to be set out in the accompanying regulations. Depending on how this requirement is implemented, this may have great impact on joint ventures between multinationals and Chinese entities and/or Chinese inventors.

Compulsory licensing

Under the current patent law there already exist wide-ranging powers allowing the court to grant a compulsory licence to anyone unable to obtain a licence on reasonable terms within a reasonable amount of time for a Chinese patent. The new CPL adds additional grounds for the grant of compulsory licences. Additionally, where the patent in question relates to semiconductors, under the new CPL a compulsory licence may be awarded in the public interest if the patentee has behaved in an anti-competitive way.

Increase in statutory damages award

Under the new CPL where damages or an account of profits cannot be accurately assessed in a patent infringement case the maximum statutory award of damages (determined as a reasonable multiple of a reasonable royalty rate) has been doubled to RMB1m (just under US$150k). Also the ability for a patentee to recover reasonable expenses to stop infringement has also been introduced.

Clarification of patent right exhaustion and parallel imports

Under the new CPL both domestic and international exhaustion apply to products sold, or licensed to be sold by the patentee. Thus under the new CPL the act of parallel importation of a patented product will not be an act of infringement. However, the new CPL does not make clear how exhaustion will apply to exported products sold outside China under contractual restrictions.

Statutory availability of presuit injunction and evidence preservation orders

Currently, pre-suit (interim) injunctions may be obtained following judicial interpretations issued by the courts. Under the new CPL the existing practice will be codified in statute, and similarly the new CPL also codifies the existing practice for the granting of evidence preservation orders, which is an option that is particularly useful as discovery is not allowed in Chinese patent litigation.

Conclusion

The changes coming into effect on 1 October 2009 will fundamentally alter the landscape of Chinese patent prosecution and litigation, and will likely require changes to how both legal practitioners and patentees approach Chinese patents.

In addition to the more fundamental and obvious changes (such as the change to an absolute novelty regime), more subtle changes may be needed to applicants’ filing strategies to make sure that they do not fall foul of the new first-filing and assignment requirements. This is something that may prove tricky to navigate particularly in relation to multinational co-operative research ventures established between Chinese and foreign parties.

From a litigation point of view, the change to absolute novelty is likely to mean that patents that were previously considered at risk of invalidation, but were not attacked for lack of applicable prior art, may now be invalidated. Similarly, patents which were formerly considered not worth asserting against potential infringers may now be reconsidered following the increase in statutory damages available.