COMMENTS OF THE UNITED STATES PATENT AND TRADEMARK OFFICE ON THE PROPOSED AMENDMENTS TO THE THIRD AMENDMENT OF THE CHINA PATENT LAW
The United States Patent and Trademark Office (USPTO) appreciates the opportunity to
comment on the newly proposed amendments to the third amendment of China’s Patent Law.
The USPTO applauds the State Intellectual Property Office for turning its attention to
enforcement as part of an effort to revise the patent law. The USPTO looks forward to continued
dialogue as the process moves forward. In the meantime, we have the following comments to
the latest draft.
Where a dispute arises as a result of the exploitation of a patent without
the authorization of the patentee, that is, the infringement of the patent right
of the patentee, it shall be settled through consultation by the parties. Where
the parties are not willing to consult with each other or where the
consultation fails, the patentee or any interested party may institute legal
proceedings in the people’s court, or request the administrative authority for
patent affairs to handle the matter.
When the administrative authority for patent affairs handling the
matter considers that the infringement is established, it may order the
infringer to stop the infringing act immediately and compensate for losses
suffered. If the interested party is not satisfied with the order, he may,
within 15 days from the date of receipt of the notification of the order,
institute legal proceedings in the people’s court in accordance with the
Administrative Procedure Law of the People’s Republic of China. If, within
the said time limit, such proceedings are not instituted and the order is not
complied with, the administrative authority for patent affairs may approach
the people’s court for compulsory execution.
The administrative authority for patent affairs shall have the right to
investigate and punish the alleged patent infringer disrupting the market
order in accordance with the law; the patent administration department
under the State Council shall organize the investigation of suspected patent
infringement activity which has significant impact on the country. If the
administrative authority for patent affairs finds that the infringement is
established and disrupts the market order, it shall order the infringing party
to stop the infringement activity, confiscate the illegal earning, and may seize
and destroy the infringing products or special equipment used for
infringement, it may also impose a fine of not more than four times of the
illegal earning, or may impose a fine of no more than 200,000 RMB if there is
no illegal earning or if the illegal earning is difficult to be calculated.
After the decision of declaring the concerned patent right invalid or
affirming the patent right becomes effective, the administrative authority for
patent affairs or the people’s court shall, based on the decision, timely hear
and resolve the patent infringement dispute.
Article 60 empowers administrative agency officers to order the infringer to pay damages, thus
opening a new route for the recovery of damages. In the original patent law, promulgated in
1985, the administrative agencies were vested with the authority to order damages in patent
infringement cases. That authority was maintained during the 1992 amendments but in 2000,
during the period of time of China’s accession to the WTO, this authority was withdrawn, only to
appear again in the present draft.
For the reasons discussed above, we suggest the Chinese government consider carefully whether
the reinstatement of this authority is consistent with its policy to incentive innovation, as outlined
in the 2008 National Intellectual Property Strategy, the 2006 Medium to Long-Term Plan for the
Development of Science and Technology, and other similar plans and documents. The judicial
branch, which is more independent and less prone to allegations of local bias, is better equipped
to administer justice particularly in cases of technical complexity.
Having two parallel routes to pursue damages, administrative and civil, may also cause
confusion, particularly with the interplay between the administrative authorities and the courts.
The 2008 National Intellectual Property Strategy identified the problem of lack of coordination
between the civil and administrative systems. Enhancing the administrative authorities and not
providing clear guidance on the relationship between the two systems, including res judicata
effect of decisions, availability of evidence, effect of conflicting orders and reliance on
administrative rules can be problematic. For example, if the administrative officer orders the
defendant to pay damages, and the complainant is not satisfied with the amount of damages, can
the complainant initiate a new case with the court?
Will a meaningful standard of review be
applied for appeals, which addresses the potential res judicata effect of the administrative
decision? Will the decision bind other parties in interest in the case? If a case is initiated ex
officio, what will be the impact on any Patent Reexamination Board validity proceedings? These
and many other questions illustrate the potential complexities of this part of the provision, and
the complex challenges facing SIPO and local patent offices.
Article 60 also authorizes administrative officers to investigate and punish alleged patent
infringers for disrupting the market order in accordance with the law. While it is unclear in the
text whether Article 60 gives the administrative officers ex officio authority, the explanatory
notes clearly state that such authority is envisioned (see e.g., paragraph 3.5 of the explanatory
notes). As discussed above, because of the apparent lack of transparency of the administrative
enforcement system, and the possibility of local bias, we are concerned that giving local
authorities such power may lead to the potential for abuse.
This provision of Article 60 also references "disrupting the market order". There is no definition
of "market order" in the law. We note, however, that the Market Order Rectification Office of
the Ministry of Commerce considers antimonopoly violations to be within its jurisdiction (see
429041=83075823). While this may not be contemplated by the current language of Article 60,
the lack of clear constraints on SIPO’s use of its ex officio authority to investigate monopolistic
behavior nevertheless raises concerns that SIPO can exercise this authority when, in fact, that
authority could be better handled by the antitrust agencies.
The amount of compensation for the damage caused by the infringement
of the patent right shall be assessed on the basis of the actual losses suffered
by the patentee; where the actual losses are difficult to be determined, it may
be assessed on the basis of the profits which the infringer has earned through
the infringement. If it is difficult to determine the losses which the patentee
has suffered or the profits which the infringer has earned, the amount may
be assessed by reference to the appropriate multiple of the amount of the
exploitation fee of that patent under contractual license. The amount of
compensation shall include the reasonable expenses incurred to the patentee
for handling the infringement.
In case it is difficult to calculate the losses of the patentee, the profits
which the infringer has earned, and the amount of the exploitation fee of that
patent under contractual license, the administrative authority for patent
affairs or the people’s court may, on the basis of such factors as the type of
the patent, nature and circumstances of the infringement etc., determine the
amount of the compensation from RMB 10,000 yuan to RMB one million
For the willful act of patent infringement, the administrative authority
for patent affairs or the people’s court may increase the damages up to three
times of the amount that is decided according to the first two paragraphs,
based on the circumstances, the scale of the infringement and damages
caused by the infringement.
Article 65 authorizes the administrative agency, or the people’s court, to increase damages up to
three times of the amount that is decided for the “willful act of patent infringement”. The lack of
a clear definition or standard for determining “willful” is potentially problematic, resulting in
serious implications for the respondent in an administrative investigation. Willful infringement
can result in treble damages for the defendant, with the potential to cause severe financial
hardship to companies, therefore, clear standards are necessary to lessen the risk for unnecessary
and unwarranted financial disruption.
Further, in the US experience, the attorney-client privilege, which protects communications
between the client and its attorney, protects the confidentiality of sensitive attorney-client
information, including financial materials that the client would need to hand over to its attorney
as evidence for a case. As China lacks the attorney-client privilege concept, we are concerned
about how a balance could be struck between the need to gather evidence necessary to determine
willfulness and the need to protect the important attorney-client information of a company. For
example, charges of willfulness could be levied, which could result in “fishing expeditions” to
seek out confidential information of competitors. Moreover, as current protections for disclosure
of confidential information to courts or administrative agencies are weak, including the lack of
strong sanctions to parties who reveal the confidential information, and there are few real
deterrents to abusive patent case filings, there are good reasons to expect that patent cases may
indeed be initiated for purposes unrelated to actual claims of harm or infringement.
The Patent Reexamination Board shall examine the request for
invalidation of the patent right promptly, make a decision on it and notify
the person who made the request and the patentee.
After the decision declaring a patent right invalid or affirming the
patent right is made, the patent administration department under the State
Council shall promptly register and announce the decision. The decision
shall become effective as of the announcement date.
Where the patentee or the person who made the request for invalidation
is not satisfied with the decision of the Patent Reexamination Board
declaring the patent right invalid or upholding the patent right, such party
may, within three months from receipt of the notification of the decision,
institute legal proceedings in the people’s court. The people’s court shall
notify the person that is the opponent party of that party in the invalidation
procedure to appear as a third party in the legal proceedings.
Article 46 requires the Patent Reexamination Board (PRB) to examine the request for
invalidation of the patent promptly, make a decision, and notify the requestor and the patentee.
Article 46 also requires that once the PRB has made a decision, the decision should be promptly
announced. The apparent objective of this provision is to accelerate the process at the PRB so
that parties will not have to wait so long to appeal a case to the court.
However, we are concerned that the immediate enforcement of the PRB decision does not
address the concerns that the intermediate level courts have low levels of appeals from
administrative agencies, other than validity appeals of patent and trademark offices. With regard
to the validity appeals of patents, we also understand the rates of reversal are very low. Such low
reversal rates may be discouraging parties from appealing decisions from the PRB. In fact, we
have heard reports that although patent and IP litigation have increased dramatically in recent
years the number of appeals of PRB decisions to the court have been stagnant or even declining,
most likely in response to the perception that these appeals are unlikely to be successful.
Where any infringement dispute relates to a patent for invention for a
process for the manufacture of a new product, any entity or individual
manufacturing the identical product shall furnish proof to show that the
process used in the manufacture of its or his product is different from the
Where the dispute of patent infringement relates to a patent for utility
model or design, the people’s court or the administrative authority for patent
affairs may ask the patentee or interested party to furnish an appraisal
report of the patent right made by the patent administration department
under the State Council after conducting search, analysis and appraisal of
the relevant utility model or design as an evidence for trial and handling of
the patent infringement disputes.
In the litigation of patent infringement, the people’s court shall, at the
request of the plaintiff or the agent of the plaintiff, investigate and collect the
evidence including the alleged infringement products, the accounting books,
materials etc. which are under the control of the accused infringer. Where
the alleged infringer refuses to provide the evidence or move, forge or
destroy the evidence, the people’s court shall take, according to the law,
compulsory measures against the obstruction of the civil actions; where a
crime is committed, the criminal liabilities shall be prosecuted according to
Article 61 provides that in utility model and design patent disputes, the court or administrative
agency may ask the patentee or interested party to furnish an appraisal report made by SIPO to
be used as evidence in trial.
While it is unclear, under the current language, what the “appraisal report” entails, to help
alleviate rights holder concerns regarding the proliferation of unexamined utility model patents,
we suggest that the "appraisal report" contain the results of a full examination by SIPO of the
utility model patent in question. Further, we suggest that the report be made mandatory so that
the court or administrative agency would require the patentee or interested party to furnish the
results of a full examination of the utility model patent that would be used as evidence in trial.
Additionally, we suggest that the report be considered by the court or administrative agency prior
to the granting of injunctive relief.