IPO’s Comments on Draft Amendments to Patent Law Implementing Regulations

On January 14, 2021, IPO submitted comments to the China National Intellectual Property Administration on its Draft Amendments to the Implementing Regulations of the Patent Law. IPO’s comments included suggestions regarding: foreign filing licenses; mandatory patent contract recordals; industrial designs;  “good faith” patent prosecution obligations; inventor remuneration; pharmaceutical issues; and other areas.  Here are some highlights:

Foreign filing licenses (FFL’s): IPO suggests that patent FFL’s be combined with MofCOM export licenses.  This would make the FFL process in China similar to the USPTO/BIS process. Reducing redundancy in licensing approvals and export controls has been a long-standing concern which has become of increasing importance as China becomes a technology exporter and an important overseas patent filer.

Patent license recordals: IPO seeks to limit the legal effect of a patent contract recordal in infringement cases and in limiting the scope of the actual license. 

Design patent practice: IPO seeks clarification on patent drafting considering changes to Chinese law regarding protection of partial designs. 

Good faith:  IPO seeks to limit the draft regulations concerning proposed good faith requirements in patent prosecution.  In IPO’s views, the mere act of copying or piecing together content from other sources should not be the basis for invalidating a patent.  Rather, IPO  recommends  that “plagiarizing” and “piecing together” be replaced instead with “plagiarizing an invention.”  As mentioned in my other blogs, “good faith” has become an increasingly important aspect of China’s IP regime and is generally in need of a more expansive application in Chinese law.  I believe that the issue is complicated by the lack of a meaningful duty of candor by applicants to the Chinese patent office. If a design is copied from a third party which may already benefit from other protections (such as applied art in copyright or a three-dimensional trademark),  in my view it may be strong evidence of “plagiarizing an invention”,  as it may constitute an effort to defraud the rights holder. Similarly, if language is copied from another person’s patent application and the source of that language is not disclosed, the “plagiarizing” and “piecing together” might be evidence of a willful failure to disclose relevant prior art and mislead the patent office.  Perhaps one effective solution to this problem may be a more expansive concept of “duty of candor” or fraud before the patent office to CNIPA, which would mandate disclosure of potentially relevant prior art.

Inventor remuneration:  This has been a long discussed issue  A recent court case involving inventor remuneration in Shanghai is discussed here.    IPO seeks clarification of the role of “by-laws” as another type of agreement with an inventor creator.

Supplemental patent term certificates: IPO urges that CNIPA make the critical clarification that patent terms may be extended for drugs that are new to China, not to the world.  Consistent with the English text of the Phase 1 Trade Agreement IPO also urges CNIPA to recognize that patent term adjustment should be granted when relevant conditions are met.  The current draft of the regulation states that it “can” (可以)be granted.  IPO also disagrees with proposals to permit third parties to contest supplemental patent term decisions. 

Thank you, IPO, for sharing these excellent comments!

IPO’s Comments on Recent Patent Legislation: Untangling a Complex Web

IPO has graciously made available two recent comments on recent legislative proposals.  On December 10, 2020 IPO  submitted comments to the China National Intellectual Property Administration on Draft Amendments to the Patent Examination Guidelines (Second Batch of Draft for Solicitation of Comments) (“Draft Amendment”) published on 10 November 2020.   The examination guidelines comments are attached here.

IPO’s comments on the examination guidelines are primarily addressed to the patentability of computer programs in those revised guidelines.   IPO has reservations about the Patent Examination Guidelines making substantive changes in the requirements for determining whether applications contain appropriate subject matter for patent protection absent higher-order changes to the laws or regulations, such as the draft Implementation Regulations of the Patent Law of China (“Draft Implementing Regulations”) which were published for comment on November 27, 2020.  The criticism is a fair one, and is one that I also drew attention to in terms of CNIPA/SAMR’s draft rules regarding patent linkage.  It is also an almost inevitable outcome of the current flood of draft IPR-related legislation released for public comment or implementation, including a year-end rush to complete key laws such as the patent and copyright laws. 

Among its other comments, IP also discusses the comments on potential risks  of functional claiming in software patents, and on the need for a stated time period for delayed examination when an invention patent and utility model patent are filed simultaneously.

There are several other changes proposed in the examination guidelines, not discussed in the IPO comments but which may be inherent in its critique regarding changes in the examination practice without higher level guidance in the law. These changes also show a pattern of continuing reform in this area, including an increasingly flexible approach by China’s examiners in examining software-enabled inventions.  Among the changes, a computer program should be interpreted as a software product that realizes its solution mainly by a computer program.  In addition, technical means has assumed a higher priority among the three technical factors (technical problems, technical means, technical effect) in technical solution assessment.  A solution utilizing a technical means implemented by a computer necessarily solves a technical problem and thereby has a technical effect. If an algorithm in the claims improves the internal performance of the computer system, the algorithm features and the technical features can be considered to functionally support each other and be interactive.  The contributions made by the algorithm features to the technical solution shall thereby be considered in examining inventiveness. 

The IPO comments note that some case examples in prior guidelines have been removed in this Draft Amendment. IPO believes that illustrative examples serve an important purpose in providing clarity to patent examiners and guiding applicants to enable higher quality application (and claim) drafting.   I agree. By contrast to the lack of exemplars noted by IPO, there was inclusion of examples in the first batch of draft related examination guidelines, which included significant pharma-related changes.  The PTO translation of the draft is attached.  The amended guidelines were announced December 14, 2020 and are described in greater detail by Aaron Wininger.

IPO also submitted comments to China’s Supreme People’s Court on the Draft Provisions on Several Issues Concerning the Application of Law in the Trial of Patent Civil Cases Involving Drug Marketing Review and Approval (Oct. 29, 2020) The comments are attached here.  My blog on the draft is available here.  My blog also includes links to the previous IPO comments on  NMPA/CNIPA rules on linkage.    IPO flags such issues as: the lack of clarity regarding “abuse of patent rights”; the tight time constraints to prepare for litigation especially in the absence of mandatory notification to the patentee; and the removal in the final patent law of a linkage limitation to those patents listed in China’s “orange book,” which is not reflected in the draft.  

The generalized, persistent and pervasive Chinese concern around “abuse of rights” is troubling.  As I had mentioned in testimony before the House Committee on the Judiciary in 2016, there are  “concerns whether China is overly focused on IP abuse, and not sufficiently directed to improving IP use.“  While there are no doubt individuals and companies “gaming” the system, it is unclear to me if any special rules on IP abuse in patent linkage is necessary particularly at this time and in light of long-standing difficulties in commercializing patented innovative pharmaceuticals in China and other measures that address IP abuse.

The revised Patent Law was passed by China’s National People’s congress on October 17, 2020.  The various patent-related regulations, rules, judicial interpretations and other documents will no doubt be revised to conform to any significant differences made in higher level laws.

The huge number of legislative changes in China’s IP regime in 2020 is likely more extensive than a prior wave of similar reforms made when China joined the WTO.  This “tangled web” of legislation reflects: China’s increasingly sophisticated and complex IP regime; China’s efforts to better implement legislative aspects of the Phase 1 Trade Agreement; and China’s own desire to make necessary reforms in its quest to become an innovative economy.  There is nothing in the Phase 1 Agreement, for example, requiring China to make changes to its computer software patent regime, an area which many view as critical to China’s innovation and industrial competitiveness goals.   

On a related note, Berkeley Law is hoping to host a webinar early next year to review all of these legislative changes and discuss what additional changes in China’s IP regime may be occurring in 2021.

Thank you, IPO, for sharing your comments!

IPO Webinar on Specialized IP Courts and A Blog Too from Nottingham

Intellectual Property Owners hosted a great webinar on “China’s New IP Courts: What U.S. Companies Need to Know.” Speakers include Benjamin Bai from Allen & Overy, Gang Hu from CCPIT Patent and Trademark Office, and me (Mark Cohen).   The program occurred on December 2 at 12:00 noon. The fee was  $130.00. The content is available on line.

Here’s a recent blog I did for the University of Nottingham on the same topic.

As I noted in the webinar and the blog, the IP Courts are a bit of a misnomer.  The lion’s share of iP litigation (trademark. copyright) will not be handled by them.  The new courts are, however, closely related to judicial reform efforts.   Moreover, the courts are closely related to what China understands to be “innovation” – including utility models, and design patents, and excluding most copyright claims.  The fact that only technical trade secrets are protected and not business secrets such as marketing plans or client lists, underscores that these courts are not comprehensive IP courts but are targeted at China’s innovative sectors — as China understands them.

 

Mark