Upcoming IPR and R&D Program in Nanjing

randd

SIPO and USPTO will be co-sponsoring a program on IPR issues of concern to conducting R&D in China.  The seminar will bring together government officials, senior IP and accounting experts, and corporate IP counsels to provide information of value to R&D centers in China.   The event will be held on May 31, 2016 at 8:30 a.m.-5:00 p.m. at the InterContinental Nanjing, address: 1 Zhongyang Road, Gulou District, Nanjing, Jiangsu.

A summary of the sessions are included below:
研讨会由如下7个主题构成:

Session 1: U.S.-China Current R&D and Collaboration Environments

主题1: 中美当前的研发和协作环境

Session 2: The Roles of IP in the Research and Development Process

主题2: 知识产权在研发过程中的角色

Session 3: Protecting Your IP: Discussion on IP Filing Strategies in U.S. and China

主题3: 保护你的知识产权:对中美知识产权申请战略的讨论

Session 4: Commercializing Your Innovations

主题4: 创新的商业化

Session 5: Drafting and Negotiating IP License Agreements – Domestic and Technology Imports; Intercompany Ownership and Transfers

主题5: 知识产权许可协议的起草和谈判–技术进口;公司间的所有权和转让

Session 6: High and New Technology Enterprises and R&D Tax Breaks

主题6: 高新技术企业和研发税收减免

Session 7: Panel Discussion of US and Chinese Experts on IP related opportunities and challenges for companies with R&D facilities in China

主题7: 圆桌讨论:中美专家就在华设立研发中心的企业面临的知识产权机遇和挑战的讨论

Please RSVP by May 24, 2016 to Aster CHEN at PTO_Shanghai_Office@trade.gov (Please include your name, title and company/organization).  Seats are limited to 100 on a first-come first-serve basis.

请在2016524日前回复陈书新 PTO_Shanghai_Office@trade.gov 确认出席,回复时请提供您的姓名、职务及单位/机构名称。100个席位,先到先得

Photo subject to creative commons license.  Source: http://www.lastampa.it.

Legislative Plans and Updates For the Balance of 2015

The following is a summary of recent and some near-term legislative developments:

According to its legislative plan (September 2, 2015), the State Council will accomplish the following during the balance of 2015:

  1. Completion: Revisions to the Regulations on Patent Agents (SIPO is drafting)
  2. Preparatory work for submission to the NPC or regulations by the State Council: Anti-unfair Competition Law (SAIC is drafting); patent Law (SIPO is drafting)
  3. Research projects:   Antitrust Law (MofCOM, NDRC and SAIC are drafting); Regulations on Science and Technology Rewards (MoST is drafting); Copyright Law Implementing Regulations (NCA is drafting), Regulations on Protection of Olympic Symbol (Sports Administration and SAIC are drafting); Platform for Innovation in National Defense Regulations (State Administration for Science, Technology and Industry for National Defense [“SASTIND”] is drafting); Management of Military Engineering and Science Research (SASTIND is drafting); National Defense Patent Regulation (revision) (PLA  General Armament Department, MIIT and SASTIND).

In addition, the new Advertising Law has been put into effect (September 1). Article 12 specifically regulates advertising that involves mentioning patents, including requiring permission of the patentee, and prohibiting mentioning patents that have lapsed, terminated or been invalidated. Enforcement authority is with SAIC.    Falsely representing that a product is patented seems to have also caught the attention of Guangdong authorities, which also recently issued guidance on new thresholds for referral of “counterfeit patenting” cases from Guangdong IP authorities to criminal prosecutions.

On October 1, the Law on Promotion of Transformation of Science and Technology Achievements 促进科技成果转化法 (the STA Law) came into effect, after having been passed by the NPC on August 29, 2015. Article 45 of the STA Law requires minimum compensation for those who make important contributions to scientific accomplishments of their work unit in the absence of specific provisions in an agreement. These presumably include service inventions and are not limited to state enterprises. They may also extend beyond patents to trade secrets, software development, plant varieties and other “technical” IP matters. The STA Law specifies high minimums if an agreement is not negotiated and provides non-negotiable minimum compensation for “state-maintained research and development institutions and institutions of higher learning”.   The regulations also do not identify how someone who has made a significant but not an “important contribution” is to be compensated, particularly as it often takes a team to make an invention.

The relationship between the STA law and proposed service invention regulations, which were made available for public comment earlier this year, now appear even murkier to me than before.   The service invention regulations are not mentioned in the 2015 State Council legislative plan on IP, noted above. This may suggest that its consideration by the State Council is less imminent. On the other hand, the State Council may have been waiting for the passage of the STA Law to come into effect, as well as for further consideration of the imminent patent law revisions.  This might seem more efficient, but for the fact that the State Council has often drafted implementing regulations while the superior law has still not been adopted. This is evident in the current drafting work of copyright law implementing regulations in the absence of finalization of proposed revisions to the copyright law.

As a higher ranking document, the STA Law should govern an inferior-ranking law, such as a regulation. If there is a conflict, China will also look at which enactment is more specific and which is later in time to interpreting the STA Law. Minister of Science and Technology Wan Gang had specifically made it clear at the US-China Innovation Dialogue that the then-proposed law permits freedom of contract and we hope that this perspective is maintained.

As can also been seen from the legislative agenda, China seems to be rapidly integrating defense related IP into its overall IP efforts. Another item in legislative work is dealing with advertising for patented products.

I think a better focus regarding patent passing-off might be on insuring that the public knows that there is no necessary product quality association with a patented product, particularly in a system where patent applications are heavily subsidized and most of the patents are not examined for substance. I find it hard to believe that Chinese consumers are looking up patent numbers and making their own assessments on the contribution of the patent to determine if a product has the product quality it desires.

The factual information in this article is drawn from the newsletter of the Beijing Intellectual Property Institute and other sources.

Service Inventions A Focus Point Once Again…

Although there is nothing under a year old when I looked today on SIPO’s s special service invention webpage, the topic of how much freedom employers have in determining how to reward their employee/inventors, has once again become a hot issue. Much of the discussion on this topic is being raised by the Ministry of Science and Technology, although SIPO reportedly is focusing on this issue as well.

Here’s an update on where we are:

At the US-China Innovation Dialogue in July 2014, the US and China agreed to the following language:

The United States and China resolved to protect the legal rights of inventors in accordance with their respective domestic laws and regulations, and in line with their domestic laws committed to respect the rules and policies developed by employers and/or legitimate contracts between employers and inventors concerning the awards and/or remuneration of inventors.

This language was essentially reaffirmed at the subsequent JCCT in December 2014:

The United States and China commit to protect the legal rights of inventors in respect of their inventions and creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws, commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between employers and inventors concerning inventor remuneration and awards.

On March 2, 2015 the National People’s Congress also released a draft for public comment of The Law for Promoting Science and Technology Achievements (促进科技成果转化法修正案(草案)).  Here’s an unofficial translation of the changes that this draft makes to the old law.  This draft contains the following specific provisions on inventor compensation:

One article is added as Article 43: “After the commercialization of a service STA [Science and Technology Achievement], the STA completing entity shall give reward and remuneration to those who have made important contributions to the completion and commercialization of the STA.

The STA completing entity may prescribe or agree with its scientific and technological personnel on the form and amount of the reward and remuneration. When formulating the relevant regulations, the entity shall fully listen to the opinions of its scientific and technological personnel and make public the relevant regulations within the entity. ”

A revised Article 44 provides for default provisions for compensation, presumably if provisions are not established with technological personnel: “If the STA completing entity has not formulated such regulations or agreed on the form and amount of the reward and remuneration, the reward and remuneration shall be given to those who have made important contributions to the commercialization of the service STA according to the following criteria:

(1) If the service STA is transferred or licensed to others for implementation, no less than 20% shall be drawn out of the income from the STA so transferred or licensed;

(2) If the service STA is evaluated for investment, no less than 20% shall be drawn out of the shares or the proportion of contribution formed by the STA;

(3) If the entity implements the service STA by itself or in cooperation with others, no less than 5% shall be drawn out of the operating profits obtained from 3~5 consecutive years of implementation of the STA after its commercialization and successful start of production.

The criteria provided in the preceding paragraphs for the reward and remuneration given those who have made important contributions to the completion and commercialization of service STAs include the remuneration given to the inventors and designers of service inventions and creations that have received patent right in accordance with the Patent Law of the People’s Republic of China and the detailed rules for implementation thereof. …”

Although more general than the Service Invention Regulations that are under consideration by SIPO, this is a law that is more authoritative than a regulation. This law, along with agreed statements by the Minister of Science and Technology Wan Gang and OSTP Director Dr. John Holdren at the Innovation Dialogue could be read to show an inclination to favor contractual arrangements or corporate policies in establishing appropriate compensation for employee/inventors, although greater clarity concerning when such arrangements would be superseded by default provisions would be helpful.   Also of concern is that if more restrictive regulations are adopted in the Service Invention Regulations proposed by SIPO, they will be entitled to considerable deference as a subsequently adopted regulation which narrowly focuses on inventor compensation.  Moreover the regulations will be particularly important to SIPO itself in any enforcement or policy making it undertakes.

Another boost to regulating service inventions appears to have come from Premier Li Keqiang at  his March 5 speech at the recent 2015 “lianghui” – the meeting of the National People’s Congress and Chinese People’s Consultative Congress, where he stated that China should “enable innovative talents to share in achievements and profit, complete the transformation of science and technology achievements, and the service invention legal system” (使创新人才分享成果收益, 完善科技成果转化、职务发明法律制度).

Comments on the draft law are due by April 1.

As always, these are my personal opinions.

 

 

China’s Patent Domination?

Thomson Reuters just released a new report on China’s Innovation Quotient  (Trends in Patenting and China’s Trends in Global Innovation).  This is the fourth in a very useful multi-year series on Chinese patenting trends.

The report looks at Chinese domestic patent data to conclude that China has “risen in patent dominance” and, hence, innovation.  The report also notes that pharma is driving the patent boom.  China has nearly 80 percent of world share in patents for alkaloid/plant extracts, and around 60 percent of global share of pharmaceutical activity – general patents. However, the plant extract filings are held by thousands of individual inventors with a handful of patents each, rather than portfolios maintained by universities or corporate entities that would be seen stateside.  Many of these patents may also involve traditional Chinese medicine (TCM).  Low service invention rates, such as may be reflected in these patents,  may also reveal problems in patent quality.  A deeper analysis would need to correlate new patents with marketing approvals and actual patent maintenance and utilization rates.

The report also notes increasing numbers of forward-looking citations to Chinese data processing patents (1.17 times each).  This is far behind the United States (6.72 times forward looking citations), but exceeds South Korea and is close to Japan and Europe (p. 9).  To me this useful data suggests that the United States remains the source of pioneering innovations and corroborates Chinese notions that it has yet to achieve any breakthroughs in IT technology, despite it having become a manufacturing powerhouse and an overall increase in Chinese patenting activity.

The key weakness with this report is that it equates increases in patenting activity with “surge[s] in innovation.” (p. 6).  That assumption may apply in other countries, but it is less clear in China due to a number of factors including: low patent maintenance rates, patent subsidies and other government-supported market “distortions” such as awards to localities or enterprises, lower quality associated with the large number of non-service invention patents, lack of correlation with commercialization data, and the apparent disparity between low quality domestic patents and high quality overseas filings, amongst other factors.

The report also analyzes patent litigation data from the Ciela database (www.ciela.cn).   It properly notes that “Foreign plaintiffs in patent litigation win materially more often against domestic defendants than domestic plaintiffs do: a 75 percent win rate against a 63 percent win rate sinc 2006.”  However, the report does not underscore that this data – like the patenting data – needs to be treated critically. Foreigners are a disproportionately small percentage of the civil IPR docket.  Indeed, foreigners may only be filing a small share of cases out of concern for other risks of litigation, including low damages, government relations “costs,”difficulties of enforcing judgments, and difficulties in sustaining judgments on appeal.  This information might also be compared with data from the United States on foreign “win” rates .  In fact, the initial data that I collected showed that foreigners due worse on appeals in China than they do in the United States, and then they also do worse on appeal than they do in trials of first instance in China.

In an important but unrelated event, IPKey posted the presentations from its recent conference on IP and innovation.  The conference addressed many of the topics I outlined above, including the role of subsidies in China’s innovation strategies.

 

Withering Problems in China’s Patent Drive? – The Latest from SIPO

SIPO’s six month report on patent filings, available on line in China shows some surprising data for the first six months of 2014.

Regionally, Jiangsu and Beijing are in the number 1 and 2 slots in terms of patent applications.  Both regions showed continued growth (slide 3).  Guangdong, however, showed a slight decline.  Anhui, Guangxi and Guizhou showed the most increase in patent applications in percentage terms (70-90%).  Interestingly, while invention patent applications increased by about 4% from domestic applicants, foreign applications were down about 11% (slide 9).  In general, increases in  Chinese-origin invention patents applications in China were not offset by decreases in utility model and design patents, with an overall decrease of 8 percent for Chinese versus a 2% overall increase for foreigners.

In terms of patent grants, amongst foreign countries, the United States showed an increase of 12% from the same period last year, while Japan and Germany (number 1 and 3, respectively amongst foreign filers), both showed declines of about 4.5%, as reflected in the following chart:

foreignpatentrates

In this chart, the orange and blue bars represent 2014 and 2013 respectively.  Japan, the USA , Germany, Korea and France are the first countries listed to the far left on the x axis.    The y axis reveals the number of granted invention patents in 2014.  The chart shows that patent grants were down for all three top foreign applicants for the first half of 2014 (by the percentages at the top of this graph). However, this could be due to drops in applications from several years prior.

The problem of low maintenance rates for Chinese-source patent applications also remains acute.  As I have previously blogged, China already shows lower patent maintenance rates than other IP-5 jurisdictions.  This report makes it clear that Chinese filers appear to be the predominant parties in China who prematurely curtail patent protection (p. 15).

patentmaintenance

The green line represents domestic patent filers; the orange line is foreign patent filers.  The x axis shows the year of the patent, through its 20th year, while the y axis shows percentage of patents filed.  The close-up image in the upper right corner is of SIPO’s own preparation.

The report also identifies Beijing as the city with the highest density of patents per capita (nearly 5,000 per million people).  Shanghai and Tianjin follow.  This further underscores that innovation is an urban phenomenon (page 17).  Guangdong also remained the main filer of PCT applications with nearly 6,000 applications — outpacing second place Beijing with about four times the number of applications (p. 25).

Some of the more dramatic changes are in utility model patents and design patents.  UMP applications from China dropped by 7.5% and design applications dropped by 28%.  The most dramatic drops were in non-service applications for UMP’s and in service inventions for designs (24.5% and 34.9% respectively).  However, foreign applications for UMP’s and designs continue to grow from a modest base (p. 29).   Non-service inventions still play a large role in China’s domestic utility model and design patent application portfolios (about 26.4% and 50.7% respectively).

 

In summary, the data shows continuing dramatic changes in China’s patent system, including shifting trends amongst domestic and foreign filers.  My guess is that the report shows the impact of an increased focus on invention patents by the government, and a decline in subsidies for utility model and design patents in key patenting regions.  The increase in service inventions for UMP’s is significant as it may show a shift to patenting in UMP’s for enterprises that actually practice the invention.   The rapid increase in regions like Anhui may be due to active government support in those regions.  The drops in patent filings for foreigners are surprising considering China’s continuing economic growth.  The report also underscores a predictable rise in China’s cities as centers of patenting activity.  Although individual PCT filers are not identified, the growth in PCT filings is probably to continued growth of companies like Huawei and ZTE from Guangdong.

Outcomes of the Fifth US-China Innovation Dialogue

The White House Office of Science and Technology Policy recently released a blog on the results of the bilateral Innovation Dialogue with China with the Ministry of Science and Technology and other agencies: http://www.whitehouse.gov/blog/2014/08/13/outcomes-fifth-us-china-innovation-dialogue.

Of particular note are the provisions regarding sanctity of contracts involving inventor compensation. According to the blog:

The United States and China resolved to protect the legal rights of inventors in accordance with their respective domestic laws and regulations, and in line with their domestic laws committed to respect the rules and policies developed by employers and/or legitimate contracts between employers and inventors concerning the awards and/or remuneration of inventors.

For further background see: https://chinaipr.com/2014/04/03/new-service-invention-draft-regulation-and-web-page/ .

New Service Invention Draft Regulation…And Web page

SIPO released its latest draft for public comment of its proposed service invention regulations 职务发明条例草案 (送审稿), including a very useful Chinese language webpage on April 1.  The website contains additional reference materials including summaries of comments on prior drafts (August 2012, November 2012 and December 2013), a comparison of these drafts as well as a report on the Japanese service invention system and summaries of meetings and surveys.

The draft is the product of several ministries and agencies, including SIPO, Ministry of Education, Ministry of Science and Technology, MIIT, Ministry of Labor and Social Security, Ministry of Agriculture, NCAC, Forestry Bureau, China Patent Protection Association and the Chinese Inventors Association.   There is no stated deadline for submitting comments, rather the draft appears to have been published on a more open-ended basis to solicit public comments, including considering the viewpoints of comments previously submitted by others.  SIPO has once again done an admirable job of making its policy considerations public available.

The proposed rules appear to adhere to the principle that gives priority to contracts or agreements between employers and employees.  However, the drafters rejected proposals to place freedom of contract in the chapeau language of the draft regulation.  The drafters also believe that there are minimal compensation standards that should apply to employee compensation claims.  The draft removes prior references to employee compensation for software based on service invention standards, while maintaining compensation for plant variety protection employee contributions.  It also maintains protections for inventors when a patent disclosure is not filed for a patent and maintained as a trade secret, but the enterprise has benefited from the invention.  The employee inventor also retains a right to know about the circumstances of his/her invention being licensed to others which now is based upon circumstances where it has a need to know.

The survey of Chinese enterprises also provides useful background concerning SIPO’s motivations.  The data shows that enterprises recognized the need to provide service invention compensation.  However, there was concern about compensation for trade secrets, and interference in the management of enterprises to compensate inventors.  SME’s were particularly concerned about interference in their enterprise’s autonomy.

When I first blogged about this draft regs, I reached a high of 426 hits – an education for me about how important this issue is to readers of this blog.