Patents

Although Chinese Patent Law was enacted on the basis of the U.S. and European patent law systems, major notable distinctions between patent practice in China and the U.S. are discussed below:

Patentability:

Chinese Patent Law recognizes utility model patents providing limited protection for improvements relating to shape or structure, while U.S. Patent Law considers the equivalent as part of the design patent.  Until 1992-1993, chemical or pharmaceutical inventions are not considered as patentable subject matter.  Up to date, Software, business methods, methods of diagnosing or treating diseases, and many plant varieties are still unpatentable in China.

First-to-file” system and Absolute Novelty:

The Chinese Patent Law, like other European Patent Laws, adopts a “first-to-file” system, contrary to the U.S. “first-to-invent” system, requiring absolute novelty as a prerequisite to patentability.  There is no grace period under Chinese patent practice comparable to the one-year period under U.S. patent practice.  Any invention that has been publicly known or used in China, or disclosed in a publication anywhere in the world is excluded from patent protection.  This means that inventors must file Chinese patents for their inventions before they publish their inventions anywhere in the world or publicly disclose their inventions in China.    Nevertheless, there is a six-month grace period for inventions where such invention (1) was first exhibited at a Chinese Government sponsored or recognized international exhibition; (2) was first made public at a prescribed academic or technological meeting; and (3) was disclosed by any person without the applicant’s consent (“innocent infringer defense”).

Compulsory License:

In contrast to U.S. Patent Law, the Chinese Patent Law and its Implementation provides that a compulsory license for invention or utility model patents can be obtained under certain conditions as discussed above, and after the expiration of three years from the grant of the patent right.  It has been emphasized that such compulsory licenses are non-exclusive and nontransferable, and should be authorized predominantly for the supply of China’s domestic market.  The licensee has to pay “adequate remuneration, taking into account the economic value of the license.  The license fee is generally negotiated by the parties, and if no agreement can be reached, the SIPO will adjudicate and make a final decision.  In accordance with the MOU, the Chinese government has placed strict standards on granting compulsory licenses for the protection of valuable patents, and would decide each case on its individual merit.  In contrast, no compulsory license is available under U.S. patent law practice.

Patent rights:

Under U.S. patent practice, a patentee or assignee of a valid patent has only a “negative” exclusive right to prevent others from making, selling or using the invention protected by a patent.  However, a patent right does not give a patentee the right to make, sell or use his/her own invention.  In contrast, under Chinese patent practice, a patent right includes both “positive” and “negative” rights.  That means, a patentee not only has a right to prevent others from making, using or selling the invention protected by a valid patent, but (s)he also has a right to make, use or sell his/her own invention.  In fact, the patentee has to exercise his/her positive right to exploit the invention protected under a patent in order to avoid a risk of compulsory license.

Other significant differences in Patent Prosecution:

For example, foreign applicants must appoint a Chinese agent designed by Chinese authorities to represent them before the SIPO.  Chinese patents do not extend to Hong Kong or Macao, where they remain separate and independent patent systems.  Moreover, China and U.S. have different extension fee procedures, maintenance fee schedules, reexamination procedures and some patent terms. 

Patent Litigation:

Unlike U.S. legal system, Chinese legal system is a civil law system, that does not support case laws, and renders any decisions on legal opinions with laws, statutes, and regulations.  With respect to patent litigation, Chinese patentee prefer mediation and/or arbitration through administrative adjudication.  Because there is no Chinese counterpart to the U.S. concept of discovery, Chinese judges conduct discovery and collect evidence.  Each party is responsible for representing evidence to support their claims, and all evidence must be presented in court and subject to cross-examination.  While U.S. plaintiffs must prove infringement, Chinese defendants must prove non-infringement in certain cases.  In determining invention scope, unlike U.S. practice, Chinese practice does not recognize a doctrine of equivalents and file wrapper estoppel.  Chinese patent litigation also limits litigants to one binding appeal, recognizes innocent infringer defense, and forces patentees to issue compulsory licenses if they refuse reasonable license terms.  Because of local favoritism and protectionism, the decisions for patent protection and/or validity often depend on where suits are brought.

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