Chinese Patent Law

A Quick Primer on Chinese Patent Law

Historical Perspective

Historically, China refused to protect intellectual property. However, it has recently begun taking steps to offer such protection. China's historic refusal to protect intellectual property was due to two primary factors: communism discourages individual property, and the Chinese view copying as flattery. As a result, it has been estimated that 90% of Chinese government offices practice piracy and that 96% of Chinese software is counterfeit. These problems plague both Chinese and U.S. companies.

In the late 1970s, China recognized that it needed to protect intellectual property in order to attract foreign investment. Accordingly, China began passing comprehensive intellectual property laws in the 1980s. However, despite passing numerous laws to protect intellectual property, enforcement efforts were often lax. For example, when Chinese authorities found 650,000 unauthorized Microsoft holograms in 1992, Chinese courts imposed a $260 fine. In another early action, Microsoft received only $2,500 in damages when seeking $22 million. To begin addressing these enforcement problems, China has subscribed to a number of multi-lateral treaties, including the World Intellectual Property Organization (1980), the Paris Convention (1985), the Madrid Agreement for the International Registration of Trademarks (1989), the Berne Convention (1992), the Universal Copyright Convention (1992), the Geneva Convention for the Protection of Producers of Phonograms (1993), the Patent Cooperation Treaty (PCT) (1994), and the World Trade Organization (2001). Most of these treaties require nations to treat citizens and foreigners alike. Although these multi-lateral treaties have provided a framework for additional enforcement activities, China has, from a practical perspective, a substantial way to go to match the enforcement mechanisms of the western world.

Patent Prosecution In China

Under China's current regulatory framework, an inventor can designate China on a PCT application within twelve months of filing a U.S. application, whereby the Chinese filing date is retroactive to the U.S. filing date. However, the PCT only provides additional time to decide whether to pursue a Chinese patent -- inventors must still separately pursue protection there. And U.S. and Chinese patent prosecution differ. For example, while China recognizes patents of invention and industrial design patents (respectively similar to U.S. utility and design patents), it also recognizes utility model patents, which provide limited protection for improvements relating to shape or structure, but for which there is no U.S. equivalent.

Until 1992-93, China did not protect chemical or pharmaceutical inventions, believing inventors should freely share such inventions. Still today, software, business methods, methods of diagnosing or treating diseases, and many plant varieties remain unpatentable in China. In addition, China requires absolute novelty as a prerequisite to patentability, while the U.S. recognizes a one year statutory grace period. And while China grants patents to inventors who first file an application, regardless of who first invents an invention, the U.S. does the opposite. Other significant differences also exist. For instance, in China, foreigners must appoint an agent designated by Chinese authorities to represent them before the State Intellectual Property Office in Beijing. In addition, patents granted in China do not extend to Hong Kong or Macao, which both maintain separate and independent patent systems. Hong Kong, for example, offers both "standard" and "short-term" patents (with different levels of review and patent terms), while patents in Macao are regulated according to Portuguese patent law. Finally, the U.S. and China have different extension fee procedures, maintenance fee schedules, re-examination procedures, and some patent terms. The following chart summarizes several key differences

in patent prosecution.

Patent Litigation In China

U.S. and Chinese patent litigation also differ. As a preliminary matter, Chinese culture prefers arbitration and mediation, viewing litigation as a last resort. For example, Chinese patentees often ask a State administrative agency to mediate a dispute before instituting legal action. Moreover, in litigation, Chinese judges conduct discovery and collect evidence, whereas U.S. litigants do so. The U.S., unlike China, formally recognizes a doctrine of equivalents, uses prosecution file wrappers to determine invention scope, has a centralized patent appellate court, and does not recognize an innocent infringer defense. China, on the other hand, limits litigants to one binding appeal, forces patentees to issue compulsory licenses if they refuse reasonable license terms, and supports legal opinions with laws, statutes, and regulations (but not previously decided cases). While U.S. plaintiffs must prove infringement, Chinese defendants must prove non-infringement in certain cases. Finally, local favoritism and protectionism still exist, and the levels of protectionism often depend on where suit is brought. For example, judges in many Eastern cities, such as Beijing and Shanghai, tend to be versant in patent law, well-educated, and fair. The following chart summarizes several key differences in patent litigation.

What WTO commitments did China make?

When China joined the World Trade Organization (WTO) in 2001, it took on obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to protectt and enforce the intellectual property rights (IPR) held by U.S. and other foreign companies and individuals in China. Among other things, the TRIPS Agreement sets minimum standards of protection for copyrights and trademarks as well as minimum standards for enforcement of those intellectual property rights in administrative, civil and criminal actions and actions at the border. The TRIPS Agreement also requires that, with very limited exceptions, WTO members provide national treatment to the nationals of other WTO members with regard to the protection and enforcement of those intellectual property rights.

How are U.S. copyright and trademark holders harmed?

Although China's central government has displayed strong leadership in modifying a wide range of IPR laws and regulations in an effort to bring them into compliance with China's WTO commitments, some significant deficiencies in China's legal regime remain, and effective IPR enforcement