A balancing act

On August 25, 2008, the day after the Beijing Olympics came to a spectacular close, the Chinese legislature calmly resumed its review on a draft revision of the Patent Law. What is behind this Patent Law revision is the government's motivation to further stimulate domestic innovation and build an adequate and balanced patent system.

Since its enactment in 1984, the Chinese patent law has been revised in 1992 and 2000 to establish a better procurement process and protection system of patent rights.

From a lay point of view a patent is regarded as a tangible representation of intellect and creativity in technological advancement, whereas, from a legal perspective, a patent may be regarded as a temporary monopoly of a technological innovation granted to an inventor in exchange for a sufficient description of the invention claimed.

Recently, it was recognized that the patent protection has to be balanced against public access to the innovative technologies. The patent regime is now committed to adjusting the balance, both by raising the threshold for obtaining patents and by introducing various options to access patented inventions, but at the same time maintaining the incentive to innovate.

To be patented, an invention must meet certain statutory requirements. Thus, the inventor has to show, among other things, his invention is new or novel as defined in legal terms. An invention may be regarded as lacking novelty and thus cannot be patented if it was previously publicly used, known, or published. Based on the territorial scope of the disclosure, the novelty could be a relative one if the scope is defined as within the boundary of China or an absolute one if the scope is defined as anywhere in the world. Obviously, it is harder for an inventor to demonstrate his invention to be novel under the absolute novelty standard.

The draft revision of the Patent Law currently under legislative review would tighten the novelty requirement.

For assessing novelty, the current Chinese Patent Law adopts an absolute test for prior publication, and a relative test for prior use or knowledge. Whereas, the draft revision proposes that the absolute novelty test will be applied not only for prior publication but also for prior use or knowledge.

Under the current law, an invention could be considered novel if such an invention was new in China even though it was publicly used or known in a foreign country. Some patents granted under the relative novelty standard may prevent certain foreign-originated technologies from being freely used in China, and on the other hand, may also provide less incentive for domestic industries to make China-originated creations rather than simply copying or repeating foreign-originated technologies.

The proposed law revision on novelty issue aims to tilt the scale towards the industries, especially the local ones, and it may be helpful to foster domestic innovation in China.

A hang-up in the process of the patent revision of much concern to many domestic and foreign entities doing business in China is the regulation for patent applications for inventions made in China.

The current patent law requires that if a Chinese individual and entity intends to file a patent application based on an invention made in China, the patent application must be filed in China first. Based on the prior practice, this rule has raised much concern among inventors and entrepreneurs both domestically and overseas. To tackle this issue, the proposed draft revision tilts the scale towards to the inventors or applicants.

Intending to encourage Chinese nationals to file patent applications overseas and to enhance the competitiveness of Chinese industries in the global market, the patent regime intends to remove the obligatory rule of "first file in China". The draft states that any entity may file patent applications in a foreign country based on his inventions made in China. For national security reasons, however, the draft further states that the applicant should petition the Chinese patent office to run a secrecy check before filing a patent application in a foreign country.

This draft, however, is unclear about what happens if someone failed to make the requisite petition for a secrecy check, noting that an earlier proposal for a rather rigid patent-denial penalty was removed in this draft.

One might expect more detailed rules regarding the process and retroactivity of the secrecy check, for example, to be proposed later in the revision. For the regulations on inventions made in China, it can be envisioned that the scale is tilted toward the inventors, either foreign or domestic, whenever they have inventions made in China.

As a temporary monopoly, a patent provides the right for the patent owner to exclude others from exploiting the invention. The law requests the infringer who illegally exploited the invention to compensate the patent owner or to pay for the infringement.

To ensure more effective protection against patent infringement, the draft revision provides more specific and stringent measures on damages for patent infringements. The payment or damage can be measured based on the patent owner's actual loss caused by the infringing act, or based on the infringer's illegal gain derived from his infringing act, or based on reasonable fees or royalties for the use of the patented invention.

But if under the circumstances where none of the above remedies are certain, the relief for the patent owner, based on the draft revision, could range from 50,000 yuan to 1 million yuan, the cap being twice that of the current practice.

Further, the draft adds that the compensation paid by the infringer should include all reasonable costs for the patent owner in an effort to stop the infringing activities. Here, the intent is to increase the risks and costs of the infringers and ultimately to build an adequate system for patent protection.

The above are just a few important issues reflected in the law revision. The third revision of the patent law may be reviewed and eventually passed by the legislature later this year or more probably early in 2009. It is not yet finalized and we have to cross our fingers.

To make the patent system a stimulus to the nation's sustainable development, it is essential to strike a proper balance between the interest of inventors and the interest of the general public. We hope China's patent system is heading toward being an adequate and balanced one.

The author is partner and director of the US and Canada practices of Unitalen Attorneys at Law, one of the largest intellectual property law firms in China. The views expressed here are his own.

(China Daily 09/08/2008 page9)