On June 20, 2020, the Standing Committee of the National People's Congress (NPC) published its 2020 version of draft amendments to Patent Law (2020 version) for comment. Millions of opinions have been collected in the past 15 months since the last version of draft amendment (2019 version). What are the main changes in this draft and what are the reasons behind these changes?
1. Compensation for the protection period of patent right
The 2020 version draft proposed compensation for the protection period of patent right. Its Article 42 includes two aspects: compensation for unreasonable delay of prosecution progress and compensation for the administrative examination for the new drug.
The former aspect is brand new. According to this article, the applicant has the right to request for an extended protection period of his patent when the patent takes him four years after the application date or three years after the date of substantive examination request, unless the delay is caused by the applicant himself. This provision offers compensation for unduly long prosecution. Nowadays, a patentee may receive an invention patent only about 22 months in average after filing the application thanks to the long-term effort of the China National Intellectual Property Administration (CNIPA). That's also a reason why the legislature proposes the compensation in the draft – if it takes 48 months to grant an invention patent in the context of the average 22-month prosecution cycle, it might be something wrong. This change may also spur the CNIPA to keep the prosecution cycle constantly shorter than four years because I bet the CNIPA does not want to receive millions of compensation requests for unreasonable prosecution time.
The later was firstly introduced in the 2019 version draft but includes several changes at this time. It is well understood that a new drug would take a long time to be approved for marketing. However, the generic drug companies may use the quality and efficacy-related data of the original drug through the consistency evaluation system to greatly save the review and marketing time for their generic products. This is unfair to the pharmaceutical companies who made the original and innovative researches. In the 2019 version, the compensation was only allowed to those drug patents that requested for both domestic and foreign marketing, which means the compensation was not available if the new drug is only for the Chinese market. The 2020 version removes this restriction, which means the foreign marketing request is not necessary. Second, the term is changed from "innovative drug" to "new drug". The literal meaning implies the compensation may be awarded to not only the innovative drugs but also those new drugs that are improved based on some original drugs. Finally, the extended protection period shall not exceed 5 years and the total protection period shall not exceed 14 years since approval for marketing.
2. Early-stage dispute resolution mechanism for drug patent
In the past, the patent owner of a drug has less to do even if he has found that a generic drug is requesting for marketing. The patentee has to wait and take actions until the generic drug is commercially available. Now, the 2020 version provides an early-stage dispute resolution mechanism. First, the patentee must register his patent(s) in the Chinese Marketed Drug Patent Information Registration Platform which will be set up according to the draft. Then, the patentee may initiate a lawsuit if he thinks a new drug falls within the protection scope of this registered patent even if the new drug is requesting for the approval of the China Food and Drug Administration (CFDA). On the other hand, the owner of the new drug may also launch a lawsuit to confirm that his product is not infringing the patent if the patentee does not sue. The court or the CNIPA must make a decision within 9 months. Each party may appeal if he is not satisfactory with the decision. Of course, the result of the CFDA review would be heavily dependent upon the outcome of the lawsuit.
This change provides an early-stage dispute resolution mechanism which intends to reduce the potential patent disputes during the administrative approval of generic drugs. First, the patentee has the duty to announce his patents around his products so that the patents could be well noted in advance and the generic companies may take actions correspondingly (design around, invalidity challenge or licensing). Then, the patentee has the right to sue even if the generic drug has not been approved by the CFDA so that the patentee may enforce his patent and is able to stop the marketing of the generic drug much earlier than before. On the other hand, the generic drug companies are also able to file non-infringing lawsuit to reduce the risk of patent disputes during the marketing request.
3. Local design patent
The current draft offers that the applicant may file a design patent for a local part of his product, for example, a brake of a bicycle or a car door handle. The local design patent was once proposed in 2015 but was removed from the draft in 2019. At this time, the local design patent appears once again for public comment.
One reason of this change is believed that China is trying to offer various IP rights in order to serve the increasing needs of the IP assets owner. Subsequent to the Graphical User Interface (GUI), local designs appear to be the next option so that not only can the appearance of the whole car be a design patent but its door handle can be a separate design patent. We think another reason of this amendment is that local designs are patentable in many other countries. After evaluating other running design patent systems, China believes it is good time to add the local design patent into the IP assets so that the IP owners may have more options to protect their intellectual properties.
4. Infringement damages
4.1 Calculation of damages
Nowadays, the damages caused by infringement are determined with priority. The damages are determined firstly based on the actual losses caused by the infringement. The patentee can turn to the benefits acquired by the infringer through the infringement only when the actual losses are difficult to be proved. That is, the calculation based on the actual losses has higher priority than the infringing benefits. Now, this statutory order is removed. The patentee may claim the damages based on actual losses or the infringing benefits.
We believe this is a clear sign that China intends to strengthen its IP protection. The patentee may choose the best way to calculate his damages in order to receive the monetary compensation as much as possible. This change also reduces the burden of proof for the patentee since the patentee bears no burden to prove the difficulty to determine the actual losses if he wants to determine his damages based on the benefits caused by the infringement.
4.2 Removal of lower limit of statutory damages
The statutory damages step in if the patentee fails to prove the actual losses or the benefits caused by the infringement and there is no licensing fee for the court's reference. In the 2019 version of the draft amendment, the statutory damages were lifted to 100 thousand Yuan to 5 million Yuan (current standard is from 10 thousand to 1 million yuan). In the 2020 version, the lower limit of 100 thousand has been removed. That is, the statutory damage will be up to the court with an upper limit of 5 million Yuan but without any lower limit.
Considering the average GDP of 79 thousand Yuan per person in 2019, some opinions argued that the lower limit of 100 thousand Yuan was a little bit aggressive because a substantial portion of infringement cases are only related to Design or Utility Model patents and the accused products are just simple ones like children toys or rulers. The lower limit of 100 thousand Yuan is too high to those simple cases. The removal of the lower limit would leave the judge more space to determine the damages at a reasonable level. On the other hand, the upper limit is still maintained at 5 million Yuan to match our economy development in the recent decades.
From these changes, we may sense from various aspects the public's interest and concerns about the ongoing amendments of our Patent Law. The opinions of the public would be continuously absorbed and reflected in each version of the draft by the legislature. The draft is now open for public comments and still far from the enactment. We still have time and chance to see if there is any revise and/or addition after this draft.
Originally published by CCPIT, August 2020
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