[DEBATE] : Revised Chinese Patent Law Aims At Quality, Compulsory Licensing

[Miles Teg]

Intellectual Property Watch

15 January 2009
Revised Chinese Patent Law Aims At Quality, Compulsory Licensing

By Jia Hepeng and Yuan Yue for Intellectual Property Watch
BEIJING - China’s newly revised patent law could create a more 
favourable environment for foreign companies to do research in the 
country, though measures are still needed to implement the law more 
effectively, according to some legal experts. The updated law also 
strengthens the government’s ability to use compulsory licences to 
produce patented products without permission and to protect the nation’s 
genetic resources from piracy.

The Standing Committee of the National People’s Congress - China’s 
legislature - passed the revision on 27 December. The revision will take 
effect on 1 October of this year. This is the third amendment of the 
law, since it debuted 1984.

“The new patent law has made it easier for our clients, enabling them to 
do more research in China,” said Lewis Ho, consultant to the law firm 
Simons & Simons’ Shanghai office.

While the previous two revisions, in 1992 and 2000, were aimed mainly at 
enabling China to absorb foreign technologies and to abide by 
international rules, the new effort has been focussed on improving 
independent innovation, Chen Guangjun, director of the standing 
committee’s science and technology office, told a press conference on 
the law revision.

The new law adopts the “absolute standard for novelty” principle to 
authorise patents rather than “relative novelty” stipulated in the 
previous law texts.

Under “relative novelty,” as long as an invention or technology is new 
in China, it can be patented in the country. But with the new “absolute” 
principle, a Chinese patent can only be given to an invention or 
technology that is totally new worldwide.

Meanwhile, the law encourages Chinese people and firms operating in the 
country to obtain international patents by deleting the previous 
stipulation that Chinese citizens or companies must first apply for 
Chinese patents before they file for foreign patents.

Previously, those filing applications in China could get an 
international patent through the Patent Cooperation Treaty (PCT) - an 
international system overseen by the World Intellectual Property 
Organization that allows patent applicants to obtain multinational 
patents while filing an application in only one country. Now they also 
can file under the PCT through other countries like the United States or 
Europe.

“In the past, even if you can obtained patents authorised by many other 
countries, the most original one on which they are based is in China and 
recorded in Chinese,” Ho said. “So if there is a lawsuit in which the 
patent is involved, it is very inconvenient to deal with. Translation 
alone could be a problem.”

In addition, he said, in the past, because the foreign patents 
authorised via the PCT were based on the original Chinese one, toppling 
the Chinese one could cause all other patents to be invalid. But given 
the green light, Chinese entities can now obtain more reliable US 
patents first, so that then all of the PCT patents could be more secure.

Long Road to Implementation?

Although the new regulation could benefit international research-based 
companies in China, they may not necessarily prompt Chinese filers to 
apply patents overseas.

China has become the world’s largest producer of internationally indexed 
engineering papers - which are often close to patentable technologies - 
but the patents granted in the United States to Chinese entities are 
only one-eighth of those obtained by South Koreans, according to leading 
Chinese financial magazine Caijing.

The fact that Chinese people seldom file international patent 
applications is decided by many factors, including the lack of 
incentives and particularly their low patent quality, said a patent 
reviewer at the State Intellectual Property Office (SIPO) who declined 
to be identified.

He added that the reason some people apply for international patents is 
simply to obtain government prizes. The government often provides 
subsidies or tax reductions to companies who have owned international 
patents as incentives to promote their innovation.

This view is echoed by Lin Xiaodong, director of the patent management 
office of Peking University Health Centre.

“Because the higher costs of applying for foreign patents, Chinese 
scientists would rethink the application if their patents do not have 
markets in foreign countries,” Lin said. Domestically, the effect of a 
higher patent standard proposed in the new patent law has to be further 
observed.

It is difficult for a worldwide novelty standard for patent applications 
to improve patent quality because the reviewers may struggle find 
evidence on whether a patent has been authorised in other countries, the 
SIPO reviewer said.

China Gains Compulsory Licensing Strategy

Another significant amendment for the new patent law is the newly added 
stipulation on mandatory patent licensing - such as for HIV/AIDS drugs 
in time of public health crisis when lower-priced treatment is needed. 
In South Africa and Thailand, the compulsory licensing of HIV/AIDS drugs 
already is an issue for international disputes.

But this is rarely possible in China.

Zhao Chen, a patent reviewer at the State Intellectual Property Office 
said that previously, China had government rules, but not laws, covering 
the compulsory licensing. This is the first time the compulsory 
licensing is written into a law passed by legislature.

Just as in the past, having the rule itself does not mean the Chinese 
government is likely to use it. “It is more possible that the government 
will use the new stipulation to negotiate with international 
pharmaceutical companies on their drug price, rather than directly 
licensing their drugs,” Zhao said.

Ho agreed, saying that given huge foreign investment in China and the 
country’s keen desire to absorb more, the government would be highly 
cautious in using the licensing clause.

Yet another aspect of the new law is stipulated articles to protect 
genetic resources in China from being pirated.

The new law stipulates that when people apply for patents originating 
from genetic resources, they should state the source or the patents 
would not be granted. Previously, there was no article in the patent law 
concerning this.

Jia Hepeng and Yuan Yue may be reached at info at ip-watch.ch.
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* Patent Policy
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