Highlights

(as on September 01, 2008)

PATENT LAW

Definition of Novelty

• China currently follows the “blended novelty standard”, that is, publication anywhere in the world destroys novelty but public use or other means of disclosure only in China constitutes prior art. To bring China in line with patent practice worldwide, a third amendment to the Chinese patent law proposes the “absolute novelty” standard, that is, publication, public use or other means of disclosure anywhere in the world would destroy the novelty of the invention.

Patentable Subject Matter

• China has a full-fledged product patent regime. The following, however, are not patentable:
• Inventions contrary to the laws of the State or social morality or being detrimental to public interest;
• Scientific discoveries;
• Rules and methods for mental activities;
• Methods for the diagnosis or for the treatment, of disease;
• Animal and plant varieties;
• Substances obtained by means of nuclear transformation.

Scope of rights

• The exclusive right of a patent owner include the right to “make, use, sell the patented product, or use the patented process, and use, sell the product directly obtained by the patented process, for production or business purposes” as well as the “the right of import” and “offer for sale” for product patents and process patents. In other words, advertising the product or displaying the product in a store or trade fair by an entity other than the patent owner is also prohibited.

Opposition

• Unlike India, there is no pre or post grant opposition in China and only invalidation/revocation proceedings can be used to challenge a granted patent. Term of Protection
• The term of protection for an invention patent is 20, years. The term of protection for a patent involving utility model or industrial design is 10 years. Compulsory licensing
• Compulsory license can be issued under three conditions:
  • Reasonable exploitation: Where any entity, which is capable of exploiting an invention, has made request for authorization from a patent right holder on reasonable terms and conditions (i.e., request for grant of a ‘voluntary license), and such efforts to obtain authorization have not been successful within a reasonable period of time, the Government may, upon the request of that entity, grant a compulsory license to exploit the patent.
  • Dependent Patent: if a patented invention involves an important technical advance of “considerable economic significance” in relation to a patent issued previously to another patentee, and if the exploitation of the later patent is dependent on the exploitation of the prior granted patent, the Government may, upon the application of the later right holder, grant a compulsory license to exploit the earlier patent.
  • National Interest: Where a national emergency or an extraordinary state of affairs occurs, or where the public interest so requires, the Government may grant a compulsory license to exploit the patent.

Burden of proof in infringement of process patents

• The judicial authorities have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process when the product obtained by a patented process is “new”. A product can be regarded as “new” if it
• Further, Chinese Patent Law provides that the entity or individual manufacturing the products need not necessarily provide details of its own manufacturing process, but is only required to demonstrate that it did not use the claimed patented process to safeguard the Defendant’s trade secrets.

Preliminary injunction

• Preliminary injunction, including an ex parte injunction, is available under Chinese Patent Law in cases where any patentee or an interested party can prove that another party is engaged or will engage in activities infringing the patent right of the patentee and if such infringement activities are not ceased or prevented from occurring on a timely basis, irreparable harm to its legal right will be caused. The Court may order suspension of such activities and preservation of the property which is the subject matter of the proceedings.

Damages

• Patent infringement damages are determined according to the loss suffered by the patent holder, or the profit made by the infringing party as a result of the infringement. When the loss or profit is difficult to determine, damages can be assessed by the Court based on a “reasonable multiple” of the patent royalties determined by the Court. Under regulations separately issued by the Supreme People’s Court, damages can be assessed at one to three times of the patent royalties that would otherwise have been obtained by the patentee under a hypothetical contractual arrangement. Further, if the level of patent royalties is not available, the judge has the discretion to award damages ranging from RMB 5,000 (US$ 666) to RMB 500,000 (US$ 66,670). On the other hand, as a result of infringement if actual damage has not occurred, but evidence can be produced that an irreparable harm is likely to the caused, a preliminary injunctive relief can be sought at a pre-litigation stage which can be affirmed in the final judgment upon establishment of the Defendant’s culpability.

Passing Off and Marking

• A unique feature of Chinese patent law is the provision of ‘passing off’ being a criminal act (which is absent in India). Where any person passing off a patent or process another patentee as its own, the administrative authority has the right to order that person to stop the passion off, and rectify the act. Further, the administrative authority may confiscate the income generated out of the infringement and impose a fine of not more than three times the value of the said income. In case there is no income, a fine of up to RMB 50,000 (US$6670) can be imposed.
• Where any person proclaims its non-patented product and non-patented process as patented one, for instance by false application of a fictitious patent number, the administrative authorities may order the person to stop the act, publish a public apology and/or impose a fine of up to RMB 50,000 (US$ 6670).

Design patents and utility model patents

• China’s patent law has provisions for grant, invalidation and enforcement of ‘design patents’ which are granted for ten years counted from the date of filing. There is no substantive examination at the time of grant of design patent.
• The patent law of China also provides for a third kind of patent rights, viz., ‘utility model patent’. This right is not available in India. The term is nowhere defined in the Chinese Patent Law but conforms to the definition prevalent in Europe and Japan. Utility model patents are also alternatively called “petty patents” in some jurisdictions. In China, a utility model, like a patent for invention, must possess the three attributes of novelty, inventiveness and practical applicability. However, an application for grant of utility patent is not subject to a substantive examination. Upon institution of enforcement proceedings though, the patentee must furnish a search report made by the Patent Office. No such search report is required for an invention patent.

TRADE MARK LAW

The salient features of China’s trade mark law are as follows:

Definition of trade mark:

• Trade marks are defined as all visible symbols that can distinguish products and services between different providers, including character, graphs, letter, numbers, three-dimensional marks (excluding those which due to the nature of the product, or required to achieve some specific technical effect, or on which substantial value depends on form) and colour combinations as well as the combinations of all or any of the above. Trade marks include collective trade marks and certification trade marks.

Status of unregistered marks

• Unlike common-law countries, a trade mark needs to be registered in China in case it is to be made a subject matter of enforcement action and/or a ground for proceedings before the Trade Mark Office – Trademark Review and Adjudication Board (TRAB). However, an exception has been made for well-known trade marks as described hereinbelow.

Well-known trade marks

• Effective June 1, 2003, China promulgated the Rule on Recognition and Protection of Well-known Trademarks (“Recognition Rule”) which replaced the earlier 1996 Interim Rule and standardized the procedure for the recognition of well-known trademarks. A “well-known trade mark” is a trade mark that is “widely known to the pertinent general public and enjoys a relatively high reputation.” The Recognition Rule eliminated the requirement of the 1996 Rule that a well-known mark had to be registered trade and “widely known to the market”.

Special Protection for well-known Trade Marks

1. The owner of a well-known but not yet registered trade mark may prevent others from registering a trade mark that is the same as, or similar to, the well-known trade mark in identical or similar categories of goods or services;
2. The owner of a well-known registered trade mark may prevent others from registering a trade mark that is the same as, or similar to, the well-known trade mark in all categories of goods or services;
3. The owner of a well-known registered trade mark may prevent others from incorporating the well-known trade mark in the name of their enterprise;
4. In terms of Article 41 of the Trade Mark law, the owner of a well-known registered trademark is not restricted by the vide-year time limitation period for bringing cancellation action against a trade mark registered in bad faith.

Application for recognition of well-known Trade Marks

• Under the Recognition Rule, the owner of a trade mark may apply to trademark office, TRAB, local office of the State Administration for Industry & Commerce (SAIC) or Court for recognition of its trade mark as well-known trade mark when one of the following situations arise:

1. Opposition against registration of Identical or similar trade mark
2. Requesting TRAB to cancel/revoke a registered trade mark
3. The owner of a well-known trade mark may request the local office of the SAIC to stop use of an infringing trade mark by submitting an application for recognition of its trade mark as a well-known trade mark. In the event that SAIC returns a finding in favour of the owner , it must submit an application for recognition to the Trade Mark Office within 15 working days from its receipt and take timely and appropriate action to stop use of the infringing mark.
4. Civil Case of trade mark infringement

In all of the above instances, if the well-known trade mark has not been registered in China, its owner may only contest the other person or company’s registration/use for identical or similar categories of goods and/or services. If the well-known trade mark has been registered in China, its owner may contest the other person or company’s registration/use in respect of any category of goods/services.

COPYRIGHT LAW

The Copyright law of China was adopted on September 7^th 1990. It has been subsequently revised in 2001 upon China’s entry to the WTO. Post 2001, the law accords equal protection to works of both Chinese and foreign authors /owners. The following are the salient features of China’s Copyright Law:

Works which enjoy copyright

The following works enjoy copyright under Chinese law: written works (akin to ‘literary works’); oral works (speeches, etc.); “Quyi” (traditional art forms as ballad singing, story telling, comical dialogues, clapper talks and cross talks) musical, dramatic, choreographic and acrobatic works; works of fine art and architecture; photographic works; cinematographic works; drawings of engineering designs, and product designs; maps, sketches and other graphic works and models; computer software; and ‘other works as provided for in laws and administrative regulations’, Copyright is not enjoyed by laws, regulations, resolutions, decisions and orders of State organs, other documents of a legislative, administrative or judicial nature and their official translations; news on current affairs; and calendars, numerical tables and forms of general use, and formulae.

Registration of copyright

In accordance with the principles of “Berne Convention for the Protection of Literary and Artistic Works” (Berne Convention) which China acceded to in 1992, registration of a work is not necessary to claim or enforce the copyright subsisting therein. However, as in India, there is a mechanism for copyright registration which is recommended since it is prima facie proof of ownership of copyright in the work in question. Moreover, insofar as software is concerned, in terms of The Measures for Registration of Copyright in Computer Software (“the Measures 2002”) issued by the National Copyright Administration on 20th February 2002, while registration of copyright in the computer software is not mandatory, the State is required to protect registered software on a priority basis.

Term of protection

The protection term of Chinese copyright to an individual author is life plus 50 years after death; if the owner/author is an entity, it is 50 years from the first publication of the work.

LAW AGAINST UNFAIR COMPETITION

• The Law against Unfair Competition came into force on December 1st, 1993. It is invoked in infringement proceedings, particularly proceedings related to infringement or passing off of trade dress/packaging or corporate name in conjunction with, or in place of, the relevant IP law where the right holder feels that the subject matter may not fall in any of the IP laws and//or that they may be inadequate to provide the necessary reliefs.
• Article 2 of the Law defines “Unfair competition” as “acts of operator which contravene the provisions of this Law, damage the lawful rights and interests of other operator, and disturb the socio-economic order.”
• Article 5 enumerates the various acts of Unfair Competition, i.e.,

1. Passing off the registered trade mark of another person;
2. Using, without authorization, the name, packaging or decoration peculiar to well-known goods or using a name, packaging or decoration similar to that of well-known goods, so that his goods are confused with the well-known goods of another person, causing buyers to mistake them for the well-known goods of the other person;
3. Using, without authorization, the business name or personal name of the other person on his own goods, leading people to mistake them for the goods of the other person;
4. Forging or falsely using, on his goods, symbols of quality such as symbols of certification and symbols of famous and high-quality goods, falsifying the origin of his goods, and making false representations which are misleading as to the quality of the goods.

GEOGRAPHICAL INDICATIONS

• China has enacted the “Provisions for the Protection of Products of Geographical Indication” which came into force on July 15th 2005.
• Opposition to an application for a geographically indicated product is provided for and protection is accorded without limitation of period.
• However, under Article 23 of the Provisions, where a manufacturer permitted exclusive use of a geographical indication fails to observe the relevant standards and administrative regulations in production, or fails to use the exclusive indication for two consecutive years, the Authority shall remove the registration.
• At present, there are over 600 applications for geographical indications, including 32 by foreign applicants; 171 appellations have been registered so far with preliminary approval extended to 25 others (out of these, 17 are in the name of foreign applicants). The first registration was that of ‘Florida Oranges’ in March 1998.

LAW RELATING TO INTERNET DOMAIN NAMES

• Domain names in China are managed and administered by China Internet Network Information Centre (CNNIC).
• The most important provisions are contained in China Internet Domain Name Regulations and CNNIC Domain Name Dispute Resolution Policy.
• The appellations available are: .cn, com.cn, .net.cn, .org.cn, .gov.cn, .ac.cn, .edu.cn, aadn (Administrative Area Domain Name) and .mil.cn.
• Contrary to international practice, individuals cannot register Chinese domain names. Nonetheless, China has approximately 4, 109, 020 domain names including names registered in .CN and International Top Level Domains (TLDs.com, .net, .org, etc.). There are approximately 843, 000 websites in china with 137 million users accessing them. This places the Internet population of China at No. 2, with USA at No. 1 with 210 million users. Some studies project China as overtaking USA in the next few years. (In contrast, India’s Internet population is 18 million).
• Insofar as domain name disputes are concerned, the same are managed by CNNIC Domain Name Dispute Resolution Policy and the Rules framed thereunder. This policy is similar to the Uniform Domain Name Dispute Resolution Policy which governs .com and other top level domains. The two designated centers for arbitrating on domain name disputes are China International Economic and Trade Arbitration Center and Hong Kong International Arbitration Center.

LAW RELATING TO PLANT VARIETIES

• Chinese government has been strengthening the protection of new plant varieties with great effort since its implementation of “Regulations on the protection of new varieties of plants” in 1997.
• On April 23, 1999, China took part in the “International agreement on the protection of new varieties of plants”, and thus became the 39th member state of “Union Internationale pour la Protection des Otentions Vegetales” (UPOV). Since the law of 1997, Chinese government has successfully issued and implemented “Implementation regulations on the protection of new varieties of plants (agriculture)”, “Implementation regulations for the protection of new varieties of plants (forestry)”, “Management regulations for new varieties of agricultural plants”, “Provisions for settlement of infringement cases of new varieties of plants”, and “Adjudication regulations of new varieties of plants reexamination committee under the Ministry of Agriculture”, thereby presenting a legal framework for enhancing the development of new varieties of plants.
• The protection of new varieties of plants (agriculture) came into effect on January 1, 2008. It stipulates that one new plant variety can only be granted one variety right. New varieties of plants that are against public interest or the ecological environment cannot be granted monopoly rights. By July 31, 2008, China has received 5099 applications for new varieties of agricultural plants, amongst which 1746 have been granted variety rights.

REGULATION ON INTEGRATED CIRCUIT LAYOUT DESIGN PROTECTION

• A registration system is set up for both domestic and foreign layout design owners to register their designs with the State Intellectual Property Office.
• Protection is granted to registered designs for a term of 10 years from the date of application or the date of first commercial exploitation.
• It is important to note that in line with international practice, there is a period of limitation for registration provided in the Regulation. According to Article 17, the intellectual property administrative authority under the State Council shall not register any layout-design in respect of which no application for the registration is filed therewith within two years from the date when it is first put into commercial exploitation anywhere in the world.

A BRIEF NOTE ON IP ENFORCEMENT

A unique two-way parallel protection mode- administrative and judicial-has emerged in China. Several departments in China are assigned with the duty to protect IP rights and determining which IP agency has jurisdiction over an act of infringement can be confusing. Following is a brief list of State agencies and the cases typically handled by them: Administration for Quality Supervision, Inspection and Quarantine (AQSIQ)- China’s standard setting agency, primarily tasked with ensuring Chinese product quality and standards also handles infringements of registered trademarks, when the infringing products are inferior quality goods. State Administration on Industry and Commerce (SAIC) – The Trade Mark Office, under SAIC maintains authority over trade mark registration, administrative recognition of well-known marks and enforcement of trade mark protection. The Fair Trade Bureau handles disputes arising under the Law of Unfair Competition, including trade secret matters. In enforcement efforts, SAIC has the power to investigate the case. When an infringement is determined, SAIC has the power to order that the sale of infringing items cease and to stop further infringement, order the destruction of infringing marks or products, impose fines, and remove machines used to produce counterfeit goods. State Intellectual Property Office (SIPO) at the national level is responsible for the examination of foreign and domestic patents and supervision of local SIPO bureaus. Provincial offices of SIPO generally handle the administrative enforcement of patent complaints. National Copyright Administration (NCA) is responsible for copyright administration and enforcement. NCA is also responsible for nationwide copyright issues, including investigation infringement cases, administering foreign-related copyright issues, developing foreign-related arbitration rules and supervising administrative authorities. General Administration of Customs (GAC) – The Customs Regulations ban the import/export of IPR infringing goods. In order for Customs to exercise this right, the IP holder must record its IP with Customs. The recordal certificate issued by Customs is valid for seven years and is renewable for seven-year periods. When the GAC’s investigation reveals a case of infringement, it has the authority to confiscate the goods. destroy and/or remove the infringing goods as well as impose a fine. Public Security Bureau (PSB) (police)/Procuratorate (prosecutors) – Under enforcement provisions of TRIPS, China is obliged to provide IP remedies through criminal enforcement for commercial scale piracy and counterfeiting. China’s laws and regulations stipulate that IP administrative authorities and Customs may transfer grave IP infringement cases to police and prosecutors (procuratorate) for initiating criminal investigation. Judicial System - The second track companies can pursue it through civil actions in the local People’s Court. Since 1993, China has maintained Intellectual Property Tribunals in the intermediate People’s Courts and Higher People’s Courts.