Deep & Far Newsletter 2020 ©
Mainland China IP Updates
Beijing: China’s Unicorn City
According to PricewaterhouseCoopers (PwC), Beijing has 43% of China’s total number of unicorn companies. A unicorn is a term coined by the venture capital industry to describe a privately held start-up company valued at over a billion dollars. In Beijing, there are 82 companies that meet the definition, including cryptocurrency mining hardware producer Bitmain, chipmaker Cambricon, and artificial intelligence company Sensetime. Part of the reason for such a cluster in Beijing is that it is also a center for angel investors and other investment institutions as well as a city of excellence in software and information services. Beijing currently is ranked the fourth biggest technology area in the world with a strong focus on cloud computing, big data, artificial intelligence, software and information services. The World Intellectual Property Organization (WIPO) estimates the city invests around 6% of its GDP into research and development. To ensure a smooth path for further development, intellectual property rights protection has been increased by the passing of relevant laws. Strengthening IPR has had a positive effect on foreign high-tech investments in Beijing at around an estimated total of 9 billion dollars in 2019. Multinationals like Apple, Tesla, Merck and Mercedes-Benz all have R & D centers in Beijing. Officials forecast that an IPR protection system will be completed by 2022 that will address historic drawbacks such as long cycles in case handling, difficulty in providing proof of rights infringements, high costs and low compensation. Other plans include strengthening the judicial guarantee of commercial trial, improving arbitration and mediation channels and guiding the establishment of a technical support alliance for the inspection of IP infringement. In 2019, China finally overtook the U.S. to become the world’s largest source of international patent applications. The recent measures being taken show that IPR in China is modernizing fast amid a process of internationalization.
China and E.U. sign Agreement on GI Protection
The China National Intellectual Property Administration (CNIPA) signed the Agreement on Geographical Indications Protection and Cooperation with the E.U. on September 14th, 2020. Approximately 100 GI products from each party will be included in the initial stages rising to 275 in the next several years. This is the first time that China and the E.U. have agreed to recognize each other’s GIs on a large scale. Previously, recognition was piecemeal and only covered agricultural and alcohol items. Now, non-agricultural items such as Xuan Paper and Shu Brocade will be granted GI protection. GI protection will help producers stand out in the market as they will be allowed to bear the official GI symbol of the host party in the foreign market. In fact, this is the first time that the E.U. has allowed foreign GI holders to use its official symbols. As of August 2020, China had approved 2,385 GI products of which 61 were of foreign origin. These numbers are expected to rise significantly after the agreement.
Changes to the Patent Law in China
The fourth revision of the Patent Law in China’s history will come into force in June 2021. The last time the law was updated was in 2008. Since then, there has been a growing need for a more thorough system of protection for the legitimate interests of patent holders as China continues to integrate into the global IP structure and as China innovates and increases its own number of patents. First, more resources are being devoted to enforcement by local patent administrations such as new offices and more staff. Clearer guidelines about the burden of proof and higher fines for damages will make infringers think twice about breaking the law. Also, a patent open license system and other avenues for facilitating commercialization of patents have been added. There have been some changes to the rules about granting patents such as the criteria for the grace period of novelty of designs and the system of evaluation reports on patentability. Businesses are optimistic that these new laws will elevate the IP field in China.
Further measures to strengthen IP protection in China
The Supreme People’s Court of China has recently issued a guiding opinion about trial practice in order to enhance judicial protection for IP in key fields and essential technologies. As China has interactions with the rest of the world in such areas as business, maritime, IP, cross-border bankruptcy and finance, it has become of paramount importance to build greater capacity and efficiency into the legal system as it strives for international standards. Various measures are being prepared such as concrete execution of punitive damages for IP infringement, heightening of trade secret protection, curtailing of unfair competition, fine-tuning foreign-related IP litigation procedures, and studying IP litigation in other countries to establish litigation venues trusted and selected by mutual parties. Under the principle of rule of law, technological exchanges and cooperation between Chinese and foreign companies are expected to be safeguarded more than previously. This bodes well for the future expansion of IP protection in China.
Patent Laws Strengthened in the Pharmaceutical Sector in China
In order to ensure a safe and effective supply of medicines, higher penalties have been signed into law for violations against pharmaceutical patents. For example, those found guilty may have to pay up to 30,000 to 5 million yuan as compensation to the patent holder even if the loss cannot be determined exactly. Also, if someone is found to have intentionally infringed another person’s patent, compensation will be capped at five times the loss suffered. The law, passed in October 2020, aims to provide clarity to the IP protection system, promote high-level medical development and eliminate controversies in the health sector. Other measures to improve the patent approval process include allowing patent holders and those seeking market approval for a drug to initiate a lawsuit to get a verdict on whether a drug’s technical composition infringes on any other patent. The idea is that potential disputes can be nipped in the bud and a balance between the interests of patent holders and producers of generic drugs can be upheld. Another side effect might be that newly developed medicines can be brought to market more swiftly.
Patent Prosecution Highway in China StatisticsCurrently, CNIPA has PPH agreements with 28 countries including the United States, Russia, South Korea, Mexico, Japan, Malaysia and many European countries. It took an average of 2.3 months from filing a PPH petition to the issue of a first office action, and 10.3 months to granting a patent or closing a case due to rejection. Applicants used the Japan Patent Office’s work results in 16,423 cases, the U.S. Patent and Trademark Office’s work results in 12,461 cases, the European Patent Office’s work results in 4,697 cases, the Korean Intellectual Property Office’s work results in 2,416 cases, the German Patent and Trademark Office’s work results in 360 cases and the United Kingdom Intellectual Property Office’s work results in 202 cases since the beginning of the PPH pilot project. The CNIPA said it was expecting to speed up the process and add more jurisdictions in the coming years.