The amendment to the Chinese patent law (New Patent Law) went into force on 1 October 2009 and has brought many significant changes to the Chinese patent system. For more information, see MWE China Law Offices’ China Law Alert “China Passes Amendment to the Patent Law”.
As part of an effort to clear up such ambiguities, Chinese government authorities have issued the Implementing Regulations for the New Patent Law (Implementing Regulations), approved by the State Council on 9 January 2010, and the Examination Guide for Examiners (Examination Guide), issued by the State Intellectual Property Office (SIPO) on 21 January 2010. Both the Implementing Regulations and the Examination Guide officially went into effect on 1 February 2010.
The Implementing Regulations and Examination Guide provide much-needed specifics regarding the New Patent Law. However, many of these details offer new challenges to multinational companies operating within China. In particular, companies that have research and development facilities located within the mainland of China are well advised to pay close attention to how compulsory SIPO confidentiality examinations could affect filings to be made in other countries, and remuneration for on-duty inventions.
Compulsory Confidentiality Examination Before Any Foreign Filing
As required by Article 20.1 of the New Patent Law, for an “invention-creation made within China” (defined by the Implementing Regulations as an invention-creation whose substantive content has been made within the geographical territory of the mainland of China), before filing an application for a utility model patent or any similar patent protections in a foreign country, an applicant must first apply to SIPO for a confidentiality examination. A confidentiality examination is a process conducted by SIPO to determine whether or not an invention-creation to be disclosed in a foreign patent application is related to a matter regarding “national security” and/or an “important interest” of China (e.g., aerospace or nuclear technologies).
Furthermore, the Examination Guide states that an applicant must provide technical specifications in its confidentiality examination application. These technical specifications must be in Chinese and “consistent with the content of the foreign patent application [to be filed]”. Unfortunately, neither the Examination Guide nor the Implementing Regulations provide any additional instructions regarding how the technical specifications to be contained within the confidentiality examination application can be consistent with the content of the foreign patent application. As such, it is unclear how detailed the technical specifications must be. In any case, a rough draft of the invention disclosure may be insufficient because of its inherent lack of detail. Therefore, such a requirement with respect to technical specifications may prove excessively burdensome and may ultimately lead to delays in the acceptance of a confidentiality examination application. As a result, the date for filing the patent application in question in a foreign country may be undesirably delayed.
In addition, Rule 9 of the Implementing Regulations provides that if an applicant does not receive from SIPO either a notice that states that the time for a confidentiality examination has been extended, or explicit permission to go forward with a foreign filing within four months from the date of the submission of a confidentiality examination application, then the applicant is permitted to directly file a patent application in another country without violating the New Patent Law. Put another way, if an applicant were to receive a notice regarding the extension of the confidentiality examination process shortly before the four-month period—for whatever reason—it is possible that the process could extend well past the four-month period mentioned in Rule 9.
Because of the potential for problems related to the length of time needed to complete the confidentiality examination process, multinational companies that have research and development facilities within China should consider choosing one of the following two options in order to be compliant with the New Patent Law:
- File a patent application in China and a confidentiality examination application at the same time, using the Chinese patent application as the requisite technical specifications for the confidentiality examination application
- Directly file a Patent Cooperation Treaty (PCT) application to SIPO
With respect to the first option, since the confidentiality examination application’s technical specifications are certain to be consistent with those contained within the Chinese patent application, it is highly likely the confidentiality examination process will be completed within four months (assuming that the patent application in question is not related to a matter concerning national security or other “important interests” of China). As such, the applicant would likely be left with enough time to file corresponding patent applications in other countries within one year from the Chinese filing date and, thus, claim the priority of the earlier Chinese filing date. Lastly, flexible language is used in the Chinese patent application to ensure that amendments made to any foreign applications filed subsequently would be supported by the Chinese patent application.
With respect to the second option, although a PCT application may be submitted in English, it is strongly recommended that lawyers well-versed in the New Patent Law and all other relevant Chinese law be consulted prior to its submission.
Statutory Remuneration for On-Duty Inventions
With the promulgation of the Implementing Regulations, we observe that the Chinese government has provided a statutory method for compensation regarding on-duty inventions in the absence of an agreement entered into between an employer and its employee-inventor, or rules regarding on-duty inventions issued by the employer in a manner in accordance with the relevant labour laws. (An “on-duty invention” is an invention-creation made by one or more employee inventors in the course of their work duties for their employer.)
Simply put, a multinational company possessing research and development facilities in China is well advised to take into consideration the new default method of compensation for on-duty inventions contained within the Implementing Regulations. Otherwise, it might end up paying a substantial price for its heedlessness.
Under the Implementing Regulations, if a patent for an on-duty invention is granted to an employer, the relevant employer-inventor shall receive no less than RMB1,000 (for utility model or design patents) or RMB3,000 (for invention patents). More importantly, the Implementing Regulations also provide that an employer shall pay the relevant employer-inventor no less than the following:
- 2 percent (for invention or utility model patents) or 0.2 percent (for design patents) of the profits derived from exploiting the patent in question
- 10 percent of all royalties related to any licenses granted to third parties regarding the patent in question.
As such, in a scenario where the default standard in the Implementing Regulations is applicable to a company that generates revenue from its patent portfolio, it is clear that it could potentially be obligated to pay substantial sums to its employee-inventors for those on-duty inventions for which applications were filed after 1 February 2010. Therefore, any companies that operate research and development facilities within China should carefully consider their current policy regarding on-duty inventions as soon as possible.
中文版