A close look into China's hotly debated Patent Law

Editor's Note: China was only a manufacturing base for low-tech consumer products 20 years ago. But since the end of the 1990s, a growing number of multinational companies have established their research and development (R&D) centers in China. It is a core strategy of their localization in China as they try to better accommodate the demand of the Chinese market by using the local technology talents.

But a problem for these companies is how to transfer their technological breakthroughs achieved in China abroad. They are challenged by how to implement their patent strategies to better protect their R&D achievements in China.

Tian Junfeng, an attorney with Unitalen Attorneys at Law, analyzed China's Patent Law and Foreign Trade Law and gave some suggestions in this article. China Business Weekly will run the article in several issues. Below is the second part of it. The views expressed here are the author's own.

The above-mentioned situation has aroused wide attention of the parties concerned. As can be seen from the discussion of the third revision of the Chinese Patent Law, this issue has become a hotly debated topic as apparently reflected in the draft opinion on the third Revision of the Chinese Patent Law (hereinafter referred to as "the first draft") and the draft opinion on the third revision of the Chinese Patent Law submitted to the National People's Congress (hereinafter referred to as "the second draft").

A brief analysis of the amendments of some related provisions in the above two versions is provided as follows.

The first draft

Article 10: The right to apply for a patent, the patent application right and the patent right may be assigned. An assignment, by a Chinese entity or individual, of the right to apply for a patent, of the patent application right or of the patent right to a foreigner, a foreign enterprise or other foreign organizations must go through relevant procedures according to laws and administrative regulations.

In the amendment of Article 10, the "right to apply for a patent" is added in parallel to the patent application right and the patent right, and the "foreigner" is further clarified as a foreign individual, a foreign enterprise or other foreign organizations, thus broadening the range of the assignees of the rights. The legislative purpose here is to emphasize that, whether before the filing of the patent application, after the filing of the patent application but prior to the grant of the patent right, or after the grant of the patent right, the above-mentioned rights must be subject to the binding force of relevant Chinese laws and regulations, so long as they are transferred from China to some one in a foreign country, be it a foreign individual or a foreign enterprise. The laws and regulations referred hereto include the Foreign Trade Law, which is to be elaborated later on.

Article 20: Where any entity or individual intends to file an application in a foreign country for a patent for its or his invention-creation made in China, it or he shall file first an application for patent with the patent administrative organ under the State Council and shall abide by the prescriptions of Article 4 in this law.

Any Chinese entity or individual may, according to the international treaties concerned to which China is a party, file an international application for patent for its or his invention-creation. The applicant for the international application should abide by the provisions of the preceding paragraph.

In Article 20, the original term "Chinese entity or individual" is amended to "any entity or individual", and the term "domestic" is amended to "China". Such an amendment has broadened the coverage of the former R&D body. The legislative purpose here lies in that as long as the R&D achievements are achieved in the Chinese territory, the filing of a patent application in a foreign country must be made in conformity with the preceding provision, filing first a patent application in China, no matter whether the R&D body belongs to China or not.

Article 64: Where any entity or individual, in violation of the provisions of Article 20 of this law, unauthorizedly files first in a foreign country an application for a patent for an invention-creation made in China, its or his patent application for the invention-creation filed in China shall not be granted a patent right. In case of divulging an important secret of the State, it or he shall be prosecuted for the criminal liability according to the law.

According to the current Article 64, where a person, in violation of the provisions of Article 20 of this law, unauthorizedly files in a foreign country an application for a patent that divulges an important secret of the State, he shall be subject to disciplinary sanction by the entity to which he belongs or by the competent authority concerned at the higher level. In other words, only if he files in a foreign country an application for a patent that divulges an important secret of the State, shall he be subject to disciplinary sanction. If his action does not divulge an important secret of the State, he shall not be punished under such disciplinary sanction.

According to the above-mentioned draft opinion, where any person, be it a Chinese individual or entity or a foreign individual or entity, in violation of the provisions of Article 20 of this law, unauthorizedly files first in a foreign country an application for a patent, he shall be subject to penalty, his patent application for the invention-creation filed in China shall not be granted a patent right, no matter whether he divulges an important secret of the State or not. Thus the enforcement of penalty is intensified in the sense of the Patent Law.

Second draft

Article 10: The patent application right and the patent right may be assigned. An assignment, by a Chinese entity or individual, of the patent application right or of the patent right to a foreigner, must go through relevant procedures according to laws and administrative regulations.

In the amendment of Article 10, the original expression "must be approved by the competent authorities designated by the State Council" in the current Patent Law is amended to "must go through relevant procedures according to laws and administrative regulations", which emphasizes that, the transfer of the rights must be subject to the binding force of relevant Chinese laws and regulations. The laws and regulations referred hereto include the Foreign Trade Law, the Regulations of the People's Republic of China on Technology Import and Export Administration and the Administrative Rules for Technologies Prohibited and Restricted from Export, which are to be elaborated later on.

Article 20: Any entity or individual may file an application in a foreign country for a patent for its or his invention-creation made in China, subject to the secrecy examination by the patent administration department under the State Council.

Any Chinese entity of individual may, according to the international treaties concerned to which China is a party, file an international application for patent for its or his invention-creation. The applicant for the international application should abide by the provisions of the preceding paragraph.

In Article 20, the original term "Chinese entity or individual" is amended to "any entity or individual", "domestic" is amended to "China" and the expression "it or he shall file first an application for patent with the patent administrative organ under the State Council and shall abide by the prescriptions of Article 4 in this law" is amended to "subject to the secrecy examination by the patent administration department under the State Council". Such an amendment has broadened the coverage of the former R&D body and clarified the territorial scope of the invention-creation made, while cancelled the regulation that the application for patent shall first be filed with the patent administrative organ under the State Council.

To be continued

(China Daily 01/19/2009 page9)