1 Patent Practice and Litigation in China John Huang Partner of AllBright Law Offices

Patent Practice and Litigation in China John Huang Partner of AllBright Law Offices September 1, 2006 All Rights Reserved

I.China Patent Legislative System 1.Patent Law a) Promulgated in 1984 b) First amendment in 1992 c) Second amendment in 2000 d) Third amendment is currently under discussion 2.Implementation Rules of Patent Law: amended simultaneously with the PRC Patent Law. 3.Judicial Interpretation from Supreme Court: for example, Several Provisions of the Supreme People's Court on the Application of Laws When Hearing the Patent Dispute Cases. 4.Local Regulation: for example, Patent Protection Regulation of Shanghai

II. Patent Types in China 1.Invention Patent: 20 years 2.Utility Model Patent: 10 years 3.Design Patent: 10 years

Statistics on Chinese patent applications from 2001 to III. Status of PRC Patent Applications

Breakdown of Chinese patent applications in III. Status of PRC Patent Applications

Analysis on PRC Patent Applications: ◆ The total volume of patent applications has increased rapidly and China has become No.1 in patent applications throughout the world. ◆ Invention patent, which is the most valuable, accounts for just 30% of the Chinese patents, and other types of patents are not substantially examined. ◆ As of the end of 2005, the number of patent application by foreigners has reached 503,674, accounting for 18% of the total applications filed. Moreover, among the applications filed by foreigners, 85% of which is for invention patents. III. Status of PRC Patent Applications

IV. Features of PRC Patent Protection 1.Various Authorities: Administrative authorities: police department, national and local IP office, and customs. Judicial authorities: prosecutor ’ s office, court. 2.Administrative Remedy v. Judicial Remedy Advantages: (a) Usually, a decision from an administrative authority ( “ AA ” ) is quicker than that from a court. (b) In terms of government fees, the fee for administrative procedure is minimal but the court fee is charged based on a progressive rate of the total claimed amount. (c) To some certain extent, a positive decision from the AA can be recognized as effective evidence for the patentee in a court proceeding.

Disadvantages: (a)The jurisdiction of the AA is limited to the territory where the administrative authority is located. (b)The remedy from the AA normally is limited to ceasing the infringement activities, and the AA has no power to make decision regarding compensation for the patentee. Any compensation request from the infringer has to resort to the court. (c)The AA has no power to render an injunction or property preservation, nor can the AA compel the infringer to enforce its decision. If the infringer fails to immediately cease the infringement activities, then the AA has to resort to the court system for enforcement. In summary, the proper procedure should be selected at different stage of the case for meeting different objectives. IV. Features of PRC Patent Protection

V. Several issues in PRC Patent Litigation Practice Case study 1.Cause of Action 2.Jurisdiction 3.Pre-trial remedies (a) Property preservation (b) Evidence preservation (c) Injunction In summary, different preservation measures shall be applicable to different types of evidences for meeting different objectives

4.Discovery (a) Limited discovery (b) “ Order of Investigation ” issued by the Court 5.Evidence (a)The Court usually accepts all the evidences submitted (b)The evidences gathered from overseas shall be notarized, authenticated, and translated by the translation institution designated by the Court Power of Attorney The identification certificate of the legal representative Evidence obtained outside China V. Several issues in PRC Patent Litigation Practice

6.Burden of Proof 7.Applicable Laws Chinese Civil Laws International Treaties 8.Damages ● No punitive damages. ● When the actual loss caused by the infringer or the illegal profit obtained by the infringer is not definite, the court can reward a compensation no more than RMB 500,000 on a case-to-case basis. V. Several issues in PRC Patent Litigation Practice

9.Enforcement ● Difficult for enforcing the judgment: social factors and regional protectionism in some areas of the PRC. 10.Relationship between Patent Invalidation and Patent Litigation Patent Invalidation: SIPO Patent Review Board Patent Litigation: designated intermediate court 11.Affirmation for Non-infringement ● Available for alleged infringer who is facing possible claims of infringement by the patent holder, and such infringement lawsuit has yet to commence.

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