1. Impact of China's new patent law upon business in and outside China Victoria Wang 11th Dec

2. © Rouse 2009 Outline 1.General comment of New Patent Law 2.Key changes, related impact on business and practical strategies 3.Summary and take-away

3. © Rouse 2009 General comment of New Patent Law New Patent Laws: –Third Amendment to the PRC Patent Law Some good, some may be problematic –Prior Art Defense, raised patentability standard, broadened protection for design patent, etc –Discretion to deny injunctive relief and acquiescence Comment –appears to have drawn carefully a balance between the interests of the patent holders and the public by providing greater certainty in terms of patentability and enforcement

4. © Rouse 2009 Key changes, impact on business and strategies 1.Patentability standard raised. 2.Double patenting defined. 3.Combined filing of similar design patents allowed. 4.Damages calculation optimized, possible damages increased. 5.First filing requirement replaced by National security review. 6.Compulsory license modified. 7.Bolar Exception introduced.

5. © Rouse 2009 1. Patentability standard raised Absolute Novelty (Article 22) Old law: Unpublished prior public knowledge or use counts as prior art against a patent or application only if the relevant act occurred in China. New law: Absolute novelty: all prior public knowledge or use counts as prior art. –This is for both novelty and inventiveness considerations.

6. © Rouse 2009 1. Patentability standard raised (1)The impact on business in China: a.The importance of patent quality b.The importance of independent R&D activities and investment. (2)The impact on business outside China: a. Less risk of so-called junk patents (ie, patents obtained in China on the back of others’ foreign technologies and frivolous infringement claims based on them). b.The importance of evidence-collection on its prior use or publication. Note: It may be difficult to prove prior public knowledge or use in a foreign country to the standard most Chinese courts require.

7. © Rouse 2009 1. Patentability standard raised. Case study. Chint v Schneider nightmare! Tips from the case. 1. Foreign applicants shall keep an invention from being disclosed in any way anywhere before filing to obtain a patent for the invention in China. 2. When launching a new product in China, thorough freedom-to-operate searches are critical. 3.Pre-emptive invalidation proceedings should also be considered for any existing patents that represent a material threat. 4.The importance of documentary evidence to a Chinese court cannot be underestimated.

8. © Rouse 2009 2. Double patenting defined. Dual filing of an invention patent and a utility model patent (Article 9) General principle is that only one patent can be granted for an invention. An applicant can file, on the same day, both an invention patent and a utility model patent for an invention, but the applicant has to surrender a previously granted utility model patent for an invention patent to be granted.

9. © Rouse 2009 2. Double patenting defined. The advantages of double patenting: earlier protection and enforceability. longer term of protection. more flexibility.

10. © Rouse 2009 2. Double patenting defined. Suggestions for business: 1.Where possible file both. 2.Patent applicants must anticipate the need for double filing in advance. (Both applications must be filed on the same day.)

11. © Rouse 2009 3. Combined filing of similar design patents allowed. Article 31: Two or more similar designs used on the same product may be submitted together in one application.

12. © Rouse 2009 3. Combined filing of similar design patents allowed. Case: Invalidation of the six design patents on dyeing machine. Under old law, combined filing of design patents is forbidden. The applicant must file one-by-one for similar designs on the same product. While, the practice of serial applications was once deemed as violation of Article 9 (For any identical invention- creation, only one patent right shall be granted). And in this case, the similar patents was once declared as invalid due to the reason above.

13. © Rouse 2009 3. Combined filing of similar design patents allowed. The impact on business: A cost-saving and time-efficient way to protect your serial innovations in designs. Tips: No more than 10 designs in one application.

14. © Rouse 2009 4. Damages calculation optimized, possible damages improved. (1) The order of applying different methods of damages calculation is specified: loss of the plaintiff, profits derived from infringement, royalties, statutory damages. (2) Upper limit of statutory damages is set to RMB 1 million. (Current Supreme Court Judicial Interpretations set the upper limit as RMB 500,000.)

15. © Rouse 2009 4. Damages calculation optimized, possible damages improved. Case: GSM/CDMA patent: Samsung held liable for USD 5.9 million in Zhejiang province. The largest-ever compensation amount in China's mobile phone industry! The damages calculation is based on the profits of Samsung. (Under old law, the plaintiff was free to select any methods of calculation in his interest, and the court paid no attention to whether there is any loss for the plaintiff.)

16. © Rouse 2009 4. Damages calculation optimized, possible damages improved. The impact on business: Good news for patent right holders. More deterrence on patent infringement. Tips: Courts have discretion on damages award. For foreign right holders, it is still likely difficult to convince courts to award higher damages.

17. © Rouse 2009 5. First filing requirement replaced by National security review. Old law: If an invention is completed in China, a Chinese applicant needs to first file an application in China. New law: Anyone can first file in a foreign country, but he/it has to go through a “confidentiality examination” by SIPO first. –"Confidentiality examination" only applies to invention patents and utility models but not design patents.

18. © Rouse 2009 5. First filing requirement replaced by National security review. Impact on business: For those transnational companies, especially those who establish R&D centres in China and employ a centralised policy of patent filing, consideration should be given to this article and change of filing strategy accordingly. Failure to do so will result in a refusal to grant the corresponding patent in China, if ever filed. the applicant will have to wait two to four months to clear the national security review process before any subsequent foreign filings.

19. © Rouse 2009 6. Compulsory license modified. Old law: SIPO can grant compulsory licenses for the following reasons: –National emergency –For public interest –When an invention or utility model involves an important technical advance of considerable economic significance in relation to another invention or utility model

20. © Rouse 2009 6. Compulsory license modified. New law adds the following reasons for granting a compulsory license by SIPO: –Making drugs for export to countries or regions that are specified in international treaties that China has entered into. –Patentee has not exploited (or sufficiently exploited) the patent within 3 years starting from a patent grant, or 4 years starting from the filing date, whichever comes later, without a justified reason. –Patentee’s exercise of the patent right is an "act of monopoly" as determined in accordance with the law.

21. © Rouse 2009 6. Compulsory license modified. No case yet. Although no compulsory license grant has ever been reported in practice since the Patent Law was first implemented in 1984, the introduction of more detailed rules for granting compulsory licenses in the New Patent Law raises the possibility that compulsory licenses may be granted.

22. © Rouse 2009 6. Compulsory license modified. (1) Impact on domestic business: A good leverage in patent infringement defense and counterclaim against high patent royalties. (2) Impact on overseas business: More risk and uncertainties in patent enforcement. Be cautious in patent pool practice or patent alliance.

23. © Rouse 2009 7. Bolar Exception introduced. Article 69:No infringement if person or entity is making drugs and/or medical devices for the purposes of providing information for getting administrative approval.

24. © Rouse 2009 7. Bolar Exception introduced. The impact on business: The introduction of the Bolar Exception does away with the artificial delay created by the old law and consequently makes it easier for local generic drug makers to springboard onto the market as soon as patents on rival products expire. It levels the playing field between local and international pharmaceutical companies.

25. © Rouse 2009 7. Bolar Exception introduced. (1) Impact on local pharmaceutical industry: a good new. Tips for local companies: monitor important patents. Plan and act in advance. (2) Impact on foreign companies: a bad new. Tips: apply for peripheral patents surrounding the crucial patent. Plan you patent filing systematically and strategically.

26. © Rouse 2009 Summary and take-away 1.New challenges, New solutions. 2.Improve patent quality. 3.Double patenting where possible. 4.Uncertainties remain in enforcement and litigation.

27. © Rouse 2009 Question ？

28. Thank you Victoria Wang Tel: +44 20 75364116 vwang@iprights.com