Why Chinese Patents Can Be Important to U.S. Marketers
We frequently recommend that our clients seek patent protection in China, even if they do not intend to market their products in China. As is well known, China has developed a formidable manufacturing base, and many patented products that become commercially successful in the U.S. and elsewhere in the world are “knocked off” in China. This is sometimes done by the same manufacturer that has been hired by a U.S. marketer to produce its patented products for sales in the U.S. or elsewhere. While such “knockoffs” may not be legally sold or imported into the U.S. because of our patent laws, it can still happen, as there is an active illegal economy. Also, such unauthorized products can be legally sold in countries where there is no corresponding local patent. We have also seen Chinese manufacturers file patent applications and register trademarks for products that they produce for U.S. companies, which can prevent the U.S. company from firing that manufacturer and selecting a different Chinese supplier. By securing and maintaining a patent in China, a U.S. company can have some measure of protection against its Chinese manufacturer.
The following summarizes some significant changes to the Chinese Patent Law that became effective June 1, 2021:
- The new law recognizes the use of broken lines to disclaim certain elements, as is common in U.S. design patent law.
- The design patent term, which was (and will remain) at 10 years for applications filed on or before May 31, 2021, will be 15 years for applications filed on or after June 1, 2021. This matches the 15-year term under U.S. patent law. The Hague Convention requires a minimum protection term of 15 years, and China’s move could signal an intent to join the Hague Convention.
The law has introduced a patent term extension of up to five years. For new drugs granted approval for marketing, the total patent term shall not exceed 14 years. This new law is also comparable to U.S. patent law.
Patent Term Adjustment
The new law has also introduced a patent term adjustment to compensate for unreasonable delays in the examination process, except those delays that are attributable to the applicant. Unlike the U.S. version of patent term adjustment, which is calculated automatically by the USPTO, the Chinese version requires the patentee to request the adjustment. Also, the adjustment is available only if at least four years have passed since the filing date, and at least three years have passed since the filing of the request for substantive examination.
The new law also implements an open license, for which there is no U.S. equivalent. Whereas in some countries, up to 40% of patents are commercialized, China has been experiencing a commercialization rate of only 10%. In an attempt to reduce transaction costs and facilitate and encourage patent licensing, the new law allows a patentee to declare its willingness to license the patent to any party. The patentee may specify the method of determining license fees. China will publish that decision by the patentee, and any party can then obtain a license by notifying the patentee and paying the appropriate license fees. China is granting a reduction or exemption from maintenance fees for patentees that participate in the program. In the event of a dispute between parties, mediation can be requested by China’s patent office or a lawsuit can be filed before Chinese courts. A patentee that has enrolled in the open licensing program can also withdraw from it, though this will not affect the validity of any licenses already granted.