7 Reasons to Consider China in Developing an IP StrategyMay 19, 2017

China now may have a better patent system for enforcing patent rights through litigation, as compared to their patent protection in past years. Before you dismiss this notion completely, consider the following:

1. A very high win rate, up to 75% – 95%, is possible for a patent owner, especially a foreign patent owner, in a litigation.
2. Discovery is limited, so patent litigation is cheaper and faster than in the U.S. The litigation process is often completed in about a year.
3. An injunction is available for almost all winning parties. An injunction may be a more effective tool to enforce patent rights than damages, and is becoming more very difficult to get in the U.S.
4. A patent owner can block exports of infringed products leaving China. Considering that China has a huge market of its own, and also is the manufacturing factory for all kinds of products sold in the U.S. and around the world, one can, in effect, enforce a worldwide patent right by a single litigation in China.
5. Patent validity challenges are not available in the courts, but can proceed in the Chinese Patent Office. The validity challenge is usually a slower process than the litigation.
6. Damages are increasing, although it is less important considering the availability of an injunction.
7. Patent litigation is done in the specialized IP courts in Beijing, Shanghai, and Guangzhou. More IP courts will soon be available in Chengdu, Nanjing, Suzhou and Wuhan. Even the establishment of a National Appellate IP Court, like the U.S. Court of Appeals for the Federal Circuit, is on the Supreme People’s Court’s agenda.

Of course, to enforce one’s patent rights, one must obtain them in China first. New policies in China have made getting patents easier for some subject matters. For example, while recent U.S. Supreme Court decisions related to 35 U.S.C. §101 have made obtaining business method, diagnostic, and software patents more difficult, the State Intellectual Property Office (SIPO) changed its Patent Examination Guidelines last year to address the “urgent demand” for the “protection of new innovation results.” These targeted innovation results include software, business methods or rules, and pharmaceutical or chemical inventions. The revisions of the Guidelines in SIPO certainly make obtaining patents in these areas easier than in the past.

As an example, for encouraging patenting in general, especially for the pharmaceutical industry, the China Food and Drug Administration published just this month a draft policy announcement soliciting public comment on developing a more IP environment for innovative drugs, including data exclusivity and patent linkage between pharmaceutical regulatory approvals and patent infringement, similar to one provided by the U.S. Hatch Waxman Act.

China is by no means perfect for its general IP environment. In fact, in the recent US Trade Representative (USTR) “Special 301 Report”, China is still listed in the “Priority Watch List” for failing to provide adequate and effective IP protection. However, one should not deny that China has made a great deal of progress in the right direction. The reasons and new policy developments listed above should motivate U.S. companies doing business in China to consider China in developing an IP strategy now.

Xiaohong Liu, Ph.D., is an Intellectual Property Attorney in the Biotechnology/Chemical Patent Practice Group at McKee, Voorhees & Sease, PLC. He is a native Chinese speaker and would be happy to discuss this topic with you in further detail. For additional information please visit www.ipmvs.com or contact Xiaohong directly via email at xiaohong.liu@ipmvs.com.