USPTO Report on Intellectual Property in China: Value, Validity, and VolumeJanuary 15, 2021

Last January the U.S. and China signed an Economic Trade Agreement which required China to overhaul its scheme of intellectual property protection. In October of 2020 the National People’s Congress passed new amendments to the Patent Law, which will come into effect on June 1, 2021.

The most significant amendments to China’s patent law relate to patent enforcement and civil litigation. In particular, the amendment awards courts the ability to grant punitive damages in the amount of up to five times actual losses suffered, for cases of willful patent infringement. The amendment also vests the China National IP Administration (CNIPA) and local patent administrative authorities with additional powers. CNIPA will have the authority to handle and combine cases involving the same patent while local patent administrative authorities can impose substantial fines for cases involving counterfeiting.

Besides changes to civil litigation, the amended Patent Law introduces a six-month novelty grace period. In cases of extraordinary circumstances or national emergency, a disclosure six months or less prior to patent application filing will not obviate novelty of the invention.

The changes to Chinese intellectual property law come amidst increased scrutiny of China’s patent and trademark examination systems. Chinese trademark and patent filings have increased dramatically in the last few years. In terms of trademark applications submitted to domestic authorities around the world in 2019, China received more than half (51.4 percent), when measured by class count. Filings in China in 2018 surpassed those of the other members of the so-called TM5 (the five largest trademark offices in the world: China, the United States, South Korea, Japan, and Europe).

However, in a report issued on January 13, 2021 by the U.S. Patent and Trademark Office, the USPTO observed that many of the Chinese trademark filings are made in bad faith or are heavily subsidized by the Chinese government (often to the extent that the subsidy exceeds the costs of registration) encouraging the pursuit of applications without any intent to use the trademark in commerce. Similarly, for patent applications, the USPTO observed that China establishes patenting targets, effectively requiring state-owned enterprises, universities, and public research institutions to file a certain number of patent applications each year. The Chinese government also subsidizes patent filings, likely encouraging parties to seek patents to receive the subsidy or meet government-mandated filing requirements rather than protect a true innovation.

The USPTO concluded that “[t]he influence of non-market factors such as subsidies and government mandates on patent filings in China calls into question the commercial value of subsequently issued patents. By a number of measures, the commercial value of patents issued in China is low compared with that of patents issued in United States and a number of other countries.”  Specifically, Chinese IP licensing receipts from 2019 show China generated substantially less licensing revenue than the US, Europe, and Japan, suggesting Chinese patents have low commercial value.

The issue of Chinese patent and trademark valuation poses a challenge for many international companies. If a patent or trademark lacks commercial value or cannot be effectively enforced, the IP right held by the owner is effectively useless. Yet the sheer size and expanding availability of the Chinese market would seem to necessitate at least some attempt at intellectual property protection. Despite the uncertainties surrounding the new Chinese patent courts and regulatory authorities, companies pursuing Chinese patent protection should be prepared to assert those rights in China and also make sure to have robust international patent protection for their technology.

Sarah M.D. Luth is an Intellectual Property Attorney in the MVS Biotechnology & Chemical Practice Groups. To learn more, visit our MVS website , or contact Sarah directly via email .

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