Patents in China: Developments in 2024 and What’s to Come

Patent law and practice in China commenced a significant adjustment at the outset of 2024. China’s State Council released its latest revision of the Implementing Regulations of the Patent Law in December 2023, and at the same time, the China National Intellectual Property Administration (CNIPA) released its comprehensive revision of the Patent Examination Guidelines. The revised Regulations and Guidelines became effective on January 20, 2024, and they were intended to make significant changes toward enhancing patent quality, increasing examination efficiency, and strengthening patent protection. Among the changes being watched most closely inside and outside China are the principle of good faith, the preliminary examination of utility models, and the impact of Patent Term Extension. Moreover, the outcome of the upcoming U.S. presidential election is likely to have vast influence over China-U.S. relations, including trade agreements that impact patent laws and practice.

Rejection or Invalidation Based on the Principle of Good Faith

Even before 2024, patentees and applicants were required and expected to act in good faith, with honesty and trustworthiness in seeking and enforcing Chinese patents.  Article 20 of China’s Patent Law states that the principle of good faith shall be followed when filing a patent application and exercising patent rights. It further states that patent rights may not be abused to harm the public interest or the lawful rights and interests of others.

Rule 11 of the Implementing Regulations reiterates the principle of good faith and adds that all types of patent applications should be based on real innovation activities, and no fraud is allowed. The revised Regulations and Guidelines now enable examiners to make rejections based on the principle, thereby introducing a consideration of good faith into all patent prosecution and invalidation proceedings. This consideration is already arising in the examination of patent applications and is likely to appear as an important issue in invalidation and enforcement.

The principle of good faith can be raised sua sponte, and “abnormal” applications are especially likely to face consideration. In March 2021, CNIPA published “Measures on Regulating Patent Application Behavior” to crack down on applications that violate the principle, and it identified several fact patterns or behaviors indicative of such applications. Some are unsurprising, such as applications containing fabricated, forged, or altered experimental data or technical effects, but others could be based on honest intentions, such as simultaneously filing multiple patent applications with the same content. The Measures also state that an application can be considered abnormal if the invention is significantly inconsistent with the research and development capabilities and resource conditions of the applicant. In other words, the principle of good faith could be raised by an examiner or judge who believes an applicant’s background or corporate size raises suspicion whether it actually made a complex invention.

In a reexamination procedure (which is akin to an ex parte appeal to a Patent Trial and Appeal Board panel), the panel generally only examines the reasons and evidence on which the Rejection Decision is based. However, the reexamination panel is also empowered to look for defects in the application that do not conform to the principle of good faith.  In an invalidation procedure, the panel may decide on its own to examine if the acquisition of the patent violated the principle of good faith and introduce Rule 11 as a reason for invalidation.

Violations of the good faith principle can lead to rejections, invalidations, investigations and fines (Rule 100), so applicants and patentees will be watching carefully how (and how often) examiners and judges interpret and apply the principle of good faith.

Substantive Examination of Utility Models 

Utility models in China and elsewhere generally do not undergo substantive examination, at least not before being asserted. Because utility model projection could be obtained quickly and inexpensively, filings increased dramatically over the past decade, and the number of granted Chinese utility models reached a high of roughly 3.1 million in 2021. Starting in 2022, filings and grants began to decrease, and that trend will not only continue but accelerate as a result of CNIPA’s Guidelines. Preliminary examination of utility models now includes an examination for an obvious lack of novelty or inventiveness. Although CNIPA had already been considering novelty to a certain degree, the consideration of inventiveness is likely to cause refusal of a high percentage of utility model applications. This change makes utility model protection slower and more expensive, and many filers are deciding it is no longer worth pursuing.

Grace Period for Academic Conferences

The revised Implementing Regulations expand the scope of the grace period for public disclosures occurring at academic or technical conferences. If an inventor publicly discloses her invention, this usually forfeits the ability to pursue a patent since the invention is no longer novel. Various jurisdictions, including the United States, permit some grace periods for an inventor’s own disclosures. See 35 USC 102(b)(1). Prior to the revision, China provided a six-month grace period for disclosure at “academic conferences or technical conferences organized by the relevant competent departments of the State Council or national academic groups.”  This has been expanded to include international conferences recognized by those relevant departments.  However, the Regulations and Guidelines do not specify which conferences are recognized or whether there are geographical limitations. Greater clarity from CNIPA as to what are recognized conferences would be interesting and helpful. 

Patent Term Adjustment and Patent Term Extension

The Fourth Amendment to the Patent Law was enacted in 2021, and it for the first time created the possibility of Patent Term Adjustment and Patent Term Extension. (Article 42). The Implementing Regulations added substance and detail, but a number of uncertainties remain.

Patent Term Adjustment (PTA) lengthens the term of a patent based on certain patent office delays. The United States and a few other countries afford PTA, but Europe, Japan and most other jurisdictions do not. China now allows for it, but as a practical matter, grants of PTA have been uncommon as CNIPA has been able to conduct examinations without “unreasonable delays,” as they are currently defined.

Patent Term Extension (PTE) is afforded by many countries for pharmaceuticals and other products that must undergo lengthy regulatory review before marketing approval (thereby delaying and shortening the patentee’s enjoyment of her exclusive right). For the first time, PTE is available for Chinese patents on new and improved drugs, but it has several differences from US PTE. For instance, the Chinese PTE is indication-specific, and medical devices are not eligible. Most significantly, CNIPA has interpreted “new drug” to mean that the drug has never been marketed anywhere before its approval in China. In other words, if a drug was approved and launched in the US before it was approved by China’s National Medical Products Administration, the Chinese patent on that drug is not eligible for PTE.

This interpretation could be viewed as a way to accelerate the distribution of new drugs in China by encouraging multinational pharmaceutical companies to launch there first or simultaneously as other countries. It remains to be seen if such companies will alter their existing regulatory and marketing strategies in response to this and/or if they will pursue litigation or other efforts to challenge CNIPA’s interpretation of “new drug.”

U.S. Presidential Election

 To predict what’s coming for patents in China, one can review regulations and guidelines, track court cases, and talk with examiners, but the upcoming presidential election introduces considerable uncertainty. It will have an unmistakable impact on America’s relations with China, and this includes patent issues, either on their own or as corollaries to larger diplomatic matters.

From a Biden victory, a continuation of current U.S. policies toward China can be assumed. With respect to patent issues, the U.S. Trade Representative and others will continue to advocate for greater consistency in protection and enforcement. A second Trump administration is more difficult to forecast, as the first saw the imposition of tariffs on Chinese goods in 2018, followed by the “Phase One” Economic and Trade Agreement signed in January 2020. In addition to various trade issues, the Agreement included China’s agreement to make certain changes to its Patent Law, including the creation of Patent Term Adjustments and Extensions. The outcome of the election will have a major bearing on China-U.S. relations, which in turn could have significant impacts on patent efforts by applicants and patentees in both countries.

The author expresses his gratitude to Xiaoman Gu of Shangcheng & Partners and Li Song of Liu, Shen & Associates for sharing their valuable insights.

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