Legislative overview 2020: patent law, trade secrets and judicial interpretations

Introduction
China-US Economic and Trade Agreement
Patents
Trade secrets
Judicial interpretations
Comment

Introduction

The year 2020 started unexpectedly with the outbreak of COVID-19, an unprecedented global disruptor. While more time is needed to fathom to what extent the pandemic will affect the global economy, myriad industry sectors and, in particular, the legal profession, in-house counsel are unsurprisingly facing budgetary restraints and law firms are being met with slashed billable hours, shelved projects and cancelled in-person meetings. People are quickly adapting to the new normal, with traditional face-to-face attorney-client meetings largely replaced by virtual meetings and IP offices and the courts moving most case hearings online.

During this time of volatility, China's legislature has completed the overhaul of an amendment to patent and copyright law and promulgated varied judicial interpretations and policy documents projected to bring substantial changes to the nation's IP landscape from 2021.

China-US Economic and Trade Agreement

On 15 January 2020 China and the United States signed the Economic and Trade Agreement (Phase One), under which China has committed to obligations covering a wide range of IP issues, including:

• trade secrets protection;
• reforms to pharmaceutical-related patents;
• combating e-commerce infringement;
• anti-counterfeiting;
• deterring bad-faith trademarks; and
• reforms to the evidence rule.

In 2020 China promulgated a series of laws and regulations which were created to both satisfy China's own demand and echo the foregoing agreement.

Patents

The most notable piece of legislation introduced in 2020 was the amendment to the Patent Law, which was finally passed after several years of discussions. The amendment introduces numerous major reforms, including with regard to:

• patent linkage and patent term compensation for pharmaceutical-related patents, whereby:
  • patentees can solve patent disputes during the drug marketing approval process without waiting for the drug to be launched to the market; and
  • patent terms can be granted with an extension of between five and 14 years from the date of regulatory approval in China as compensation for an unreasonable examination delay during the patent granting procedure;
• reforms to the rules concerning damages, whereby the legislation:
  • recognises punitive damages for wilful infringement;
  • increases the statutory damages from the current range of Rmb10,000 to Rmb1 million to Rmb30,000 to Rmb5 million; and
  • shifts the burden of proof to the defendant to produce sales records which are under the defendant's control, provided that the plaintiff has exhausted measures to collect such evidence;
• reforms to design patents, whereby, for the first time, partial design can be patentable subject matter and the patent term is extended from 10 years to 15 years; and
• provisions regarding the good-faith principle to discourage patent abuse.

Trade secrets

China has also refined its trade secrets regime. The Supreme People's Court promulgated a comprehensive judicial interpretation for civil cases – the Provisions on Several Issues Concerning the Application of Law in Adjudicating Civil Cases Involving Infringement of Trade Secret – which provides:

• a definition of 'trade secrets';
• a determination of appropriate trade secret protection measures;
• a determination of misappropriation;
• parameters to ascertain trade secret infringement;
• rules concerning preliminary injunctions and remedies;
• rules concerning the allocation of the burden of proof; and
• rules concerning the dovetailing of civil and criminal proceedings.

Further, the Supreme People's Court and the Supreme People's Procuratorate jointly promulgated a judicial interpretation for criminal cases – the Interpretation on Several Issues Concerning the Application of Law in Handling Intellectual Property Criminal Cases (III) – which stipulates the criteria for determining that a trade secret infringement has met the threshold for pursuing criminal liability of the infringer. Moreover, the State Administration for Market Regulation published a draft rule regarding administrative enforcement of trade secrets, which is still under discussion.

Judicial interpretations

The Supreme People's Court promulgated a strand of important judicial rules that will guide judicial practice in a broad manner, including:

• the Several Provisions on Evidence in Intellectual Property Civil Lawsuit, which detailed the evidence rules for IP civil litigation; and
• the Provisions on Several Issues Concerning the Application of Laws in Adjudicating Administrative Cases Involving Granting and Affirmation of Patent Rights (1), which provides detailed rules and criteria followed by the courts regarding patent re-examination and invalidity cases.

In addition, the Supreme People's Court promulgated several policy provisions which aim to foster a friendly environment for IP owners in China, including:

• the Opinions on Fully Strengthening the Judicial Protection of Intellectual Property;
• the Opinions on Ramping up Punishment to Intellectual Property Infringement; and
• the Guidelines on Adjudicating Intellectual Property Civil Cases Concerning E-Commerce Platform.

Comment

There are still many legislative initiatives in the pipeline. For instance:

• the government is drafting rules to implement the amended Patent Law and the Copyright Law;
• more judicial interpretations associated with the major law amendment are forthcoming; and
• the government is drafting rules to conduct the administrative enforcement of IP rights.

These well-coordinated legislative efforts ensure that parties will have detailed rules and criteria to follow and will improve the consistency, predictability and transparency of IP protection in China.

For further information on this topic please contact Feng (Janet) Zheng at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email (zhengfeng@wanhuida.com). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.