International Patent Rights Harmonisation

The Case of China

Weinian Hu

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317113799
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

With reference to China, this book examines the course of international patent rights harmonisation; its characteristics as well as impediments. It evaluates the case of China's patent law development over the course of the last three decades by drawing on the most up-to-date Chinese language sources. In the process, the volume focuses on China's patent legislation, its achievements and weaknesses, as well as the intrinsic limitations, especially as far as enforcement is concerned. The author pays close attention to the unique societal background in China, a country that did not provide constitutional recognition to private property rights until 2004 and where a property law entered into force as late as 2013, 30 years after the first promulgation of the patent law.

Global trade policy makers, IP professionals and businesses will benefit from the insights presented by the chapters as they will help them to appreciate the achievements and the controversies pursuant to China's efforts in patent protection. While serving as a useful case study for countries seeking to leverage patent protection as a driver for economic development, the book will equally facilitate Chinese legislature to reflect on its patent legislation development, specifically on legislative policy choices.

An additional analytical strength of the volume is that it compares the Chinese patent legislation with the American Invents Act and the European Patent Convention. It discovers the differences between the three patent legislations by using the minimum patent protection standards set down by the TRIPS Agreement as the benchmark. The results of the comparisons suggest that China has successfully harmonised its patent legislation with the global patent protection system, and often opts for higher patent protection standards. The book also considers whether China could learn lessons from Japan and India in their respective patent legislation and policy choices.

With China undertaking a fourth patent law amendment, the provisions contained in the second draft of the Patent Law 2015, which was published in December 2015, are included in the analysis.

1
Introduction

I Background

I) International patent rights harmonisation

Patent rights protection is a key component of international trade. The expansion of international trade requires patent rights to be able to cross the national borders within which they are protected. This requirement can only be fulfilled when the relevant national patent systems are harmonised with regard to application and protection.

Concluded in 1883, the Paris Convention on Industrial Property Protection (Paris Convention) is the first attempt to harmonise patent protection at international level on procedural compatibility. In the last century a series of international patent harmonisation treaties succeeded in a few areas. For example, the Patent Cooperation Treaty (PCT) enables patent protection in multiple jurisdictions after a single international filing. Also, thanks to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), protection standards on substantive subject matters are harmonised at the minimum level among all the members of the World Trade Organization (WTO). Notwithstanding, no treaties on substantive patent harmonisation at the maximum level have ever been concluded. Notably, the negotiations for the Substantive Patent Law Treaty (SPLT) were suspended in 2006. When international patent rights harmonisation is not achieved at the substantive maximum level, the global patent system remains fragmented. Consequently, international trade will continue to be impeded and unable to realise its full potential.

Though in the past it was relevant only to a few economically advanced countries, international patent rights harmonisation has attracted global attention in recent years, mainly because more and more countries have acceded to the WTO. World Trade Organization accession means that all WTO members, including developing countries, transitional economies as well as the least-developed countries, must harmonise their respective patent legislation with the TRIPS Agreement in terms of protection and enforcement.

China’s participation in the process of international patent rights harmonisation was prompted by the country’s WTO accession negotiations, which started in the late 1970s in the aftermath of the Cultural Revolution. Although a latecomer to patent legislation, China is nowadays recognised as the force behind the world’s growth in patent application and a major applicant of the multiple patent application systems, such as those established by the PCT and the European Patent Office. Up until July 2012, China has cumulatively granted more than one million invention patents, which made it the fastest growing country to achieve the number in merely 27 years.¹

II) Patent rights protection in China

The evolution of China’s patent legislation is itself a process of international patent rights harmonisation and it is characterised by achievements and controversies.

Within three decades of the enactment of the first patent law in 1984 China established a comprehensive framework of legislation for patent protection. It is not only in full compliance with the relevant international treaties to which China has acceded, but also often obliges higher protection standards vis-à-vis, for example, the minimum protection standards set down by the TRIPS Agreement. In recent years China has become one of the top patent applicant countries in the world. In 2015 Chinese applicants filed a total of 29,846 PCT applications, which ranked third in the world after the US and Japan. China’s home-grown technology companies, such as ZTE Corporation and Huawei Technologies, have become the world’s leaders in technology innovation. For example, since 2010, ZTE Corporation has been ranked among the world’s Top three PCT applicants each year. As a global leader in telecommunications and information technology, ZTE Corporation has established 20 state-of-the-art R&D centres in Asia, North America and Europe, and employs over 30,000 research professionals in the development of next-generation technologies.

Despite the achievements, controversies over patent rights protection in China persist and are reflected mainly in two aspects. One concerns weaker enforcement and the other is in relation to the innovation policies that were implemented in more recent years. China’s weaker enforcement in patent protection, or in intellectual property rights (IPR) protection at large, has as its root cause the judicial unpreparedness sustained prior to the promulgation of the country’s first patent law. China’s controversial innovation policies refer especially to the government’s tactic of engaging patent application as a vehicle to nurture an innovative society, in order to transform its economy from an export-driven one to ultimately one driven by innovation. Some have cautioned that such a policy would cause market distortion and high patent application numbers may lead to compromised patent quality.

The issue of judicial unpreparedness may be examined in two forms: legislature and personnel. China’s first Patent Law was promulgated before private property rights were recognised by the country’s Constitution in 2004. China has been a Communist state since 1949 and therefore, by default, all properties, real and intellectual, are collectively owned by the State. In the absence of constitutional recognition, protection for patent rights, and for IPR at large, sought judicial justification from the general principles of civil law, which has established the principle of civil and property rights protection, including IPR protection, since 1986. Prior to that, in order to pave the way for providing private property protection, China declared that it would follow a socialist commodity economic development model. This being the case, rights of disposition over commodities were introduced to the society and IPR protection immediately found its logical place in legislation. However, it is doubtful how much these efforts succeeded in influencing Chinese society concerning property and patent rights and their protection. With regard to personnel, China simply was not able to acquire adequate qualified staff for enforcement in the run up to reinstating the judiciary after the Cultural Revolution. As a consequence of the Cultural Revolution from 1966 to 1976, the country’s higher education was completely abolished and resulted in the loss of a whole generation of legal professionals. In parallel, since at the time innocence and guilt were decided by social class and judged by the Communist Party, the legal profession became redundant in China and legal professionals were compelled to change their job to that of factory worker or peasant. As a quick solution to the personnel shortage, retired army officers ventured into the judiciary and were given the power of enforcement. Another solution to mitigate the lack of judicial capacity was to rely heavily upon administrative enforcement, for which personnel required less legal competence but, as a result, the enforcement outcomes could be compromised. In recent years, although China has taken concrete steps to enhance judicial enforcement, including in the area of patent rights, the legacy of personnel shortages has had a long-term effect on enforcement efficiency and effectiveness. Other causes resulting in weaker patent rights enforcement include institutional defects and local protectionism.

III) International patent rights harmonisation – the case of China

China has been at the forefront of patent protection ever since shortly after patent legislation was introduced in the country. It was, for example, one of the first countries in the world to extend the patent protection term to 20 years in 1992. Additionally, it may be surprising to many that China often opts for higher patent protection standards, if one makes a comparison between the substantive measures adopted by the Chinese patent legislation and those prescribed by the TRIPS Agreement. This policy choice nonetheless did not conform to China’s cultural tradition and economic/social reality, especially at the beginning of its patent law development.

Once a technology-dependent country like China, Japan implemented patent legislation more than a century ago in order to facilitate technology transfer. Japanese patent legislation has been heavily influenced by industrial policies, which are, nonetheless, moulded on cultural traits and traditional values. Japan is now one of the world’s most innovative countries. Looking at India, as one of the world’s biggest developing countries, ever since independence it has been conscious of balancing international obligations to patent protection with domestic development objectives, such as the success of the generic pharmaceutical industry. Based on this premise and facilitated by the legislature, when public interest and patent protection are in conflict, the former shall always prevail. In comparison, China did not elect to have a moderate policy approach towards patent protection. Neither did China exploit the transitional measures offered by TRIPS in order to mitigate its adverse impact on the country’s domestic industry and to allow the society to be better prepared for the transition from collective to private property ownership, including intellectual properties.

The contrast between China’s more advanced legislation but weaker enforcement in patent protection results in much soul-searching. The controversies in patent policy also necessitate close examination. What methods did China use in order to harmonise its domestic patent legislation with international patent protection standards? Why is international patent harmonisation necessary? How has China’s patent legislation been evolving in the last three decades? What measures did China undertake to strengthen its patent law enforcement mechanism? Why does weaker enforcement persist?

II Structure of the book

To reflect on these questions, the book will examine the process of international patent rights harmonisation and analyse China’s patent protection legal framework from the point of view of international patent rights harmonisation. It will also evaluate China’s patent legislation and policy choices by drawing on experiences from India and Japan in the same regard. The book will proceed in ten chapters.

Chapter 2 begins with a historical review of patent development throughout the world. Chapter 3 argues the rationales for establishing patent legislation and for international patent rights harmonisation. Chapter 4 presents China’s judicial system and Chapter 5 examines the country’s legal framework of IPR protection, including legislation and enforcement, as well as the jurisdiction of IP cases in China. Chapter 6 enquires into the evolution of patent legislation in China. Chapters 7 and 8 compare China’s pursuit of patent legislation and policy with the cases of Japan and of India, respectively. The question of China’s patent policy concerning the high number of patent applications will also be analysed. Chapter 9 evaluates how China harmonised its patent legislation with the TRIPS Agreement and investigates the strengths of China’s substantive patent legislation by comparing it with American patent law and the European Patent Convention (EPC). The chapter will then provide an analysis of the challenges that China’s patent protection is still facing and the achievements the country has amassed.

The book is as up-to-date as possible. The second draft text of China’s Patent Law 2015, which was published in December 2015, is duly referred to in the book. Readers are welcome to suggest improvements or make other comments, and can email me at: [email protected]. It goes without saying that all errors and omissions are the sole responsibility of the author.

Note

1 Available at http://english.sipo.gov.cn/specialtopic/number/index_4.html (last accessed 5 April 2016).

2
The process of international patent rights harmonisation

I Overview

Patent rights are legal monopolies that the law recognises in their owners the privilege of exclusive use or exploitation of their creations, including inventions, utility models and industrial designs, for a limited time. Such privilege is obtained after the creation is publicly disclosed by the owner, based on the premise of encouraging industrial progress from which the community should profit. Once the period of the granted privilege lapses, the public will possess the creation.¹

Patent legislation is usually drafted with the objective of incentivising innovation and developing and commercialising inventions.² What legislation aims to achieve in terms of protection is a balance between protecting the freedom of trade and avoiding the adverse effect of a monopoly harmful to the public. Patent legislation also defines formalities and obligations that a right-holder must follow including, for example, administrative procedures for obtaining the right, the duration of the privilege and the fees to be paid.

Initially, the remit of patent rights was confined to national territories so as to attract tradesmen to make new products and introduce new manufacturing processes; later, it went beyond national territories thanks to international trade,³of which patent is a component. Patent holders therefore started to look for efficient means to acquire, and subsequently to protect, their exclusive rights in new territories where trade reached, although the initial rights were awarded only in the locality where patent application was submitted. If protection in multiple locations succeeded, patent holders would, nonetheless, face challenges in enforcement while pursuing multiple actions against infringement in cross-border disputes.⁴ Due to the characteristic of territoriality embedded in patent rights, successive litigations may trigger different applications of domestic and international patent protection standards to the same set of facts. This may lead to conflicting judgments and sometimes irreconcilable outcomes.⁵

I) Introduction

When discussing harmonisation in general, one must look at four legal elements together, which are: 1) legislative texts and regulations containing rules of laws and procedures for their application; 2) judicial and administrative decisions construing and applying these texts; 3) traditional techniques and modes of handling legal materials, and finally; 4) philosophical, political and ethical ideas and ideals. Harmonising IPR laws will further involve two factors. First, the procedural mechanism of IPR application and, second, the amendment of existing laws, which reflects the challenges that law has always had to deal with. This process implies reconciliation of conflicting demands representing the need for stability and for change.⁶ These two factors are interwoven; one cannot survive without the other.

Harmonising patent laws across a range of countries requires a quest for uniform solutions for specific problems transcending national territories and that are experienced universally by the countries involved. In this respect, attempts made at the international level so far aimed to remove the impediments and risks that foreign patent right-holders are exposed to by superimposing international protection standards on national patent laws. As the number of international pate...