since the enactment of the first chinese patent law in 1984 (taking effect in 1985), a comprehensive legal framework has been developed for the protection and enforcement of patents in china. this presentation shall give an overview of certain salient features of this system and how they interact with each other in operation to provide the patent owners and their licensees effective protection. first, in part i, i shall briefly describe the phenomenal growth of patent filings in china in recent years and how aggressive filings by foreign companies have provided an impetus for domestic businesses to follow suit. this part shall contain the most recent statistics released by the chinese government. then in part ii i shall explain what has prompted this race in patent filings, with examples from several most publicized cases in the past two or three years. next, in part iii, i shall introduce the readers to the evolution of china’s legislative framework for patent enforcement since 1984. part iv describe the process of judicial enforcement of patent in china. part v addresses a very important aspect of patent infringement litigation in china: stay of the litigation pending a patent invalidation proceeding before the patent reexamination board (the “board”) and judicial review of its decisions; part vi touches on several extra-judicial enforcement of patent in china, i.e. customs protection, administrative relief, and criminal prosecution.

i. recent increase of patent filings and litigations in china

a. increase of patent filings

between april 1985, when the patent law of the people’s republic of china was first enacted in china, and the end of 2003, 1,931,125 patent applications were filed with the people’s republic of china state intellectual property office (“sipo”). among them, 82.6% (1,595,184) were domestic filings and 17.4% (335,941) were from foreign applicants. in 2003 alone, sipo received 308,487 patent applications, showing a 22.1% increase from 2002 (252,631).[1]

based on the statistics provided by sipo, patent filings in 2003 have the following breakdowns:

(1) the number for invention patents reached 105,318, an increase of 31.3% over 80,232 of the previous year. the number for utility models amounted to 109,115, an increase of 17.2% over 93,139 of the previous year.

(2) most of the domestic applications were for utility models and design patents while most of the foreign ones were for invention patents. 

(3) among the applications for invention patents filed in 2003, 56,769 came

from domestic applicants, and 48,549 from foreign applicants. for the first time since china became a pct member state in 1994, the number of domestic applications for invention patents has surpassed that of foreign ones. but it remains true that domestic applications led foreign applications by a far bigger margin in the number of utility models and design patents, which accounted for more than 92% of the total.

 (4) foreign filings have come from a diverse source. by december 31,2003, 125 countries and regions had filed their applications in china. the top ten countries in terms of the number of patent applications are japan, usa, the republic of korea, germany, france, netherlands, switzerland, united kingdom, italy and sweden.

 (5) between 1994, when china officially became a member state of the patent cooperation treaty (pct) and the end of 2003, sipo received a total of 5,543 international applications, 2,990 demands for international preliminary examination, and rendered 2,425 international preliminary examination reports. in 2003 alone, sipo received 1,171 international applications, 708 requests for international preliminary examination, and rendered 656 international preliminary examination reports.[2]

b. increase of patent litigations

 in parallel, statistics show that patent litigations have exploded since 1998. from the beginning of 1998 to the end of 2002, chinese courts tried 23,636 cases related to intellectual property, with an average annual increase of 9%. of these, 7,459 patent cases were disposed after trial. according to judge ma laike, deputy chief judge of the court's ipr division of the no. 1 intermediate people’s court of beijing, nearly one-tenth of the 200 intellectual property cases filed with his court in the first half of 2002 involved foreign parties. [3]

 part of the growth stemmed from an increasingly aggressive attitude taken by foreign companies toward enforcing their patent rights in china.[4] for instance,honda crv is the first model launched by dongfeng-honda, a joint venture between dong feng automobile of china and honda of japan. but on the eve of its official launch, honda realized that the joint venture’s first-born baby had an imitation. a chinese auto maker, shijiazhuang shuanghuan automobile, inc. was about to launch a new model, laybo srv, which had a strikingly similar appearance as honda’s crv but sold for only 90,000 yuan rmb while honda crv had a price tag of 300,000 yuan rmb. honda then sued shijiazhuang shuanghuan for infringement of its patent.[5]

honda is also very aggressive in pursuing its patent and trademarks in motorcycles. it has started nearly a dozen lawsuits against motorcycle manufacturers in china for patent infringement[6] and when the latter tried to escape liability by invalidating honda’s patents, it fought all the way to the higher court of beijing.[7]

philips electronics n.v. of the netherlands is another foreign company in china that has resorted to frequent litigation to enforce its patents or to invalidate its rivals’ patents.[8] it has also applied for and received china’s administrative relief against counterfeiters.[9]

among american companies, dupont and pfizer are two industry leaders that never hesitate to take their competitors to courts for infringing their patents. in october 1999, for instance, dupont sued zhongnong farm chemicals, a beijing-based pesticide company, on the grounds that the latter was selling dupont's patented pesticide in china without authorization. in december, 2001, the beijing no. 1 intermediate people's court ordered the beijing zhongnong farm chemicals company to make a public apology in the farmers' daily and pay 450,000 yuan (about 54,220 u.s. dollars) to dupont as damages. [10] 

ii. the drive behind the growth of patent filings: stake out your rights in face of tough competition

a. the race to stake out claims

since china joined the wto in 2002, two trends have been at work as an impetus for increased filings for chinese patents: first, china has become a global manufacturing power and a major source of consumer and industrial products on the world market; second, the chinese government and courts have shown increasing commitment to comply with the trips requirement for providing sufficient protection of intellectual property. with the converging of these two trends, few major players in any industry can afford to ignore the strategic advantages of acquiring patents for their technologies in china and the disadvantages of not doing so.

b. illustrative examples:

the following are a few recent examples:

1. dvd core technology

since 2002, foreign firms holding patents of relevant technologies, including the 3c alliance (sony, philips, and pioneer), 6c alliance (panasonic, jvc, hitachi, toshiba, mitsubishi electric, and time warner), and 1c (french thompson), began to charge chinese dvd machine makers patent fees for using core technologies in their exported dvd machines with domestic brands. patent fees levied on chinese dvd player manufacturers has reached as high as us$27.45 per unit, representing nearly 20 to 30 percent of their production cost.[11]

2. mobile phone technology.

according to sources from the chinese ministry of information industries, major international mobile phone suppliers, including nokia, motorola, sony, ericsson, are planning to demand for patent royalty from chinese manufacturers of gsm mobile phones. there are 38 mobile phones manufacturers in china who utilize licensed technologies. among them, only a dozen own more than one patent. altogether they own no more than two dozen patents. by contrast, foreign companies started to patent gsm technology in china as early as ten years ago, according to telecommunication patent examiners at china’s state intellectual property office (sipo). if and when the foreign telecommunication giants start to collect royalty for these patents, there will be severe negative impact on china’s mobile phone industry. [12]

3. digital tv

a third high-tech area where foreign companies may come in and claim significant amounts of patent royalty from chinese manufacturers is the core technology for digital television technology. [13]

4. banking and financial business methods

in the late 2002 and early 2003, sipo granted the first two “business method” patents to citibank. the first is a patent for “an electronic money system” (application no. 92113147) and the second is a patent for “a computer system for data management and method for operating said system”(application no. 96191072). [14] this has triggered wide coverage by the chinese media. reporters from chinese newspapers who went to chinese patent office under sipo (the “patent office”) to search the records were surprised to find that citibank had started to file applications for such “business method” patents as early as the late 1990s. during the same period, not a single chinese bank had filed any patent application for business method related computer programs. will foreign banks and investment companies eventually monopolize the business method field in the chinese banking-finance industries? many in china seem to believe so.[15]

iii. milestones in the development of china’s patent law system

the dramatic increase of patent filings in china indicates, at least to some extent, increasing confidence among intellectual property owners in china’s system for patent enforcement. such confidence cannot possibly exist without a mature legislative framework. between 1984 and 2003, china witnessed a very active period of law-making with regard to patent enforcement. its patent statute was revised twice to be consistent with the commitments made by china in international treaties, first in 1992 to fulfill the obligations undertaken by china in the 1992 memorandum of understanding regarding protection of intellectual property rights between china and the united states, and then in 2000 to fulfill china’s obligations under the agreement on trade-related aspects of intellectual property rights (trips). by 2002, a complex system of statutes, regulations, and judicial interpretations and rules were in place. as it shall become obvious to the readers, both in scope and in depth, this system can match the statutory framework in any major industrialized nation. while it will take a long time for this legislative framework to translate into an effective system of patent enforcement in practice, mostly through judicial applications, a foundation is laid and an important first step is taken.

a. milestones in patent law making

the following is a chronology of some milestones in china’s efforts to lay down a legal framework for patent enforcement.

in 1985, china’s first patent law (“patent law”) came into effect; china’s supreme court issued its first judicial interpretation concerning patent trials.

in 1985, china acceded to the paris convention for the protection of  industrial property.

in 1989, china adopted its first administrative litigation law (effective 1990), making decisions of the patent reexamination board (the “board”) reviewable by courts.

in 1992, the patent law underwent its first revision, providing for the patent cancellation (che xiao) proceeding, its administrative review by the board, and its judicial review by the courts; the scope of patent enforcement was expanded to promises to sell; provisions were added concerning civil liability of “innocent infringer,” calculation of damages in infringement actions, and the period of patent protection (extended to 20 years from date of application). this revision of the patent law was partly the result of china’s commitment made in the 1992 memorandum of understanding regarding protection of intellectual property rights between china and the united states.[16]

in 1993, intellectual property divisions were set up in people’s courts, now called “third civil division. ”patent reexamination review cases began to be heard by the first intermediate people’s court of beijing (within whose jurisdiction lies the state intellectual property office (sipo)). appeals from this court go to the higher court of beijing, and ultimately, the chinese supreme court.[17]

in 1994, china joined the patent cooperation treaty (pct).

in 1995, the chinese government issued the regulations of the people's republic of china governing customs protection of intellectual property rights (the “old customs intellectual property protection rules”), which came into effect on october 1 the same year.  according to this regulation, china's customs offices must take measures to intercept importation or exportation of goods that were proved to be infringing on patents, trademarks, or copyrights legally protected in china.  china's customs offices were also granted authority to investigate any suspected shipment and confiscate the goods where infringement was proved.

in 1997, china amended its criminal law by adding article 216 which provides for criminal penalty for patent counterfeiting.

in 1998, the high court of beijing issued several opinions on the reform of intellectual property adjudication (for trial implementation), laying down detailed provisions regarding the “authentication system in the beijing court system. [18]

in 2000, the patent law was revised for the second time (effective june 1, 2001); it replaced patent opposition (yi yi) and cancellation (che xiao) proceedings, both before the patent office, with the patent invalidation (xuan gao wu xiao) proceeding before the board; provided for judicial review of administrative decisions (denial of applications and denial or grant of invalidation requests) of the board for utility model patents and design patents, meeting the judicial review requirement of article 41 of the agreement on trade-related aspects of intellectual property rights (trips); expanded the right of patentee to include “offering for sale,”in addition to manufacturing, use , sale or importation of the subject matter of the patent; provided in article 58 administrative fines and criminal liability for patent counterfeiting.

in 2001, the chinese government (state council) adopted the implementing regulations of the patent law of the people's republic of china (the “patent implementing regulations”) and the chinese supreme court issued two important judicial interpretations concerning patent litigation:

1) several provisions of the supreme people's court on issues

relating to application of law to adjudication of cases of patent disputes (the “supreme court patent trial provisions”), providing for jurisdiction based on place of infringement or place of defendant’s domicile, giving guidelines about when an infringement litigation can be stayed on the ground that there is an patent invalidation proceeding pending, and adopting the doctrine of equivalent for finding of infringement, providing for operational definitions of losses and profits, various factors that may be considered by trial courts in calculating damages, and statutory damages between 5,000 and 300,000 yuan in ordinary cases and between 300,000 and 500,000 yuan in extreme circumstances involving bad faith; and

2) several provisions of the supreme people's court for the

application of law to pre-trial cessation of infringement of patent right (the “supreme court patent provisional remedies provisions”).

in addition, the higher court of beijing issued its “opinions on certain issues oncerning determination of patent infringement (for trial implementation)”[19] it provides detailed guidelines for judges of the higher court of beijing, and the two intermediate courts of beijing, on claim construction and determination of patent coverage, application of  doctrines of equivalent, and prosecution estoppel, etc. in infringement litigation involving invention and utility model patents, determination of design patent infringement,  contributory infringement and counterfeit, affirmative defenses of patent misuse, prior use, implied license, and statute of limitation, etc.

in 2002, china joined wto and the chinese government amended the patent implementing regulations, to be effective february 1, 2003, providing for 30-month period for a pct international application to enter into the national phase in china and the relevant procedure.

in 2003, the chinese government issued the regulations of the people's republic of china regarding customs protection of intellectual property rights (the “new customs intellectual property protection rules”), effective on march 1, 2004).