Posts by: Daniel Fritsche | (2) posts

As has previously been mentioned on this blog, Schneider Electric Low Voltage (Tianjin) Co. Ltd., a joint venture of Schneider Electric, was ordered in 2007 to pay record damages of 334.8 million yuan (approx. € 36 million) to its Chinese competitor Chint Group (”Chint”) for infringement of a Utility Model Patent held by Chint. The validity of the Utility Model Patent was challenged by Schneider Electric before the Chinese Intellectual Property Office (SIPO), but the Utility Model Patent was found to be valid. This decision was appealed by Schneider Electric to the Beijing No. 1 Intermediate People’s Court, which in March 2009 issued a decision agreeing with the SIPO’s decision, upholding the validity of Chint’s Utility Model Patent.

The Chinese court case, which ended in the record damages was part of a series of patent disputes in different jurisdictions between Schneider Electric and Chint. This series of patent disputes was brought to an end through a settlement between Schneider Electric and Chint that was concluded on 15 April 2009. According to the settlement, Schneider Electric agreed to pay Chint 157.5 million yuan (approx. €17 million).

The originally awarded damages are still by far the highest yet in a patent dispute in China. However, the number of IP cases in Chinese courts and the average damages ordered are increasing rapidly.

To handle the ever increasing number of IP cases, the new Implementing Regulations of the Chinese Patent Law to come into effect on 1 October 2009 provide for a more decentralized handling of IP related cases by allowing local administration to handle IP cases.

Furthermore, according to the new Implementing Regulations, SIPO will be allowed to handle major patent disputes, such as issues related to patent infringement and invalidation, upon request by local patent administration departments.

Hopefully, at least the latter of these measures will lead to a more uniform handling of patent cases in China. Anyway, this certainly seems to be the intention of the Chinese government, which has additionally launched an initiative to compile an IP related case law based on 100 typical IP cases from the past 30 years.

Finally, it should be mentioned that arbitration by the China International Economic and Trade Arbitration Commission is becoming an increasingly popular way of handling IP related disputes in China, especially in cases involving foreign parties, in which the arbitration can be bilingual or in English.

Daniel Fritsche, European Patent Attorney

Everybody knows that China (PRC) is the most populous country in the world. Most are probably also aware of the fact that the Chinese economy is steadily growing by about 10% each year, and that China has a foreign exchange reserve of stunning 1,600 billion dollars to be compared with the national debt of the USA, which is about 5,000 billion dollars.

What may be a little less known is that only the American and Japanese patent offices receive more patent applications than the Chinese patent office (SIPO). In 2007, almost 250,000 applications for invention patent were filed with the SIPO, which can be compared with the about 140,000 patent applications filed with the European Patent Office (EPO). In addition to the 250,000 invention patent application, about 180,000 utility model patent applications were filed with the SIPO. Since utility model patent applications are not examined with respect to novelty and inventive step, practically all of the utility model applications that are filed result in registered IP rights with a time lag of about 1 – 1.5 years.

Of this total of 430,000 patent applications, less than 100,000 were filed by foreign (mainly Japanese) applicants, indicating that Chinese enterprises are very actively developing and protecting technology.

This trend of growing economy, an increased level of domestic technological development and IP awareness can be said to have been embodied by last year’s famous Chint vs. Schneider decision, where the People’s Court of Wenzhu ordered the Chinese (joint venture) subsidiary of French multinational Schneider Electronic to pay Chinese competitor Chint Group 330 million Yuan (about 33 million Euro) for infringing a utility model patent held by Chint. Since Schneider has appealed the decision to the next instance, the award of the record-breaking damages is not the end of the story, but still marks a new situation where a Chinese company is on the winning side of an infringement case.

Considering these recent developments, there are more reasons than ever before for learning more about China in general, and the Chinese IPR-system in particular.

Since the first Chinese patent law was put into force in 1985 based on the German patent law, it has been revised twice, in 1992 and in 2000. Currently, the third revision is being processed by the People’s Congress and is expected to come into force early 2009.

With this new revision, some important aspects of Chinese patent law will change. One of these changes is that the current relative novelty standard will be replaced with the absolute novelty standard which already applies in most other patent laws and conventions, including the US patent law and the European patent convention.

According to the Chinese patent law currently in force, disclosure by other means than publication, such as exhibition, sale, use etc, that takes place outside China cannot be used against a Chinese patent application. That means that an invention can receive a valid patent protection in China even if it had already been made public outside China prior to the filing/priority date of the Chinese application for an invention patent or a utility model patent.

One practical implication of the current patent law is that it is possible for enterprises to obtain patent protection in China for products already on the market outside China. The other side of this is that less scrupulous parties may obtain patent protection in China for inventions conceived and disclosed by others. These patents will not be validly obtained, because the applicant has no right to file the application, but will be very difficult, if not impossible, to invalidate due to difficulties in proving the non-entitlement.

With the new law, both of these possibilities (threats) will seize to be possible, which should, on the whole, be positive to foreign companies.

You may, however, want to check whether your enterprise has any inventions/technical solutions which have been disclosed outside China, but not yet through (written) publication, and consider whether to take this final opportunity to file applications in China. In particular, the Chinese utility model patent protection could be considered for relatively simple “structural” inventions because of the relatively cheap and simple procedure required for obtaining such rights.

Daniel Fritsche, European Patent Attorney