China: Managing the IP Lifecycle 2018/2019

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1 China: Managing the IP Lifecycle 2018/2019 Patenting strategies for R&D companies Vivien Chan & Co Anna Mae Koo and Flora Ho

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3 Patenting strategies for R&D companies By Anna Mae Koo and Flora Ho, Vivien Chan & Co China remains a research hub for domestic and foreign companies alike. According to the State Intellectual Property Office (SIPO), 1.3 million invention patent applications were filed in 2016 a 22% increase on the previous year. Since the revision of Chinese patent laws in 2008, there have been material changes in patent filing practice and procedures in China. These changes and trends have had a profound impact on filing strategies. This chapter highlights certain features of the Chinese patent system and provides practical tips for devising a patenting strategy in China, with particular regard to inventions involving computer programs, business methods and pharmaceuticals. It further examines recent amendments to the Guidelines for Patent Examination, which have brought changes in practice for such invention patents. Overview In brief, two types of patent are available to protect technical solutions: invention patents and utility model patents. Subject matter Invention patents provide protection for technical solutions relating to apparatus or methods, whereas utility model patents protect only structural, physical and shape features of products. Term of protection Invention patents last for 20 years from the filing date, whereas utility model patents last for only 10 years. Inventiveness standard The inventiveness requirement for utility model patents is lower than that for invention patents. Invention patents must have prominent substantive features that represent notable progress over the prior art, whereas utility model patents merely must have substantive features that represent progress in inventive step. According to the Guidelines for Patent Examination, the inventiveness of a utility model patent will be assessed in relation to no more than two pieces of prior art and such prior art must come from the same technical field. On the other hand, an examiner may consider more than two pieces of prior art in assessing the inventiveness of an invention patent application and such prior art may come from similar or related technical fields. Examination and patentability evaluation Utility model patents undergo only a formality examination, while invention patents undergo substantive examination. A utility model patent can be granted within six months to one year after filing, whereas an invention patent typically takes three years on average to proceed to grant. However, before commencing infringement proceedings, the owner of a utility model patent must obtain a favourable patentability evaluation report from SIPO, which normally takes two to three months. Costs The costs of drafting and preparing applications for both invention patents and utility model patents relating to the same invention are similar, as the formality requirements for the application documents are identical. However, since there is no substantive examination procedure, the costs of prosecuting utility model applications are much lower. China: Managing the IP Lifecycle 2018/

4 General filing strategies Simultaneous filing of invention patents and utility model patents Where a product is close to launch, but has fundamental features which will be valuable for a long time, the applicant may wish to file for both utility model and invention patents (albeit at a higher cost). Applicants may file both applications for the same subject matter on the same day. The utility model patent will normally be granted quickly. If an invention patent is subsequently granted for the same subject matter, the applicant will have to abandon the corresponding utility model patent. Earlier publication of patent Under the Chinese patent regulations, a patent application is published 18 months after its filing date or the earliest priority date. However, applicants for invention patents may request earlier publication on filing the application at no additional cost. If such a request is filed, the patent application will be published as soon as it passes the preliminary examination, which may be as early as two months from the filing date. Early publication of a patent application may be beneficial to the applicant, especially where the product to be protected is close to launch and ready to go public, as it may serve as prior art to block competitors from seeking to patent similar ideas. It may also afford the applicant a provisional patent right to license its technology to other parties. However, it is generally not advised to publish early if the relevant product is still far from being market ready, as this would allow others to potentially find ways to work around the design or even copy the product. Using the Patent Prosecution Highway SIPO launched the Patent Prosecution Highway (PPH) pilot project with the Japan Patent Office in 2011 and has since entered into 20 PPH programmes with most major patent offices worldwide, including the IP5 PPH programme between China, the United States, Europe, Japan and Korea. Most patent applicants use the PPH to expedite examination of a Chinese patent application based on the favourable results of a corresponding application filed with another patent office (the so-called office of earlier examination ). This may be either a Patent Cooperation Treaty (PCT) application or a foreign national patent application. If speed is the main concern and the scope of the foreign application is acceptable, it is advisable to use the PPH for China, which means that the Chinese claims will likely be the same as those of the foreign application. Generally speaking, a first official action for a PPH patent may be issued 12 months earlier than for a normal patent application. Further, only one official action is normally issued, in comparison to the three or four that are typical of a normal patent application. The corresponding costs will also likely be lower, as there are fewer office actions. Relationship with corresponding applications PPH requests are categorised as either a normal PPH request or a PCT PPH request, depending on whether the application filed with the office of earlier examination is a foreign national application or a PCT application. Under a normal PPH request, the indication of allowance of claims in a notification of a corresponding foreign application is used to expedite examination of the Chinese application. Under a PCT PPH request, the positive written opinion or international preliminary examination report of the international searching authority is used to expedite examination of the Chinese application. Timing of filing PPH request: Under the SIPO regulations, a request to participate in the PPH may be made after the application has been published, but before SIPO issues the first office action. All pending claims in the Chinese application must sufficiently correspond to the allowed claims in the original foreign application (ie, be similar or narrower in scope). There is an additional limitation on the timing for filing the PPH request if the originally filed claims of the Chinese application are broader in scope than the allowed claims of the foreign application. For normal Chinese invention patent applications, applicants are given two chances to file voluntary amendments to the application during prosecution: when filing the request for substantive examination; and within three months of receiving the notice of entry into the substantive examination procedure. For Chinese national phase entry of a PCT application, there is one more opportunity: when the PCT application enters into China, an amendment can be made under Article 28/41 of the PCT. 20 China: Managing the IP Lifecycle 2018/2019

5 Anna Mae Koo Partner Anna Mae Koo is a partner at Vivien Chan & Co, practising non-contentious, contentious and transactional IP law. She regularly advises on all areas of intellectual property, including licensing, franchising, due diligence, prosecution and unfair competition law in China and Hong Kong. Ms Koo is a Techstars mentor and constantly involved in international associations, including the litigation committee of the International Bar Association and the Internet committee of the International Trademark Association. She was named the rising star lawyer in intellectual property in Asialaw Leading Lawyers consecutively from 2014 to She was a Prince Philip scholar at the University of Cambridge, where she graduated with an MA in law. Flora Ho Patent attorney Flora Ho is a Chinese patent attorney at Vivien Chan & Co. She has acquired considerable experience in patents in a wide range of technical fields. She has prepared and prosecuted patent applications in major jurisdictions (including China, the United States and Europe) in electronics, telecommunications, semiconductor technologies, wireless communications, computer hardware and software, medical devices, automation and industrial systems, internet-related inventions, business methods, mechanical and electro-mechanical inventions. If the foreign application is allowed after the deadline to file a voluntary amendment to the claims to match the allowed claims, the PPH may not be used, as the claims of the Chinese application may not correspond. Accordingly, applicants may consider delaying filing an examination request for their Chinese patent applications until the final deadline of three years from the filing date or earliest priority date. If the option is available, applicants may request expedited examination of their application based on the foreign application. Conformity of claims: Under the SIPO regulations, a PPH request will be accepted if the scope of the Chinese claims is the same as or narrower than the scope of claims of the foreign or PCT application. However, in practice, SIPO s formality examination of PPH requests is usually very strict. SIPO also gives applicants only one chance to revise a rejected PPH request. Therefore, it is recommended to make the Chinese claims identical (ideally word for word) to the claims of the foreign application. Confidential examination for inventions created in China Under the Chinese patent regulations, if the invention is created in China either wholly or partially it is subject to confidential examination before being filed abroad. This is in order to prevent inventions which affect national security from being disclosed abroad. The confidential examination requirement may be a pitfall for foreign R&D companies whose patent filing policy is to file first in their home China: Managing the IP Lifecycle 2018/

6 Under the Chinese patent regulations, if the invention is created in China either wholly or partially it is subject to confidential examination before being filed abroad. This is in order to prevent inventions which affect national security from being disclosed abroad countries. It is important that overseas companies with active R&D programmes in China make provision for this requirement in their patent filing policy and account for any additional time that may be needed to obtain permission to file abroad. Generally speaking, the confidential examination filing is straightforward and is not a bar to filing abroad. However, it generally takes four to six months, unless SIPO finds that national security interests are contravened. For international PCT patent applications filed with SIPO, the applicant need not file a separate request for the confidentiality examination; SIPO will automatically start the confidentiality examination on receipt of the PCT application. The PCT application can be filed in Chinese or English. Patenting software programs In China, the source or object code of a computer program can be protected by copyright, whereas the idea underlying the computer program can be protected by a patent if it constitutes a technical solution. The Guidelines for Patent Examination provide that a computer program-related invention is considered a technical solution if it fulfils one of the following conditions: It solves a technical problem. It uses technical means following the laws of nature. It achieves a technical effect in conformity with the laws of nature. With the entry into force of the amended Guidelines for Patent Examination on April , the specific requirements on claims for computer program-related inventions have been relaxed. Under the previous practice, claims for computer program-related inventions could be drafted as process claims or apparatus claims. If the claim was drafted as an apparatus claim, its description as an apparatus had to be submitted. As a result, drafting apparatus claims relating to computer programs was similar to drafting apparatus claims relating to methods or functions of hardware. Confusion could arise if the claim was directed to an invention which comprised technical features of both a computer program and hardware. Under the amended Guidelines for Patent Examination, this requirement has been removed and apparatus claims of inventions relating to computer programs may contain not only the apparatus features, but also the computer program. Therefore, claims for such inventions may be drafted in a more straightforward manner to avoid any confusion in claim interpretation. Patenting business methods As provided under Article 25 of the Patent Law, rules and methods involving merely mental activities are not patentable. Traditionally, business methods are not patentable subject matter because they involve merely mental activities in many cases. However, similar to inventions relating to computer programs, inventions relating to business methods may be patentable if they also contain technical features, as is the case with certain new e-commerce technologies. This was further clarified by SIPO in the amended Guidelines for Patent Examination. In practice, it is advisable to clearly define in the application document the technical problem that the business method-related invention intends to solve and how the characteristic technical features of the invention are part of the technical solution to the defined technical problem. Patenting pharmaceutical innovations In China, innovations relating to pharmaceutical compounds, intermediates, preparation methods and new therapeutic uses for existing drugs may be protected by invention patents. Methods 22 China: Managing the IP Lifecycle 2018/2019

7 for diagnosis or treatment of diseases are not patentable as provided under Article 25 of the Patent Law, but the medicinal use of a pharmaceutical compound in preparation of a drug is patentable. A claim for a new medicinal use of a pharmaceutical compound can be drafted in a manner such as use of compound A in preparation of therapeutic agent for the treatment of disease X to avoid being deemed as a method of treatment of disease. Unlike other jurisdictions (eg, the United States and Japan), China does not provide for an extension of the patent term for drugs which are subject to regulatory marketing authorisation. However, the Bolar exemption also exists in China. This enables a generic drug manufacturer to start preparing to market a patented drug well before the patent expires. As provided under the Guidelines for Patent Examination, a claim for a new pharmaceutical compound or combination must be supported with full disclosure of at least one specific medicinal use or pharmacological effect and evidence using qualitative or quantitative data derived from laboratory tests or clinical trials. Following the recent amendment of the Guidelines for Patent Examination, the late filing of experimental data may be allowed during the examination of patent applications for chemical inventions, provided that the experimental data can be derived from the application s disclosure by a person skilled in the art. Under the previous practice, only the experimental data disclosed in the originally filed application documents was considered during examination. This requirement posed difficulties in patent filing for drug products. Clinical trials usually take years to complete and drug manufacturers may want to file patent applications for new drugs as soon as they have preliminary laboratory test data in order to secure filing dates as early as possible. During examination, patent applications may be rejected if the examiner finds the claim to be insufficiently supported by the disclosure of medicinal use or pharmacological effect in the originally filed application documents. Under the amended Guidelines for Patent Examination, applicants for new drug patents may submit experimental data derived from laboratory tests or clinical trials after the application filing date in order to support their claims. However, the applicant must convince the examiner that the intended pharmacological effect can be derived from the initial disclosure of the application and evidenced by the subsequently filed experimental data. Vivien Chan & Co 32/F Harbour Centre 25 Harbour Road Wan Chai Hong Kong Tel Fax Web China: Managing the IP Lifecycle 2018/

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