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The rapid rise of the Chinese economy has increased the focus on China’s intellectual property system, particularly in terms of its capacity to protect and enforce IP rights. Unlike the United States, modern China has only a very recent history when it comes to intellectual property rights. While the Chinese intellectual property system is still evolving, the internal and external pressures on the Chinese government will inevitably lead to an intellectual property system comparable to those of other developed nations. The question is when. China enacted its first patent laws in 1984. This version of the Chinese Patent Law provided limited protection for biotech and pharmaceutical inventions. Subject matters excluded from protection under the 1984 law included “methods of diagnosis and treatment of diseases,” “food, drink and seasoning,” “drugs and materials obtained by chemistry methods” and “animals and plants.” The law, however, provided that “methods of making” all of the above excluded subject matter were patentable. This patent law was amended in 1992 in accordance with China’s obligations under a “memorandum of understanding” between China and the United States with respect to intellectual property protection. At that time, matters pertaining to food, drink and seasoning and drugs and materials obtained by chemistry methods became patentable. The timing of China’s enactment of its first patent laws and the concurrent development of the biotechnology industry has produced historic anomalies. Many of the current blockbuster biotechnology drugs lack any meaningful patent protection and are generically produced in China. This has occurred for several reasons. First, many of these drugs were invented in the late 1970s and early 1980s, during a time when patent protection for them simply did not exist in China. Second, because of the historic lack of enforcement and lack of a significant market, many companies did not file applications in China. China’s present patent laws still classify methods of diagnosis and treatment of diseases and animals and plants as non-patentable subject matter. China’s prohibition on patents relating to diseases is similar to European patent law, and protection for such inventions can be achieved by Swiss type claims. While many other countries also exclude patents pertaining to animals and plants, China’s exclusion applies to transgenic animals and plants. However, methods of making transgenic animals and plants are patentable subject matter as are genetically engineered microorganisms and cells. This provides limited patent protection for transgenic animals and plants. In addition, plants are protected under the New Plant Varieties Protection Regulation in China, which grants exclusive rights to produce and sell a new plant variety. Three types of patents are granted under the Chinese Patent Law � invention, utility model and industrial design patents. Invention patents are directed to new technological developments relating to products, methods or their improvements. Biotechnology and pharmaceutical inventions are typically protected by invention patents, which have a term of 20 years from the filing date. Over the past six years, the number of patent applications of all types filed with the Chinese Patent Office has risen by almost 50,000 per year. Meanwhile, in the last two years the granting of Chinese patents has risen by about 50,000. Both foreign and domestic applicants have sought more patents and received more grants during this time period. The increase in patent applications by domestic applicants reflects an increased focus by Chinese companies on protecting innovation. The increase in patent applications by foreign applicants reflects an increased focus on the Chinese market. As Chinese patent grants continue to increase and both domestic and foreign companies seek to enforce those rights, the Chinese patent system will continue to evolve and enforcement issues will become less problematic. In order to be patentable under Chinese law, an invention must be novel, inventive and useful, which is analogous to the patentability requirements under U.S. and European patent laws. Novelty means that “prior to the filing date, an invention or utility model was not described in a domestic or foreign publication, was not publicly used in China, was not otherwise known by the public or was not described in a patent application by another filed with a patent administrative office of the state council before the filing date and published after the filing date.” Inventiveness means that “comparing to technologies existing prior to the filing date, an invention has noticeable substantive characteristics and non-obvious improvement or a utility model has substantive characteristics and improvement.” Usefulness means that “an invention or utility model can make or be of use and can produce positive effects.” The novelty requirement under the Chinese patent law allows no prior disclosure of an invention except under limited circumstances. In contrast, under U.S. patent law, a public use, offer to sell or publication of an invention sets in motion a one-year grace period in which an inventor is able to file a patent application. In China, disclosure of an invention before its filing date will bar a patent on the invention unless the disclosure is made within six months before the filing date of the application under one of the following circumstances: (1) the invention is first presented in an international meeting organized or recognized by the Chinese government; (2) the invention is first published in an academic or technological meeting organized by national-level academic organizations or relevant administrative agencies of the Chinese state council; (3) the invention is disclosed by another without the consent of the patent applicant. The Chinese Patent Law requires that patent applications involving inventions made in China by Chinese entities or individuals must be filed first in China before any patent applications can be filed for the same invention in foreign countries. Many Chinese inventors, particularly academic researchers, lack the level of sophistication maintained by their U.S. counterparts when it comes to patent matters. In part, this is because patent protection itself is a relatively new development in China. In the United States, meanwhile, implementation of the federal Bayh-Doyle law caused a proliferation of technology transfer offices in U.S. academic institutions and a corresponding focus on patent protection by U.S. researchers. China has a dual system of enforcing patent rights. One focuses on administrative enforcement and the other relies on the judicial process. Patent disputes can be resolved through either system. Administrative actions are usually faster and less expensive than court proceedings. However, courts can award damages while administrative authorities cannot. Both administrative authorities and courts can provide injunctive relief although jurisdiction by administrative authorities is limited. Generally, administrative enforcement is more effective for straightforward cases where there is clear evidence of infringement or wrongdoing such as counterfeiting. Courts are better equipped for handling complex cases such as patent infringement disputes. Administrative authorities involved in patent enforcement include local intellectual property offices, customs offices and the police. Local intellectual property offices may handle patent infringement matters, mediation of patent disputes, patent false representation and other patent-related disputes. Customs offices are involved in the control of importation and exportation of goods infringing intellectual property rights. Police departments are mostly involved in cracking down on criminal activities that involve intellectual property rights. Judicial enforcement may include civil cases and criminal cases. At the trial level, patent cases are heard by intermediate people’s courts located in the capital city of each province and by some intermediate people’s courts and primary people’s courts designated by China’s Supreme Court. Appeals are heard by the high people’s courts of the provinces. Appeals of decisions handed down by high people’s courts may be filed with the Supreme Court, which has discretion whether or not to review a case. Courts do not decide patent validity issues directly. Instead a request for patent invalidation must first be filed with the Patent Reexamination Board of the State Intellectual Property Office. After the board issues a decision on a patent’s validity, the parties may file a lawsuit before a court to challenge that decision. The Beijing No.1 Intermediate People’s Court is the tribunal with jurisdiction over the Patent Re-examination Board. Severe violation of intellectual property rights can constitute a criminal offense punishable by imprisonment and fines. Notwithstanding the progress China has made developing its patent system, patent damages remain insignificant when compared to patent damages in the United States. Under Chinese patent law, infringement damages may be calculated as lost profits to the patent holder or benefits gained by the infringer. If lost profits or gained benefits are difficult to determine but royalty payment references are available, a court may award damages equal to one to three times the royalty payment. If no royalty payment references are available or the references are obviously unreasonable, a court may award damages within the range of 5,000 to 300,000 yuan (about $625 to $37,500) but that cannot exceed 500,000 yuan (about $62,500). Generally damages awarded for lost profits, gained benefits or royalty payments are not significantly greater than the statutory damages. China is a rapidly evolving country and its patent system will rapidly evolve as well. The Chinese economy will continue to grow and its domestic companies will continue to innovate and take advantage of China’s patent laws. More foreign companies will file patent applications in China, particularly as it becomes a greater economic force in the world marketplace. The increased utilization and focus on patent protection and enforcement, particularly by domestic Chinese entities, will inevitably help to bring China’s patent system more in line with those of other developed nations.

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