Why file in China? Overview of the system. Types of patents. Patent basics. Applications and Applicants. China and PCT. The legal framework. The enforcement framework. The changing environment.

1. June 28, 20181
Intellectual Property in China
Jay Erstling
May 20, 2010
Why file in China?
Overview of the system.
Types of patents.
Patent basics.
Applications.
Applicants.
China and PCT.
The legal framework.
The enforcement framework.
The changing environment.

2. Intellectual Property in China
Jay Erstling
Of Counsel, Patterson Thuente
Professor, William Mitchell College of Law
© 2010 Patterson Thuente Christensen Pedersen, P.A., some rights reserved - www.ptslaw.com
RIGHT TO USE: This presentation may be freely distributed, used and/or modified, so long as appropriate attribution is made that
includes retention of the firm name in connection with any materials from this presentation.
DISCLAIMER: This presentation and any information contained herein is intended for informational purposes only and should not be
construed as legal advice. Seek competent legal counsel for advice on any legal matter.

3. China
An Emerging IP Powerhouse
Unparalleled cultural shift
Marked by spotty but steady improvement
Increasing Government and industry buy-in
Growing business knowledge and comfort
Result = A country that may no longer be ignored
June 28, 20183

4. Why File in China?
Topics to be covered:
Uptake in use of the system
Strengthened legislation
Strengthening enforcement
Recognition of the importance of patents and changing IP environment
June 28, 20184

5. Some Highlights of the System
State Intellectual Property Office of China (SIPO)
3rd biggest; largest recipient of patent applications
> 4,400 staff; > 2,000 examiners
Member of IP5 (EPO, JPO, USPTO, KIPO, SIPO)
Third Revision of the Chinese Patent Law
Amendments to the Implementing Regulations
Supreme Court Judicial Interpretation
Concerning the Trial of Patent Infringement Cases
June 28, 20185

6. Overview of the System
3 Types of Patents
Invention patent: “any new technical solution relating to a product, a
process or improvement thereof”
Utility model patent: “any new technical solution relating to the shape, the
structure, or their combination, of a procuct, which is fit for practical use”
Design patent: “any new design of the shape, pattern or their combination,
or the combination of color with shape or pattern, of a product, which
creates an aesthetic feeling and is fit for industrial application”
June 28, 20186

7. Three Types of Patents
Invention Patent Utility Model
Patent
Design Patent
Term: 20 years 10 years 10 years
Substantive
Examination:
Yes No
(formal exam only)
Yes
Typical Time
to Grant:
≈ 3 years < 1 year < 1 year
Strength of
Protection:
Strong Weak Relatively strong
Scope of
Protection
Method protected Method not
protected
2 Dimensional or
3 Dimensional
Sought by non-
Chinese
Rarely sought by non-Chinese

8. Some Statistics
June 28, 20188

9. TOTAL INVENTION UTILITY
MODEL
DESIGN
2009 976,686 314,573 310,771 351,342
D = 89.9% D = 72.8% D = 99.4% D = 96.7%
F = 10.1% F = 27.2% F = 0.6% F = 3.3%
2008 828,328 289,838 225,586 312,904
D = 86.% D = 67.1% D = 99.3% D = 95.4%
F = 13.4% F = 32.9% F = 0.7% F = 4.6%
2007 694,153 245,161 181,324 267,668
D = 84.5% D = 62.4% D = 99.3% D = 94.8%
F = 15.5% F = 37.6% F = 0.7% F = 5.2%
D Domestic
F Foreign
Patent Applications

10. Invention Patent Basics
First to file
Substantive examination upon request within 3 years from the priority date (6
months from PCT national phase entry date)
Requirements
Statutory subject matter (e.g., no software per se or pure business
methods)
Novelty
Inventiveness (non-obviousness)
Industrial applicability
Sufficient disclosure
Support for claims in the description

11. 0
10000
20000
30000
40000
50000
60000
70000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Invention
Patents
Issued
Domestic
Patents
Issued
Foreign
Patents
Issued
Number of Invention Patents Issued

12. Growth of Domestic Applications
Source: SIPO 2008 Annual Report

13. Top 10 Applicants
Source: SIPO 2008 Annual Report

14. Top 10 Provinces & Cities
Source: SIPO 2008 Annual Report

15. 0
5000
10000
15000
20000
25000
30000
35000
40000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Japan
Europe
USA
Korea
Number of Applications Filed by Foreigners
(1998 – 2007)

16. 0
5000
10000
15000
20000
25000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Japan
Europe
USA
Korea
Number of Patents Issued to Foreigners
(1998 – 2007)

17. Top 10 Countries of Origin
Source: SIPO 2008 Annual Report

18. Top 10 Non-Chinese Applicants
Source: SIPO 2008 Annual Report

19. What is Being Patented
Source: SIPO 2008 Annual Report

20. China and PCT
7,946 PCT applications in 2009
5.1 % increase over 2008
Likely to top 10,000 in 2010
5th largest:
PCT filing country
International Searching
Authority
Huawei Telecommunications
No. 1 PCT filer in 2008
No. 2 PCT filer in 2009
USA
Japan
Germany
Republic of Korea
China
France
UK
Netherlands
Switzerland
Sweden
India
All others

21. 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
US JP DE KR CN FR GB NL CH SE IT CA FI AU IL
China overtakes France for
the first time (and files
only 120 fewer
applications than KR)
US: -11.4%
JP: +3.6%
DE: -11.2%
KR: +2.1%
CN: +29.7%
Source: WIPO
PCT Applications Received in 2009

22. Share of Country in Total PCT Filings:
Top 12 Countries of Origin
Source: WIPO Statistics Database

23. SIPO PCT Activity
Source: SIPO 2008 Annual Report

24. SIPO Examiner Experience
Source: SIPO 2008 Annual Report

25. The Legal Framework
June 28, 201825

26. Patent Law Revision
First law entered into force in 1985
Early patent policies established in response to international pressure
Third Amendment took effect October 1, 2009
Proactive; entirely self-motivated
• Recognition that Chinese companies benefit from patent protection
Strengthens prosecution and enforcement

27. Third Revision of the Patent Law
Adopts absolute novelty
Clarifies co-ownership
Opens up patent representation
Permits first filing outside China

28. Third Revision of the Patent Law
Increases statutory damages
Formerly RMB 10,000 ($1,465)
Now RMB 1,000,000 ($146,530)
Permits reasonable expenses
Prohibits the offer to sell infringing products
Limits the defense of unintentional infringement
Provides for preliminary injunctions

29. The Enforcement Framework
June 28, 201829

30. Dual enforcement system
Judicial route – trial proceeding
Administrative route –
provincial/city patent
administration
Number of cases in 2007:
Patent: 4,045
Trademark: 50,318
Source: Unitalen Attorneys at Law, Beijing, China
Number of Patent Cases Filed
in Chinese Courts
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2001 2002 2003 2004 2005 2006 2007
China and Enforcement

31. Number of Patent Cases Filed in the Courts (2001-2007)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2001 2002 2003 2004 2005 2006 2007
Uptake in Enforcement

32. Judicial Remedies
Injunctions
Statutory damages
RMB 1,000,000
Reasonable expenses (attorney’s fees)
Compensatory damages
Relatively small but growing
• Holley Communications v. Samsung Electronics: ≈ $7.4 million
• Chint v. Schneider Electric: RMB 330m ≈ $48.5 million; settled for
RMB 157m ≈ $23,000,000
Criminal punishment for patent counterfeiting

33. Evidence Preservation
Property Preservation
Preliminary Injunction
Permanent injunction
Other Civil Remedies Available

34. Forum Shopping
Selection of Jurisdiction
The place where the infringer has his domicile
The place where the infringement takes place
• the place where the infringing act actually takes place, such as
making, selling, using or importing infringing products
• the place where the damage result caused by the infringing act
occurs
Selecting intermediate courts hearing the patent infringement cases of
first instance
Selecting a favorable jurisdiction to minimize or avoid local protection

35. Border Protection
Possible but not frequent
Can file a request with the local customs authority to detain suspected
goods in both import and export
A bond is required
The customs authorities may also take action on their own initiative
In 2007, there were 2,267 border protection cases; value of detained
goods: over RMB 430.000.000.

36. Supreme People’s Court
“Interpretation of Several Legal Issues Regarding the Handling of Patent
Infringement Cases”
Clarifies claim construction
Endorses prosecution history estoppel
Adopts All Elements Rule
Permits contributory infringement
Allows prior art to be asserted as a defense
Limits prior user rights defense

37. Supreme People’s Court
The Interpretation
Recognizes a defense for failure to disclose a patent necessary to
implement an industry standard
Sets rules for calculating damages
• Damages determined on the basis of the portion of the profit
attributable to the patented component
Regulates declaratory judgment jurisdiction
June 28, 201837

38. The Changing Environment
June 28, 201838

39. Changing IP Environment
Patent protection now in the interest of Chinese companies
Rapid increase in R&D expenditure
• Up from 0.9% of GDP in 2000 to 1.49% in 2007
Increase in exports of innovative technologies
Government encouragement of domestic innovation
Recognition that patent law influences investment decisions

40. Changing Government Environment
China State Council’s Outline of the National Intellectual Property Strategy
(June 2008):
IP is “a strategic resource in national development and a core element in
international competitiveness, an important supporting force in building an
innovative country, and a key to holding the initiative in development.”
• Goal: To transform China into a country with a high level of IP
“creation, utilization, protection, and administration” by 2020

41. Changing Business Environment
Chinese companies becoming IP savvy
Creation of IP education centers in almost all provinces
Local government “IP Weeks”
Institution of company design-around procedures
But room for lots more growth
Only about 0.03% of companies own patents
• Patenting activity predicted to increase as companies understand
importance of IP in the marketplace

42. Changing International Environment
Increasing number of Chinese applicants filing abroad
Between 2000 and 2006:
• China’s share of worldwide filings increased from 1.8% to 7.3%
• Total number of Chinese applications filed increased by 32.1%

43. Changing Enforcement Environment
Number of infringement suits growing rapidly
Almost all brought by Chinese companies
Plaintiffs win in about 75%
Beginning 2006: more patent cases filed in China than in any other country
98% involved only Chinese companies
Of the 2% involving a foreign plaintiff, plaintiff won about 90% of the time

44. Changing Enforcement Environment
But weaknesses persist
Despite increase in statutory damages
• Damage awards still too low to deter infringement
• Losing infringer can register as a different company and continue to
make the same infringing product

45. Changing Enforcement Environment – Outside China
Increasing Chinese patent litigation in the US
Both as assertive plaintiffs and aggressive defendants
Previously
• Chinese companies were almost always the defendant
– Most often company quickly settled, or
– Defaulted and gave up US market
Now
• Chinese companies becoming more mature and learning the rules
and strategies of US litigation

46. Conclusions
China now a significant player on the world IP stage
Determined to use IP to advance national interests
Foster domestic inventiveness and develop an innovation-oriented
economy
Combine price competition with IP as a key to securing market edge
But foreign applicants also benefit

47. Conclusions
IP protection will continue to improve
Eager Government
• Consistent with Outline of National IP Strategy
Top-down society
• Success in effecting change
Ability to learn from Japan, Korea, and Taiwan
• Asian Trilateral; IP5
Desire to continue to attract foreign investment and technology

48. Thank you!
Jay Erstling | erstling@ptslaw.com | 612.349.5740