Written by: Haoyu ZHOU(Elliot)

 

There is a trend that more and more applicants are interested in filing utility model (UM) patent applications and design patent applications in China. The increased design patent filings could be probably attributed to the fact that China opened the gate for partial designs in 2021 and the fact that China joined Hague Industrial Design system in 2022. The increased utility model filings could be probably attributed to their higher grant rate and faster grant speed compared to invention patents, and the fact that utility models have a lower requirement for inventive step than that of invention patents.

 

But, due to the lack of substantive examination in utility model prosecution and design patent prosecution, the stabilities of these patents are questionable. So, many IP law firms often suggest patent owners to request for a patent evaluation report (PER) from the CNIPA if they want to enforce utility model or design patents. However, PER is like a double-edged sword. If the result of a PER is indicated to be positive, it will be in favor of the patent owner, and the patent owner could more confidently enforce the patent right in subsequent enforcement proceedings; nevertheless, if a PER is indicated to be negative, it will be sometimes detrimental to the patent owner, and the patent will be hardly enforceable.

 

To this end, it is important to note that PER will be issued only once, and there is no way to request the CNIPA to re-issue a second PER to replace the first PER. The result of PER will be laid open to the public soon after it is issued by the CNIPA. Although the patent examination guideline clearly stated that PER can be modified upon a written request, however, this is almost impossible in practice unless there is an apparent mistake in the PER as issued. So, the entities who decide to request for PERs should be more prudential, because the result of PER will not be changeable and will be immediately searchable to the public.

 

Thus, requesting for PER in utility models or design patents is a rather important decision to make for patent owners, and certainly not just a trifling procedural matter. As an attorney who experienced a lot of upside and downside of PERs, I would not suggest patent owners to request for PER recklessly, because there are a lot of pros and cons to consider.

 

I. Who Can Request for Patent Evaluation Report?

According to the current patent law and draft examination guideline (2022), after the utility models patents or design patents are granted, PER can be requested by (i) patent owners, (ii) parties of interest, or (iii) accused infringers. For any pending utility model applications or pending design applications, there is no way to request for PER.

 

Regarding the definition of (i) patent owners above, the draft guideline further clarifies that if a patent is co-owned by multiple patent owners, PER can be requested by one or part of the patent owners, and it does not need all the patent owners to agree unanimously.

 

Regarding the definition of (ii) parties of interest above, the draft guideline interpreted it as “the one who has a right to initiate a patent infringement lawsuit or the one who has a right to file a patent infringement complaint to the intellectual property administrative department”. If this draft is finally approved by the legislature, then according to Article 65 of the Chinese patent law, parties of interest will likely include:

(1) Licensees of “patent sole license”,

(2) Licensees of “patent exclusive license” where patent owners give up the “right to sue”, and

(3) Licensees of “non-exclusive license” where patent owners have granted the “right to sue” to the licensees.

 

The most interesting part is the definition of (iii) accused infringers above, as such has aroused a wide controversy in China. According to the draft guideline (2022 version), the term “accused infringers” should be interpreted as any entities or individuals that could be possibly accused for patent infringement. The draft guideline also gives an example saying that “a party who has received a lawyer’s letter is considered to be an accused infringer” (Part V, Chapter 10, Section 1, 2.1, 2.2 and 2.3).

 

Apparently, according to the draft guideline, if a party only receives a lawyer’s letter (for example, a cease and desist letter) but is not yet being sued for patent infringement, the party will be endowed with a right to request for patent evaluation report.

 

But, the practice currently adopted by the CNIPA seems to be different from what the draft guideline stated, as the CNIPA will almost always reject a request for PER filed by someone who merely receives a lawyer’s letter. We have attempted to discuss with officers at the CNIPA about this issue. The CNIPA officers seem to believe that only the parties who have already been accused for patent infringement in a lawsuit or in an administrative enforcement proceeding will be eligible for requesting PER. In other words, the CNIPA’s interpretation on “accused infringers” is more like actual accused infringers but not any potential infringers who may be drawn into a lawsuit in the near future.

 

In view of the CNIPA’s attitude above, patent owners (or parties of interest) for UM or design patents could actually play a trick by just sending out cease and desist letters to potential infringers, without requesting a PER. Since potential infringers who receive the lawyer’s letters will have no right to request for PER under the current law, the potential infringers would probably have to spend time and money to analyze the risk of patent infringement, or even spend a lot of efforts searching for prior art or prior designs to get prepared for filing a request for patent invalidation.

 

To be honest, I think the CNIPA’s interpretation is sort of unfair to “potential infringers”, because utility model patents (or design patents) have never been examined for novelty or inventive step, so patent owners could easily get a “broad patent scope” in utility model and design patents, and could easily send a lawyer’s letters to their competitors. I would suggest the CNIPA to seriously consider to grant parties who receive a lawyer’s letter with a right to request for PER, as proposed in the 2022 version of the patent examination guideline, to help prevent the UM or design patent owners from excessively abusing the patent rights.

 

II. When Do You Need Patent Evaluation Report?

According to the current Chinese patent law and practice, only a few enforcement procedures are known to require a patent evaluation report (PER) for sure:

-       (i) the procedure of filing a complaint to e-commerce platforms to claim for UM or design patent infringement; and

-       (ii) the procedure of filing a patent recordal for UM or design patents at Customs.

-       (iii) a declaration for open license of UM or design patents.

 

For (i) and (ii), this is mainly because E-commerce platforms and Customs are not specialized in handling patent affairs, so they certainly need a professional patent bureau (i.e., patent office of the CNIPA) to issue a positive PER, so that the patentability of utility models and design patents will be more credible. Open license, which is a brand-new system in China, also requires a PER, as only a positive PER (or partially positive PER) could give potential licensees more confidence about the patentability and enforceability of the patents.

 

On the other hand, regarding patent infringement proceedings held by Courts or IP offices, as have been discussed in my previous article (https://foundin.cn/en/bbs/board.php?bo_table=ip_trends_en&wr_id=47&page=1), although PER is normally required, it is not a must if certain conditions are met. For example, if patent owners could submit evidence to show that the patent has survived from a round of patent invalidation attack, then the stability of patent has been sort of confirmed, and PER would be dispensable in that case. As another example, if the Court or IP office does not explicitly require patent owners to provide a PER in a patent infringement proceeding, it implies that PER is not a must in that case.

 

For other enforcement approaches like sending out C&D letters, notarized purchase, or notarization of webpages, PER is not required, as these are not official ways of patent enforcement.

 

Generally, my advice to patent owners is “do not request for a patent evaluation report unless it is necessary”. A fundamental reason is that no one like uncertainties, including your competitors. A granted but relatively “undetermined” utility model or design patent right could create a huge deterrence to your competitors. As discussed earlier, even if there is no patent evaluation report obtained for utility model or design patents, patent owners could still send out C&D letters to potential infringers without a PER. In this way, the burden will be shifted to the potential infringers, and they will have to seriously look into the matter, but does not have any right to request for PER  (this is at least the case based on the current patent law, but could be changed in the next examination guideline).

 

Even for circumstances where PER is absolutely required, I would still suggest patent owners (or parties of interest) to conduct a stability search via a patent law firm before requesting a PER, to avoid the risk of receiving a negative PER. If the stability search showed that the utility model or design patents are relatively stable, then the patent owner can go ahead requesting for PER, and this approach will increase the confidence and likelihood of receiving a positive PER. If the stability search showed that there is a killer art destroying the novelty or inventive step of the patent, then the patent owners could quickly adjust the enforcement strategies and change to approaches that do not need a PER for patent enforcement.

 

To this end, it is important to be aware that, even if a PER is indicated to be negative by the CNIPA, it does not mean the patent is held invalid by the CNIPA. We have seen some cases where utility models with negative PER are still maintained valid after a round of invalidation attack (for example, see the prosecution history of CN 201420786681.4).

 

More importantly, even if a negative PER is received, it does not mean the patent owner can’t enforce the patent right in a court proceeding. This is because PER is just treated as a piece of evidence during the infringement proceeding. If patent owners have good counter-argument to support the validity of the patent in light of the negative PER, the court may still issue a favorable decision to the patent owners. We have a successful litigation case last year by enforcing a design patent with negative PER at Beijing IP Court.

 

If there are any questions in relation to this topic, or anything that pops up in your mind about Chinese patent laws and practice, please do not hesitate to contact Mr. Haoyu ZHOU (Elliot) at patent@foundin.cn.