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30 September 2020
China in recent years has become a hub for emerging computing technologies. Platforms such as internet technologies, especially the internet of things (IoT), artificial intelligence (AI), e-commerce, fintech, advanced payment technologies, blockchain, cloud computing and technologies relating to social media are now being used by big tech companies and cool startups for the advancement of their systems. Interestingly, even the small players – including businesses in traditional technology areas – are investigating how these new techniques can help them get in front of their competitors.
According to Xiaofan Chen, a partner at AWA Asia in Beijing, along with these new technologies comes the need for IP protection, especially during these times of health crisis when the innovative use of data may affect privacy and result in liabilities under both GDPR and local laws and regulations.
“Clearly, IP protection for these innovations is an important issue to consider for those companies who want to keep their competitive edge,” he says. “Strategic protection of innovations of new technologies by intellectual property would be using a combination of different types of IP, such as copyright, trademark, trade secrets and patents, but patents by nature may provide the strongest and most profound protection for computer-implemented inventions.”
Aimin Huo, a trademark attorney and deputy director of the legal division at CCPIT Patent and Trademark Law Office in Beijing, meanwhile, adds that to protect its owners, the principle of “express consent from users” and “minimum and adequate use” should be followed when collecting and using the data of users.
“Online platform providers may assert rights if, without authorization, third parties have used the data which the online platform providers have collected and used with the consent of users on their online platforms,” he says. “Third parties should follow the triple-consent principle – consent from users + consent from platforms + consent from users – when collecting users’ data and information from the open online platforms so as to avoid unfair competition liabilities.”
He adds that in a nutshell, it is imperative that the companies collect and use data in strict compliance with GDPR and local laws and regulations so as to avoid administrative, civil or criminal liabilities.
Not surprisingly, however, these new technologies brought rise to the number of patent applications – more so during this new normal. At the policy level, China has been constantly introducing new laws and revising existing laws and regulations for this purpose. As a result, the overall environment of IP protection in China has been significantly improved over the past years through the large scale of legal reform in various areas of IP law. On the patent side, new laws and regulations include a series of amendments of patent examination guidelines, the upcoming fourth amendments to the patent law and some judicial interpretations and administrative regulations to strengthen enforcement of patent rights in China.
“These new laws and regulations are particularly relevant to the protection of innovations of digital technology and emerging computing technologies in that there are many elements in the new laws and regulations which are favorable to securing and enforcing patent rights for the new technologies,” says Chen. “We have seen a positive response from the high-tech industries to legal reform, and an increasing number of patent filings for new technologies. Globally, China now takes the lead in patenting 5G, fintech, blockchain, artificial intelligence and IoT.”
As a general principle, however, the patent law does not protect abstract ideas and rules and methods of mental activities. The concept behind this is that the patent right is, after all, a monopoly right, and a human’s idea or people’s thinking should not be monopolized. Therefore, basically in all major jurisdictions, the laws stipulate that a computer program or algorithm per se is unpatentable.
“However, in this day and age, the business of many companies relies heavily on the products and services developed based on computer programs and algorithms, and they consider these products and services as their core assets, and would not want third parties to make improper use of the assets by copying their ideas,” says Chen. “So, the importance of protection is clear. Historically, the topic of patenting computer implemented has always been controversial, and there is a fine balance for the law to strike between the public interest of not monopolizing human’s idea or people’s thinking and the incentives offered by patent rights over computer implemented inventions to the innovative companies in the IT and digital industries. The law must evolve constantly to address the balance in view of the social and economic developments domestically and internationally.”
According to Chen, the big challenge that the patent law faces in protecting these new technologies is how to strike the fine balance between the public interest of not monopolizing a human’s idea or people’s thinking and the incentives to the innovative companies in the IT and digital industries.
“My observation on the law and practice in China is that, at the moment, China is putting slightly more weight on the business side of the relevant industries by loosening the standards of patent eligibility of computer implemented inventions to some extent, while maintaining the examination standards of inventiveness for the sake of public interest,” he says.
For Xiaofang Li, a patent attorney at CCPIT Patent and Trademark Law Office in Beijing, the major challenge that the patent law faces in protecting these new technologies is that the law cannot be changed frequently due to a complex process, while new technologies are ever-changing.
“For resolving this, generally, the patent law makes a high-level provision while the specific rules are stipulated in the implementing rules thereof or the guidelines for patent examination, which can be amended relatively easily,” she says.
Chen adds that the new amendments appear to be a signal of further relaxation of patentability requirements for patent applications of emerging technologies relating to advanced computing and new business models.
“In fact, the new amendments try to clarify some grey areas in patentability examination of inventions of new technologies, and hopefully the examiners’ practice may be more predictable and consistent in the future.” says Chen. “In the new amendments of the Patent Examination Guidelines, it is required that examiners should not isolate algorithm or business method features from technical features of a computer implemented invention during examination. An optimistic estimate is that chances of such applications passing examination are likely to be increased as a result. Also, my personal observation is, with a series of amendments of Examination Guidelines put in place, as a whole, Chinese examiners’ mindset regarding patentability of inventions of new technologies and business models may begin to change to a friendly attitude towards these applications. This change of attitude, although psychological, may help a lot for more applications relating to new technologies get granted for patents. Moreover, the relaxation on examination of designs of GUIs in amendments of the Guidelines of 2019 means that GUIs of apps can be better protected compared with the old practice. All in all, the recent amendments of Patent Examination Guidelines are very positive developments encouraging entities to seek more patent protection for their innovations based on new technologies.”
With these new technologies developed over the past 10 years, China has seen great changes in the framework of patent law towards stronger protection in favor of patent owners. On the prosecution side, especially for high-tech industries, the situation is basically satisfying because the examination standard is more or less the same with major jurisdictions around the world. Because of China’s recent initiatives to promote innovations for high-tech technologies, in practice the examination standards may be somewhat more relaxed than the EPO when it comes to obtaining patent rights for digital technologies.
On the enforcement side, challenges do exist, but the situation is improving towards faster and stronger protection. A frequently asked question is if foreign companies are treated differently before Chinese courts. Statistics suggest the answer to this question is no. In fact, foreign companies have a higher win rate in China compared with domestic companies when it comes to patent litigation, based on various sources of statistics.
On a provincial level, local protectionism exists. But China is improving the situation by establishing specialized IP courts and tribunals having cross-regional jurisdictions. A centralized appellate tribunal has been established at the Supreme Court to hear appeals for technology related IP cases. Evidence burden on plaintiff (patentee) is still heavy in infringement litigation due to lack of discovery procedures.
But the trend is that the courts are easing the burden on plaintiffs to some extent, says Chen. “For instance, by reversing the burden of proof under some circumstances, and giving more power to judges to issue orders of preservation of evidence and to administrative authorities to collect evidence on behalf of the plaintiff. Damages awarded by courts are still relatively low, but the good news is that the upcoming amendments of the patent law will increase the upper limit of the statutory damage to Rmb5 million (US$730,000) and introduce punitive damage for willful infringement.”
Five to 10 years from now, Chen believes that China’s patent law (and relevant regulations) should continually evolve to adapt to the country’s social, technological and economic developments.
“With the desire to keep its competitive edge in the areas of high-tech and new technologies, China will continue the legal reform towards a more friendly and effective patent regime so as to further encourage the R&D activities in the fields of computer and digital technologies,” says Chen.
Li expects this new patent law to be amended in a short time, maybe in one year or two years. “Conventionally, the new patent law will remain unchanged for about 10 years,” she says. “However, the implementing rules thereof or the guidelines for patent examination may be amended with new and still-emerging technologies. It has been 12 years since the last amendment to the patent law, so the current patent law may not perfectly match the development of the technologies and society. Amending the rules on damages to increase the damages awarded by the court, for example, may strengthen it more.”
