Chinese Patent Invalidation Proceedings Will Not Be Suspended for Ownership Disputes
On August 3, 2021, the China National Intellectual Property Administration (CNIPA) published the Draft Amendments to the Guidelines for Patent Examination (the “Draft Amendments”). Many amendments to the Guidelines are responsive to the amendment of the Patent Law. For example, the Draft Amendments provides detailed rules on partial design, patent term adjustment, patent term extension, and invalidation involving drug patent disputes arising under the newly established patent linkage system. Many other amendments deal with issues raised in Chinese patent practice in recent years. One of the important amendments to the Guidelines eliminates an unfair procedural advantage for owners of Chinese patents. More specifically, patent invalidation proceedings, just like infringement proceedings, will not be suspended despite a dispute over ownership of the patent in issue.
According to the current patent examination guidelines, an invalidation proceeding can be suspended when there is raised an ownership dispute, or when the patent is preserved during a property preservation proceeding. Infringement litigation proceedings are not similarly suspended, however. Thus, patent holders were able to sue for patent infringement and then have any invalidation proceedings filed by the alleged infringer suspended, merely by creating an ownership dispute. This gave patent owners an unfair procedural advantage.
In the 2018 Annual Patent Administrative Litigation Case Seminar (2018 Conference) jointly held by the Intellectual Property Tribunal of the Supreme People’s Court, the Intellectual Property Division of the Beijing Higher People’s Court, the Beijing Intellectual Property Court, and the Patent Reexamination Board, it was confirmed that there are various illegitimate suspensions cases in patent invalidation administrative cases due to fake ownership disputes created by the patent owner and a secret partner. This abuse of the suspension procedure is considered very serious, and negatively impacts both the administrative procedure for patent invalidation and the civil procedure for infringement litigation. The 2018 Conference concluded that “in the event of a patent ownership dispute or a court ruling to take property preservation measures against patent rights, there is actually no absolute necessity to suspend invalidation proceedings, and it is entirely possible to safeguard the legitimate interests of third parties by establishing other reasonable mechanisms."
The recent Draft Amendments with respect to the invalidation proceeding reflects the conclusion of the 2018 Conference. With such changes, it will be difficult for the right holder to exploit the suspension tactic during the invalidation proceeding. However, elimination of suspension of the invalidation proceeding could cause certain losses to the party involved in the patent ownership dispute or to the applicant of the property preservation. When the patentee of record is lazy, negligent, or otherwise fails to defend his patent right, the patent which possibly could be sustained may be unreasonably invalidated due to the patentee’s carelessness or malfeasance. As a result, the other party involved in the ownership dispute or the applicant for property preservation could lose their legitimate rights and interests without due process.
To protect against such loss of legitimate rights and interests of a party involved in an ownership dispute during the invalidation proceeding, the suggestion given by the 2018 Conference was that “the party of the patent ownership dispute who did not participate in the invalidation proceeding may request to participate in the invalidation proceeding or request to replace the patentee of the record in the invalidation proceeding to defend his own interests.” For the applicant for property preservation, no protection mechanism was discussed in the 2018 Conference.
The Draft Amendments state that a party to the patent ownership dispute may request to “participate in” the invalidation proceeding through receiving the documents and notices sent by the Reexamination and Invalidation Department. However, such measures may not be sufficient to allow real participation in the invalidation proceeding. To substantively provide the party involved in the patent ownership dispute with due process, some further measures can be considered.
The first measure is to ensure that the party to the patent ownership dispute is notified of the filing of the invalidation proceeding. According to the current regulations, when someone files a request to invalidate a patent, only the patentee is notified. The legitimate party to a patent ownership dispute has no way to know of such validity challenge in the context of the ownership dispute. Therefore, that party does not know that it should request to participate in the invalidation proceeding. It is suggested that when the patentee receives the notice of invalidation request forwarded by the CNIPA, the patentee should be required to disclose the fact that the patent is involved in an ownership dispute, so that the other party to that ownership dispute can be notified about the invalidation proceeding. A patentee who does not disclose the fact of the ownership dispute might be subject to some level of punishment for disrupting civil or administrative procedures.
The second measure to be considered is to give the party to the patent ownership dispute the right to state opinions. If the right of participation is limited to receiving documents or notices sent by the Reexamination and Invalidation Department, the notified party does not really participate in the invalidation proceeding and is merely an observer. If the patentee is not willing to defend the patent right diligently, the other party to the ownership dispute will be unable to do anything but watch the right and interest in the patent disappear.
On the other hand, giving the party to the patent ownership dispute the right to state opinions will not increase the procedural burden because the patent invalidation procedure is relatively simple and substantially focuses on analysis of prior art references. Thus, additional statements regarding validity from the other party involved in the patent ownership dispute may not create undue burden on the tribunal.
In the civil procedural law, there is a concept that a third party who is considered to have an independent right to claim the subject of the litigation or has legal interests in the outcome of the litigation may participate in that litigation. In the invalidation proceeding, we may borrow that concept and allow a legitimate party to a patent ownership dispute to participate in the invalidation proceeding in a form similar to the mechanism for the third-party participation in the civil procedure. Similarly, when the patent right is preserved during a property preservation proceeding, the applicant for preservation may be allowed to participate in the invalidation procedure to protect the applicant’s own rights with due process.
We will continue to report the progress of the Amendments to the Guidelines for Patent Examination in timely fashion.