6 Apr
2016

Understanding utility model patent and design patent protection

Utility models and designs are two available categories of patent in China. Utility models are sometimes referred to as ‘small inventions’ because they involve a comparatively lower level of inventive step and are less costly than inventions. Subject to preliminary examination, a utility model takes just several months to obtain, from filing to grant. Therefore, utility model protection is worthwhile for inventions that contain minor technical improvements, but are of significant commercial value.

Designs are also subject to preliminary examination only. A design is an artistic creation which features the decorative or aesthetic exterior appearance of an article – unlike an invention or utility model, which involves a technical solution.

In 2014 the State Intellectual Property Office (SIPO) received approximately 928,000 utility model applications and 869,000 design applications, respectively accounting for 22% and 21% of the total number of annual patent applications. From 2010 to 2014, the mean annual growth rate of utility model applications filed by domestic applicants was 29%; about 7% of those were filed by foreign nationals. These figures suggest that utility models are still attractive to both domestic and foreign rights holders, despite the high invalidation rate of roughly 65% to 72% over the past two years, according to available statistics.

The total number of design filings peaked in 2013, but declined in 2014, with a drop of some 24,000 applications. However, design applications filed by foreign applicants have risen steadily each year.

Patentable subject matter

The Patent Law 2008 defines a ‘utility model’ as any new technical solution relating to the shape or structure of a product, or a combination of both. In other words, a utility model does not protect methods, processes or improvements to such. Non-technical solutions, such as the use of a product or substance with an unfixed shape, are ineligible for utility model protection; as are products featuring decorative designs only.

A ‘design patent’ is any new design of a product’s shape, pattern or a combination of both, or a combination of colour with a shape or pattern, which creates an aesthetic impression. In principle, an application is limited to one design. However, an exception is available for similar designs for the same product or several similar designs incorporated in products as a set, which may be filed together in a single application including up to 10 designs.

Graphic user interfaces (GUIs) are also patentable subject matter. The protection of a GUI was affirmed in administrative litigation in 2014; the court ruled that a GUI which, in combination with the associated product, presents appealing features complies with the definition of a ‘design’. Under SIPO Order 68 – which removed the requirement that a product pattern be permanent and visible, rather than flickering or conditionally visible – the SIPO Guidelines for Patent Examination 2010 were amended to include GUIs as patentable subject matter for designs.

As a blanket restriction, Article 5 of the Patent Law provides that an application for a utility model or design will be rejected if the subject matter is contrary to law or social morality, or is detrimental to the public interest.

Unlike some countries, China does not specifically provide for the conversion of an invention application into a utility model application and vice versa.

Patentability

Utility models

Articles 22(1) and (3) of the Patent Law provide that: “An invention or utility model for which a patent is to be granted shall be novel, inventive and practically applicable…….Inventiveness means that,……..the invention has prominent substantive features and represents a notable progress and that the utility model has substantive features and represents progress.” Whereas an invention must involve notable progress in order to meet the inventiveness requirement, a utility model that involves merely some degree of progress will suffice. Therefore, a utility model involves a comparatively lower level of inventive step than an invention patent.

Designs

A patentable design must be novel, differ significantly from the prior art and be industrially applicable. A design will be granted patent protection only where it does not conflict with existing and legitimate rights, such as copyright, trademarks, trade dress or images.

Preliminary examination

The Patent Law does not require substantive examination of utility models and designs. Applications are subject to a preliminary examination only, without any prior art or prior design search before grant. The preliminary examination generally takes from three months to one year.

However, preliminary examination does not imply that novelty is not examined at all. According to SIPO Order 67 and the post-amendment Guidelines for Patent Examination 2010, the examiner may investigate whether a utility model or design application prima facie lacks novelty (ie, an examination for obvious and substantive defects), as well as for any potential double patenting. Without conducting a search, the examiner may use other available technical solutions to identify anything that would conflict with the application in the prior art, including search results in other countries.

Scope of protection

The product or article to which a design applies is an indispensable element that must be designated or illustrated in the application in order to define the boundaries of the right. In contrast to invention patents and utility models, the scope of protection for a design is defined in the drawings or photographs submitted. To interpret a design, the Patent Law requires that a brief description be included in the specification. Further, Article 28 of the Implementing Regulations requires that this brief description indicate the essential features of the design; this is particularly important for distinguishing prior designs.

Term of protection

The term of patent protection for both utility models and designs is 10 years from the filing date.

International priority

To enjoy international priority, the applicant must file in China, within 12 months (for a utility model) or six months (for a design) of the date on which it first filed in a foreign country, an application for the same utility model or design. A priority claim must be made upon filing and a copy of the priority document must be submitted within three months of the filing date. Failure to meet either requirement will result in the priority claim being void.

China allows for the national entry of a Patent Cooperation Treaty (PCT) application as a utility model application. However, the applicant cannot take advantage of the ‘one invention, two applications’ strategy (see further below) by filing through the PCT national entry route. The applicant must choose either an invention patent or a utility model application for PCT national entry.

There is some doubt as to whether a foreign partial design can serve as the priority basis for a Chinese design application, as China does not permit partial designs. According to SIPO’s current practice, if the dotted lines or double-dotted lines are modified to solid lines in the drawings submitted to SIPO, the applicant may be entitled to a priority claim to a first-filed foreign partial design. No problems will arise once partial designs are admitted as patentable subject matter by the prospective Fourth Amendment to the Patent Act.

Dual filing strategy

Article 9 of the Patent Law prohibits double patenting, although it does permit a ‘one invention, two applications’ filing strategy. Article 41 of the Implementing Regulations provides that where the same applicant files same-day applications for a utility model and an invention patent relating to the same invention, it should indicate this accordingly. Failure to specify at filing may cause the applications to be rejected due to the prohibition against double patenting.

Since utility models are not subject to substantive examination, in practice they are granted much faster than invention patents. The applicant can thus enjoy utility model protection from that point and then subsequently abandon this protection upon grant of the invention patent. The utility model will cease from publication of the invention patent. This patent prosecution strategy indicates that utility models can be used not only as a form of supplementary protection while an invention application is pending, but also as a form of alternative protection if the application for an invention patent is rejected during the substantive examination.

This route is available only when both applications are filed in China on the same date and are based on the same priority date, if any. The applicant can claim priority based on the first-filed foreign application according to the Paris Convention. If the first-filed application is a PCT application, the applicant must file national applications for a utility model and invention patent respectively, claiming priority for the PCT application under the Paris Convention. The applicant thus should not opt for the PCT national entry route. Where the PCT route is desirable, the applicant must choose between the utility model and invention patent, and cannot take advantage of the ‘one invention, two applications’ filing strategy from this point onwards. This is because the filing date of the second national application for the same invention differs from the filing date of the PCT application on which the national entry is based.

Enforcement of patent rights

According to the available statistics, the patent validity rate in 2014 for utility models was about 28%; the same rate for invention patents was roughly 30%. However, while the validity rate for utility models in 2015 increased to around 36%, the same rate for invention patents plunged to just 8%. Since utility models involve a comparatively lower level of inventive step, their stability against invention patents is attractive. The win rate of utility model patentees in infringement cases from 2014 to 2015, again according to the available statistics, was about 61% to 72%; while the same rate for invention patentees was approximately 59% to 69%. It would thus appear that acquiring an invention patent – which involves a lengthy and expensive procedure compared to the investment required to obtain a utility model – does not guarantee the rights holder a better win rate in infringement suits. However, the optimal patenting strategy will still depend on the kind of invention that the rights holder is seeking to protect and the desired term of protection.

Patent evaluation report

The Patent Law imposes a special burden of proof on utility model and design patentees in the event of infringement litigation. Article 61(2) reads: “the people’s court… may ask the patentee or any interested party to furnish an evaluation report of patent made by [SIPO] after having conducted a search, analysis and evaluation of the relevant utility model or design, and use it as evidence for hearing or handling the patent infringement dispute.” Since utility models and designs are subject only to preliminary examination before grant, their validity may be vulnerable during the trial. However, an evaluation report is neither an administrative decision on patent validity nor a prerequisite for initiating a legal action. The report serves only as a preliminary reference for the court, which has full discretion to decide whether to suspend the pending proceedings. Only the Patent Re-examination Board has the authority to confirm or invalidate the patent in dispute. Moreover, whether the report may be appealed is moot. SIPO’s position would indicate that the report is not an agency decision and the rights holder cannot file administrative litigation against it.

Fourth Amendment provisions on utility models and designs

According to the latest draft of the Fourth Amendment to the Patent Act, published in December 2015, several new provisions concerning utility model and design patents will be introduced, as outlined below.

Partial designs

The Patent Act 2008 does not expressly exclude the patentability of partial designs. Instead, their ineligibility for protection is listed as an example in the Guidelines for Patent Examination 2010. Additionally, the guidelines require that the full appearance of the relevant product be delineated by solid lines, thus precluding the use of dotted lines.

Article 2(4) of the draft defines ‘designs’ as new designs of “the whole or partial” shape or pattern of a product, or a combination thereof. Under the draft, therefore, partial designs will expressly constitute patent-eligible subject matter. It is expected that the guidelines and relevant regulations will also be modified accordingly.

Extension of term for design patents

In line with the US system, a design’s term of protection will be extended to 15 years from filing; the term of protection for utility model will remain 10 years.

Punitive damages and increased statutory damages

The changes to the sums of monetary damages that can be awarded have attracted considerable attention. The first three methods of calculating damages – that is, the rights holder’s actual loss, the infringer’s profits and a reasonable royalty – remain unchanged. Under the draft, however, the court may now weigh the circumstances, scale and consequences of the infringement to award up to triple damages calculated using one of these methods. The damages may include the rights holder’s reasonable expenses incurred in stopping the infringement. Most importantly, statutory damages have been increased significantly, to a range from Rmb0.1 million to Rmb5 million.

Indirect infringement

Contributory and induced infringement are two types of offence recognised under the draft. Contributory infringement occurs when “[t]he parties who knowing the raw materials, intermediates, components, equipment are specifically designed for implementing the patents, in the purpose of business, provide the products above to the other parties infringing patents”. Induced infringement occurs when “[t]he parties who knowing the relevant products or methods are patented, in the purpose of business, induce the other parties to infringe the patents”. A fundamental prerequisite for indirect infringement is the presence of a direct infringer; the inducer or contributor’s knowledge of the infringement is also required. In other words, the rights holder must prove that the inducer or contributor’s intent was wilful. Once infringement is found, the inducer or contributor shall be held jointly liable with the direct infringer for damages.

The authors would like to thank Kevin CW Feng for his assistance in the preparation of this chapter

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Crystal J Chen
Partner
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Crystal J Chen is a partner at Tsai, Lee & Chen. Her practice covers all areas of IP law in both China and Taiwan. She counsels on patent prosecution and enforcement, and infringement litigation relating to copyright, designs, trademarks and unfair competition. Her clients include Rimowa, Applied Materials, B Braun Avitum and Nike.

Ms Chen received her LLM from the UNH School of Law. She is admitted to the National Bar of China and the New York State Bar. She is a member of the American Intellectual Property Law Association, the American Bar Association, the Intellectual Property Owners Association and the Beijing Bar Association. She is currently the chair of delegates for independent members of the International Association for the Protection of Intellectual Property.

Sylvester Hsieh
Junior partner
[email protected]

Sylvester Hsieh is a junior partner and a qualified Chinese patent attorney heading the electronics and mechanics section of Tsai, Lee & Chen’s international division.

Mr Hsieh previously worked at United Microelectronics Corporation doing computer repair/maintenance engineering and was an assistant teacher on the digital logic course at National Taiwan Ocean University. He started his Taiwan and China patent prosecution practice in 2004. He has extensive experience in designing Chinese patent prosecution strategies for international clients. He is particularly knowledgeable in high-tech areas such as circuit design, semiconductors, communications and computer software.

Mr Hsieh holds bachelor’s and master’s degrees in computer science and information engineering.