The rapid rise of the Chinese economy has placed increased focus on China's intellectual property system in terms of both its capacity to protect intellectual property rights and more importantly, its ability to enforce those rights. Unlike the United States, modern China has a very recent history with intellectual property rights. While the Chinese intellectual property system is still evolving, the internal and external pressures on the Chinese government will inevitably lead to an intellectual property system comparable to those of other developed nations. The question is when. This article will briefly examine the protection of biotechnology inventions in the current Chinese patent system.

China enacted its first patent laws in 1984. This version of the Chinese Patent Law provided limited protection for biotech and pharmaceutical inventions. Subject matter excluded from protection under the 1984 Patent Law included "methods of diagnosis and treatment of diseases," "food, drink and seasoning," "drugs and materials obtained by chemistry methods," and "animals and plants." The 1984 Patent Law provided, however, that "methods of making" the above excluded subject matter were patentable. In 1992, the Chinese Patent Law was amended in accordance with China's obligations under the Memorandum of Understanding between the Government of the People's Republic of China and the Government of the United States of America on the Protection of Intellectual Property, at which time "food, drink and seasoning" and "drugs and materials obtained by chemistry methods" became patentable subject matter.

The timing of China's enactment of its first patent laws and the concurrent development of the biotechnology industry has produced historic anomalies. Many of the current blockbuster biotechnology drugs lack any meaningful patent protection and are generically produced in China. This has occurred for several reasons. First, many blockbuster biotech drugs were invented in the late 1970's and early 1980's. Patent protection for those drugs simply did not exist in China at that time. Second, because of the historic lack of enforcement and lack of a significant market, many companies simply did not file applications in China.

China's present patent laws still classify "methods of diagnosis and treatment of diseases" and "animals and plants" as non-patentable subject matter. China's prohibition on "methods of diagnosis and treatment of diseases" is similar to European patent law, and protection for such inventions can be achieved by Swiss type claims. Like many other countries animals and plants are not patentable subject matter but, China's exclusion of animals and plants from patent protection includes transgenic animals and plants. However, methods of making transgenic animals and plants are patentable subject matter as are genetically engineered microorganisms and cells. This provides limited patent protection for transgenic animals and plants. In addition, plants are protected under the New Plant Varieties Protection Regulation in China, which grants exclusive rights to produce and sell a new plant variety.

Three types of patents are granted under the Chinese Patent Law, namely invention, utility model, and industrial design patents. Invention patents are directed to new technological developments relating to products, methods or their improvements. Biotechnology and pharmaceutical inventions are typically protected by invention patents, which have a term of 20 years from the filing date.

In the last six years, the number of patent applications of all types filed with the Chinese Patent Office has risen by almost 50,000 applications per year. SEE FIGURE 1.

Meanwhile, in the last two years the grant of Chinese patents has risen by about 50,000 patents. SEE FIGURE 2. Both foreign and domestic applicants have sought more patents and received more grants during this time period. The increase in patent applications by domestic applicants reflects an increased focus by Chinese companies on protecting innovation. The increase in patent applications by foreign applicants reflects an increased focus on the Chinese market. As Chinese patent grants continue to increase and companies both domestic and foreign seek to enforce those rights, the Chinese patent system will continue to evolve and enforcement issues will become less problematic.

To be patentable under the Chinese patent law, an invention must be novel, inventive and useful, which is analogous to the patentability requirements under U.S. and European patent law. Novelty means that "prior to the filing date, an invention or utility model was not described in a domestic or foreign publication, was not publicly used in China, was not otherwise known by the public, or was not described in a patent application by another filed with a patent administrative office of the State Council before the filing date and published after the filing date." Inventiveness means that "comparing to technologies existing prior to the filing date, an invention has noticeable substantive characteristics and non-obvious improvement, or a utility model has substantive characteristics and improvement." Usefulness means that "an invention or utility model can make or be of use, and can produce positive effects."

The novelty requirement under the Chinese patent law allows no prior disclosure of an invention except under limited circumstances. In contrast, under U.S. patent law, a public use, offer to sell or publication of an invention begins a one year grace period in which an inventor to file a patent application. In China, disclosure of an invention before its filing date will bar a patent on the invention, unless the disclosure is made within six month before the filing date the application under one of the following circumstances:

(i) the invention is first presented in an international meeting organized or recognized by the Chinese government;
(ii) the invention is first published in an academic or technological meeting organized by national-level academic organizations or relevant administrative agencies of the State Council;
(iii) the invention is disclosed by another without the consent of the applicant of the patent.

The Chinese Patent Law requires that patent applications directed to inventions made in China by Chinese entities or individuals must be filed first in China before any patent applications can be filed on the invention in foreign countries. Many Chinese inventors, particularly academic researchers, lack the level of sophistication in patent matters of their counterparts in the U.S. This is in part because patent protection is a relatively new development in China. Whereas, in the U.S., implementation of Bayh-Doyle caused a proliferation of technology transfer offices in U.S. academic institutions and a corresponding focus on patent protection by U.S. researchers.

China has a dual system of enforcing patent rights - one system of administrative enforcement and another of judicial enforcement. Patent disputes can be resolved through either system. Administrative actions are usually faster and less expensive than court proceedings. However, courts can award damages, whereas administrative authorities can not. Both administrative authorities and courts can provide injunctive relief, but the administrative authorities jurisdiction is limited. Generally, administrative enforcement is more effective for straight forward cases where there is clear evidence of infringement or wrongdoing, such as counterfeit actions. Courts are better equipped for handling complex cases such as patent infringement cases.

Administrative authorities involved in patent enforcement include local intellectual property offices, the Customs Office, and the police. Local intellectual property offices may handle patent infringement matters, mediation of patent disputes, patent false representation, and other patent related disputes. The Customs Office is involved in the control of importation and exportation of goods infringing intellectual property rights. The police departments are mostly involved in cracking down on criminal activities against intellectual property rights.

Judicial enforcement may include civil cases and criminal cases. At the trial level, patent cases are heard by intermediate people's courts located in capital city of each province, and also certain intermediate people's courts and primary people's courts designated by China's Supreme Court. Appeal cases are heard by the high people's courts of the provinces. Appeal from high people's courts' decisions may be filed with the Supreme Court, which decides, in its own discretion, whether to review a case. Courts do not decide patent validity issues directly. A request for patent invalidation must be filed first with the Patent Re-examination Board of the State Intellectual Property Office. After the Patent Re-examination Board issues a decision on the validity of a patent, the relevant parties involved may file a lawsuit before a court to challenge the decision of the Board. The Beijing No.1 Intermediate People's Court is the court that has jurisdiction over the Patent Re-examination Board, and all cases against the Board must be filed with the Beijing No.1 Intermediate People's Court. Severe violation of intellectual property rights can constitute a criminal offense punishable by imprisonment and fines.

Notwithstanding the progress China has made developing its patent system, patent damages remain insignificant in comparison to patent damages in the U.S. Under Chinese patent law, patent infringement damages may be calculated as lost profits of the patent holder or benefits gained by the infringer. If the lost profits or gained benefits are difficult to determine, but royalty payment references are available, a court may award damages equal to one to three times the royalty payment. If no royalty payment references are available or the references are obviously unreasonable, a court may award damages within the range of RMB 5,000 yuan (approximately US $625) to RMB 300,000 yuan (approximately US $37,500), not to exceed a maximum of RMB 500,000 yuan (approximately US $62,500). Generally, damages awarded for lost profits, gained benefits or royalty payments are not significantly greater than the statutory damages.

China is a rapidly evolving country and its patent system will rapidly evolve as well. The Chinese economy will continue to grow and its domestic companies will continue to innovate and take advantage of China's patent laws. More foreign companies will file patent applications in China, as China has become an economic player in the world market. The increased utilization and focus on patent protection and enforcement, particularly by domestic Chinese entities, will inevitably drive China's patent system to become comparable to those of other developed nations.