Ⅰ. Legal Insights

Article 19 of Patent Law of the People's Republic of China (2020 Amendment) (New China Patent Law) outlines the requirement for a confidentiality review by the State Council's Intellectual Property Administration before filing an invention or utility model patent application in China. Violating this rule results in a denial of patent rights in the country. Chinese entities or individuals can submit international patent applications based on international treaties, but adherence to relevant regulations is essential. The processing of international patent applications is subject to the State Council's Intellectual Property Administration's scrutiny based on international treaties, laws, and regulations.*

As per the first paragraph of Article 19, the conditions for a confidentiality review by the China National Intellectual Property Administration (CNIPA) include:

• The invention or utility model must qualify as such. 
  • Before 2008, China's patent law applied to a category known as "inventions and creations," which included inventions and utility models and extended to industrial designs. However, since industrial designs mainly emphasize visual enhancements without delving into substantial improvements in technical functionality or technical information, they are less likely to pose risks to national security or significant interests. Consequently, there was no imperative for a confidentiality review. Therefore, the 2008 amendment to China's patent law explicitly clarified that only inventions and utility models fall within the purview of subjects requiring a confidentiality review by the National Intellectual Property Administration.

• The invention or utility model was completed in China. 
• As patents are inherently territorial, countries worldwide typically mandate that applicants undergo a confidentiality review by their respective national authorities before applying patents in foreign lands. Consequently, the CNIPA is not required to conduct confidentiality reviews for all inventions or utility models intended for foreign patent applications. The review is limited explicitly to those inventions or utility models that have been completed within the boundaries of China.
• The term "completed in China" encompasses inventions or utility models completed by Chinese entities or individuals within China and those finalized by foreign applicants who have established wholly-owned or joint ventures in China. Essentially, as long as the invention or utility model is brought to fruition within the territorial confines of China, any applicant looking to apply in countries or regions beyond China must comply with the stipulations of Article 19, Paragraph 1 of the Patent Law.
• When determining whether an invention or utility model is completed in China, Rule 8, Paragraph 1 of the Patent Law's Implementing Regulations further specifies that in Article 20 (corresponding to Article 19 in this context, considering the application of the 2010 revised version), "completed in China" means the substantial content of the technical solution is achieved within China's borders for the given invention or utility model.
• A critical consideration in the evaluation and invalidation processes under the confidentiality review provisions is precisely defining "substantial content." This is commonly approached through an analysis of the inventors. According to Rule 13 of the Implementing Regulations, an "inventor or designer," as referred to in the Patent Law, makes a creative contribution to the substantial characteristics of the invention or creation. In practical terms, individuals listed as inventors in the patent document are acknowledged as those who have creatively contributed to the invention's or utility model's substantial characteristics. Suppose the inventor's workplace is within China or the research and development work linked to the invention occurs within China. In that case, the substantial content of the technical solution is deemed to be completed in China. In situations with multiple inventors and some working outside China, further assessment is necessary to ascertain whether the contributions of those inventors align with the technical solution outlined in the independent claims. This determines whether the substantial content of the technical solution is accomplished within China for the invention or utility model.
• The applicant intends to apply for a patent abroad for the invention or utility model.
  • This includes applications under the Paris Convention to countries other than China and PCT international applications. Each technical solution in the patent necessitates a confidentiality review. Suppose the documentation submitted to foreign countries includes a technical solution not outlined in the confidentiality review request. In that case, it should be regarded as though that particular technical solution has not undergone a confidentiality review by the CNIPA.

Ⅱ. Cases of Invalidation

In the National Intellectual Property Administration's (CNIPA) published decision number 55586, CNIPA declared the patent titled "A Scalable Transmission Assembly Device and Lifting Column" (Patent No.: ZL201720389490.8) entirely invalid. This decision was based on the grounds that the involved patent did not comply with Article 20, Paragraph 1 of the Patent Law (Article 19, Paragraph 1 in the new law). This case is a typical instance of a patent's invalidity being declared due to introducing the "confidentiality review provisions" in China's Patent Law.

The crux of the decision is as follows: "If the patent applicant/patentee applies for a patent for the same invention or utility model abroad and fails to undergo confidentiality review procedures, and if there is preliminary evidence indicating that the substantial content of the invention or utility model has been completed domestically, and the patent applicant/patentee cannot provide sufficient evidence that the substantial content of the invention or utility model has been completed abroad, the patent applicant/patentee shall bear the legal consequences of the invention or utility model not being eligible for patent protection."

Based on the provisions discussed above, the involved patent is categorized as a utility model patent, meeting the criteria outlined in the first provision of the relevant prerequisites. Additionally, the petitioner supplied application documents related to China's first application CN2017200259814 (filed on January 10, 2017), China's second application CN2017203894908 (filed on April 14, 2017, and claiming the priority of the aforementioned first application), and the U.S. provisional application US62/436730 (filed on December 20, 2016). The petitioner also presented the patent application filing documents issued by CNIPA. The petitioner argued that considering the technical content of the involved patent in conjunction with the first and second application documents, the technical solution of the involved patent and the U.S. provisional application are for the same subject matter. The patentee acknowledged that the technical content of the involved patent is identical to that of the U.S. provisional application, confirming the technical relevance of the involved patent. The involved patent falls into the category of first applying for a patent abroad, and the applicant did not undergo confidentiality review procedures. The main focus of the discussion is whether this utility model is completed in China.

The petitioner argues that, based on the patentee's prospectus for the initial public offering of shares and related webpage screenshots, it can be proven that the inventors of the involved patent are all Chinese, with their research and development addresses and the applicant all located within China. The applicant/patentee has a well-established research and development system and institution within China, supported by extensive technological research and development under national/provincial R&D projects. Additionally, the patentee has no research and development company overseas. Therefore, it can be demonstrated that the inventive creation of the involved patent was completed within China, and the technical solution of the involved patent has not undergone a confidentiality review, thus not meeting the requirements of Article 20 of the Patent Law (Article 19 in the new law).

The patentee asserts that the involved patent was an inventive creation completed abroad, submitting relevant counter-evidence, including the "Entry and Exit Record Inquiry Result" issued by the immigration authority for the first inventor. The patentee believes that the first inventor has research and development capabilities, and the inventive creation of the involved patent was mainly completed by the first inventor in the United States, with the other inventors contributing during the collaborative process. This is used to argue that the substantial content of the technical solution of the involved patent was completed in the United States.

In response, the review panel believes that the petitioner's evidence, based on the following two points, convincingly indicates that the substantial content of this patent was completed domestically:

The perspective of the patentee's domicile. The patentee's domicile and research and development institution are both within China, and there is no evidence that the patentee company possesses technological research and development or product design capabilities abroad.

The perspective of the inventors' nationality. The involved patent lists four inventors, with the first three being employees of the patentee company. In the absence of contrary evidence, the work location of these three individuals should be considered within China when performing the duties of an invention. Additionally, evidence indicates that the tasks of the fourth inventor are relevant to the involved patent, and their work location is within China.

The evidence submitted by the patentee can only prove that the first inventor had a history of outbound travel before the application date without directly proving that the involved patent was completed abroad by the first inventor. Moreover, apart from the first inventor, the patentee also fails to prove that the other three inventors conducted the inventive creation of the involved patent abroad.

Based on the above content, the review panel believes that the evidence submitted by the petitioner is mutually corroborative, proving with a high degree of certainty that the inventive creation of the involved patent was completed domestically. In the absence of sufficient evidence from the patentee to overturn the facts above, it can be confirmed that the technical solution of the involved patent cannot be granted patent rights. After being declared invalid by the CNIPA in May 2022, the patentee filed an administrative lawsuit, and the first-instance court upheld the decision of invalidity after trial.

Ⅲ. Key Takeaways

The case mentioned illustrates the importance of confidentiality reviews in patent applications, regardless of whether they involve national security or significant public interests. A confidentiality review is mandatory for any invention or utility model completed within China and intended for a patent application abroad. It is a legal responsibility for patent applicants, and neglecting this obligation leads to the legal consequence of forfeiture.

Typically, inventions or utility models don't inherently touch upon national security or significant public interests. In cases like these, attempting to bypass the provisions of Article 19 of the Patent Law by not requesting the CNIPA to conduct a confidentiality review only heightens the instability of the patent rights acquired in China. With the recent case serving as precedent, more challengers are willing to invest time, effort, or resources to unearth evidence of patentees violating Article 19 of the Patent Law. Whether the invention or utility model requires confidentiality when applying abroad or not, once someone raises an invalidation request on these grounds, the patent rights obtained in China will be declared legally invalid.

It's crucial to note that, as per the Patent Law before the 2008 amendment, only Chinese entities or individuals applying for patents abroad were bound by the constraints of the confidentiality review provisions (corresponding to Article 19 in the new law). Foreign entities or individuals weren't subject to these provisions. However, in practice, many foreign companies establishing wholly-owned or joint ventures in China often stipulate in their investment agreements or internal company regulations that inventions or creations made by their subsidiaries or joint ventures in China are entitled to worldwide patent rights by their parent companies. This implies that the actual applicant listed in the patent application request is a foreign individual, company, or other foreign organization, not "Chinese entities or individuals," thus circumventing the constraints of the pre-2008 Patent Law. Therefore, the 2008 amendment to the Patent Law removed the reference to "Chinese entities or individuals," stipulating that the provisions of the confidentiality review (Article 19 in the new law) apply as long as the invention or utility model applied for a patent is completed in China, regardless of whether the applicant is a Chinese entity or individual or a foreign individual, company, or organization.

In today's age of technological globalization and international market dynamics, many innovators strategically pursue a global patent strategy for their research and development achievements. Especially for foreign enterprises establishing wholly-owned or joint ventures in China, to ensure prudence, applicants should explicitly request a confidentiality review during the application process whenever seeking to file patents abroad and when the research and development location, experimental site, or implementation site of the relevant technical solution is within China. This helps to mitigate the risk of losing patent rights.

* Article 19 of Patent Law of the People's Republic of China (2020 Amendment) (New China Patent Law) stipulates that: Where any entity or individual intends to file a patent application abroad in a foreign country for any an invention or utility model accomplished in China, it or he shall submit the matter to request the patent administration department under the State Council for confidentiality examination in advance. The procedures and duration etc. of the confidentiality examination shall be carried out in accordance with the regulations of the State Council.

Any Chinese entity or individual may file for an international patent application in accordance with the relevant international treaties to which the People’s Republic of China is a party. If an applicant files an international patent application, he or it shall abide by the provisions of the preceding paragraph.

The patent administration department under the State Council shall deal with international patent applications in accordance with the relevant international treaties to which the People’s Republic of China is a party, this Law and the relevant regulations of the State Council.

For an invention or utility model, if a patent application has been filed in a foreign country in violation of the provisions of the first paragraph of this Article, it shall not be granted a patent right while filing a patent application in China.

Author: Yaqi Kuang 

• Yaqi Kuang holds a Master's Degree in Optics from Wuhan University of Technology and a China Patent Agent Qualification Certification.
• With 9 years of experience in the intellectual property industry, she worked successively in the Patent Examination Coordination Hubei Center of the Patent Office, Tianma Microelectronics, and Beijing Hankun Law Offices. She served clients including Tianma Microelectronics, Baidu, CATL, China Changjiang Energy Corporation, Honor and more.
• Yaqi has a professional background in optics, semiconductor technology, electronic information, and other fields, specializing in patent search, invalidation, patent mining, risk assessment, and stability analysis. Yaqi can be reached at yaqi.kuang@purplevineip.com.