But when the Wenzhou Intermediate People's Court rejected
its arguments and awarded damages of $23 million against it, that
was not the only shock. The most astonishing thing about the case
to foreign eyes was that the patent in question had been granted
with only a cursory examination and had cost just $70.
The patent, which referred to a circuit breaking system, was
what is called a utility model patent. China has three kinds of
patent: invention patents, which last for 20 years; design patents;
and utility model patents, which last for just 10 years.
Utility model patents, or 'petite patents', exist only in some
countries. You find them in Germany and France but not in the UK or
US (though, confusingly, the US uses the term 'utility patent' to
refer to its regular patent). They are issued for new
technical solutions relating to a product's shape or structure, or
a combination of the two, where it has a practical use.
The patent requires less inventiveness and is awarded quickly
and cheaply. Full invention patents can take four years to be
granted, while a utility model patent is typically granted in just
one year.
This can be crucial for inventions in electrical or electronic
fields. By the time four years have passed and your invention is
finally protected by a fully-enforceable patent, technology may
have moved on. Your invention could be irrelevant.
Perhaps the most crucial thing to know about utility model
patents in China is that they are awarded with no substantive
examination. Only preliminary examination is required, meaning that
you can get one easily. But this means they are also easy for your
business rivals to acquire.
If you do business in China you may have no choice but to get to
grips with these unusual patents. Between 1986 and 2007 half of all
patent requests in China were for the utility model patents. Full
invention patents only accounted for 19.9% of applications, and 87%
of those applications were by foreign businesses.
Multinational companies, then, have clearly not switched their
focus yet in China from more familiar full invention patents to the
utility model patents. That must change.
Though the protection they offer is weaker than companies might
be used to, utility model patents can play a very important role.
They can give you fast protection for your inventions. Some Chinese
companies apply for both kinds of patents at once, cancelling the
utility model application when their invention patent is granted
after four years, giving them more protection while they wait.
Like Scheider Electric, foreign companies will surely
increasingly come up against the utility model patents. But
companies should not just react to them, they should make them part
of their own patent portfolio if they are serious about doing
business in China.
By Dr Kening
Li, a partner in the Shanghai office of Pinsent Masons, the law
firm behind OUT-LAW.COM, and head of the firm's intellectual
property team in China.
Editor's note, 14/09/2009: This story was
originally entitled 'Beijing ruling shows why foreign companies
need a patent strategy for China' and said that the ruling was
made by the High People's Court of Beijing. In fact the ruling was
made by the Wenzhou Intermediate People's Court. We apologise for
the error.
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