The uniqueness of the utility model patent system in China lies in its readiness to obtain, and its strong enforcement. Utility models have many advantages in acquiring rights. For example, the cost of applying for a utility model patent is remarkably lower than that of an invention patent; and the prosecution term of a utility model is very short – a UM application can usually be granted within one year with more than 80% of granting rate. A utility model patent also has a lower inventiveness requirement than that of an invention. Facing the same prior art, an invention patent may be invalidated while a utility model with the same claims may be maintained.
With respect to enforcement, the patentee of a UM patent is entitled to file an infringement lawsuit directly after issue of the patent.
According to the litigation system of China, even if the utility model patent is finally invalidated, and thus failed in the infringement case, the losing patentee does not need to compensate the loss of the winning defendant unless the patentee is proved to have sued in bad faith. In the present judicial practice in China, since the recognition of bad faith is very strict, only a few cases have determined that the plaintiff patentee sued in bad faith.
For the reasons mentioned above, and taking over two million UM patent applications that were filed in 2018 into consideration, a considerable amount of utility model patent applications are granted without substantive examination (inventiveness exam) and, in particular, independent claims of many utility model patents are unreasonably broad, even covering prior art. As such, manufacturing enterprises face high patent risks in their operations.
Manufacturing enterprises may be accused of infringement by a patentee of unstable but broad utility model patents. In patent infringement proceedings, even if the manufacturing enterprise believes the patent is a prior art, its sales of the product will face risks and pressure before the court makes a decision; and even if the manufacturing enterprise wins the case, it still has to pay its attorney fees and other costs. In addition, it is quite difficult to prove bad faith of the patentee, thus it is nearly impossible to claim compensation against the patentee.
In addition to the risk of infringement lawsuits, manufacturers also confront difficulties that are hardly susceptible to the general public. Careful manufacturing enterprises will perform the “freedom to operate” (FTO) search and analysis, and in such searches usually at least one (according to the author’s experience, often one to three) risky utility model patents will be found. However, after patent validity search and analysis against the risky patent, we found that such utility model patents are mostly prior art, with no novelty or inventiveness.
Invalidation requests against these patents means a lot of money. Otherwise, the manufacturing enterprises have the sword of Damocles hanging over their heads if they turn a blind eye to the problem.
There is also another possibility of abuse of utility model patents in practice, which is very rare in cases found, but very difficult to deal with. For instance, when a new product is developed, manufacturer A would file a patent application to protect its inventive points. The patent application usually focuses on the inventive points, while it maybe has a very simple, or no, description of other portions not relating to the inventive points of
After the launch of the product on the market, someone named B submits a utility model patent application for protection of specific structures of such product, particularly for the protection of certain structural features of the product that are unlikely to have been included in the invention patent application filed by A. After some time, the utility model application filed by B is granted, then B accuses A of patent infringement.
However, A has difficulty using his invention patent to invalidate the later utility model patent, because the technical information in his invention application is insufficient to disclose claims of the utility model patent. According to the patent law, earlier sales are considered as a publication by use, which is prior art. But in practice, the problem is evidentiary issue, that is to say, in the absence of prior preparation it is very difficult to find evidence to prove the earlier sale, or the corresponding evidence for the sale has low leverage.
Suggestions for coping with utility model patents for manufacturing enterprises. First of all, the author suggests doing the FTO search before the launch of the product, but differentiate the risks during the search and analysis. For utility model patents without novelty, or clearly no inventiveness, manufacturing enterprise can prepare invalidation requests (prepare relevant documents and evidence in case of infringement), but hold, and do not file, the requests.
When being accused, the manufacturing enterprise can file invalidation requests immediately, and with strong evidence to prove prior art, it is very likely that the infringement proceeding will be suspended. For utility model patents that can only be challenged with inventiveness, and still with uncertainty, consider firstly designing around, and if it is difficult to design around, then an invalidation request with a “straw man” (nominal person) can be considered to test the line of attack.
Second, manufacturing enterprises in China can keep the evidence of manufacturing activities of the products (it is suggested to notarize the evidence with a local public notary) as a prior use defence against possible infringement allegations with later-filed utility model patents.
Third, in terms of key products, it is better for manufacturing enterprises to preserve evidence of the first sale (such as a sales note or receipt, and it is suggested to notarize the evidence with a local public notary) to prove disclosure by use as prior art, as it will be useful to fight against copycats copying new products with utility model patents and intending to block your business.
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