China’s new Patent Law, coming into effect on October 1, 2009, has been in force for nearly six months. The revisions to the two articles concerning patent agency have led to the alarm that “the wolf is coming.” Is there any “wolf” after all? What threat will the “foreign wolf” bring? A China IP reporter interviewed related personages.

 

 

Article 19 of the old Patent Law said: “Where any foreigner, foreign enterprise or other foreign organization that has no habitual residence or business office in China applies for a patent, or has other patent matters to attend to, in China, he or it shall appoint a patent agency designated by the patent administrative department of the State Council to act as his or its agent.” The current law removed “he or it shall appoint a patent agency designated by the patent administrative department of the State Council to act as his or its agent,” thus making all lawful patent firms on the Chinese mainland qualified for accepting foreign patent applications.

 

Removal of the threshold of, “patent agency designated by the patent administrative department,” gave the 700-strong patent agencies across China access to foreign patent applications. Will the opened door sharpen the competitiveness and professionalism of Chinese agencies? To what degree will the trade be shaken by the change from “designation” to “opening”? And is a “wolf” really coming for the market?

 

Mr. Ma Lianyuan, President of the All-China Patent Agents Association and General Manager of Lian & Lien IP Attorneys, told our reporter: “It is very hard to conduct business related with foreign affairs, for this part of market has long been taken up by the once designated ‘mature firms.’ For those who have never engaged in foreign patents before, it is difficult to enter the market now and catch up with firms that have spent years in building up their experience, language and personnel.”

 

Xu Tianyi, a lawyer from Unitalen Attorneys At Law, agreed, saying the cancellation of “designated patent agents” will not affect these firms or bring a huge impact on patent agencies. But he expressed concern that, “Without the limitation of ‘designation,’ partners of mature firms might come out to form new agencies and their experience might exert pressure on the existing ‘triangular balance of power,’ but the pressure will not be big.”

 

Most insiders believe revision to the article is unavoidable, considering the fact that the state had no other choice other than to create “designated agents” in the early stages of the reform and opening up, when China only had three such agents designated by the State Council. In 1992, upon the first revision of the Patent Law, the designating authority shifted to the State Intellectual Property Office (SIPO), and by the latest revision in 2008 China had had more than 160 firms handling foreign patent affairs, with the market pattern haven taken shape. Along with the development of the Chinese economy and culture, cancellation of “designation” had become a trend, while patent agents were the last to become open among all intermediary firms.

 

Affected by the 2008 financial crisis, China’s foreign-related patent firms suffered different degrees of business loss. In past years they had experienced growth, big or small, but in 2009, particularly the first half, performance declined. However, as the impact of the crisis faded, business turned for the better starting at the end of 2009 and they all felt the “recovery,” but paid little regard to the competition brought by the revised law.

 

 

Article 20 of the old Patent Law said: “Where any Chinese entity or individual intends to file an application in a foreign country for a patent for invention or creation made in China, it or he shall file first an application for a patent to the patent administrative department of the State Council, appoint a patent agency designated by the said patent administrative department, and abide by Article 4 of this Law.” The revised law deleted “appoint a patent agency designated by the said patent administrative department” but required “any work unit or individual wishing to apply for a patent in a foreign country for an invention or utility model completed in China to first submit such invention or utility model to the State Council’s patent administrative department for a confidentiality review.”

 

The revised Article 20 saved enterprises or individuals the step of going through designated Chinese agencies and theoretically enabled them to apply directly to foreign patent firms or other agencies.

 

That is the so-called “coming wolf”, which now has an opportunity for “domestic prey”. Given the current limited understanding of intellectual property by Chinese enterprises, however, how many of them are able to deal with foreign agents independently?

 

Attorney Xu Tianyi said: “We didn’t feel an obvious change in the business amount. The cancellation of “designated agents” enabled Chinese enterprises to apply directly to foreign firms, but very few of them can do that. Perhaps it is only possible for a company like Huawei, for it possesses a relatively professional IP team which is familiar with preparatory work for overseas applications as well as foreign laws and regulations. A company can cooperate directly with foreign agents only when it is capable of early-stage preparations and understanding the possible legal problems. Most Chinese medium and small sized enterprises lack staff dedicated to patent applications and know little about foreign laws; so, despite the revision, they tend to entrust the vast majority of preparatory work to Chinese firms before going to foreign ones, for the latter charge by the hour and are very expensive.”

 

What Xu said accurately describes the current situation facing most Chinese enterprises. Despite their increasing awareness about intellectual property protection, they lack capability in this aspect of law or leaders dedicated to IP affairs.

 

After all, Chinese enterprises have more choices despite their dependence on domestic aid. At a corporate IP summit in Shanghai, the ChinaIP reporter met a Taiwan firm interested in the mainland market.

 

Taipei-based North America Intellectual Property Corporation (NAIP) has increased publicity on the Chinese mainland since 2009. It is a firm with15-year of experience in international patent applications and case management. General Manager Winston Hsu told our reporter: “The revised law filled us with confidence in the mainland, a place with numerous enterprises and increasing IP awareness. We have a unique advantage in overseas patent agency and more than a decade’s worth of experience, drawn from the failure of Taiwan enterprises in IP protection. We also have an advantage in staff and we are no more expensive than mainland firms. So we will focus on digging out mainland clients in the next two years.”

 

Despite Hsu’s confidence, Ma Lianyuan said that the existing clients’ knowledge of mature agents on the mainland and their caution in choosing one will make it hard for other firms to win their hearts.

 

The revisions to Article 19 and 20 didn’t have a strong impact on the pattern of Chinese patent agents, but in the long term, such a change might benefit domestic firms in a more balanced fashion.