Yu Weiyan
The new Implementation Regulations of the Patent Law (hereinafter referred to as “the new regulations”) were promulgated on December 21, 2023, and are set to take effect on January 20, 2024. The fourth amendment to the Chinese Patent Law established the patent open licensing system. The new regulations provide specific provisions regarding the content requirements of the open licensing declaration, situations where open licensing should not be implemented, and the filing procedures after the establishment of the license in the sixth chapter "Special License for Patent Implementation".
I. Content Requirements for the Open Licensing Declaration
According to Article 85 of the new regulations, an open licensing declaration should include: the patent number, patentee information, payment methods，standards of the licensing fees, and the duration of the license. In contrast to countries like the UK and Germany, which only require patentees to specify basic information about open-licensed patents in their declarations without disclosing specific licensing conditions, Chinese open licensing declarations demand that patentees explicitly state the payment methods and standards of the licensing fees as well as the duration of the license. Based on Article 472 of the Chinese Civil Code concerning the criteria for the establishment of an offer, an open licensing declaration containing the aforementioned details has reached the level of "specific and clear". Combined with Article 51.1 of the Patent Law, entities interested in implementing open-licensed patents shall notify the patentee in writing and pay the licensing fees according to the announced payment methods and standards to obtain the patent implementation license. It can be concluded that Chinese open licensing declarations is of an offer attribute. Potential implementers do not need further negotiations, only notifying the patentee will result in the legal consequences of determining the licensing conditions.
Unlike the one-on-one negotiation mode for regular patent licenses, the disclosure of licensing fee standards in open licensing declarations inevitably involves business information or information from prior licenses, putting patentees in the "open place" at aspect of information disclosure. Therefore, patentees should provide appropriate and reasonable explanations for the licensing fee standards to avoid adverse effects on subsequent licensing negotiations or damages calculations in infringement lawsuits.
II. Situations Where Open Licensing Should Not Be Implemented
Article 86 of the new regulations specifies several situations in which patentees should not implement open licensing. These include situations where the patent is within the sole or exclusive license period, involved in ownership disputes or subjected to judicial preservation measures, annual fees are not paid as required, or the patent is in pledge and the consent of the pledgee is absent. This article requires patentees to ensure the legality and validity of the patents subject to open licensing, without any rights burdens that hinder patent implementation.
Concerning patents within the sole or exclusive license period, since the absence of filing does not render the license contract invalid, there may be cases where conflicting licensing modes arise. For instance, a patent intended for open licensing may be within the sole or exclusive license period, but the license contract has not been filed. After examination by China National Intellectual Property Administration (CNIPA), the open licensing declaration of this patent is announced. This scenario could potentially harm the market share of the sole or exclusive licensee, affecting the expected profits under the sole or exclusive license contract. Therefore, due diligence on the part of the sole or exclusive licensee needs to be more comprehensive when entering into such contracts. It requires not only verifying whether the target patent has been subject to any prior licenses but also confirming whether the patentee has made an open licensing declaration and promptly filing it after signing the sole or exclusive license contract.
III. Procedures for Filing after the Establishment of Open Licensing
Article 87 of the new regulations stipulates that after the establishment of open licensing, the patentee or licensee should file with CNIPA. Although filing is not a requisite for the effectiveness of the license contract, according to the Guidelines for Patent Examination (2023) issued by CNIPA on the same day, filing the implementation contract of open licensing is regarded as the patentee's request for a reduction in patent annuity fees. Given that obtaining annual fee reduction is one of the main benefits for patentees to grant open licenses, it can be expected that the filing rate of open license contracts will be much higher than other license contracts.
IV. Requirements for the Principle of Good Faith in Open Licensing
Article 88 of the new regulations stipulates that patentees should not use false materials or conceal facts to make open licensing declarations or obtain patent annuity fee reductions during the open licensing period. In order to achieve the institutional goal of improving the transformation of technological achievements through open licensing, rather than providing the patentee with a means of fraudulently obtaining annual fee reductions, this article requires the patentee to make an open licensing declaration and apply for annual fee reductions in accordance with the principle of good faith. Meanwhile, Article 100 of the new regulations stipulates that if the patentee violates the provisions of Article 11 and Article 88, the department responsible for patent law enforcement at or above the county level shall issue a warning and may impose a fine of up to RMB100,000 yuan. Article 100 of the new regulations fills the legislative gap where there is no direct administrative penalty for violating the principle of good faith. Patentees should uphold good faith in open licensing, otherwise they may end up losing more than their gains.
Grace Yu
Grace Yu is engaged in intellectual property legal service from 2002, and has provided professional legal service to world-renowned companies like Sony, IBM, Procter & Gamble, Mitsubishi and Motorola etc. She joined NTD in 2014 and focuses on patent related legal services including civil litigation, administrative litigation, patent administration protection, patent invalidation, infringement investigation, FTO search, validity search, cyber and data security compliance analysis, copyright infringement litigation etc. The technical fields of patent cases are mainly machinery and industrial design.
