Revised Chinese patent guidelines mean better prospects for software, business methods than U.S.

By Steve Brachmann
December 20, 2016

Chinese flag computerIn late October, China’s State Intellectual Property Office (SIPO) released a set of guidelines for Chinese patent examiners that revises the last guidelines put in place in 2010. Although SIPO has made the revised guidelines available online in the Chinese language only, analysis of those guidelines by the European Patent Office (EPO) and others indicates that, in some important ways, the new guidelines represent a veritable inverse of the current patent examination environment seen here in the United States.

According to the EPO, the draft guidelines amend aspects of China’s rules on substantive examination including rules and methods for mental activities (Part II, Chapter 1, Paragraph 4.2). Part II, Chapter 1 of previous Chinese examination guidelines, titled Inventions-Creations for Which No Patent Right shall be Granted, reflects similar ideas on unpatentable subject matter seen in U.S. federal code by Title 35 U.S.C. § 101, which outlines the minimum requirements as to what kind of inventions can be patented. Similar to how U.S. patent law does not recognize scientific laws or basic mathematical algorithms to be patentable material, the Chinese patent office does not grant patents for scientific discoveries, methods for diagnosis or treatment of diseases as well as animal or plant varieties, among other things. According to coverage of the recent draft guidelines published by Bloomberg BNA, changes to Chinese patent examination guidelines affect language which has been used by examiners in that country to throw out patent applications for computer programs.

Other reported changes in the new Chinese patent examination guidelines make the prospects for software and computer program inventions in that country even more promising. EPO reports that other changes to Chinese rules on substantive examination (Part II) are being made to Chapter 9, which regards provisions on examining applications related to computer programs. The paragraphs amended are specific to examination criteria for computer program invention applications, examples of such invention applications as well as the drafting of claims for those invention applications. Bloomberg’s analysis indicates that the changes are friendly to those applying for patents on software programs.

Invention applications directed towards business methods are also viewed in a friendlier light in the new Chinese patent examination guidelines. India IP legal firm Khurana & Khurana has published English language translations of some parts of the revised guidelines. Specific to business methods, the proposed draft reportedly reads: “Claims related to business methods that contain both business rules and methods and technical characteristics, shall not be excluded from the possibilities of obtaining patent rights by Article 25 of the Patent Law.” Article 25 codifies the unpatentable subject matter outlined in Chinese patent examination guidelines mentioned above.

Of course, these moves are in stark contrast to the environment surrounding software patents here in the United States. The U.S. Supreme Court’s unanimous 2014 decision in Alice Corporation v. CLS Bank International declared certain software to be unpatentable subject matter and that has led to a spate of Alice-related patent application rejections from examiners at the U.S. Patent and Trademark Office, some of which grossly misapply the Supreme Court’s standard in Alice. Many of these rejections have continued despite a U.S. Court of Appeals for the Federal Circuit (Fed. Cir.) decision this May in Enfish, LLC v. Microsoft Corp., in which Fed. Cir. reversed a summary judgment issued in district court that had found patents related to a self-referential database as ineligible subject matter under Section 101. Mainstream views of software patents have further been tainted by well-funded efforts from at least one highly recognizable tech investor to eliminate software patents.

Business method patents have also been under fire in recent years, even before passage of the America Invents Act of 2011 (AIA). In an effort to curb patent litigation abuses, the AIA did established the USPTO’s Patent Trial and Appeal Board (PTAB) and created covered business method (CBM) review proceedings, bringing business methods under even further assault. A CBM proceeding can be used to invalidate patent claims directed at a method or a corresponding apparatus for performing data processing related to the practice, administration or management of financial services. The PTAB has been criticized for initiating CBM proceedings on patents that are clearly technical in nature, such as those covering a graphical user interface (GUI), and the Federal Circuit has recently slammed the PTAB for defining practically every patent as a CBM patent.

In light of the new Chinese examination guidelines and further in view of what is transpiring in the United States, business method patent owners would seem better off focusing their resources on their Chinese IP assets rather than seeking U.S. patents.

Patents covering chemistry inventions are also affected by the new patent examination guidelines in China. Analysis of the new guidelines completed by legal professionals at Beijing-based ZY Partners notes that proposed revisions so that experimental data regarding chemistry inventions can be submitted after the patent application filing date. According to the legal analysis, the greatest significance of this change would be felt during post-grant patent invalidation challenges in which such experimental data is not permitted for submission.

Revisions found in the new Chinese patent examination guidelines update sections on processes for patent invalidation (Part IV, Chapter 3). Specific paragraphs being amended are directed at causes for invalidation, evidence presented by the petitioner, claim amendments and restrictions to claim amendments. According to ZY Partners’ analysis, the revisions introduce some flexibility for patent owners who want to amend claims during an invalidation procedure, allowing them the ability to correct obvious errors or incorporate limitations from other claims. Bloomberg’s coverage of the new guidelines notes that these new amendment rules could potentially be friendly to patent assertion entities (PAEs), which again would fly in the face of the official U.S. position on such entities in light of the Federal Trade Commission’s (FTC) recent report on PAE business models.

A few other changes are proposed to Part V of Chinese patent examination guidelines regarding patent application processing and related procedural matters. EPO reports changes to Chapter 4, which relates to patent application files, as well as Chapter 7, which relates to time limits and procedural suspensions. In Chapter 4, proposed changes would affect language on patent application file contents which are allowed for consultation and photocopying. ZY Partners indicates that the revisions increase the public’s ability to review office actions and other SIPO decisions made prior to granting a patent. Chapter 7 revisions have been made to paragraphs concerned with time limits of suspension either for execution assistance of property preservation or invalidation procedures. ZY Partners reports that the revisions limits procedural complexity by providing patent prosecution suspension as a tool to prevent court actions from escalating out of control.

If the new patent examination guidelines draft is adopted as it is reportedly written, China is about to become friendlier to software patents in particular and patent owners more generally by reducing the complexity of prosecution procedures and making more information publicly available. Given the large number of patent applications being filed with China’s patent office, a high percentage of which are not filed with foreign offices as well, and the growing preference for China as a patent infringement litigation venue, it’s likely that these new guidelines are further proof of the growing divide of IP regimes in the United States and China which, if left unchecked, will probably be to the detriment of the U.S. and its economic prospects in future years.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 23 Comments comments.

  1. Gene Quinn December 20, 2016 12:07 pm

    Inventor Woes-

    The article you suggest is actually wrong, as is most of everything they publish. For reasons that are a mystery that publication ignores the factual reality that patents spur economic activity. Where patent rights are weak economic activity is weak, or weakens. They predict the demise of China as the result of following a strong patent policy, which is utterly asinine. Throughout history that has never happened. History is, however, filled with examples of countries that have adopted strong patent rights and seen extraordinary economic activity and innovation. So I’d be careful taking advice from a thoroughly discredited publication that ignores history and economic reality.

    -Gene

  2. IPdude December 20, 2016 1:12 pm

    Techdirt.com is a shill for Google.

  3. Inventor Woes December 20, 2016 1:31 pm

    Didn’t think about it that way Gene. Thanks!

  4. Inventor Woes December 20, 2016 1:35 pm

    IPdude,

    Although, I could imagine someone saying the same thing about this site, no? That it’s a shill for lawyers. Sometimes I don’t know who to believe anymore.

  5. Inventor Woes December 20, 2016 1:46 pm

    Hold on I just thought of something. What if China’s strengthening of its patent system has the opposite effect? It lures US companies in, just to make it easier to copy their work. Could that be an issue?

  6. IPdude December 20, 2016 11:44 pm

    @5Inventor Woes – I’m not an attorney. I’m the CEO of a startup that has its patented technology efficiently (and blatantly) infringed by large multi-billion dollar corporations. If you can’t see the value and necessity of a pro-patent system to protect small and medium sized businesses (because you are inexplicably drinking the Kool Aid served up by the big boys), you probably also want to turn a blind eye to the venture capital that is flowing out of the US and to pro-patent countries, like China.

    @6Inventor Woes – no need to imagine the consequence of the theft of IP through a corrupt patent system, that’s what we’ve had since AIA and Lee.

    Think about it, before these big software companies demonized patents it was a point of pride to spend time and money to innovate and be awarded a patent. Now, investing time and money to innovate simply results in theft and being labeled a troll if you try to defend your “property rights”.

  7. angry dude December 21, 2016 10:24 am

    Inventor Woes @1

    Perhaps you should know that Mike Masnick of techdirt is a paid shill spreading
    false anti-patent propaganda
    I used to argue with him a lot a few years back but then got tired of his nonsense and stopped reading his sh1tty blog altogether

    and so should you

  8. angry dude December 21, 2016 10:37 am

    Gene Quinn @2

    I think there is a little more to this

    China has had a lot of economic activity in the past – and weak IP protection system. But that economic activity was entirely focused on copying and manufacturing technologies mostly created in other countries, US in particular

    Now that they are moving into actually inventing new technologies for the rest of the world including US, a strong patent protection is a must to sustain their startup system

  9. Inventor Woes December 21, 2016 11:06 am

    angry dude @8

    Their podcasts are entertaining. I’ve listened to a couple of them. Check these out:

    https://www.techdirt.com/blog/podcast/articles/20161025/11514835885/techdirt-podcast-episode-96-death-knell-software-patents.shtml

    That’s why I said I don’t know who to believe anymore. You got these guys who are into the tech industry saying that patents get in the way. On the other hand, you’ve got guys on this site saying the opposite. Both sides are calling each other shills. I mean who’s to say who’s right?

  10. Inventor Woes December 21, 2016 11:07 am

    It all makes my head spin. I just want to focus on science and my work 🙁

  11. step back December 21, 2016 11:49 am

    i-Woes @11

    The US Constitution does NOT say, ‘to promote progress by de-securing inventors of any rights in their respective discoveries’.

    Why don’t you start with the US Constitution when figuring out whom to believe?

    Also there are a few countries left in the world who do not have enforced patent laws. Why don’t you check out how much “innovation” comes out of those countries?

  12. step back December 21, 2016 11:55 am

    Just an after thought after I typed above, The US Constitution does NOT say, ‘to promote progress by de-securing inventors of any rights in their respective discoveries’.

    But then again, the SCOTeti believe that they are promoting (aka not ‘stifling’) innovation by stripping inventors of essentially all rights (even the right to legal counsel).

  13. Gene Quinn December 21, 2016 12:12 pm

    Angry @9-

    I agree with you 100%. China protecting patents more forcefully is just the logical path to follow in the maturation of their economy. They are following the U.S. example from over 100 years ago in that regard. The U.S. was once a robber nation with respect to intellectual property. Indeed, Thomas Jefferson took many of his “inventions” from Europe. The difference is that China is a one-party-rule country so changes can and do happen very rapidly.

    -Gene

  14. Gene Quinn December 21, 2016 12:18 pm

    Inventor Woes @6-

    I’ve wondered that myself. China has a very sketchy past on this point, requiring companies to lay open their IP and secrets only to wind up competing with their innovations on the global marketplace. But his is already happening. Even where it isn’t happening in a nefarious way it is happening given the amount of manufacturing that occurs in China. With innovation in the U.S. and manufacturing in China at a minimum all the follow-on innovation associated with the manufacturing of products is being done in China, not the U.S. That follow-on innovation is 3 to 4 times the amount of the initial innovation required to launch.

    China has a lot more development to do, but I don’t think this is going to be a bait and switch approach to IP. As they loosen they will attract more investment and businesses will move. That will increase opportunities for a rapidly growing Chinese middle class that wants more, dreams bigger, etc. Also, as companies (i.e., startup companies in particular) move to China (which they will) there will not be the need for a Chinese partner because the company will be a Chinese company to start with.

    Perhaps China will screw things up, but they have been very cautious. They have wondered out loud over the last decade why the U.S. would so intentionally be forfeiting our major advantage. They smelled a trap. Now they realize our politicians and ideologues are just that stupid and are moving in with smart policies. I don’t see them screwing up this golden goose.

    -Gene

  15. angry dude December 21, 2016 1:09 pm

    Inventor Woes @10

    Definition of “shill” (from google search)

    noun
    1.
    an accomplice of a hawker, gambler, or swindler who acts as an enthusiastic customer to entice or encourage others.

    a big swindler as far as patent matters are concerned is almighty google (to the point of appointing their own as USPTO Director),
    and little mike masnick of techdirt is just a shill for them

    What is so difficult to understand here ?

  16. Inventor Woes December 21, 2016 1:32 pm

    angry dude @16

    That’s what I’m saying, the same definition could be applied to pro-patent people. That they are shills for patent attorneys. That’s why I’m skeptical of both sides. I guess I’m too skeptical for my own good.

  17. Independent Inventor December 21, 2016 5:24 pm

    Every invention 101-extinguished — or denied — is yet another innovation rendered free for the taking by others; both here in the U.S. and in the rest of the world.

    These interlopers take great delight in the knowledge that the most innovative country in the history of the world has seen fit to take away — and block — that which has in material part made us the economic leader that we are (or at least used to be).

    Effectively bashing our very own innovative heads in … and for what? To what end?

    Shame on us.

  18. Anon December 21, 2016 8:00 pm

    Inventor Woes @ 17.

    I see that you have bought into the Kool-Aid that patent attorneys are only out there to fleece clients out of their money.

    Unlike other professions, attorneys actually have a code of ethics that they have to live by. Violators (of which there surely are some – just as there are some bad eggs in ALL fields) can be brought before the state boards and contained.

    The fact that you accept “as gospel” such a premise says more about you (unfortunately for you) than you may realize.

  19. step back December 21, 2016 8:30 pm

    Inventor Woes @ 17.

    Anything can be said about anything as if it were a “fair and balanced” game of he said, she said.

    But it is not.
    The anti-patent people generally make up pure BS about “trolls” and “abstract” claims and “obviousness” and each line of code infringing 100’s of patent out there, thus rendering the system “broken”.

    Sure the patent system has problems.
    Every system has problems.
    But that’s no reason to toss the baby out with the bath water.

  20. Inventor Woes December 21, 2016 9:25 pm

    I try to stay away from any kool aid, which is why I’ll have to do more research on the subject before I can make a decision or take some kind of side. This site will keep me up to date on patent stuff and other sites can keep me up to date on the other side of the argument. As always, the truth lies somewhere in the middle.

  21. Night Writer December 23, 2016 9:21 am

    The Chinese are expressly making strong patents to encourage innovation.

    TechDirt people are such dolts. They are suckers of the worst kind. Listen, bozo TechDirt people, the only reason that you have jobs were you can move to another job and be paid well is patents. If you take away patents, you are going to locked down to a single company and get paid half as much. Remember Google conspired to lower your wages? Remember that?

    You won’t be able to talk about what you do without patents. You guys are such suckers. Just the worst kind of suckers that burn their own houses down while your masters laugh.

  22. Inventor Woes December 23, 2016 10:28 pm

    Night Writer @22

    Just curious, is there a pro-patent podcast similar to techdirt? All I can find on the web is seminar videos by patent attorneys on youtube. It’s cool and all, but it’s super technical and geared towards practicing attorneys. I’m looking for something “cool” and hip on a platform like soundcloud.

    Not just Night Writer but anyone: could you recommend me one?