“Starting in 2017, the China National Intellectual Property Administration began giving utility model applications increased scrutiny during the formal examination stage. This ramped up in 2018, and now CNIPA is regularly issuing rejections.”
In recognition of China’s increasing importance in the global IP landscape, patent applications in China by U.S.-based applicants have steadily increased in recent years. Data compiled by the World Intellectual Property Organization (WIPO) in its World Intellectual Property Indicators 2017 and 2018 reports show the number of regular patent applications in China filed by U.S.-based applicants increasing by about 14% from 2016 to 2017. Over the same period, the number of U.S. utility patent applications filed by U.S.-based applicants fell by about 0.5%. Whatever the story is behind these numbers, U.S.-based applicants are clearly interested in obtaining patent protection in China, and China is courting that interest.
Most U.S.-based applicants will naturally gravitate toward protecting their inventions using China’s so-called “invention” patent. This is China’s counterpart to a U.S. utility patent. But China also has the world’s most active utility model system. In many cases, a U.S. patent application could be filed as either a utility model application or an invention application in China. In recent years, the China National Intellectual Property Administration (CNIPA) has been quietly updating its utility model system by increasing the degree to which utility model applications are substantively examined. The outcome may be stronger utility model rights, if applicants can successfully prepare for and navigate the new rigors of examination.
Chinese Utility Models
Around 95% of the world’s utility model applications are filed in China, totaling more than 50% of the number of utility patent applications filed worldwide, according to WIPO’s World Intellectual Property Indicators 2018 (based on 2017 data). So, changes to China’s utility model examination are a big deal, potentially affecting one-third of all invention-based IP in the world. Changes have come, albeit quietly and gradually, over the past couple of years. Below is a quick refresher on utility models in China, and an account of some recent changes.
A utility model patent is in many ways like a regular utility patent, but with some differences that vary by jurisdiction. A utility model patent is often quicker and cheaper to get, it may have restricted subject matter eligibility, and it often will have a shorter term. In China, a utility model patent has a 10-year term (compared to 20 years for a regular “invention” patent). Method and software claims are not eligible. Application pendency is generally only 6–9 months. And patentability requirements are somewhat lower than for regular invention patents.
Utility model patents are important in China. In 2017 they accounted for around 30% of patents asserted in litigation (compared to around 10% for regular invention patents, and 60% for design patents). In litigation, utility model patents undergo the same type of infringement analysis and claim construction, and have the same available injunctive relief, as regular invention patents.
Chinese utility models have a two-stage examination process. The first stage is a formal examination, which, until recently (more on that below) did not involve substantive issues. After successfully completing the first stage, a utility model patent will be granted. The second stage—a post-grant substantive examination by CNIPA—is optional, but generally necessary for enforcement of the utility model patent in the courts. Upon substantively examining a utility model patent’s claims, CNIPA will issue a Utility Model Patentability Evaluation Report (UMPER) opining on the validity of the claims, considering both novelty and inventive step (at a lower standard for inventive step than that for an invention patent). The claims cannot be amended in response to the UMPER. The UMPER will be considered informative, but not necessarily definitive, in litigation and invalidity actions.
Starting in 2017, CNIPA (then known by its old acronym SIPO) began giving utility model applications increased scrutiny during the formal examination stage. This ramped up in 2018, and now CNIPA is regularly issuing rejections—during the ostensibly “formal” examination—for novelty, lack of enablement, lack of support, and ineligible subject matter, in addition to more mundane formal issues. Similar increased scrutiny also began being applied to Chinese design patent applications around the same time.
These changes began quietly, under the radar, and all the while there has been no relevant amendment to China’s examination guidelines. Anecdotally, it appears that examiners are not applying this increased scrutiny evenly to all applications though. For novelty in particular, they appear to be looking for things that make an application stand out as susceptible to a novelty challenge. This might mean claims that are short, that appear overbroad or too simple, or drawings that don’t convey much complexity. In other words, examiners appear to be looking for “red flags” that cause them to dig in to an application substantively. These cases are more likely to receive substantive rejections at the “formalities” stage, increasing cost and delay to the applicant and reducing the chances of grant.
Because there has not been an official change in examination guidelines, there is no official rationale for the changes in utility model examination practices. But we can guess. A criticism of China’s utility model system has been that it issues a significant number of low-quality utility model patents. Even though utility model patents have a higher standard for invalidation than regular invention patents, they are still invalidated at a relatively high rate (estimated to be greater than 50%). This can be attributed at least in part to the historical lack of substantive examination before grant. So, the goal of injecting earlier substantive examination may be to improve the quality and perception of utility model patents in China.
Given the probable goal of improving overall utility model patent quality, the largest impact is likely to be on low-quality patent seekers, which may tend to be mostly local applicants due to some subsidies that the Chinese government gives to promote patent application filing. But the effects of this new zealousness are being felt more broadly. Even when they are overcome, office actions increase cost and delay.
Knowing that examiners are looking for red flags, an applicant might do what they can to reduce these. For example, aim for reasonable claim scope, and make robust use of dependent claims. Dependent claims may take on increased importance to surviving examination, since substantive amendments cannot be made during examination. These were always good things to keep in mind anyway, in preparation for a possible later substantive examination and UMPER. Now they may help even earlier.
The present risk to applicants appears mainly to be in being needlessly snared by substantive rejections, when such rejections could have been avoided by appreciating in advance the new lens through which examiners will be looking at claims. Ideally, as CNIPA’s new practices become more broadly recognized, the increased rigor with which utility model applications are being examined will prove to be an improvement in the overall quality and perception of utility model patents, without being an undue burden on applicants seeking legitimate protection. This will be to the benefit of all utility model patentees, including those U.S.-based applicants with the foresight to take early advantage of the unique benefits of the utility model patent in China.
The opinions expressed are those of the author and do not necessarily reflect the views of Sterne, Kessler, Goldstein & Fox p.l.l.c., its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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