Despite being no mandatory provision, the patent evaluation report has become a de facto item of evidence or precondition to be met when enforcing a utility model or design patent in China.[1] However, once CNIPA[2] issues a patent evaluation report including some comments or conclusions unfavorable to the patentee, there is no relief available. The patentee cannot file an administrative reconsideration or appeal for the evaluation report because it’s not deemed as an administrative decision.[3] Such an unfavorable evaluation report puts the patentee in a dilemma: whether to submit the report or not? If the patentee submits it to the court, the judge will inevitably doubt the stability of the patent in view of the unfavorable conclusion, or the unfavorable comments might be used by the opponent to attack the patent scope. If the patentee doesn’t submit the report, the judge may believe that the patentee intentionally conceals a material fact, which may hurt his credibility in the eye of the judge. The opponent may retrieve the report from CNIPA’s official website and submit it to the judge, or he may even use this to file a counter claim based on patent misuse.
In view of the above, an unfavorable patent evaluation report causes great harm to the patentee, with no relief available. If the patentee defers to the report, he can only keep the valid patent as a wall flower or just abandon it. Otherwise, it’s hard for the patentee to cast off the shadow of the unfavorable evaluation report during patent enforcement.
According to Patent Examination Guidelines (i.e., Chinese MPEP), a patentee may request CNIPA to issue a patent evaluation report for his utility model or design patent. After patent search, the examiner will make comments on whether the patent complies with the patent laws/rules and draw a clear conclusion to form the patent evaluation report. If the patentee believes that the patent evaluation report has errors, he may request for correction. In that situation, CNIPA will set up a group of three examiners to double check the report. If the report is found unreasonable, a correction will be made and a corrected report will be issued to replace the old one; otherwise, the group will confirm the report and give its reasoning.
This is similar in form but very different in essence, as compared with patent examination and reexamination, both of which are also ex parte proceedings.
The hearing principle is followed in patent examination and reexamination. In patent examination, the examiner shall issue at least one office action before making a rejection decision. The applicant may conduct a phone discussion with the examiner, request for interview, or even request for field investigation. In patent reexamination, the panel shall issue at least one reexamination notification before maintaining the rejection decision. The applicant may request for oral hearing to persuade the panel. All these ensure that the applicant enjoys a good opportunity of making arguments and his voice can be heard. However, no patent evaluation report is made under the hearing principle. From raising an initial request to receiving a patent evaluation report, the patentee has no chance to communicate with the examiner. Even if he requests for checking an unfavorable evaluation report, there is no way to start a dialogue with the double check group. Everything is done in a one-way paper examination. Therefore, the patent evaluation report is equivalent to a first office action and the opinion of the double check group is equivalent to a reexamination notification, whose conclusions are prone to err.
Both patent examination and reexamination provide adequate relief. In patent examination, the examiner may issue a rejection decision after hearing the arguments of the applicant. If the applicant is not satisfied, he may request PRB (Patent Reexamination Board) for reexamination. All members of the reexamination panel are senior examiners and they have a regular mechanism for deliberation. If the applicant is not satisfied with the decision of the panel, he may appeal to the court. All these may help the examiners have a deep and complete knowledge regarding whether the application is patentable, and thus minimize personal bias and blind spots. In contrast, a patent evaluation report is made solely based on the personal understanding of the examiner in charge.[4] Although the subsequent double check may reduce errors to some extent, it’s still conducted within the department of the examiner and is limited to one-way paper review. This leads to a limited error correction and cannot ensure adequate authority.
Patent invalidation and patent evaluation report both occur after patent grant, but they are completely different in both form and essence. Patent invalidation is inter parte, with a mission to declare patent validity or invalidity. The hearing principle is followed, and the decision may be appealed to the court.
For a rejection decision, a notification decision or an invalidity decision, the underlying reasons, evidence and fact finding should have been known to the applicant/patentee before the decision is made. The applicant/patentee enjoys an opportunity to raise arguments. Also, judicial relief is available. But it’s not that case for the patent evaluation report.
Generally, as long as a specific act of CNIPA harms the interests of the patentee, there should be relief available. For procedural matters, administrative reconsideration is available; for substantive matters, reexamination is available and subsequently it may be appealed to the court. Same as the rejection decision, the notification decision and the invalidity decision, the patent evaluation report involves specific comments of CNIPA and is sealed by CNIPA, which naturally will lead to some sense of authority. Therefore, it’s no wonder that an unfavorable evaluation report has certain influence on court judges and may produce negative impacts on patent enforcement, as described above.
However, it’s stipulated in Chinese MPEP that a patent evaluation report is not an administrative decision and thus the patentee or any party of interest cannot file an administrative reconsideration or appeal.[5] Beijing High Court confirms that the patent evaluation report cannot be used as direct evidence to determine patent validity and will not influence the legal effect of the patent per se, therefore producing no direct impact on the rights and obligations of the patentee or party of interest. CNIPA is not conducting a specific administrative act when issuing a patent evaluation report. For this reason, the patent evaluation report is not within the scope of administrative decisions and cannot be appealed.[6]
In view of the above, even if the patent evaluation report produces potential negative influence on the interests of the patentee, its influence is not inevitable or direct, and thus reconsideration or appeal is not available. This weird logic is not easy to understand. On the timeline, CNIPA first issues a utility model or design patent, and then makes a patent evaluation report alleging the patent not patentable. It’s hard to see which one is more authoritive. In all, the patent evaluation report is called non-administrative but it bears an administrative appearance, which is quite confusing.
In China, utility model patents and design patents have not been subject to substantive examination, and thus they may be unstable. For this reason, Article 61 of Chinese Patent Law suggests that the court or the patent administration authority may ask the patentee of a utility model or design patent to furnish a patent evaluation report prepared by CNIPA as evidence for adjudicating or handling the patent dispute. However, as its nature is concerned, the patent evaluation report has no legal effect and its conclusion regarding patentability is just for reference. This makes the patent evaluation report very awkward: significant in procedure and negligible in substance.
According to Chinese MPEP, the patent evaluation report is mainly used for the court or the patent administration authority to decide whether to stay the infringement proceedings or not. In other words, if the defendant intends to challenge the patent validity issue, he should request PRB to declare the patent is invalid. The court or the patent administration authority will then find whether the patent is valid according to the decision of PRB. The documents generated in the invalidation procedure form a part of the patent prosecution history, and may be used for claim construction or may trigger the prosecution history estoppel. In such circumstance, the patent evaluation report will become moot.
But a problem arises when the defendant does not challenge the patent at PRB: is the patent evaluation report intrinsic evidence or extrinsic evidence?
In China, the theory and practice of prosecution history estoppel are borrowed from US. The patent prosecution history refers to the record of the examination of a patent application, including the original application, objections raised by the examiner, as well as responses and amendments made by the applicant. Since it’s generated between the applicant and the patent office, the patent prosecution history is also referred to as intrinsic evidence. However, US has no utility model patent and all US design patents have gone through substantive examination. Therefore, the patent evaluation report is a product with Chinese characteristics, and no experience can be borrowed outside of China.
In China’s judicial practice, the patent prosecution history has been recognized by the court, but there is no clear rule as to whether the patent evaluation report belongs to the patent prosecution history. According to the Patent Infringement Determination Guidelines 2017 released by Beijing High Court, the patent prosecution history includes all written materials submitted by the patent applicant or patentee, office actions, interview records, records of oral proceedings, effective decisions on reexamination and invalidation issued by CNIPA and PRB in the procedures of examination, reexamination and invalidation. Clearly, the patent evaluation report is not covered here.
Although the patent evaluation report includes comments and conclusions on patentability, it has nothing to do with patent examination or invalidation because it doesn’t lead to patent grant, rejection or invalidation. Since no legal effect is produced in sense of the administrative law, it should not be deemed as a part of the patent prosecution history. Moreover, it’s not fair and reasonable to include the patent evaluation report in the patent prosecution history based on equality of rights and obligations. If it’s to be included in the patent prosecution history and to limit the patent scope, reconsideration or appeal should be provided; if no reconsideration or appeal is provided due to lack of direct legal effect, the patent evaluation report should not be deemed as a part of the patent prosecution history. There is no strong reason to take the patent evaluation report as intrinsic evidence.
Then, does the patent evaluation report belong to extrinsic evidence?
In China, there is no official definition of extrinsic evidence. Dictionaries, tool books and textbooks are commonly known as extrinsic evidence since they are not generated during patent prosecution and not made by the applicant/patentee or the patent office with respect to a certain patent/application. Although the patent evaluation report is made and sealed by CNIPA, here the “CNIPA” in this context is not a patent examination authority, but has no difference from a patent search company. The patent evaluation report in essence is not superior to a search report made by a search institute, an appraisal report made by an appraisal institute, or a legal memo made by a law firm. Although the patent evaluation report may be retrieved from CNIPA’s official website, it’s not intrinsic evidence, but extrinsic evidence.
In presence of a negative patent evaluation report, the judge should stay the infringement proceedings and wait for the invalidation decision. If no invalidity action is brought at PRB, the judge should presume the patent as valid. Even if the patent evaluation report contains some opinions regarding the prior art or the design space, it cannot be used as intrinsic evidence in determining the patent scope. In this way, the veil of the patent evaluation report can be pierced, so as to avoid confusing the patentee and disturbing the judge. For example, in the Stapler case, the court held that although the utility model patent evaluation report considers claim 1 not patentable, the patentee is still entitled to exclude others from implementing his patent before the claim is declared invalid by PRB.[7]
In summary, the patent evaluation report is not a part of the patent prosecution history, but a preliminary extrinsic evidence. Even if it has negative comments and conclusions regarding patentability, that’s not authoritive. If the patentee has full confidence in the stability of his patent, he can still choose to enforce the patent. The defendant should not have a fluke mind, but should attack the patent through the invalidation procedure. Otherwise, it’s still possible for the court to find infringement.
The official fee of RMB2400 for requesting a patent evaluation report is comparable to the fees for requesting substantive examination and invalidation[8], but there are huge gaps as the authority and the relief are concerned. Some improvements can be made in the following aspects:
First, the awareness of service should be strengthened and the administrative impression should be weakened. Interactions are needed in the process of making a patent evaluation report so that the patentee can have opportunities to provide oral or written arguments before an unfavorable report is issued. This may also help the examiner develop a comprehensive knowledge and objective judgment over the patent and the prior art. Furthermore, it’s suggested to highlight that the patent evaluation report is only for reference and has no legal effect, which may prevent others from misunderstanding that a subsequent patent evaluation report has overturned the previous notice of patent grant. Also, it’s better to isolate the patent evaluation report from the patent prosecution history so that it cannot be obtained via CNIPA’s official channels. This is because CNIPA is not a patent examination authority when making the patent evaluation report which should be kept confidential so as to protect the interests of its client. It’s even better not to provide a formal written opinion when the patentability conclusion is negative, which is common practice for patent search and appraisal institutes.
Second, the patent infringement procedure and the patent invalidation procedure may be coordinated or consolidated. On one hand, more cooperations are expected between the court and PRB. When possible, the court and PRB may have a joint hearing, with PRB solving the patent validity issue first and then the court deciding on the patent infringement issue, just as reported in various media. If joint hearing is impossible, PRB may decide on the patent validity issue in Beijing and make a quick decision, and then the court may decide on the infringement issue. On the other hand, starting from utility model and design patents, the court may decide on the patent validity issue upon request of the defendant before making a comparison between the patent and the accused infringing product. With successful operations of three IP courts and establishment of 16 specialized IP tribunals, the patent judges in China are becoming more and more experienced. It’s time to consider combination of patent validity and infringement in one judging body, especially for simple patents such as utility model or design. In this regard, Japan and Taiwan have done some pioneering explorations, which may be followed by China with amendments to current laws and rules.
Third, for utility model and design patents, an ex parte reexamination procedure may be introduced to replace the current patent evaluation report system. For example, laws and rules may be amended to require utility model and design patents to go through an ex parte reexamination procedure before enforcement and classify the ex parte reexamination decision as an administrative decision, which may be reconsidered by CNIPA and appealed to the court. This may prevent misuse of low quality patents without changing the current preliminary examination system for utility model and design patents.
Fourth, for utility model and design patents, the current preliminary examination based allowance may be changed to substantive examination based allowance, to lay a solid foundation in pursuit of high value patents. Compared with US and EP, China has a very high percentage of utility model and design in all patents. Due to lack of substantive examination, there are a lot of garbage or useless patents, which greatly lowers the average quality of Chinese patents and hurts our image on the world IP stage. A great IP nation is not supposed to be like that. In recent years, CNIPA has made great achievements in patent examination team building and is currently advocating a patent quality boosting project. Under such circumstances, it’s time to reexamine the examination system for utility model and design patents. If substantive examination is applied to utility model and design patent applications, the powerful search and examination capacity of CNIPA can be fully tapped and hopefully the patent quality can be boosted, which may transform China from a big IP nation to a strong IP nation.
Steve Song, Jerrey Liu, and Harry Fang
[1] According to Article 61 of Chinese Patent Law, the court or the patent administration authority may ask the patentee of a utility model or design patent to furnish a patent evaluation report prepared by SIPO as evidence for adjudicating or handling the patent dispute. In practice, both the court and the patent administration authority generally require submission of the evaluation report, and most e-commerce platforms list the evaluation report as a necessary item for filing a complaint.
[2] Previously known as SIPO (State Intellectual Property Office), recently renamed as CNIPA (China National Intellectual Property Administration) .
[3] See Patent Examination Guidelines, Part V, Chapter 10, Section 1.
[4] In most of the patent evaluation reports received by us, the examiner and the supervisor are the same.
[5] See Chinese MPEP, Part V, Chapter 10, Section 1.
[6] No. 2017-167 Decision by Beijing High Court.
[7] No. 2017-73-20 Decision by Guangzhou IP Court.
[8] RMB2500 for requesting substantive examination, RMB3000 for requesting invalidation of an invention patent, and RMB1500 for requesting invalidation of a utility model or design patent.
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