Compensation for victims to be raised and fines increased for guilty parties

A draft amendment to China's patent law aims to strengthen the crackdown on intellectual property rights infringement by substantially raising compensation for victims, and fines for violators, which experts said will help build a fairer business environment and encourage innovation.

The draft was approved at a State Council executive meeting on Wednesday, presided over by Premier Li Keqiang, and will be submitted to the top legislature - the Standing Committee of the National People's Congress - to become law.

The move will protect the legal rights of patent holders and improve the mechanism for encouraging innovation, said a statement released after the meeting. It targets violators by increasing fines and compensation, and clarifies the responsibilities for online service providers. In the meantime, inventors and designers will receive a reasonable share of profits brought by patents they made when serving employers.

For example, the draft raises the fine range for violators from a minimum of 100,000 yuan ($14,490) to 5 million yuan when the loss to patent holders, and the benefits gained by violators, cannot be determined. The current fines range from 10,000 yuan to 1 million yuan.

In many cases of IPR infringement in China, the average compensation is usually around several hundred thousand yuan, and it was rare to see 1 million yuan awarded in compensation, according to figures by the Supreme People's Court.

This is the fourth amendment to China's patent law since 1984, with the latest revision in 2008. The National Intellectual Property Administration started preparations for the amendment in 2014 and began to solicit public opinion at the end of 2015 after it submitted the first draft to the State Council. In March, Shen Changyu, head of the administration, said the amendment would be accelerated this year.

On Dec 5, the administration and another 37 departments released a document to punish violations of IPR, including patents. Stocks related to IPR protection in the A-share market went up by 3.52 percent to record highs since August.

Over the past 10 years, China has leapt in IPR protection. According to the World Intellectual Property Organization, China ranked first in the number of applications of patents, trademarks and industrial designs this year. In the first half of this year, the country had 751,000 patent applications, and 217,000 of them had been approved, up by 6.5 percent compared with the same period last year.

Meanwhile, the country moved up by two places to rank 25th in the International IP Index 2018, according to figures released by the US Chamber of Commerce's Global Innovation Policy Center.

A report by Essence Securities said that detailed policies were carried out this year in IPR protection, including articles in the white paper entitled "China and the World Trade Organization" released in June by the State Council Information Office. China will deepen its institutional reform and make stronger efforts to fortify IPR protection, the report said.

Since joining the WTO in 2001, China has amended the laws related to IPR, including those on patents in 2008, trademarks in 2013 and obstructing fair competition in 2017, to boost protection of such rights.

Innovation has become an enduring engine for a country's social and economic development, and IPR protection has to be fulfilled and guaranteed by legal support and penalties, said Zhang Naigen, director of the Center for Intellectual Property Study at Fudan University in Shanghai.

Zhang said more punishment for violators is expected to build a legal environment that is more beneficial for holders of such rights.

Zhang said how to promote innovation is a key agenda for China as its door opens wider, bringing more competition among domestic and international companies. New measures, including the draft amendment, are expected to build a more inviting business environment and offer conditions for more fair competition, he said.