Beijing to tighten foreign companies law

Proposed changes to China’s patent law will require ­foreign companies making discoveries in the country to file for a patent in China first or risk losing legal protection of their intellectual property.

The new requirement, which could become law this year, comes at a time when Microsoft and other foreign companies are setting up research centres in China and trying to expand sales in the market.

Another proposal involves the adoption of an “absolute novelty” standard that will make it hard to get a ­Chinese patent for inventions that are already in use overseas.

Together, the proposed legal changes “will make it more challenging for foreign companies inventing in China”, said Elliot Papageorgiou, a patent law expert in the Shanghai office of Rouse & Co, an intellectual property consultancy.

However, he said that the new law would also “make it easier to challenge rogue Chinese patents”, an outcome that foreign companies should welcome.

Foreign companies and chambers of commerce have submitted comments on the draft legal amendments to Beijing but declined to discuss their feedback.

Most western countries also have a “file first at home” rule but the penalty for failing to do so will be tougher in China. If foreign companies fail to register Chinese discoveries first in China, rivals will be able to challenge the validity of any subsequent domestic patent and potentially block sales in the local market.

Most foreign companies that invent in China at present file for patent protection in the country in which they are based, where applications can be written in their native language by counsel experienced in the home country’s patent law. It has been known for multinational companies to send Chinese inventors to work temporarily in their home country, so that key patents can be filed overseas to prevent early disclosure to Chinese rivals.

If the revisions are adopted, foreign companies would have to draft patents in Chinese for inventions made in the country. But because China’s patent regime is so new – dating only from the early years of this century – there are relatively few Chinese-literate lawyers who are experienced in this area.

“The market is not quite ready in terms of the supply of high-level legal skills,” said Tony Chen of Jones Day, a law firm.

Mr Chen said that foreign companies had concerns about the new requirement. “They have to trust people in China to write the patent in a language they don’t understand and, when a problem happens, how can they explain it since they don’t even understand it?” he said.

ZTE, the big Chinese telecommunications equipment company, said it had made “suggestions to the government” about the law, noting that since “some inventions are jointly developed by ZTE’s China and overseas R&D institutes, it will be difficult to define where the inventions are discovered”.

Hal Wegner, a patent law expert at the law firm Foley & Lardner, said the new rule “will be inconvenient initially” but companies could adjust to it.

(FT)