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First China Patent Case Invalidated Due to Non-compliance of Secrecy Examination Requirement



I.             Special Requirements for Global Patent Filing 
 
Decisions regarding global patent filing after completion of invention (such as applying in multiple countries, first-filed patent application worldwide etc.) are made by patent applicants based on their specific needs. However, for national defense confidentiality and other national security concerns, patent laws of certain countries contain special pre-requisites for foreign patent filings, which can affect decisions made by applicants. The major intent of such provisions is prevention of adverse effects caused to national defense and other national security concerns. 
 
Among all the signatories to the Patent Cooperation Treaty (PCT), the national patent laws of around 20 signatories contain the noted special provisions related to foreign patent filing. The World Intellectual Property Office (WIPO) has compiled the relevant provisions of these PCT signatories (see https://www.wipo.int/pct/en/texts/nat_sec.html) for reference by patent applicants when making decisions on international patent filing. 
 
To increase technological competition and seek necessary protection of self-developed technologies/commodities in the international market, it is common for industries/patent applicants to take aggressive approaches in seeking patent protection internationally. In addition, as the global marketplace becomes increasingly consolidated and development of cress-area technologies increases, more research and development projects are much more likely to include collaborations between/among multiple jurisdictions. When planning for global patent filings, in addition to having sufficient understanding of the patent law provisions for the concerned jurisdictions, patent applicants must comply with the specific requirements of the concerned jurisdictions. Such compliance can help avoid legal risks such as patent rejection, invalidation of granted patent, other legal liabilities etc.).
 
Since the patent law of each jurisdiction may involve different conditions and prerequisites, when planning for global patent filing and deciding the order of filing among jurisdictions,  a patent applicant may s face different  evaluation factors  (such as selection of jurisdictions for filing, first-filed jurisdiction, pre-requisite for foreign filing etc.) Generally speaking, patent applicants need to identify the invention subject matter, the nature of the invention (independent or co-developed), inventor(s), nationality and residence of the inventor(s), location of completing the invention, and others. Subject to these determinations, the patent applicant can decide what prerequisites are involved before moving forward with the global patent filing, such as, for example, Foreign Filing License requirements in US, Singapore, Malaysia, and India, specific requirements for national defense patent filings in Korea and Germany,  as well as the Secrecy Examination in China. 
 
For example, according to 35 U.S.C. § 184 (Patent Act), where an invention is completed in the USA, except when authorized by a foreign filing license obtained from the USPTO, a person shall not file or cause or authorize to be filed in any foreign country prior to six months after filing in the USA a patent application in respect of an invention made in this country. A violators of the above-mentioned foreign filing license requirement shall be fined not more than $10,000 or imprisoned for not more than two years, or both. In Malaysia, as stated in its Patent Act (Section 23A), no person resident in Malaysia shall, without written authority granted by the Registrar, file or cause to be filed outside Malaysia an application for a patent for an invention unless (a) an application for a patent for the same invention has been filed in the Patent Registration Office not less than two months before the application outside Malaysia. According to Section 62A of the Malaysian Patent Act, any person who files or causes to be filed an application for a patent in contravention of Section 23A commits an offence and is liable on conviction to a fine not exceeding fifteen thousand ringgit or to imprisonment for a term not exceeding two years or to both.
 
If a patent applicant complies with the Foreign Filing License and/or the Secrecy Examination requirement, the patent applicant must also ensure that invention(s) disclosed in the foreign patent application  is(are) within the scope of the invention(s), for which the Foreign Filing License and/or Secrecy Examination was obtained/compiled. In addition, any amendment or correction of the foreign patent application or the invention(s) included in any continuation applications must be also within the same scope of the Foreign Filing License and/or Secrecy Examination.  Where a foreign patent filing involves any new subject matter, the applicant must evaluate and decide whether to obtain an additional Foreign Filing License or proceed with additional Secrecy Examination requests for such new subject matter. 
 
II.           Secrecy Examination Prescribed in China Patent Law
 
The 3rd amendment to the China Patent Law was passed in December 2008, and took effect on 1 October 2009 ("2008 Patent Law"). The 2008 amendment brought into the China patent system the “secrecy examination practice” (i.e., secrecy examination must be proceeded and passed before filing a patent application abroad for an invention completed in China). The said secrecy examination requirement applies to invention patent applications and utility model patent applications (but not design patent applications). 
 
Prior to 30 September 2009, for an invention completed in China, the applicant was required to file a patent application in China first before applying for patent abroad. The 2008 amendment of the Patent Law eliminated the requirement for such “first filing in China” requirement, and, according to Article 20.1 of the 2008 Patent Law (Article 19.1 of the current Patent Law), for an invention or utility model completed in China (Taiwan, Hong Kong and Macao are excluded), the applicant must undergo the Secrecy Examination before applying for patent abroad. According to the Patent Law, where the applicable Secrecy Examination requirement is not completed, the concerned invention or utility model patent application filed in China shall be rejected (Rules 44 & 53 of the Implementation Rules of the Patent Law). Rule 65 of the Implementation Rules further stated that “a violation of the Secrecy Examination requirement” is one of the legal grounds to invalidate a granted patent.
 
In practice, when a patent applicant first decides to apply for patent abroad for an invention completed in China, the applicant must first file a request for secrecy examination with the China National Intellectual Property Administration (CNIPA), submit a document explaining the content of the invention, and pass the said secrecy examination. If the applicant decides to file a China patent application first before filing abroad, it must still file a request for secrecy examination and pass the same before proceeding with the foreign patent filing.  A qualified patent applicant may file a PCT international patent application with the CNIPA as the Receiving Office for invention(s) made in China. According to the China Patent Law, when filing such a PCT international patent application, it is considered that the applicant has filed a request for substantive examination with the CNIPA (no separate request for secrecy examination is needed), and the CNIPA will proceed with the secrecy examination accordingly. 
 
According to Rule 9 of the Implementation Rules of the Patent Law, after receiving a request for secrecy examination, the CNIPA shall proceed with the secrecy examination. If the concerned invention or utility model involves any national security concern or any other major national interest concern, the CNIPA shall serve the applicant with a decision on the secrecy examination (to point out the existence of the national security and/or national interest concern) in a timely manner. If the applicant receives no decision from the CNIPA within 4 months from the date of its filing the secrecy examination request, the applicant may proceed with the patent filing abroad for the concerned invention or utility model (including national filing or PCT international filing). 
 
III.         First China Patent Case Invalidated Due to Non-compliance of Secrecy Examination Requirement
 
Since the implementation of the 2008 Patent Law, some invalidation actions s have been filed by petitioners with the CNIPA against granted patents (invention and utility model patents) based on non-compliance with the secrecy examination requirement set forth in Article 20.1 of the Patent Law. According to the incoPat database, up to 7 July 2022, the CNIPA (Reexamination and Invalidation Department) issued decisions for around 22 invalidation actions, which were filed based on the secrecy examination violation. On 22 April 2022, the CNIPA issued a decision (No. 55586) for an invalidation action filed against China Patent No. CN201720389490.8 (a utility model patent entitled telescopic transmission assembly device and lift stand;priority date: 10 January 2017; Filing Date: 14 April 2017; Patent Grant Publication Date: 16 February 2018; Patent Publication No. CN207016433U) owned by a Chinese company named Zhejiang Jiecang Linear Motion Technology Co. Ltd. (hereafter referred to as “Zhejiang Jiecang”). The CNIPA’s decision stated that “the concerned China utility model patent is invalidated because Claims 1-11 of the patent violated the secrecy examination requirement prescribed in Article 20.1 of the Patent Law”. 
 
To our best knowledge, the above-mentioned case was the first one involving patent invalidation due to violation of the secrecy examination requirement. The petitioner filing the invalidation action claimed that all the claims of the concerned utility model patent should be invalidated for the following reasons:
 
(1)    The claims of the concerned patent fail to meet the novelty and creativeness requirements, and are not supported by the specification on file.
 
(2)    The utility model in the concerned patent was completed in China but the patent applicant failed to comply with the secrecy examination requirement.
 
In response to the above-mentioned invalidation reasons, the patent owner, when filing a defense brief, applied for amendment of the claims with 11 remaining after amendment. The patentee also raised the following counter-arguments.
 
(1)    Claims 1-11, after amendment, meet with the novelty and creativeness requirements and are all fully supported by the specification on file.
 
(2)    The utility model in the patent was completed outside of China such that there is no violation of the secrecy examination requirement set forth in Article 20 of the Patent Law.
 
After paper review of all briefs and evidence filed, the CNIPA conducted a hearing attended by both parties.  The CNIPA concluded that Claims 1-11 of the concerned patent violated the secrecy examination requirement and all the claims of the patent were invalidated. The CNIPA also pointed out in its decision that since all the claims (Claims 1-11) were held invalid due to violation of Article 20 (secrecy examination) it was not necessary to examine the claims based on other invalidation reasons (i.e., violations of novelty and creativeness requirements as well as claims not supported by specification). In other words, after CNIPA invalidation of the entire patent for “secrecy examination” violation, no review of the validity based on other substantive allegations (novelty, creativeness and support violations) was conducted.
 
A case summary is provided as follows.
 
A.     Case Background Information
 
The patent owner, Zhejiang Jiecang Linear Motion Technology Co. Ltd. (hereafter referred to as “Zhejiang Jiecang”), filed 4 patent applications in China and USA (with case details listed below):
       
Pat. Appln. No.
Filing Date
Priority Claim Information
US62/436,730
 
2016/12/20
 
CN201720025981.4
 
2017/1/10
 
CN201720389490.8
(the invalidated patent) 
 
2017/4/14
CN201720025981.4
2017/1/10
(Domestic Claim)
US15/639,005
 
2017/6/30
US62/436,730
2016/12/20
 
B.      Arguments, Evidence & CNIPA’s Finding
 
Argument 1: Whether the utility model disclosed in China Patent CN201720389490.8 is the same as that disclosed in the earlier-filed US patent application, US62/436,730.
 
CNIPA Findings:
 
Based on arguments, defense, and supporting evidence filed by both parties, the CNIPA concluded as follows:
 
"The utility model disclosed in China Patent CN201720389490.8 is same as the one disclosed in the earlier-filed US patent application, US62/436,730CN201720389490. The patent owner failed to apply for and go through the secrecy examination as needed in China."
 
Argument 2: Whether the concerned utility model was completed in China.
 
Arguments & Evidence Submitted by Invalidation Petitioner
 
The petitioner submitted to the CNIPA the following evidence, arguing that the utility model was completed in China as supported by the declared "business place of the patent owner” and “nationality of inventors".
 
(1)    Evidence 2-1: IPO Prospectus released by the patent owner (Zhejiang Jiecang), of which the source of document as the China Securities Regulatory Commission (CSRC); and
 
(2)    Evidence 2-2: an article entitled Zhang Dongxing in Xinchang: "Dream Chaser" on bravely climbing the peak of science and technology” shown in Zhejiang online-xinchang news website http://cs.zjol.com.cn/kzl/202105/t20210528_22594156.shtml of 28 May 2021.
 
Arguments & Evidence Submitted by Patentee
 
With respect to the foregoing arguments and evidence as filed by the invalidation petitioner, the patent owner submitted the following rebuttals.
 
"Rebuttal 1: Entry and exit certificate record for an individual Hu Jen Chang (胡仁昌), issued by Shaoxing Public Security Bureau, verifying that the utility model disclosed in of the concerned patent was completed by Hu Jen Chang during his trip to the USA in 2016.”
 
CNIPA Findings:
 
Regarding the above-mentioned arguments (whether the utility model included in the concerned patent was completed in China and whether there exists a violation of Article 20 of the Patent Law) and support for the same as submitted by both parties, CNIPA concluded as follows.
 
"To support the argument raised by the invalidation petitioner (violation of secrecy examination requirement), the petitioner bears the initial burden of proof regarding the utility model included in the patent was completed in China, and such burden of proof should meet with the high probability level requirement."
 
"Determination of the question that whether the utility model was completed in China shall be evaluated from the points of view as listed below with a conclusion made based on considering of both points:
 
(1)   Location of the patent owner
 
Evidence 2-1 (the IPO Prospectus released by the patent owner, Zhejiang Jiecang) shows that the patentee’s place of business as Hsin Chang Hsien, Shaoxing City, Zhejiang Province. Page 1-1-113 of the IPO Pprospectus states "Zhejiang Jiecang (the patent owner) always emphasize and pay attention to their research and development system and its fine construction, and it established province-level high tech research and development center and province-level industry research organization" & "In 2011, Zhejiang Jiecang received the national high tech industry qualification". On Page 1-1-114, it is stated that Zhejiang Jiecang completed two national torch program projects: "intelligent drive and control system of multi-functional medical bed" and "high precision electric actuator" & "In 2016, Zhejiang Jiecang completed several provision-level of new product inspection for straight-barrel lifting column."
 
The CNIPA stated that the patentee’s place of business and R&D groups were all in China. There is no evidence indicating that prior to the filing date of US62/436,730, the patentee had R&D and product design groups in any foreign country. It can thus be initially ascertained that 'the utility model in the China patent was completed in China."
 
(2)   Nationality of inventors
 
According to Implementation Rule 13 of the Patent Law, the term "inventor" refers to one who has made any contribution with respect to the substantive features of the invention. That is, whoever named as an inventor for a patent application shall be considered as one making the contribution to the invention. For China Patent CN201720389490.8, inventors are listed as Hu Jen Chan(胡仁昌), Lu Hsia Chien (陸小健), Huang Chan Hwei (黃占輝), and Chang Tung Hsien(張東行). These 4 individuals are considered to have made contribution with respect to the substantive features of the claimed utility model.
 
As shown in Evidence 2-1, Hu Jen Chan(胡仁昌), Lu Hsia Chien (陸小健), Huang Chan Hwei (黃占輝), and Chang Tung Hsien(張東行) are all China nationals and , none of them has a permanent residence abroad (Pages 1-1-218, 1-1-219 & 1-1-121 of Evidence 2-1). In addition, these 4 individuals are all employees of Zhejiang Jiecang (the patentee). In the absence of evidence proving otherwise, the job invention(s) completed by Hu, Lu, and Huangshall be considered as an invention completed in China. Evidence 2-2 states: “Chang Tung Hsien (張東行) serves as the responsible member of the R&D group of the company, who in charge of desk lifting system”; “Chang Tung Hsien(張東行), by coincidence, joined Zhejiang Jiecang for working there”; and “Chang Tung Hsien(張東行), after serving Zhejiang Jiecang for more than 6 years, Chang Tung Hsien(張東行) has been constantly devoted to R&D and the smart office team led by Chang Tung Hsien(張東行) received excellent working result.”   The CNIPA thus concluded that the job missions done by Chang Tung Hsien(張東行) has relationship with the utility model disclosed in China Patent CN201720389490.8 and Chang Tung Hsien(張東行) conducted such invention work in China."
 
The CHIPA further stated that rebuttal evidence submitted by the patentee insufficient to demonstrate that the utility model was completed abroad and the patentee shall take the unfavorable legal consequence thus caused for the major reasons as follows.
 
(1)   Rebuttal Evidence 1 (the entry and exit certificate record from Shaoxing Public Security Bureau) shows that one of the inventors, Hu Jen Chang (“胡仁昌”) was abroad from 12 June 2016 through 16 July 2017. For the four patent cases filed in China and USA (Evidence Nos. 1-4), the earliest filing date is 20 December 2016. Prior to 20 December 2017, Hu Jen Chang (“胡仁昌”) was on official record traveling to Canada from 12 June to 3 July 2016, Germany from 13 November to 24 November 2016, and USA from 14 November to 24 November 2016. Rebuttal Evidence 1 only shows that Hu was outside China during the listed time periods. . There is no verification that the other three inventors completed the utility model in China. In addition, the patentee argues that the concerned utility model was mainly completed by Hu Jen Chang (“胡仁昌”) in the USA. Rebuttal Evidence 1 shows, however, that Hu Jen Chang (“胡仁昌”) was in the USA only from 14 November to 24 November 2016. It is unreasonable to conclude that, as the Chairman of Zhejiang Jiecang, Hu Jen Chang (“胡仁昌”) not only conceived and completed the utility model but also filed a US provisional application covering the utility model within only 10 days. 
 
(2)   Evidence 2-1 shows that Zhejiang Jiecang (the patentee) intended to become publicly listed and should have been equipped with an established corporate operation structure. If Zhejiang Jiecang argue that the concerned utility model was completed abroad, it should be able to produce direct evidence proving the same. But, no such evidence was submitted to the CNIPA.
 
Accordingly, the CNIPA concluded that the patentee would bear the unfavorable legal consequences because it produced insufficient evidence. The CNIPA issued a decision that, prior to filing the US provisional application on 20 December 2016, the patentee failed to comply with the secrecy examination requirement and that Claims 1-11 of the patent were thus not allowed and the patent invalid.
 
IV.          Special Remarks
 
Patent laws for each concerned country may set forth different factors and requirements for Foreign Filing License and Secrecy Examination. Although these requirements are of a procedural nature, failure of an applicant to comply with any of these requirements may lead to rejection of patent application, invalidation of patent, and other penalties (including criminal penalty). This can impede the legitimate rights and interests originally available to patent applicants. In China, if a secrecy examination is not properly and timely adhered to, there is no means of making it up retroactively. Under such non-compliance situation, the China patent application will be rejected and the China patent granted thereto will be invalidated. Since many multinationals may have presences (subsidiaries) in foreign countries and they may conduct joint R&D projects globally, such entities (patent applicants) should establish well-organized systems to monitor the concerned factors, such as "place of completing inventions", "nationality or residence of inventor", "employee’s overseas trips record" etc. to ensure that all the concerned factors are well considered and ensure proper handling of Foreign Filing License and Secrecy Examination requirements.
 
Patent applicants may also pay attention to the following when evaluating and proceeding with secrecy examination under the China Patent Law:
 
1.      Secrecy examination requirement must be complied where the concerned invention/utility model is completed in China, and the nationality of inventor(s) is irrelevant.
 
2.      The so-called "invention/utility model completed in China" refers to two situations: (1) where the invention/utility model is entirely completed in China, and (2) where a part of the invention/utility model is completed in China (the rest part is completed abroad).
 
3.      An applicant filing a request for secrecy examination needs to file a document illustrating the concerned invention/utility model under secrecy examination. The said document does not need to be a full patent text (including specification, claims and drawings) and it can be any suitable document that can fully illiterates the identity of the concerned invention/utility model. If a patent text is filed for requesting secrecy examination, as far as we understand, the CNIPA examiner in charge of secrecy examination will review the entire patent text on file, but not just the claims submitted thereto, when deciding whether the invention/utility model involves a secrecy issue.  
 
4.      The so-called "applying for patent abroad" refers to "filing a patent application (including a provisional application and a regular application) for an invention/utility model completed in China with a foreign patent office." Based on our understanding from our discussion with several CNIPA examiners, If a patent applicant discloses an invention/utility model partially completed in China and partially in a foreign country (such as an invention/utility model co-developed by inventors in China and USA) to a foreign patent office (such as USPTO) only for the purpose of obtaining a foreign filing license, such disclosure to the foreign patent office shall not be considered as "applying for patent abroad." Given the above, where an invention/utility model is completed in both China and USA, the applicant(s) may proceed with the foreign filing license and the secrecy examination at the same time before proceeding with foreign patent filing.
 
5.      According to Section 6.3.1., Chapter 5, Part 5 of the Patent Examination Guidelines announced by the CNIPA, if the nationality of the applicant of a PCT international patent application is China or if the nationality of at least one co-applicant of the said PCT patent application is China, the applicant may file the PCT international patent application with the CNIPA as the Receiving Office (RO). As advised above, when a PCT international application is filed with the CNIPA as RO, it is considered that a "request for secrecy examination" is filed simultaneously when the PCT application is filed. After the said PCT international application is filed, the CNIPA will issue a "Notification of the International Application Number and of the International Filing Date" (Form PCT/RO/105). Where the invention covered in a PCT international patent application filed with the CNIPA (RO) is completed in China (entirely or in part), if the CNIPA consider the invention not involving secrecy issue and the secrecy examination is passed, the CNIPA will directly state in the said Notification that "the PCT patent filing documents will be forwarded to the PCT International Bureau" and further state/confirm the following in the said Notification: (1) patent filing is accepted, (2) the PCT serial number assigned to the case, and (3) the filing date of the PCT filing.  If, on the contrary, the secrecy examination is NOT passed for the invention disclosed in the said PCT international patent application, the CNIPA will state the following in the Notification:
"The record copy of the international patent application has not yet been transmitted to the International Bureau because the necessary national security clearance has not yet been obtained."
 
 
6.      To file a request for secrecy examination, the following information and document must be submitted to the CNIPA on the date of filing such request:
 
(1)    the serial number of the Chinese patent application (if a Chinese patent application has already filed);
 
(2)    a written document (in Chinese language) illustrating the technical content of the invention/utility model;
 
Under the current practice of the CNIPA, the description of the invention/utility model subject to for secrecy examination shall be same as the contents of the invention/utility model disclosed in the patent application to be filed abroad. The Patent Law and its Implementation Rules as well as the Patent Examination Guidelines do not provide any "specific formality requirement" for such written document. An applicant may choose submitting (1) a complete patent text or (2) a document of another format to support his/her secrecy examination request, as long as the submitted document can clearly identify the "invention/utility model" for secrecy examination purpose.
 
(3)    the information (i.e., name, address and nationality) concerning the applicant(s);
 
(4)    the name(s) of the inventor(s);
 
(5)    the available Chinese name(s) for the inventor(s); and
 
(6)    a Power of Attorney executed by an authorized representative for the applicant.
 
7.      If a secrecy examination requirement is not complied and a foreign patent application has been filed, it is NOT allowed to make up a secrecy examination request retroactively.  There existed some cases involving non-compliance of secrecy examination, and most of these cases occurred because the patent applicants did not know the China secrecy examination requirement beforehand.  As far as we understand, when facing with the above-mentioned non-compliance situation, some patent applicants chose one of the below-mentioned approaches to minimize the possible risks:
 
(1)    If the foreign patent cases have not been published, the applicants chose to abandon the already-filed foreign patent cases and prevent them from being published; and  
 
(2)    The applicants chose applying for secrecy examination in China and re-filing the foreign patent applications.
 
Through this article, the co-authors share with patent applicants a clear picture about how to handle the Foreign Filing License and Secrecy Examination matters. Only with well-managed of the concerned invention factors as well as a well-organized global filing strategies and, patent applicants' legitimate rights and interests can be better and sufficiently protected in the global market.

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