Countermeasures against abuse of utility model patents

The uniqueness of the utility model patent system in China lies in its readiness to obtain, and its strong enforcement. Utility models have many advantages in acquiring rights. For example, the cost of applying for a utility model patent is remarkably lower than that of an invention patent; and the prosecution term of a utility model is very short – a UM application can usually be granted within one year with more than 80% of granting rate. A utility model patent also has a lower inventiveness requirement than that of an invention. Facing the same prior art, an invention patent may be invalidated while a utility model with the same claims may be maintained.

With respect to enforcement, the patentee of a UM patent is entitled to file an infringement lawsuit directly after issue of the patent.

According to the litigation system of China, even if the utility model patent is finally invalidated, and thus failed in the infringement case, the losing patentee does not need to compensate the loss of the winning defendant unless the patentee is proved to have sued in bad faith. In the present judicial practice in China, since the recognition of bad faith is very strict, only a few cases have determined that the plaintiff patentee sued in bad faith.

For the reasons mentioned above, and taking over two million UM patent applications that were filed in 2018 into consideration, a considerable amount of utility model patent applications are granted without substantive examination (inventiveness exam) and, in particular, independent claims of many utility model patents are unreasonably broad, even covering prior art. As such, manufacturing enterprises face high patent risks in their operations.

Manufacturing enterprises may be accused of infringement by a patentee of unstable but broad utility model patents. In patent infringement proceedings, even if the manufacturing enterprise believes the patent is a prior art, its sales of the product will face risks and pressure before the court makes a decision; and even if the manufacturing enterprise wins the case, it still has to pay its attorney fees and other costs. In addition, it is quite difficult to prove bad faith of the patentee, thus it is nearly impossible to claim compensation against the patentee.

In addition to the risk of infringement lawsuits, manufacturers also confront difficulties that are hardly susceptible to the general public. Careful manufacturing enterprises will perform the “freedom to operate” (FTO) search and analysis, and in such searches usually at least one (according to the author’s experience, often one to three) risky utility model patents will be found. However, after patent validity search and analysis against the risky patent, we found that such utility model patents are mostly prior art, with no novelty or inventiveness.

Invalidation requests against these patents means a lot of money. Otherwise, the manufacturing enterprises have the sword of Damocles hanging over their heads if they turn a blind eye to the problem.