Chinese Supreme Court ruled on unenforceability of utility model if corresponding utility patent application is rejected on novelty, or inventiveness against a single reference

Langting Company V. Xixian SUN

Most readers are familiar with utility patents. Some readers are also familiar with utility models, which are available in about 76 patent offices around the world including China. What some readers might not know is that in the Chinese patent office it is possible to file for both kinds of protection, preserving both options until the applicant finds out whether or not it will be possible to obtain a utility patent. If a utility patent proves unavailable, the applicant can settle for a utility model. This approach is called “dual filing” and has been pursued more than one million times in the Chinese patent office.

This article reports a recent ruling in the Chinese Supreme Court that makes things more difficult for users of dual filing, and offers suggestions for users of that filing approach. It may be helpful by way of background to review the utility model and to compare it with the utility patent. By comparison with a utility patent, a utility model has a shorter term. The government fee to file the application is smaller. The utility model application is examined for various formal requirements but examination for novelty and inventive step is largely reserved for post-grant proceedings. Such post-grant proceedings might be initiated by the owner of the utility model or by a third party. Importantly, the claims of a utility model are narrowly limited when compared with those of utility patents. A utility model may not have method claims, and may not have claims directed to compositions of matter or bulk materials or fine structures. Generally speaking the claims of a utility model may only be directed to human-scale, directly observable features of mechanical or electrical apparatus.

In some offices where utility models are available, the applicant must at the outset pick one or the other type of protection to pursue. In other offices, the applicant can file both kinds of applications but if one application has been allowed (typically the utility model will finish its examination far sooner than the utility patent application), the other (typically the utility patent application) must be abandoned.  

In China, however, the above-mentioned dual-filing mechanism offers the best of both approaches for the applicant. The applicant files a utility model application and a utility patent application at the same time. The formal examination of the utility model application proceeds quickly (typically 8-12 months from the Chinese filing date) and of course the usual result is an allowance of the utility model. At some later time the utility patent application is examined for novelty and inventive step, and the applicant finds out whether that application will be allowed. It is helpful to consider the possible outcomes: 

If it is allowed, the applicant can pay the issue fee and obtain a granted utility patent. The claims can include subject matter that would not have been available in the utility model, and the term is longer than the utility model term. For litigation and licensing purposes the novelty and inventive step have already been established.   

If on the other hand it is not allowed, the applicant has the option of abandoning the utility patent application and preserving the already-allowed utility model.

It will be appreciated that this dual filing approach offers at least some protection with either outcome, and offers the prospect of more protection than if the only application filed had been a mere utility model application. To the extent that there is any drawback to this dual filing approach, it is that more government fees need to be paid than with either filing approach taken individually, and perhaps that more professional fees are incurred. Given that this dual filing approach has been pursued more than a million times to date, apparently many applicants feel the potential advantages to outweigh the potential drawbacks. 

With this background having been set, we may turn to the main point of this article, which is a recent ruling that makes things more difficult for users of dual filing. 

On July 23, 2021, in Langting Company V. Xixian SUN, the Chinese Supreme Court Intellectual Property Tribunal established new law that applies in the case where dual filing has been pursued, and where in the utility patent application a claim has been found to be unpatentable based upon one reference in the same art. Under this new law, if that same claim can be found in the corresponding utility model, then it is deemed automatically unenforceable due to the unpatentability of the claim in the utility patent application. This automatic unenforceability happens regardless of whether the unpatentability is due to lack of novelty on the one hand, or due on the other hand to lack of inventive step (what in the US would be termed non-obviousness).

It bears emphasis that the new law established by this court ruling limits the automatic unenforceability to rejections based upon a single reference in the same art. 

It is helpful to remind ourselves what would have been required for a claim of a Chinese utility model to become unenforceable before this new law came into existence. What would have been required is that some party (the owner of the utility model, or some third party) would have needed to request examination in a post-grant proceeding, and there would have needed to be a finding of unenforceability in that post-grant proceeding. But now with this new law, there is this new way that a claim of a utility model is at risk of becoming unenforceable.

Why does the decision require the reference used in the inventive step rejection can be only one piece and in the same art? The inventiveness requirement is lower for a utility model than it for a utility patent because pieces of reference can be used to destroy a utility model’s inventiveness are typically limited to one or two in the same art.

In this case, the utility and utility model patent applications were filed on the same date at the Chinese Patent Office with the same claims. All 7 claims in the utility patent application were all rejected in the first Office Action in view that Claim 1, 4-7 lacked of novelty against reference D1 and Claims 2 and 3 lacked inventive step against D2. D2 was in the same field as the invention. The applicant amended the claims but the rejection was sustained. The first- and second-instance courts upheld the rejection. The case went all the way to the Supreme Court. The Supreme Court rejected Sun’s petition to rehear the case. 

Why was this case decided on unenforceability other than invalidity of the utility model? Unlike the US, the invalidation request has to be initiated at the Patent Reexamination Board of the Chinese Patent Office.  

Will this decision have a significant impact on dual filing? Based on rough statistics, the number of utility model patents using the dual filing mechanism is more than 1.77 million. Among these cases, only about 480 utility model patents have been involved in patent infringement litigations. Among these 480 cases, only about 100 corresponding utility applications were rejected. Among these 100 cases, how many utility cases were rejected on novelty or inventive step against one reference in the same art? We guess, not many.  

What might have a bigger impact on dual filing? Based on the Draft Revised Patent Examination Guidelines (Draft for Solicitation of Comments) published on August 3, 2021, the utility patent application in the dual filing will have a 4-year delay in examination and no Patent Term Adjustment will be provided for the utility patent.

What can we guess about the consequences of this ruling?  

A first thing that we can say is that we can guess that most dual-filing cases will not be affected directly by this ruling. 

A second thing is that we can identify things that the applicant in a dual-filing case might want to try to do during the prosecution of the utility patent application. The applicant may want to try to avoid getting the application rejected on inventive step against only one reference. For example, suppose there is a rejection of the application as supposedly lacking an inventive step, based upon a two-way combination of a single reference along with something that is said to be common knowledge for people skilled in the relevant art. In such a case, the applicant might wish to try to argue that the second part of the combination is not in fact commonly known, but can only be found by making use of a second cited reference. If such argument were successful, then this would preserve the utility model against the automatic unenforceability that would otherwise occur.