Chinese Utility Model Patents Might Cut Your IP Costs by Half While Providing Better Protection2005-06-13

U.S. corporations often overlook the Chinese utility model patent when seeking patent protection in China. In 2004 foreign companies filed 64,374 invention patents in China and only 1,247 utility model patents.  Foreign companies may be missing an excellent opportunity to both obtain faster patent protection and significantly decrease their filing costs.  A Chinese patent strategy should include consideration of the Chinese utility model patent.  Following are factors to consider when analyzing the usefulness of utility model patents for your company.

Chinese Utility Model Patents Might Cut Your IP Costs by Half While Providing Better Protection

Three types of patents in China

China has three types of patents, the invention patent, utility model patent, and design patent.  Although the name is similar, the utility patent in the United States is similar to the Chinese invention patent.  The Chinese utility model patent is similar to the European and Japanese utility model patents.  The United States has no utility model style patent.

Both the utility model patent and the invention patent receive the same protection from infringement under Chinese law, but there are enforcement differences which should be considered.

A utility model patent may not be acquired for all types of inventions.  Utility model patents may only be obtained on physical products.  Therefore, methods or chemical compounds may not receive utility model protection since they do not have a shape or structure.  However, in some cases, it may be possible to revise the application such that an invention may receive utility model protection.  For example, it may be possible to revise a method application to claim a product that uses the method rather than the method itself.   However, the product must have an element of shape or structure and may not be described entirely as to its function.  Electronic circuits, since they have a structure, may receive utility model protection if described as a product rather than a pure circuit.

Utility model patents are granted faster

A principal disadvantage of the utility model patent is its ten-year term from the filing date, rather than the twenty-year term enjoyed by the invention patent.  However, a utility model patent will issue much faster than an invention patent. This is because a utility model receives preliminary examination but does not receive substantial examination.  Therefore, at this time, a utility model Patent issues in four to twelve months while it typically takes two to five years for an invention patent to issue.   Some inventions grow more valuable with time.  Other inventions, such as electronics or inventions that experience a limited period of being “fashionable” or “new”, grow less valuable with time.  The later types of inventions are excellent utility model patent candidates.

Utility model patents cost much less

The cost to receive a patent varies depending upon the translation costs, number of pages, number of claims, number of drawings and the number and time to respond to office actions. Using common quantities for these values, the cost to obtain a utility model patent is about one half of the cost to obtain an invention patent. The actual savings is largely dependant upon the costs required to reply to the office actions.  It is noted the following cost analysis does not include additional savings gained because non-China-based attorneys need not review office action responses.  Savings are also obtained from maintenance fees.  Ten years of maintenance fees for a utility model patent cost 77% of the cost of ten years of invention patent maintenance fees.

With an active patent portfolio in China cost savings by filing utility model rather that invention patents may be significant.  For example, assuming an average of 8 hours of charges to reply to office actions, it is estimated it would cost about $231,477 for 50 invention patents to issue and only $115,835 for those same patents to issue as utility models[i][i].  An additional $29,841 would be saved in maintenance fees for ten years of coverage.  Using this scenario, ten years of coverage from 50 invention patents cost $361,050 and that same coverage from Utility model patents cost $215,566.  This is a savings of $145,484 that could be used for expenses such as an aggressive enforcement campaign.

Rather than choosing to obtain cost savings for their patent portfolio, a corporation may instead choose to acquire more intellectual property protection in China.  For example, using the above figures, for the same cost to obtain 50 invention patents, 95 utility model patents could be obtained.  If maintenance fees are factored in, for the cost of obtaining and receiving 10 years of protection from 50 invention patents, a corporation may obtain and receive 10 years of protection from 82 utility model patents.  For the cost of obtaining and receiving 20 years of protection from 50 invention patents, a corporation may obtain and receive 10 years of protection from 184 utility model patents.

Similar protection under both patent types

It is estimated that less than one patent in 100 filed in China will be the subject of an infringement action.  Infringement cases involving invention patents and utility model patents are similar, but there are differences.  At the time an infringement action involving a utility model patent is filed in court or with the local Intellectual Property Office, the patentee must furnish a search report made by the Patent Office.  No such search report is required if it is an invention patent.  After the filing of an infringement action involving an invention patent, it is very common for the defendant to initiate an invalidation proceeding against the patent.  With a utility model patent, invalidation will invariably be sought.  Therefore, with either patent type, it may be anticipated the patent will be the subject of invalidation.

The power of the Judge to suspend the case is also different depending upon which patent type is involved.  In an infringement case involving a utility model patent, the judge has no option but is required to suspend the infringement case to await the outcome of the invalidation case.  However, in a suit involving an invention patent, the judge has the option to continue the infringement case without waiting for the outcome of the invalidation proceeding.  This might be under circumstances where the judge felt the invalidation action was frivolously filed. In practice, though, Chinese judges typically suspend the infringement proceeding and await a ruling that the invention patent is valid before continuing the infringement case.

Therefore, the nature and cost of infringement actions are similar whether it is a utility model patent or invention patent.  There is usually an invalidation filed, and the judge will suspend the infringement case until the invalidation matter is settled.  The costs in both time and expense to defend against the invalidation are about the same regardless of which type of patent it is.  This means the value in having a utility model verses an invention patent in terms of enforcement lies in the ability to enforce the utility model patent sooner.  Therefore, the utility model option is particularly attractive in technologies, such as electronics, which require a longer time to issue as an invention patent.  Also, if a corporation’s inventions would be obsolete in 10 years, the utility model patent is a viable alternative.

Since the utility model patent is not examined, enforcement of that patent will depend upon the results of the invalidation proceeding.  During the invalidation, the patent holder has the opportunity to amend the claims to traverse references.  However, there is no opportunity to add material from the description into the claims as would be possible during an examination by a patent examiner.  For this reason, it is often beneficial to have as many claims as practical in the utility model patent. 

Filing both utility model and invention patents?

On the same subject matter, both a utility model application and an invention application may be filed.  Filing both applications enables a patent owner to obtain the advantages of the fast issuance and protection of the utility model, while still being able to enjoy longer term of the invention patent.  During the prosecution of the invention application, the applicant typically is requested to choose which patent is to be abandoned.  If the utility model is selected, the invention patent will be abandoned and not prosecuted.  If the invention patent is selected, the utility model patent will be abandoned at the time of the issuance of the invention patent. However, should the examiner miss the fact that a utility model patent exists, the applicant should be careful to abandon the utility model patent to prevent potential invalidation from double patenting. 

Because there is only one translation required, using the same assumptions as in the cost analysis above, for the same cost to file 50 invention patents alone, a corporation could file for both an invention patent and utility model patent for 40 inventions.  It does not cost a great deal more to obtain the advantages of both patent types.

Another consideration in the deciding whether both patent types should be filed, is that there may be difficulty in enforcing the utility model due to timing of an infringement action.  If the invention patent were to issue in the midst of an infringement proceeding on the utility model patent, it is unclear whether the infringement case would continue.  Also, any injunction bonds that were paid might be lost.  Because of the above, it is typically preferable to file only a utility model patent, and not both patent types, provided the ten year term is acceptable.

Under the PCT regulations which came into effect on 1 January 2004, the choice as to whether an invention patent or utility model patent is sought can be made upon entry into the national phase.  This is an important change as it allows the examination of the international search report prior to deciding whether to file a utility model or invention patent.

Conclusion

To summarize, when deciding between filing a utility model application or an invention patent application the following questions should be considered:

  • Questions precluding utility model filing
    • May the subject of the invention receive utility model protection?
    • Will patent protection be needed beyond ten years of the filing date?
    • Has the one-year priority period already passed, or has novelty been lost, to enable the filing of both a utility model and invention application?
  • Questions requiring estimates
    • Does the invention grow more or less valuable with time?
    • What is the value of the 20-year term vs. the 10-year term?
    • How advantageous is it to receive lower filing and maintenance costs?
    • Does your company’s patent portfolio contain additional inventions which could receive protection if the lower cost utility model patents were filed?
    • What is the chance an early infringement action will be sought within the time it would take for an invention patent to issue?
    • Does the patent have a strong search report?
    • Would the inability to add information from the description into the claims during an invalidation proceeding seem problematic?
    • What is the present time period for an invention patent to issue in China in your particular technology?

In conclusion, a U.S. corporation should consider utility model patents when designing their patent strategy in China.  Depending upon the nature of the invention, the utility model patent might allow the corporation to receive better protection in China at a significantly lower cost. We at Tee & Howe can provide assistance in helping you analyze your patent portfolio to determine the potential savings and advisability of filing utility model patents in China.

Author: James Haynes


[ii][i] The cost estimates are made using the “All-China Patent Agents Association” Minimum Price schedule with the following variables:

Ave words/patent = 8,000

Ave pages/patent = 31

Ave number claims/patent = 15

Ave number drawings/patent = 5

Ave hours Atty Office Action Review/patent = 8

Atty cost/hr = $200

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