Revised Patent Examination Guidelines in China welcome more patents on business models

business-model-innovation

Last October, the State Intellectual Property Office of China (SIPO) released draft revisions to its Guidelines for Patent Examination for public consultation (see my earlier post). This month, SIPO published the final text of the revised Guidelines, which will enter into force on 1 April 2017. In comparison to the draft, the final version remains substantially unchanged. This may be a sign of support from the stakeholders. In fact, the proposed revisions received a quite good press immediately after their release, even when it comes to the part of revisions regarding patents on business models, which have been and probably are still one of the most controversial aspects of the IP system in many other countries such as the U.S.

As the SIPO explicitly stated, the planned revisions are aimed to strengthen the IP protection for innovation in emerging fields such as Internet, e-commerce, big data and to improve the IP protection system for business models. This emphasis reflects the state of innovation in China, where indigenous businesses have been so far quite successful in developing innovative services and products in these emerging fields. While it can be debated whether an expansion of patent protection into the arena of business models would indeed do more good than harm to the innovation, the objective of the Chinese policymakers is clear: to promote business model innovation through more IP protection.

While it remains to be seen in long term whether the above policy objective can be achieved, it is for individual inventors and businesses more interesting what immediate changes in practice will come out of the planned revisions. So, let’s first take a look at the revision itself.

Content of the revision

Art. 25 of the Chinese Patent Law states:

“Patent rights shall not be granted for any of the following: … (2) rules and methods for intellectual activities; …”

Regarding Art. 25, the current Guidelines contain the following exception rule:

“If a claim in its whole contents contains not only matter of rule or method for mental activities but also technical features, then the claim, viewed as a whole, is not a rule or method for mental activities, and shall not be excluded from patentability under Art. 25 of the Patent Law.”

As planned, the following example will be added to the above exception rule:

“If a claim relating to business model contains not only matter of business rules and methods but also technical features, it shall not be excluded from patentability under Art. 25 of the Patent Law.”

That’s it! The only planned revision specifically concerning business models. As you can see, it doesn’t change or add anything substantially new to the existing rule. Rather, it only makes the applicability of the existing rule to business models explicit. One may thus wonder whether the planned revision may have any significance. To answer this question, let’s first take a look at three main hurdles that patent applications on business models have to face in China.

Three hurdles for patents applications on business models

Besides the above discussed Art. 25 of the Patent Law, two other hurdles are stipulated by Art. 2 and Art. 22 of the Patent Law: Art. 2 requires inventions to be “new technical solutions proposed for a product, a process or the improvement thereof”; Art. 22 contains the famous inventive step requirement. The three hurdles are supposed to be assessed by patent examiners in the following order:

Technical feature requirement (Art. 25) -> technical solution requirement (Art. 2) -> inventive step requirement (Art. 22).

It should be noted that the “technical solution” requirement is a higher threshold than the “technical feature” requirement, because the former is a more complex concept and, according to a three-part test stipulated in the Guidelines, requires the presence of three essential elements, namely ”technical problem”, “technical means” and” technical effect”.

Now one may ask: Has Art. 25 been especially too often misused that now a clarification is necessary?

Implications of the revision

Surprisingly, an article published by the SIPO in 2014 cites the statistics that, among 681 pending re-examination cases concerning business-method-related patent applications at that time, only 1.17% of the applications were rejected under Art. 25, while 74.6% were rejected under Art. 2 and 19.53% under Art. 22. Clearly, Art. 25 played only a minor role here in blocking business-method-related applications.

Now one surely has to ask: Is the planned revision actually necessary, if it merely clarifies the technical feature requirement (Art. 25), which has been only seldom used by examiners as a rejection ground, anyway?

One optimistic view is that the clarification of Art. 25 may also influence rejections under Art. 2 (“technical solution” requirement).

It was reported that, in practice, examiners often incorrectly mix the Art. 2 requirement with the Art. 25 requirement. For instance, examiners may reject a patent application under Art. 2 by asserting that the claimed invention doesn’t involve a technical solution, since a business model is contained in a claim. This reasoning is nevertheless incorrect because it is Art. 25 that stipulates the exclusion from patentability of rules and methods for mental activities (including business models) – subject to the technical feature exception rule; therefore, if the claimed invention can pass the technical feature test, its mere containing of a business model should not be a reason for rejections under Art. 25, and consequently also not under Art. 2.

Hence, by clarifying the technical feature requirement under Art. 25, it can be hoped that such incorrect rejections under Art. 2 may also be reduced. As the afore-cited statistics indicate, a large portion of business-method-related patent applications have actually been rejected under Art. 2. The planned revision may thus well have a broad impact. In the end, the planned revision is hoped to address some examiners’ over-cautiousness in treating any reference to business models as a red flag that indicates unpatentability.

Besides, as usually based on computer software, patent applications on business models will also be influenced by the planned revisions to the Guidelines that concern software inventions in general. I will discuss these revisions in my next post.

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