China Unveils Comprehensive IP Action Plan to Fulfill US-China Phase 1 Trade Agreement Commitments

The Phase 1 Trade Agreement between the United States and China, signed in January 2020 and effective from February 2020, marked a significant milestone in the ongoing trade tensions between the two nations. Among its broad provisions, the Agreement included commitments by China to strengthen intellectual property rights (IPR) protection. On April 20, 2020, China’s National Intellectual Property Administration (CNIPA) published a comprehensive 2020-2021 Implementation Plan, commonly referred to as the IP Action Plan, detailing 133 specific actions aimed at fulfilling these commitments.

The IP Action Plan is designed to amend China’s IP legislation and enforcement practices to better protect rights holders, particularly those from the United States. While some provisions reiterate existing Chinese laws, others introduce new mechanisms or enhance current frameworks. The plan’s publication fulfills Article 1.35 of the Phase 1 Agreement, which requires China to promulgate such an action plan within 30 working days of the Agreement’s entry into force.

One notable reform involves permitting pharmaceutical patent applicants to rely on supplemental data to satisfy patentability requirements. Although the 2017 Patent Examination Guidelines allowed some use of such data, the Phase 1 Agreement pushes for broader acceptance, enabling supplemental data to support sufficiency of disclosure, inventive step, and claim support both during patent examination and invalidation proceedings. This change is expected to reduce the relatively high rate of patent rejections and invalidations in China.

The Action Plan also outlines the establishment of a patent linkage system akin to that in the United States. Under this system, patent holders would receive notifications when third parties apply for marketing authorization of potentially infringing products, such as generics. This would grant patentees opportunities to seek remedies, including preliminary injunctions, to prevent unauthorized market entry. This reform builds on prior proposals by the Chinese Food and Drug Administration.

Further, the plan introduces patent term compensation mechanisms. If patent grant is delayed beyond four years from filing or three years after a substantive examination request, and the delay is not attributable to the applicant, compensation will be granted. Additionally, pharmaceutical patents may qualify for patent term adjustments of up to five years if the effective patent term post-marketing approval is less than 14 years. This approach parallels the Supplementary Protection Certificates system used in the European Union.

Trade secret protection is set to be strengthened by removing the current requirement to prove actual loss before initiating criminal investigations. Presently, China’s Criminal Law requires demonstration of “serious” or “exceptionally serious” losses caused by trade secret infringement, a threshold that has hindered enforcement. The planned amendments aim to lower or eliminate this threshold, facilitating more effective criminal enforcement against trade secret theft.

The Action Plan also targets e-commerce platforms that repeatedly fail to curb counterfeit sales. While current law permits only fines, the new provisions contemplate revoking operating licenses in severe cases, providing IP owners with a powerful enforcement tool. However, criteria defining "repeated failure" remain unspecified, and license revocation is likely reserved for extreme circumstances.

Modifications to the notice-and-takedown regime under China’s E-Commerce Law are also proposed. IP right holders will have 20 days, instead of 15, to respond to counter-notifications. Moreover, good faith incorrect takedown notices will no longer be subject to penalties, aiming to balance enforcement with fair use considerations.