the State Council, the Central Military Commission

Order of the State Council and Central Military Commission

No. 418

The Regulation on National Defense Patent is promulgated hereby and shall come into force as of November 1, 2004.

Premier of the State Council Wen Jiabao

Chairman of the Central Military Commission Jiang Zemin

September 17, 2004

Regulation on National Defense Patent

Chapter I General Provisions

Article 1

The present Regulation is formulated in accordance with the Patent Law of the People’s Republic of China for the purposes of protecting
the patent rights of the pertinent national defense inventions, safeguarding the state secrets, facilitating the popularization and
application of inventions and creations, promoting the development of science and technology for national defense and meeting the
demands of the modern construction of national defense.

Article 2

The “national defense patent” refers to the patent of any invention that relates to the national defense interests, which is potentially
important to the national defense construction and thus should be kept confidential.

Article 3

The national defense patent institution of the state (hereinafter to the NDPI) shall be responsible for accepting and examining the
applications for national defense patent. If, upon examination, the NDPI believes that an applicant meets the relevant requirements
of the present Regulation, the patent administrative department of the State Council shall grant the national defense patent right
to the applicant.

The administrative department of science, technology and industry for national defense of the State Council and the General Armament
Department of the People’s Liberation Army (hereinafter referred to as the GAD) shall be responsible for the management of national
defense patents of the local system and army system respectively.

Article 4

As for an invention that relates to the national defense interests or is determined as the top secret of the state for its potential
importance to national defense construction, no one may apply for determining it as a national defense patent

Prior to declassification, the applications for national defense patent and the work of keeping national patent confidential shall
be managed in accordance with the Law of the People’s Republic of China on Guarding State Secrets and other relevant provisions.

Article 5

The term of protection fora national defense patent shall be 20 years. It shall be calculated from the date of filing an application.

Article 6

Within the term of protection for a national defense patent, if it is necessary to change the security classification of the national
defense patent, to declassify the national defense patent or to extend term of confidentiality after the termination of the national
defense patent right, the NDPI may make a relevant decision accordingly. However, if it has been determined as a state secret before
an application is filed for determining it as a national defense patent, permission shall be obtained from the organ or entity that
previously determines the security classification and the term of confidentiality, or from its superior organ.

An entity or individual who has been granted the right of a national defense patent (hereinafter referred to as the patentee of a
national defense patent) may file a written application with the NDPI for changing the security classification, declassifying the
national defense patent or extending the term of confidentiality. If the entity is a state-owned enterprise or public institution
or military entity, such an application shall be accompanied by the opinions of the organ or entity that previously determines the
security classification and the term of confidentiality, or by the opinions of its superior organ.

The NDPI shall publish the decision of changing the security classification, declassifying the national defense patent or extending
the term of confidentiality on its Internal Bulletin for National Defense Patent, inform the patentee of the national defense patent
of it, and simultaneously submit the declassified national defense patent to the patent administrative department of the State Council
for changing it into a general patent. The patent administrative department of the State Council shall timely announce the declassified
national defense patent to the general public.

Article 7

The right to apply for a national defense patent and the right of a national defense patent may be transferred to a Chinese entity
or individual within China upon approval.

When transferring the right to apply for a national defense patent or the right of a national defense patent, one shall ensure that
the state secrets won’t be divulged, shall guarantee that construction of national defense and the army won’t be affected and shall
file a written application with the NDPI. The NDPI shall conduct a preliminary examination, and then it shall, in accordance with
the functions as prescribed in the second paragraph of Article 3 of the present Regulation, timely report it to the administrative
department of science, technology and industry for national defense of the State Council or the GAD for examination and approval.

The administrative department of science, technology and industry for national defense of the State Council or the GAD shall make
a decision of approval or disapproval within 30 days after the NDPI accepts an application. If it makes a decision of disapproval,
it shall give a written notice and an explanation therefor to the applicant.

Where an applicant is approved of transferring the right to apply for a national defense patent or the right of a national defense
patent, the parties concerned shall sign a written contract and shall have it registered in the NDPI. The NDPI shall publish it on
its Internal Bulletin for National Defense Patent. The right to apply for the national defense patent or the transference of the
right of the national defense patent shall be valid from the registration date.

Article 8

It is prohibited to transfer the right to apply for a national defense patent or the right of a national defense patent to an entity
or individual outside China, or to a foreigner or foreign institution within China.

Article 9

Anyone who needs to entrust a patent agency to apply for a national defense patent or to handle other matters related to national
defense patent shall entrust a patent agency designated by the NDPI to do so. The patent agency and its personnel shall be obliged
to keep confidential the state secrets they learn in handling the national defense patent application and other matters related to
national defense patent.

Chapter II Application, Examination and Authorization of National Patent

Article 10

Anyone who applies for a national defense patent shall submit an application, description and its abstracts, claims and other documents
to the NDPI.

The national defense applicant shall prepare the application documents according to the requirements and uniform formats as prescribed
by the NDPI and shall submit them to the NDPI by personal delivery, confidential correspondence or any other secret way. The applicant
may not post them by ordinary mail.

The day when the NDPI receives the national defense patent application documents shall be the date of filing an application. If the
application documents are submitted by confidential correspondence, the date of mailing indicated by the postmark shall be the date
of filing an application.

Article 11

The NDPI shall regularly appoint a person to examine the common patent applications in the patent administrative department of the
State Council. If it finds that an application involves the interests of national defense or is of potential importance to the construction
of national defense and thus it is necessary to keep it secret, then upon consent of the patent administrative department of the
State Council, this application shall be changed into an application for national defense patent and the applicant shall be informed
of the change.

After a common patent application has been changed into an application for national defense patent, the NDPI shall examine it in accordance
with the relevant provisions of the present Regulation.

Article 12

Any invention to which the right of national defense patent may be granted must possess novelty, inventiveness and practical applicability

Novelty means that, before the date of filing an application, no identical invention has been publicly disclosed in publications within
China or abroad or has been publicly used or made known to the public by any other means within China, nor has any other person previously
filed an application which described the identical invention or obtains the right of national defense patent after the date of filing
an application.

Inventiveness means that, as compared with the technology existing before the date of filing an application, the invention has prominent
substantive features and represents a notable progress.

Practical applicability means that the invention can be made or used and can produce effective results.

Article 13

Under any of the following circumstances, an invention for which a national defense patent is applied does not lose its novelty within
six months before the date of filing an application:

(1)

It is, for the first time, exhibited at an internal exhibition sponsored by the corresponding administrative department of the State
Council or the corresponding administrative department of the People’s Liberation Army;

(2)

It is, for the first time, made public at a academic or technological conference internally held by the administrative department
of the State Council or the pertinent administrative department of the People’s Liberation Army; or

(3)

It is disclosed by any other person without the consent of the applicant.

Under any of the circumstances as listed in the preceding paragraph, the applicant for national defense patent shall make a statement
when it files an application, and shall provide the relevant documentary evidence within 2 months from the date of filing an application.

Article 14

If, upon examination over an application for national defense patent, the NDPI considers that the application doesn’t meet the requirements
of the present Regulation, it shall inform the applicant for national defense patent to present an argument or revise or make supplements
and corrections to its application for national defense patent within a specified time limit. If the applicant fails to make a response
within the specified time limit without any reasonable ground, it shall be regarded as having withdrawn its application for national
defense patent.

Within 6 months from the date of filing an application, or when the applicant for national defense patent make a response to the notice
of opinions on preliminary examination, the applicant for national defense patent may, on its own initiative, requests to revise
its application for national defense patent.

The revisions made by the applicant to its national defense patent application documents may not exceed the scope of disclosure contained
in the initial description and claims.

Article 15

After the applicant for national defense patent has presented an argument or has revised or has made supplements and corrections to
the national defense patent application documents, if the NDPI still considers that the application doesn’t meet the requirements
of the present Regulation, it shall dismiss the application.

Article 16

The NDPI shall set up a National Defense Patent Reexamination Board, which shall be responsible for reexamining the national defense
patents and announcing invalid ones.

The National Defense Patent Reexamination Board shall consist of technical experts and legal experts. Its position of director member
shall be concurrently held by the person-in-charge of the NDPI.

Article 17

If an applicant for national defense patent refuses to accept the decision of the NDPI on dismissing the application, it shall, within
3 months from receipt of the notice, ask the National Defense Patent Reexamination Board to conduct reexamination. After the National
Defense Patent Reexamination Board conducts reexamination and makes a decision, it shall notify the applicant for national defense
patent of the said decision.

Article 18

If it is held that there is no reason to dismiss a national defense application upon examination, or it is improper to dismiss a national
defense application upon reexamination, the patent administrative department of the State Council shall decide to grant the applicant
the right of a national defense patent, authorize the NDPI to issue a national defense patent certificate to the applicant and simultaneously
disclose the date of filing an application for the national defense patent, the date of granting the right of national defense patent
and the number of the national defense patent through the patent bulletin published by the patent administrative department of the
State Council. The NDPI shall register the matters relating to the national defense patent and publish them on the Internal Bulletin
for National Patent.

Article 19

Where an entity or individual considers that the grant of the right of a national defense patent is not consistent with the present
Regulation, it (he) may ask the National Defense Patent Reexamination Board to declare the right of the national defense patent invalid.

Article 20

After the National Defense Patent Reexamination Board examines an application for announcing a national defense patent invalid and
makes a decision, it shall notify the applicant and the patentee of a national defense patent of the said decision. The NDPI shall
publish the decision on declaring the right of a national defense patent invalid on the Internal Bulletin for National Patent, and
the patent administrative department of the State Council shall publish it on the patent bulletin.

Chapter III The Exploitation of National Defense Patents

Article 21

The NDP shall, within 3 months from the day when it grants the applicant the right of a national defense patent, submit the duplicates
of the relevant documents of the national defense patent to the corresponding administrative department of the State Council or the
corresponding administrative department of the People’s Liberation Army, which shall, within 4 months from the day after receipt
of the duplicates of the relevant documents, put forward opinions in writing about the exploitation of the national defense patent
and inform the NDPI of its opinions.

Article 22

The corresponding administrative department of the State Council or the corresponding administrative department of the People’s Liberation
Army may permit its designated entities to exploit the national defense patents of its own system or department. If it is necessary
to designate entities to exploit a national defense patent other than those of its own system or department, it shall file a written
application to the NDPI, which shall, in accordance with the functions as stipulated in the second paragraph of Article 3 of the
present Regulation, report that to the administrative department of science, technology and industry for national defense of the
State Council or the GAD for approval. Upon approval, the said patent may be exploited.

The NDPI shall register the information concerning the designated exploitation of national defense patents and shall publish it on
the Internal Bulletin for National Defense Patent.

Article 23

An entity exploiting a national defense patent of others shall sign a written contract with the patentee of this national defense
patent, shall pay fee to the patentee of the national defense patent in accordance with Article 25 of the present Regulation and
shall report that to the NDPI for archival purposes. Except the entities as stipulated in the contract, the exploiting entity may
not allow any other entity to exploit the national defense patent.

Article 24

Where a patentee of a national defense patent permits an overseas entity or individual to exploit its national defense patent, it
shall ensure that the state secrets won’t be divulged, shall guarantee that the construction of national defense and the army won’t
be affected and shall file a written application with the NDPI. The NDPI shall conduct a preliminary examination in pursuance of
the functions as stipulated in the second paragraph of Article 3 of the present Regulation, and then timely submit it for examination
and approval to the administrative department of science, technology and industry for national defense of the State Council, or the
GAD.

The administrative department of science, technology and industry for national defense of the State Council, or the GAD shall, within
30 days after the NDPI accepts the application, make a decision of approval or disapproval. If it makes a decision of disapproval,
it shall give a written notice and an explanation therefor to the applicant .

Article 25

Anyone who exploits the national defense patent of others shall pay the national patent exploitation fee to the patentee of a national
defense patent. If the exploitation of a national defense patent, which is derived from using the scientific research funds directly
allocated by the state for national defense or from the scientific research activities by using other national defense funds, is
consistent with the purposes of the funds from which the national defense patent is derived, it (he) may only be required to pay
the necessary national defense patent exploitation fee except there are otherwise stipulations in the scientific research contract
or in the description of scientific research project.

The “national defense patent exploitation fee” as mentioned in the preceding paragraph refers to the essential expenditure incurred
in the exploitation of a national defense patent for offering technical materials, training personnel and further technical development.

Article 26

The amount of the fee for exploiting or using a national defense patent shall be determined by the patentee of a national defense
patent and exploiting entity through negotiation. If they fail to come to an agreement, the issue shall be arbitrated by the NDPI.

Article 27

The state shall compensate the patentee of a national defense patent. After the NDPI issues a national defense patent certificate,
it shall pay the compensation fee for national defense patent to the patentee of the national defense patent. The amount of compensation
fee shall be determined by the NDPI. If the patent is for a service invention, the patentee of the national defense patent shall
pay at least 50 % of the compensation fee for national defense patent to the inventor.

Chapter IV Management and Protection of National Defense Patents

Article 28

The Internal Bulletin for National Defense Patent published by the NDPI falls within the scope of state secret documents. The range
of its readers shall be decided by the NDPI.

The Internal Bulletin for National Defense Patent may publish the following contents:

(1)

The items as recorded in an application for national defense patent;

(2)

The claims for a national defense patent;

(3)

The abstracts of the description of an invention;

(4)

The grant of a national defense patent;

(5)

The termination of a national defense patent;

(6)

The announcement on invalidity of a national defense patent;

(7)

The right to apply for a national defense or the transference of a national defense patent;

(8)

The designated exploitation of a national defense patent;

(9)

The records of a license contract on the use of a national defense patent;

(10)

The change of the security classification or declassification of a national defense patent;

(11)

The extension of the term for the confidentiality of a national defense patent;

(12)

The change of name or address of a patentee of a national defense patent; and

(13)

Other relevant items.

Article 29

After the grant of a national defense patent, one may, upon permission of the NDPI, consult the descriptions of the national defense
patent under any of the following circumstances:

(1)

Requesting to declare the national defense patent invalid;

(2)

Being in the need of exploiting a national defense patent;

(3)

Occurrence of any dispute over the national defense patent; or

(4)

Due to the needs of scientific research for national defense.

A consulter shall be obliged to keep secret the state secrets he learns during the consulting.

Article 30

The corresponding administrative department of the State Council, the corresponding administrative department of the People’s Liberation
Army and the administrative departments of science, technology and industry for national defense of the provinces, autonomous regions,
and municipalities directly under the Central Government shall each designate an institution to be responsible for the management
of national defense patents and shall notify the NDPI of it. All such institutions shall be subject to the operating guidance of
the NDPI.

The army entities undertaking tasks of scientific research or production for national defense or participating in armament orders,
entities for which the State Council performs the obligations of the investor, and public institutions directly under the State Council
shall each designate a corresponding department to manage their respective national defense patents.

Article 31

The NDPI may mediate the following disputes over national defense patent at the request of a party concerned:

(1)

Any dispute over the ownership of the right to apply for national defense patent and the national defense patent right;

(2)

Any dispute over the qualification of the inventor or creator of a national defense patent;

(3)

Any dispute over the award and remuneration of the inventor or creator of a service invention-creation; and

(4)

Any dispute over the fees for using or exploiting the national defense patent.

Article 32

Except when it is otherwise provided in the Patent Law of the People’s Republic of China and the present Regulation, anyone who exploits
a national defense patent without the permission of the patentee of the national defense patent, it (he) infringes upon its (his)
national defense patent right, the parties concerned shall solve it through negotiation if any dispute is caused. If the parties
concerned refuse to negotiate, or if they fail to reach an agreement through negotiation, the patentee of a national defense patent
may file a lawsuit in the people’s court or require the NDPI to solve the issue.

Article 33

Anyone who divulges the state secrets in violation with the present Regulation shall be punished in pursuance of the Law of the People’s
Republic of China on Guarding State Secrets and other relevant provisions of the state.

Chapter V Supplementary Provisions

Article 34

Anyone who applies for a national defense patent to the NDPI and go through other formalities with it shall pay the fees according
to the relevant provisions.

Article 35

The pertinent provisions in the Patent Law of the People’s Republic of China and the Detailed Rules for the Implementation of the
Patent Law of the People’s Republic of China are applicable to the national defense patents, but the specific provisions in the present
Regulation shall prevail.

Article 36

The present Regulation shall come into force as of November 1, 2004. The Regulation on the National Defense Patents approved by the
State Council and the Central Military Commission on July 30, 1990 shall be simultaneously abolished.