On November 12, 2012, the Consultation Draft of Regulations on
Service Inventions ("Draft Regulation") was released by
the State Intellectual Property Office of China for public comments
with immediate effect. The Draft Regulation was formulated for the
purpose of protecting the legal rights and interests of the
inventor-employee and the employer, to stimulate and improve the
ability to innovate. For those pharmaceutical companies which have
Chinese service inventions in China, they should be aware of this
Draft Regulation as it places additional pressures on
The Draft Regulation addresses the following topics: the
employer's obligation to establish an internal intellectual
property management system; ownership and reporting of the
inventions/creations; the reward and remuneration of the service
inventions/creations; the utilization and implementation,
supervision and inspection, and legal liability of the intellectual
property rights of the service inventions-creations.
It is worthy of special attention that the default rule of
remuneration according to the Draft Regulation is huge (no less
than 5% of the turnover for an invention patent) and companies
shall also reveal extensive commercial information to its employees
if the default rule applies. Moreover, pharmaceutical companies
should be aware that this default only applies to the circumstance
when an employer does not reach an agreement with its employees.
Therefore, a proper agreement with employees is vital in mitigating
service invention disputes and reducing associated risks.
Pharmaceutical companies should review their agreements and
ensure there are no ambiguities in their agreements. In addition,
they should ensure compliance with any requirements or obligations
to avoid damages due to the huge remuneration as ruled.
On December 14, 2012, the China Trademark Office issued a Notice
on Adding Trademark Specifications on Retail and Distribution
Service Trademark. In this Notice, the CTMO specifies that
"Retail and Distribution Service for pharmaceutical,
veterinary, sanitary and medical goods" will be added to Class
35 of the Revision of the 10th Edition of Goods and Services
Classifications in China, and the new Revision will be effective
January 1, 2013.
According to the Notice, the newly expanded service
classification will not be deemed as similar to pharmaceutical
goods. Additionally, the services are classified differently from
prior "Distribution for others" in Class 35.
Prior to the Notice, the CTMO rejected trademark applications on
retail and distribution services. Pharmaceutical distribution
companies generally relied on registering trademarks in the
"distribution for others" service to try to cover their
retail or distribution business in China. However, the Notice
denies this practice and opens trademark registration for medicine
retail and distribution services. Therefore, the failure to
register such trademarks may put pharmaceutical distribution
companies in danger of losing their trademarks in China.
The Notice also sets out a transitional period for such
registration from January 1, 2013 to January 31, 2013. Trademark
applications filed during this period will be considered to be made
on the same day for identical or similar newly added services. This
rule will protect the real trademark owner from rush trademark
registrations. However, this rule is only available during the
In light of the benefits during this transitional period, all
pharmaceutical companies, especially those who have a
pharmaceutical distribution business in China, are highly
recommended to register their trademarks in China by adding the
above mentioned services classification during the transitional
period and as soon as possible, for either use or defense.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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