Since the reform and opening-up in 1978, China has seen huge increase of foreign direct investment. More and more foreign companies have set up their R&D centers in China, hence making more and more invention-creations therein. We would like to outline several aspects that deserve kind attention, especially for those foreign companies to seek patent protection for the invention-creations developed in China.
1. Confidentiality Examination
In the Third Amendments to the Chinese Patent Law there is newly introduced the following statute on the confidentiality examination of a patent application to be filed abroad for an invention-creation made in China:
Article 20 of the Chinese Patent Law: Where any entity or individual intends to file an application for patent abroad for any invention or utility model developed in China, it or he shall request in advance the patent administration department under the State Council for confidentiality examination.
The statute governs both 1) the patent application intended to be filed abroad directly and 2) patent application to be filed abroad after filing a patent application with State Intellectual Property Office of China (SIPO). And the statutory confidentiality examination applies for a patent application for invention or utility model, not including a patent application for design.
The purpose of the confidentiality examination is to determine whether any technical solution involved in a patent application to be filed abroad relates to the interests concerning national defence or the security or other vital interest of the State and hence is required to be kept secret.
Where the technical solution is found obviously not necessary to be kept secret after the confidentiality examination, the examiner will issue a foreign filing license.
The documents for the request for the confidentiality examination shall include a form called the "Request for Confidentiality Examination of Patent Application to Be Filed Abroad" and the description of the technical solution, both in Chinese. The description of the technical solution is required to be identical with the contents of the patent application to be filed abroad.
Based on the current practice, it generally takes about one month from the filing date of the request for confidentiality examination to get the foreign filing license.
If a patent application has been filed in a foreign country without going through the statutory confidentiality examination, it shall not be granted patent right while filing application for the patent in China.
2. Reward and Remuneration to the Inventor or Creator
Article 16 of the Chinese Patent Law: The entity that is granted a patent right shall award to the inventor or creator of a service invention-creation a reward and, upon exploitation of the patented invention-creation, shall pay the inventor or creator a reasonable remuneration based on the extent of spreading and application and the economic benefits yielded.
First, according to the Rule 76.1 of the Implementing Regulations of the Chinese Patent Law, the entity to which a patent right is granted may, on the manner and amount of the reward and remuneration, enter into agreement with the inventor or creator.
Second, according to the Rule 77 of the Implementing Regulations, under no agreement situation, amount of reward (no less than RMB 3000 for patent for invention and no less than 1000 for patent for utility model or design) and percentage for remuneration (no less than 2%, patent for invention or utility model, or no less than 0.2%, patent for design, from the profits from exploitation or no less than 10% from the license fee) are provided.
Third, it has to be admitted that the application of Article 16 is somewhat complicated under some situations, such as the patent owner is not the employer. However, the regulations and opinions regarding the reward and remuneration to the employees who are inventor or creator are developing. For example, SIPO proposed the draft of Service Invention Regulations in November, 2012 and Shanghai Higher People's Court issued the Trial Guidelines Regarding Reward and Remuneration to Inventors or Creators of the Service Invention-Creations in June, 2013. The development in this field may deserve the further attention.
3. Freely Export Technology Contract Registration
For most cases, the invention to be applied abroad is the freely exportable technology. Thus, the discussion below is mainly on this kind.
Article 10 of the Chinese Patent Law: Any assignment, by a Chinese entity or individual, of the right of patent application, or of the patent right, to a foreigner, a foreign enterprise of any other foreign organization shall proceed by going through the formalities as provided by the relevant laws and administrative regulations.
Rule 39 of the Chinese Administrative Regulations on Technology Import and Export (the TIE Regulation): Freely exportable technology shall be subject to the contract registration administration. A contract for exporting a technology takes effect from the time when the contract is established according to law without taking the registration thereof as a condition for the contract to be effective.
First, the Freely Exportable Technology Contract Registration Certificate (the Registration Certificate) should be applied for with Ministry of Commerce or local competent authorities of commerce, depending on the specific technology and the location of the transferor.
Second, for some inventions made in China, the foreign parent company may obtain the ownership thereof based on prior contract such as intercompany agreement with the subsidiaries in China. Under such situation, the foreign parent company may file the patent application with SIPO or other IP offices abroad without submitting the Registration Certificate. (But the procedures in relation to foreign exchange, bank, tax, custom and etc may require the Registration Certificate, according to the Rule 41 of the TIE Regulation.) The reasons are detailed as follows.
Based on the timeline of a patent, it may be divided into two categories of right: "the right to file patent application" before the filing and "the right of patent application or the patent right" after the filing.
For filing a patent with SIPO, based on the intercompany agreement, foreign parent company has achieved "the right to file patent application" regarding the invention made by the subsidiaries in China. The intercompany agreement comes into effect not requiring the Registration Certificate.
If the patent is filed in the name of the foreign parent company, SIPO would automatically admit that the parent company should enjoy "the right of patent application or the patent right" based on the filing in its name, neither requiring the Registration Certificate.
For filing a patent with foreign IP offices abroad of China, according to the principle of territoriality, the proprietorship of the patent (application) shall be determined by the laws of the jurisdiction where the patent are applied for protection. It is of very low possibility that foreign IP offices would require such Registration Certificate.
This is also confirmed by the Article 48 of the Chinese Law on Application of Laws to Foreign-Related Civil Relations, which prescribes that "Proprietorship and content of intellectual property rights are governed by the law of the place where protection is sought".
However, according to the Article 10 of the Chinese Patent Law and Guidelines for Patent Examination, the Registration Certificate is required when transferring "the right of patent application or the patent right". For example, if a patent had been filed in the name of a Chinese company, it would require the Registration Certificate for the transfer of "the right of patent application or the patent right" to foreign parent company in the procedure with SIPO.
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.