I. Historical background
A. Chinese strategy
From the 1980s to the early 2000s, China achieved significant progress in its economic developments through its "open door policy". However, this progress was essentially dependant on its capacity to manufacture and export, hence the well-known saying that "China is the factory of the world". However, throughout the 2000s, the Chinese Government became increasingly aware of the strategic importance of innovation and of the acquisition of intellectual property rights. In 2006, a series of Regulations was issued with a view to promoting the concept of "Indigenous innovation", which showed a preference for domestically developed intellectual property rights in public procurements. Later on, in June 2008, the Chinese government issued its National Strategy for the Industrial Property, with the intention to develop Chinese IP rights and achieve technological independence by the year 2020 was clearly announced. China intended to replace the slogan "made in China" by "designed in China".
B. Evolution of the legal background
China did not wait all this time, however, to address the issue of what to do when an invention is made by an employee. This was already provided for, even if in rather simple terms, in the first patent law. In 1993 and 1996, other laws addressed the issue of the remuneration of an employee inventor. The revision of the Patent Law in 2001, when China joined the WTO, did not modify this legal context.
It was only in 2009, when the Patent Law and its Implementing Rules were revised for the third time, the significant changes occurred. The attention of the business community, including foreign enterprises, became suddenly aroused.
1. The first Patent Law and its Implementing Regulation (1984-1985)
The Patent Law was promulgated in 1984. Article 6 defines what an "employment invention" is: an invention-creation1 "made by an employee in the course of performing his duty, or mainly by using the material and technical conditions of the employer". Article 16 provides that the entity shall "reward" the inventor or designer of the service-invention, and after the invention-creation is exploited, shall pay to the inventor a "reasonable remuneration" according to the scope of exploitation.
This obligation provided in the law applied to all employers, State-Owned or private.
With regard to the reward, Article 71 of the Implementing Rules, issued in 1985 provided that "a State Owned Enterprise ("SOE")" shall pay its employee RMB 200 per invention patent granted and RMB 50 for each utility model patent or design patent granted.
As to the remuneration, Article 72 of the Implementing Rules provided further that an SOE shall pay to the employee between 0.5 % and 2 % of the profits derived from the exploitation of an invention patent, and between 0.05 % and 0.2% of the profits deriving from the exploitation of a utility model or design patent.
For employers other than SOEs, the above amounts and percentages were not compulsory and only indicated as reference.
The Patent Law and its Implementing Regulations were revised in 1993, but no modification was made to the above articles.
2. The Law on Science and Technology Progress (1993)
Article 36 of this law provided, for the first time, for the creation of Research and Technology Centres by foreigners, directly or in the form of Sino-foreign joint ventures. Article 55, without making any distinction between State-Owned enterprises and other entities, provided that "a certain percentage of the profit derived from the exploitation of a scientific achievement shall be set aside to reward individuals who have accomplished the technological achievements".
No example of implementation of this provision is known.
3.The law on Promoting the Transformation of Scientific and Technological Achievements
The purpose of the law, as described in Article 1, was to promote the transformation of scientific and technological achievements onto actual productive forces". Two articles address the issue of remuneration of the "persons who have made significant contributions to the accomplishment and transfer of the achievement". Article 29 provides for a remuneration of 20 % of the net income derived from a transfer of technological achievement. When the technological achievement is directly exploited, the entity should set aside no less than 5 % of the profits derived from the exploitation, during a period of 3 to 5 years.
Likewise, the law makes no distinction between SOEs and other entities. No example of implementation of this law is known.
4.Revision of the Patent Law and Implementing Regulations in 2001
When China joined the World Trade Organisation, the Patent Law and its Implementing Regulations were revised for the second time. The amounts of reward were increased: 2,000 Rmb for an Invention Patent and 500 Rmb for a Utility Model or a Design Patent. The percentage of remuneration was also raised to 2% for an Invention Patent and 0.2% for a Utility Model or Design Patent. Furthermore, in case a licence is granted, a remuneration of no less than 10 % of the after tax royalties was to be paid to the employee inventor or designer.
The above rewards and remunerations were only compulsory for SOEs.
5. Revision to the Patent Law and Implementing Regulations in 2010
In 2010, the Patent law and the Implementing Regulations were revised again. While the principle of reward and "reasonable remuneration" provided in the law remained unchanged, the amounts of reward were slightly increased: 3,000 Rmb for an Invention Patent and 1,000 Rmb for a Utility Mode or a design Patent. The amount of remuneration remained unchanged.
The most important change was introduced in a discreet manner. In Articles 77 and 77 of the Implementing Regulations, which provide for the amounts of reward and remuneration, the words State Owned Enterprise were replaced by the words the entity that is granted the patent right, which meant that ALL employers, whether State Owned or not, Chinese or foreign, were concerned.
However, such articles provided also that the amounts and percentages were only compulsory if the employer fails to agree with the inventor or designer or fails to provide in its rules or regulations the method and amount of reward and remuneration.
A few questions were immediately raised, such as: (1) what if the employee signs a contract or internal rules and thereafter complains that the remuneration is "not reasonable" according to Article 16 of the Patent Law ? or (2) what happens if the patent is granted to another entity than the employer of the inventor/designer: who should pay ?
6.Draft Regulations by the State Intellectual Property Office (SIPO) in 2012 and 2014.
In June 2010, the State Council released the Outline of the Central Coordination Group for Talent's Affairs concerning the Implementation of National Medium-term and Long-term Plan for Talent's Development Plan.
In 2010 and 2011 the State Intellectual Property Office prepared a Draft Regulation on Employment Inventions, which was released in November 2012, and widely circulated, with a call for comments.
The Draft did attract a lot of comments from all parties concerned.
The SIPO, then, released a second draft in April 2014, which is still under discussion (see below).
7.Guidelines of the Shanghai High Court in 2013.
On 25 June 2013, between the issuance dates of the above two SIPO drafts, the Shanghai Higher People's Court issued Guidelines on the Adjudication of for Disputes Involving Rewards and Remunerations to Inventors or Designers of Employee Inventions-Creations (see below). These are, of course, only "guidelines" and only apply at the local level of Shanghai. Still, they contain precise answers to the questions that had been raised after the publication of the 2010 revision of the Patent Law and Implementing Rules, and may be used as reference.
II. Principles applicable to the remuneration of service inventions
A. Right to apply for the patent
Article 6 of the current Patent Law is the same as in its original version of 1984: a service invention is an invention or design that is either "made by an employee in the course of performing his duty, or that is made "mainly by using the material and technical conditions of the employer".
If an employee invention is of the first category, the right to apply for a patent2 belongs to the employer who, upon approval of the application, becomes the patentee. If the employee invention belongs to the second category, it is possible to provide, in a contract, a clause about the right to apply for a patent. In such case, the contract shall prevail. In the absence of such contractual stipulation, the rule is the same as for the first category.
Some questions could be raised concerning the scope of application of the said provision relating to employee inventions: (1) whether the provision applies solely to invention-creations accomplished in China or also applies to inventions accomplished overseas; (2) whether the provision only applies to the right to apply for a patent in China, or also applies to the right to apply for a patent in other jurisdictions.
According to the Patent Law and the principle of territorial jurisdiction in private international law, the above-mentioned provisions should apply only to invention-creations accomplished within China. They do not apply to inventions accomplished overseas. On the other hand, the provisions should apply to the filing of patents both in China and in other jurisdictions3.
B. Method of reward and remuneration
Article 78 of the Implementing Regulations provides that the employment contract or by-laws may stipulate not only the amount of, but also the method, of remuneration. The Shanghai Guidelines provide that the manners of rewards and remunerations may vary. Apart from money, it can be shares, options, position promotion, salary increase, paid leaves, etc..
C. Level of reward and remuneration
1. Freedom to contract
As mentioned above, the 2010 revision of the Law extended the scope of application of the Regulations concerning the reward and remuneration of service invention to all employers, but mitigated this measure by providing that employers are at liberty to provide such rewards and remunerations in a contract to be signed with the employees, or in their internal rules or by-laws.
However, like any contractual agreement, an unsatisfied party may always challenge the validity of the agreement, in particular given the circumstance that, according to the Patent Law, the remuneration should be "reasonable". Therefore, it cannot be avoided that validity and reasonableness of such an agreement could be tested in court.
a) Validity test
According to the Company Law as well as the Labour Contract Law of PRC, in determining the validity of a contract or by-laws, the main issues to be considered are whether a person or an entity has the civil capacity to contract, whether the stipulated contents are specific and clear, as well as whether they violates mandatory provisions of laws and administrative regulations.
Furthermore, according to the Contract Law of PRC, in determining whether a contractual stipulation is valid, the main factors are whether such contractual stipulation was reached under a material misunderstanding, whether such stipulation was reached against the employee's true intentions as a result of the employer's fraud, threatening or for the reason that the employer takes advantage of the employee's difficulties.
b) Reasonableness test
It may happen that an employee inventor decides to challenge the agreement on the ground that the level of remuneration is "unreasonable", according to the law.
Understandably, the reasonableness review of reward and remuneration is one of the most controversial issues in the law, because neither the Law nor the Regulations provide what is "reasonable" and where is the limit to contractual freedom. The European Chamber proposed in its 2011 Position Paper the following wording: "Labour contract or company regulations should only be challengeable in exceptional cases of wilful neglect of inventors' rights".
On this issue, the first SIPO Draft of November 2012 proposed a totally different solution :" Any agreement or policy eliminating or limiting the rights to which the inventor is entitled in accordance with the (draft) Regulation is invalid". All commentators understood this proposal as an obligation to provide, in the contracts or company regulations, levels or remuneration that had to be at least equal, and not lower, than what was provided in the SIPO Draft4. Following the strong disagreement received from various industry groups, the second Draft of 2014 proposed at modification:"Any agreement or policy eliminating the right which the inventor is entitled to in accordance with the draft) Regulation or imposing unreasonable conditions to the entitlement or the exploitation of the above right are invalid". This second solution, does not clarify the concept of reasonableness, and maintains the sanction of invalidity, and therefore, but to a lesser extent, the risk signalled by the commentators.
The Shanghai Guidelines, however, propose a much more practical solution:
- The remuneration maybe above or below the statutory amounts;
- The remuneration may be calculated in accordance to the average invention value in the R&D field concerned;
- Reward and remuneration agreed are deemed reasonable. The Guideline recognise the "need to respect the autonomy of the will of the parties concerned". Only if the amounts agreed are extremely low and obviously unreasonable, can the Court decide to disregard the agreement, in which case, it will not apply blindly the statutory standards.
The Shanghai Guidelines bring another important clarification concerning the nature of a conflict arising between an employer and the employee-inventor: the conflict is considered as a patent dispute, to be handled by the IP section of a People's Court (or the IP court, now that such specialised courts are established in Beijing, Shanghai and Guangzhou). This should reassure the industry, which would have been wary of having to argue such cases before a court specialized for ordinary labour conflicts.
D. Commissioned inventions and joint inventions
As mentioned above, the substitution of the words A State-Owned Enterprise by the words the entity to which the patent is granted raised the issue of foreign companies, having established an R&D Centre in China and having stipulated that for all inventions made in the centre, the right to apply for a patent belongs to the "parent" company. In such case, the entity to which the patent is granted is not the employer of the inventor, and such entity does not have an agreement with the inventor or a specific internal regulation concerning China. The consequence could logically be that the statutory standard remuneration should automatically apply.
The question who should pay had been put to SIPO, as early as 2010, and it has been orally replied that only the employer in China is liable to pay a remuneration according to the law. A written confirmation had been requested in the European Chamber of Commerce's Position paper of the same year.
This question applies to all the situations where the patentee is not the employer of the inventor, which includes many cases of commissioned or joint research.
The Patent Law (Article 8) provides that "With regard to inventions accomplished by two or more organizations or individuals in collaboration, or an inventions accomplished by an organization or individual under entrustment of other organizations or individuals, the right to apply for a patent shall vest in the organizations or individuals that have accomplished the invention either by themselves or in collaboration with others, unless it is otherwise agreed upon. If the application is approved, the applying organization or individuals shall be the patentees".
If the agreement is that the right to apply for a patent shall belong to a party who is not the employer of the inventor, the Patent law, the Implementing Rules and the SIPO Drafts are silent on the important issue: who should pay the remuneration of the inventor.
The Shanghai Guidelines provide a clear explanation in this regard. Whether the inventions has been commissioned or jointly made, the obligation to remunerate the inventor only lies on the employer of the inventor who is granted the patent. Neither the entity that is granted the patent but is not the employer, nor the entity that is the employer but is not granted the patent, is liable to pay remuneration to the inventor.
III. Case law5
Cases are relatively limited. Two specific cases may be mentioned, one is recent 2013, the other is dated 2005 (first instance), and 2008 (appeal).
WENG Like vs. Shanghai EV Fuel Injection Co., Ltd. ("EV Company") and Shanghai Diesel Engine Co., Ltd.("Shanghai Diesel")6 (2005 and 2008)
The Plaintiff, Mr. WENG Like, was a technician in EV Company, a company partly owned by Shanghai Diesel. In the course of his research at EV Company, he obtained some results, and the parent company Shanghai Diesel applied for two utility models in 2001. In 2003, Shanghai Diesel assigned the two utility models to EV Company free of charge. Later on, the utility models were licensed to Shanghai Denso Corporation who paid an initial payment and a royalty fee from 2003 to 2007.
WENG Like brought a lawsuit against the two companies, EV Company and Shanghai Diesel, claiming a remuneration of RMB 2 million.
The court of first instance ordered EV Company to pay RMB 270,000 and such ruling was upheld by the court of appeal.7
This case illustrates two main issues: (1) how to determine which entity is liable for paying the remuneration and (2) what factors should be considered when calculating the remuneration.
1. Which entity is to pay the remuneration?
In this case, Shanghai Diesel, the parent company of EV Company, was the original patentee. WENG Like was employed by EV Company when he made the invention. He sued Shanghai Diesel and EV Company claiming joint liability. The court of first instance noted that, on the one hand, the invention was accomplished when the Plaintiff was employed by EV Company and the patent assignment between Shanghai Diesel and EV Company only concerned the issue of the ownership of the patents, and on the other hand, that the party receiving the royalty through the license was EV Company. So the court decided that EV Company was the only entity liable to pay the remuneration. The court of second instance confirmed the ruling.
It is interesting to analyse this case (2005) in light of the Shanghai guidelines (2013). According to Article 10 of the Shanghai Guidelines, the obligation to pay the remuneration exists only if the employer and the patentee are the same entity. If the case had been judged pursuant to the Guidelines, it might be that none of the two companies - EV Company and Shanghai Diesel – would have been liable to pay the inventor the remuneration. According to their agreement, the research work was commissioned by Shanghai Diesel to EV Company, and the right to apply for the patent belonged to the commissioning party, Shanghai Diesel, who was not the employer. As to EV Company, it was the employer of the inventor, but until the patent was assigned, it was not the patentee.
Whether the assignment would have made a difference, it is difficult to say.
2. How to calculate the remuneration
According to the Implementing Regulations in force at the time (2005), a State Owned Enterprise, which exploits itself, or licenses others to exploit a patent, shall pay remuneration at least equal to the minimum standard defined in the Regulation. The judgement does not say if EV Company was a State Owned Enterprise...But it seems that this was not a factor.
In this case, the patents in question had been invalidated in December 2005, while the plaintiff was claiming remuneration based on the period from the commencement of the licence agreement until April 2007. The court held that the Plaintiff could only claim remuneration for the period before the patents were declared invalid.
The court then assessed that the amount of royalties deriving from the two patents license agreement concerned represented 70 % of the total after tax royalty income of EV Company from its licensing activity. So, in order to calculate the "income derived from the exploitation of the patents", the court applied the royalty rate provided in the license agreement to 70 % of the above mentioned income. Finally, the calculation was further assessed with an estimation of the respective contribution of the two patents to the resulting figure.
LIU Changren v. Roxtec Sealing System Co., Ltd.8
The Plaintiff LIU Changren (hereinafter "LIU") was an employee of the Defendant, Roxtec Sealing System Co., Ltd (hereinafter, "Roxtec"). They entered into a contract, stipulating that the intellectual properties generated by LIU in course of his employment belonged to Roxtec.
In May, 2009, Roxtec on the Liaoning nuclear power plant project. Roxtec engaged in developing modules for fastening sealing cables suitable for the project requirements. It assigned LIU to draft drawings of frames and develop the devices. Later, Roxtec delivered the drawings made by LIU to a third party, Feizhou Group.
Claims and arguments:
In November, 2010, LIU sued Roxtec, demanding Roxtec to pay him a reward and, for the remuneration, an amount of 72 million Rmb based on the huge market value of the patent (Liu estimated that the value of the patent is approximately 300 million Rmb).
With regards to the reward, Roxtec argued that it already paid a bonus to the Plaintiff which included the reward of employment invention. .
With regard to the remuneration, Roxtec argued that did not exploit the patent and that the license to other entity was free of charge.
With regard to the reward, the court of first instance rejected the argument of Roxtec by ruling an amount of 10,000 Rmb to be paid to Liu, which was upheld by the court of second instance.
With regard to the remuneration, the court, considering that the production of the products of the disputed patent had stopped, ordered a remuneration of RMB3,000 to be paid by Roxtec to LIU, which was also upheld by the court of second instance.
1. Could rewards for inventions be included in salaries and bonus?
In this case, Roxtec argued that it paid the Plaintiff an allowance of 3,600 Rmb for his position of R&D Manager. The court held that, though Roxtec paid the allowance, it did not pay a special reward for the patent, and the argument was not accepted.
According to the court, an entity must give separate rewards for patents and cannot argue that the reward is already included in salaries, bonuses and benefits. The entity should keep files and records in respect of payment of special rewards, otherwise they will be deemed as not paid.
2. Whether the remuneration calculation could be based on the anticipated revenue.
During the trial, the LIU argued that the disputed patent had a huge market value and the amount should be calculated as approximately 30% of the value of the disputed patent, but failed to submit evidence and materials to support his claim.
In this regard, the court held that, the remuneration should be based on the actual revenue derived from the patent, rather than the estimated revenue. The court also clarified that the actual revenue may be: (1) the operating profit of the year during which an entity exploits a patent, (2) the available operating profit to be received in the future after an entity exploits a patent, which can be evaluated as a basis for a lump sum of money paid to inventors as, and (3) the royalties an entity has collected from a licensee.
2.The SIPO Draft
As mentioned above, the Draft, or rather the two Drafts, attracted heated debates, and it seems that, for the time being, no date of further publication or proposal can be foreseen. The urgency of the issues seems to have faded.
Indeed, the Draft places the relationship between employers and employees - which are essentially private by nature (except for State Owned Enterprises, of course) - under a strict administrative supervision and control system. This makes industry uncomfortable, all the more so because, according to Article 18, it is specified that any agreement or policy eliminating the right which the inventor is entitled with in accordance with the regulations (i.e the Draft) or imposing unreasonable conditions on the entitlement or exploitation of the above rights are invalid.
Considering the difficulty to define what is "reasonable", it could be feared that even the careful drafting of labour contracts or internal rules cannot guaranty that the statutory provisions might not eventually be imposed on an enterprise.
a) Administrative supervision
The supervisory authorities are SIPO, the Department of Science and Technology and the Department of Human Resources and Social Security department.
b) The definition of "Invention"
The term refers to the achievement of "mental-creation", made within the Territory of the People's Republic of China, and may be protected by a patent, a right of new variety plant, a right of layout design, or know-how.
The reference to know-how, which is protected by secret, is one of the most controversial aspects of the Draft. In the case of technical secret, no patent is granted, and the entire report and remuneration system described by the Draft can hardly apply.
The Draft further specifies that an invention made within one year from the retirement, resignation or otherwise termination of the employment, should be treated as if made during the term of the employment contract.
c) Obligation to establish an invention reporting system and an reward / remuneration system.
According to Article 6.1, the State "encourages" all enterprises and institutions to establish such an IP management system, but it is provided, in Article 6.2 that enterprises and institutions engaging in research and development shall establish an invention reporting system, or reach an agreement with inventors, and in Article 6.3 that they shall establish an reward and remuneration system, or reach an agreement on such issues. Furthermore such system should be established after taking into consideration the opinions of, and disclosed to, relevant persons, a undefined category (insiders or outsiders to the enterprise?) and to the research staff.
It may be noted that, in the Implementing Regulations of the Law, the establishment of such a system, whether in internal company rules or by separate agreement, is only optional. The only consequence of not doing it is the application of the statutory remuneration standards.
d) Reporting system.
Articles 10 to 16 provide for a detailed disclosure mechanism. The main issue is to determine whether an invention made by an employee belongs to the category of "service-invention", or not. Time frame and details of disclosure etc. are specified, as well as what happens when an employee claims that the invention is a non service-invention. how the enterprise may reply, as well as how both parties cooperate for the patent application, the confidentiality obligation regarding thereto, etc.
Regarding the reporting of a non service-invention, it has been suggested that the burden of proof should be borne by the employee, rather than by the employer.
e) Reward and Remuneration
In the absence of agreement or by-laws, the Draft provides for levels of rewards and remunerations that are significantly higher than those already provided in article 78 of the Implementing Regulations of the Patent Law. For rewards, the 3,000 Rmb (patent) and 1,000 Rmb (utility model or design) are replaced by 200 % of the monthly average wages of the workers in the enterprise. For the remuneration, the percentages of 2 % (patent) and 0.2 % (utility model and design) are raised respectively to 5% and 3 %. New varieties of plants and "other intellectual property rights" are to be remunerated at the rate of 0.5 % and 0.3 % respectively. Finally, the 10 % remuneration in case of assignment or license, provided in the Implementing Regulations, is raised to 20 %.
Article 22 of the Draft stipulates that it is necessary to take into account the contribution of each employment invention to the entire product or process, and the contribution into each service invention made by every inventor. This article raised strong objection from several industries, in particular the telecommunication sector, which argued that a single product may contain hundreds of patents, and that it is impossible to calculate the contribution of each patent to the product.
As mentioned above, the Industry is uncomfortable with the administrative and inquisitorial supervision system provided by the Draft.
Article 32 authorizes the supervision and administration departments to inspect and enquire on rewards or remunerations for employee inventions as well as to order a deadline for compliance and punish the defaulting entity.
Articles 36 and 37 provide that an inventor or other organizations or individuals is authorized to report an act of infringement of his right of authorship to a competent intellectual property authority. The inventor is also authorized to bring a suit with a court...
Article 38 provides that when the agreement or bylaws fail to comply with Article 18.1 of the Draft in any of the following circumstances, (i) failure to notify the inventor of its rights and remedies, (ii) failure to sufficiently consider contributions of the invention or the inventor to a product, or (iii) when the agreement is invalidated because it eliminated a right of the employee or imposed unreasonable conditions to it, if the employee suffered a loss, the entity is liable for damages.
The Draft also provides that if the entity fails to pay rewards and remunerations in full, a competent intellectual property authority shall order it to correct and pay damages when any loss was incurred.
It may be noted that the Draft does not address the issue of who should pay, in cases of commissioned or joint research.
Organizing the relationship between an employee inventor and the employer is a delicate matter. In some countries, the position is that the employee researcher is paid to research. If the researcher discovers something that is patentable, the patent belongs to the employer and no additional payment should be made. This position is not adopted everywhere, and in other jurisdiction, it is admitted that some kind of financial stimulation is in the interest of all.
The evolution of the Chinese system is an interesting illustration of the above comment. In the early stages, almost every industrial activity was performed by State Owned Enterprises, and it was logical, for the Government, to regulate the relationship of its own enterprises with its own employees. The open door policy, the development of the private Chinese sector and the development of the foreign invested sector, changed the context dramatically.
The contrast between the Chinese Judiciary – flexible and open - and the Chinese Administration – more rigid - is striking. In the end, it is likely that the judicial view shall eventually prevail. Even in the event, as provided by the Draft, that an agreement would be declared invalid for the above mentioned reasons, it is not certain that a Court would blindly apply the statutory levels of reward or remuneration. It is more likely that the Court would search what is currently done in other enterprises acting in the same field, and would define a "reasonable" remuneration.
The advice that can be given, however, is that enterprises engaged in research and development should definitely draft agreements and/or company regulations, defining in detail the service-invention system in a way that corresponds, in average, to what is done in their field.
1 According to Patent Law of PRC, the term "invention-creation" in the law includes the three categories of patents, namely invention patent, utility model patent and design patent. Such three categories of patents are collectively called "invention-creation".
2 The Patent Law provides three categories of rights concerning a patent in different stages: the right to apply for a patent (after completion of the invention), the right deriving from the patent application (once it is filed), and the patent right, once it is granted.
3 Yin Xintian, Annotations to the Patent Law of the PRC, Intellectual Property Publishing House 2012, Page 73
4 Which, by the way, was significantly higher than what was provided in the Implementing Rules of the Patent Law
5 The term "Case law", should be construed in a civil law country context, where court decisions are not actually binding (like in Common Law countries). However, the court decisions made my Supreme Court or other major Appeal Courts, namely High Courts at provincial level are usually used as persuasive reference to interpret laws.
6 See the civil judgement (2005) HU YI ZHONG MIN WU (ZHI) CHU ZI No. 220, delivered by Shanghai No.1 Intermediate People's Court, and the civil judgement (2008) HU GAO MIN SAN (ZHI) ZHONG ZI No. 23, delivered by Shanghai Higher People's Court.
7 Chinese courts adopt a two-instance trial system, which means that a decision made by the courts of second instance are generally final, unless the related party rarely succeeds in challenging a final decision of second instance in a subsequent re-trial procedure.
8 see Shanghai Higher People's Court Judgement ((2013) HU GAO MIN SAN (ZHI) ZHONG ZI NO.131)