Rights to Research Results in China – Agreements are often possible

(IPRinfo 2/2010)
Liguo Zhang, LL.M., Researcher
University of Helsinki, INNOCENT graduate school

The Chinese legal system resembles the civil law system in Europe. The General Principles of Civil Law (1986) govern the general issues regarding any civil activities, including contract, property, patent, trademark, copyrights and tort.

Certain special civil legislative instruments were drafted to specify these rules, such as the Patent Law (1984), the Copyright Law (1990), the Trademark Law (1988), the Contract Law (1999), the Property Law (2005).

The ownership of the research results and the assignment of and licensing of IPR are covered by those laws whereas business secrets are stipulated for in the Unfair Competition Law.

The Chinese Patent Law was first enacted in 1984, the latest amendments being from 2008. A patent can be granted for an invention, utility model and design. In this article, only the invention patent is covered.

The laws stipulate the ownership of patent and other IPRs, but some of them can be got around by agreement between parties. An agreement concluded in advance on the ownership of IPRs arising from joint research activities may avoid, or at least minimize disputes.

The content of a technology contract is determined by the parties. Furthermore, in China, a contract can be in writing, oral or involve other formalities. Still, some laws and regulations may specifically require approval or registration of some kind of contract.

Inventions completed at work belong to the employer
”Inventor” is the person who has made a creative contribution to the substantial features of an invention. In China, inventors can only be natural persons and they have the right to be named as such in patent documents.

”Employment invention” is one made by the employee while performing a task assigned by his employer. It can also be made by the employee primarily using the employer’s facilities and technological resources such as funding, devices, spare parts, materials and undisclosed technical documents.

In such cases, the right to apply for patents – the patent right, if approved – remains with the employer. The employer is required to award the employee inventors of reasonable remuneration. There are situations where an employee making an invention (not assigned by the employer) needs also his employer’s material and technological resources to accomplish it. In such cases the ownership and the rights to the invention can be agreed on between the parties. However, if the employer and employee have agreed otherwise, the agreement applies.

Employment inventions not only comprise the inventions completed by the employee in the course of performing his normal duties but also those completed while performing any task specifically assigned to him by the employer – even outside his normal duties – or those completed within one year of his resignation, retirement, or change of job, when it is relevant to his tasks with the previous employer.

When an invention is created jointly by several individuals or entities, the right to apply for patents belongs to the creators, unless otherwise agreed upon. The same rule applies to commissioned research.

Unless otherwise agreed, each joint owner is entitled to exercise the patent respectively, or to grant non-exclusive license to exercise the patent. The royalties must be allocated among all joint owners. Other activities involved in exercising the joint patent must be agreed by all joint patent owners.

The copyright to a work remains with the employee
The copyrights in a work created to carry out the job assigned by the employer remain with the author. The employer, however, has priority over exploiting the work. Moreover, within two years after the work is finished, the author is not allowed, without the employer’s permission, to license the work to others to exploit in the same as the employer does.

However, copyrights automatically remain with the employer in certain type of works: engineering designs, product designs, maps, software that the employer takes responsibility for, and that are completed on the employer’s facilities, the. The author only has the right of authorship.

In addition, if the parties of a commissioned work have not agreed on the ownership of copyrights, the rights belong to the author(s), not the commissioner.

The copyrights in a work created by several authors remain with the co-authors. If the parts of a joint work can be exploited separately, each author owns copyrights to his contribution.

If the work cannot be separated, the exploitation should be agreed on by all the co-authors. If they cannot reach an agreement, one author must not prevent others from exploiting the work. The profit resulting from such exploitation should be allocated reasonably among all the co-authors.

Some universities have published rules that stipulate the ownership and application procedure regarding the research results produced at the universities.

These internal rules are valid only when they are not in conflict with the national law. Typically, these rules reiterate the provisions of national laws and specify the administrative procedures at the university.

The Chinese higher education institutions enjoy legal personality, which makes them competent to sign a contract. However, departments or faculties of a university can only sign a contract if they get the authorization from the university, which will also be responsible for the enforcement of the contract.

Restrictions in cross-border IPR
China has signed the Berne Convention and WIPO agreements WCT and WPPT and joined the WTO and thus TRIPS. Then works of most foreigners working in China are covered by these. If an author comes outside the scope of those agreements, his copyrights are protected according to an agreement concluded between his and the Chinese Government.

If the owner of an invention which has been completed in China wants to first file a patent application abroad, the owner should file an application for confidential review with the SIPO (State Intellectual Property Office) in advance. If the applicant fails to do so, the invention will be denied the granting of the patent in China.

Assignment of patents or the right to apply for a patent to a foreigner by a Chinese entity or individual, has to follow procedures laid down in the relevant legislations. In the Administrative Regulations on Technologies Exportation and Importation (2001), technologies are classified into three categories: export prohibited, export restricted and export free.

To assign or license export-restricted technologies out China, approval is needed. In the case of export-free technologies, the assignment contract or the license contract should be registered with a competent authority.

IPR disputes can be solved in arbitration or litigation
In the event of a dispute, the burden of proof is usually on the plaintiff. In certain exceptional circumstances, a defendant may have to prove its non-obligation, for example in the case of infringement of a process patent.

Parties to a contract involving foreign elements may choose the applied law regarding the disputes. Where parties do not make the choice, the laws of the country that are in the most significant relationship with the contract apply. Thus, if joint research activities take place in China, the court may assume the Chinese laws is the most significant relationship with the contract.

The parties may choose arbitration or litigation to resolve disputes resulting from the contract. As for litigation, they can choose which court of different alternatives is competent to hear cases.

Joint projects with foreign partners are encouraged
The Chinese authorities encourage Chinese and foreigners to enter into joint research activities. It is important that the joint research parties enter into a contract to define rights and obligations regarding allocation of research results in advance.
Before starting a research project, foreign researchers should also check how the internal rules of a university or a research institution (the Chinese partner) apply to them and how these rules may be excluded by agreement.

Also, a foreign partner wishing to exploit research results out of China should check before commencing a research project whether the target research result belongs to a category in which the technologies are exportable according to relevant Chinese law.

This text is an abridged version. The entire article by Liguo Zhang ”The Rights in Research Results” has been published in the TEKES publication ”Technology Transfer of Research Results Protected by Intellectual Property: Finland and China” by Rainer Oesch (ed.), Olli Kotila and Liguo Zhang. Tekes Review 259/2009, Helsinki 2009. ISBN 978-952-457-483-9.

The article by Liguo Zhang about Chinese Patent law and its latest amendments (2008) was published in IPRinfo 2/2009.

Rainer Oesch (ed.), Olli Kotila, Liguo Zhang: Technology Transfer of Research Results Protected by Intellectual Property: Finland and China. Tekes Review 259/2009. ISBN 978-952-457-483-9
Available on the web site of TEKES:
http://www.tekes.fi/fi/community/Julkaisut ja uutiskirjeet/333/Julkaisut/1367