SIPO solicited many opinions on the Employment Invention Regulation, including pros and cons, for its consideration.
Article 4The term "invention" as used in this Regulation means intellectual creative achievements, including the rights to patents, the rights of new plant varieties, the exclusive rights of layout-designs of integrated circuits, or technical secrets, that are accomplished in the territory of China and protected as subject.
Article 24The entity should, when deciding to protect an employment invention as a technical secret, make reasonable compensation to the inventor according to the provisions of this chapter and by reference to the contribution made by the technical secret to the economic efficiency of the entity.
Pros:A technology can be protected by way of applying for a patent or keeping it as a trade secret. Generally speaking, it is the core technology of the entity when it is protected as a trade secret. If the entity decides to apply for a patent, the relevant provisions concerning the right of employee inventor to authorship and to reward and remuneration shall be abided by. If the entity decides to protect it as a trade secret, there will be no way to realize the foresaid rights. One thing should be mentioned is that the entity has the sole say on whether an employment invention should be protected as patent or trade secret. Therefore, there should be a similar solution to trade secret, patent, and other technical achievements in terms of employment invention so that the rights and interests of the inventor of trade secrets can be protected by law.
Cons:There should be no inclusion of trade secret in the Regulation because trade secret is different from patents, new plant varieties and other technical achievements in feature, including requirement of no examination and registration, and containment of large quantities of technical information, experimental data etc. that constitute no technical solution. Therefore, it will generate more disputes because there is no way to operate if technical secrets are included in the Regulation for adjustment. It is in practice that the employee will be rewarded in his salary if he makes a technical secret, which requires no special stipulation in the Regulation. Some experts also suggest a clear definition should be included in the Regulation that the technical secret is a kind of technical secrets to which a right to patent may be granted.
Article 5The term “inventor” as used in this Regulation means any person who makes creative contributions to the substantive features of an invention.
Any person who, during the course of accomplishing the invention, is responsible only for organizational work, or who only offers facilities for making use of material and technical means, or who only takes part in other auxiliary functions, shall not be considered as inventor or creator.
Pros:The right to authorship is the most basic rights for the inventor. There should be resolute oppositions against academic fraud and scientific and research fraud, and no person shall be entitled to have his name mentioned as the author in connection with the invention if he makes no creative contribution to the invention. Similar provisions can be found in Article 13 of Implementing Regulations of the Patent Law of The People's Republic of China. For example, the person in charge of material collection and retrieval, equipment purchase etc., should not be considered as the inventor because they make no creative contributions to the substantive features of the invention although they make somewhat contributions to the accomplishment of the invention. There are also opinions and suggestions that the provisions under U.S. patent law may be a reference for China, according to which the patent shall be declared invalid due to unreal authorship in connection with the invention.
Cons:There should be a strict provision on the right of authorship and the inventor should enjoy such right. However, this does not mean that a person has no way to have his name mentioned as the author in connection with the work if he makes no creative contributions. It is necessary in practice for a project to have the leader’s approval for initiation and it will be difficult to be accomplished without support from the leader. Therefore, the leader makes somewhat contributions to the invention and his name is usually mentioned as the author. A suggestion was put forward that there may be a provision that these people cannot be placed before the actual inventor in terms of authorship.
Article 7 (4)The following inventions shall be deemed as employment invention: the inventions that are mainly accomplished by exploitation of the material and technical means of the entity, including the entity’s money, equipment, spare parts, raw materials or technical materials etc. which are not disclosed to the public, except for agreement on which the capital should be refunded, royalties paid, or the material and technical means of the entity used for a mere verification or testing of the invention after its being accomplished.
Pros:The instruments, equipment etc. for verification or testing belong to the entity and it is a general requirement that the inventor should be approved by the entity before his use of them for verification or testing. In practice, the entity may reach an agreement with the inventor on his rights and obligations for a mere verification or testing of the invention through the material and technical means of the entity. If there is no such agreement, the invention shall not be considered an employment invention because it is accomplished before verification or testing. The same provision can be found in a judicial interpretation released by China’s Supreme People’s Court.
An agreement in this regard may be reached and concluded between the entity and the inventor after the accomplishment of the invention according to the principle of autonomy of civil law.
Cons:It is difficult to determine what is a mere verification or testing of the invention through the material and technical means of the entity in practice because it is difficult to determine the time of accomplishment and to determine to what extent the material and technical means of the entity is used. Furthermore, it will be unfair for the entity under such circumstance if the invention is considered as non-employment invention under a naive application of the so-called “verification or testing of the invention through the material and technical means of the entity” because the inventor makes such an accomplishment on the basis of his huge working experience at the entity from the perspective of the accomplishing and producing process.
Another proposal suggested is to reach an agreement prior to such use.
Article 12Where the inventor claims that the invention he reports is not an employment invention, the entity shall make a written response within two months from the date on which it receives the report in line with the provisions of Article 11 of the Regulation; where such response is not made within the said period, it shall be considered as a consent to the inventor’s claim. Where the entity and the inventor have entered into a contract in which the said period is provided, such provisions shall apply.
The entity shall enumerate its reasons in the written response for its claim that the reported non-employment invention is an employment invention.
The inventor shall submit his objection against the written response within two months from the date on which he receives the response. Both parties may settle the dispute according to the provisions of Article 40 of Regulation.; if no objection is raised by the inventor, he shall be deemed to have consented to the opinion of the entity.
Pros:Where the inventor claims that the invention he reports is not an employment invention, the entity shall, within a certain period of time from the date on which it receives the report, submit its objection or make an express or implied response. If no response is made, the entity shall be deemed to have made an implied recognizance. Under such circumstance, the entity shall not suffer from loss of or change of substantial rights because it enjoys no rights to such invention or claims for no relevant rights. Without such provision, the inventor shall suffer undue loss from the entity’s failure to response to the report submitted by the inventor.
In fact, the report system of the invention imposes additional obligations to the inventor in terms of non-employment invention report, which shall not influence his full rights to the non-employment invention accomplished by him, including the right to apply for intellectual rights and etc. Where there is a provision that the inventor has obligations to make a report of non-employment invention to the entity, there should also be provisions for the corresponding obligations of the entity, namely, an obligation to submit its opinion on the ownership of the right to the invention and inform the inventor as soon as possible in order to protect the inventor’s rights. Therefore, neither a too long period for the entity to response nor a changeable and difficult operated reasonable period should be set.
Cons:It is a mere procedural defect for the entity’s failure to response in a certain period and substantive rights should not be deprived due to the procedural defect. The identification of invention is a complicated process and it will consume a lot of resources if the employee is required to submit a number of reports. Furthermore, the period of two months for response is too hasty and the entity will have to bear a heavy burden as a result. It is suggested to set a longer period for response.
Article 15 (1)Where the entity intends to stop the application procedure for IP rights or abandon the IP rights to the employment invention, the inventor shall be informed of such information one month in advance. The inventor may, through negotiation with the entity, obtain the right to apply for the IP rights, and the entity shall actively assist him in rights transferring procedures.
Pros:The reason for the requirement that the entity shall notify the inventor in advance is that there should be enough time for the inventor to go through the procedures for transfer etc. For example, it is always required to submit an application for change of rights to patents, the rights of new plant varieties, the exclusive rights of layout-designs of integrated circuits and for the changes of the rights to apply for the foregoing rights to authority in charge of patent grant or registration and go through some legal procedures. It will be impossible to go through the procedure for rights transfer in the event of a procedural stop to apply for IP rights or an abandonment of IP right.
In some cases, the invention may be still useful even if the entity decides to abandon the IP right to it. If so, the inventor’s right to get reward and remuneration would come to noting, not to mention the value of his labor attached to the invention. Therefore, some rights should be conferred to the inventor under such circumstance in order to balance the interests between the entity and the inventor. The provision under this article will thus be conducive to the promotion of IP rights implementation and protection of the inventor’s rights.
Cons:It is impossible to notify the inventor one month in advance. If the entity decides to abandon an application because of no prospect of a patent to be granted and other reasons, there may be only several days left for such notification. Therefore, it will be very difficult to operate in practice. Meanwhile, the entity enjoys complete rights, including the right to dispose of the invention, to the employment invention, and it should bear no overdue obligations as a result. Moreover, the entity may be worried about the risk from its transfer of the invention to the inventor, which means that the inventor may conduct a competition with the entity by way of starting all over again somewhere else, or bring a lawsuit against the clients of the entity etc. If so, a hindrance may stand in the way of the development of the industry.
Article 18 (2)Any agreement or provision shall be invalid if, according to which, the right that the inventor shall enjoy under this Regulation is rescinded or unreasonable conditions are set for the inventor’s enjoyment or exercise of the foresaid rights.
Pros:In order to fully respect the autonomy of the parties, the draft stipulates that the agreement shall prevail in terms of right ownership, reward and remuneration, namely, the agreement shall be enforced at first where such an agreement is lawfully reached and concluded between the parties. However, it will be a common phenomenon that the inventor has no access to the interests due to him according to the mere agreement because the entity is in an advantageous position in the negotiation. Therefore, there should be some limitations on the entity to prevent it from depriving or restricting the inventor of rights by agreement in disguised forms.
Cons:The principle that the agreement shall prevail is repealed by this article in fact. Furthermore, the meaning of “unreasonable conditions” is far from being clear and certain, of which different people may have different interpretations. It may lead to a huge uncertainty of the agreement between the inventor and entity and of rules and regulations formulated by the entity. It may be easier for disputes to emerge and the entity will have much pressure to tackle with.
Article 19 (2)Where the entity obtains economic benefits from its own exploitation of, transfer of, or license of other’s exploitation of the employment invention, the inventor has the rights to know the information related to the economic benefits the entity obtains.
Pros:In calculating the remuneration the inventor deserves, the entity is completely on its own initiative, the inventor has no mastery of the financial conditions of the entity, some entities intentionally minimize the amount of profits from the employment invention in order to reduce the amount that the inventor deserves, or even change the profits into a zero number to refuse to pay the due remuneration to the inventor. Therefore, there should be a legislative right for the inventor to know the benefits gaining of the entity from its exploitation of the employment invention.
Cons:It is in fact impossible to operate to require the entity to inform the inventor of the economic benefits from its exploitation of the employment invention because one product may contain hundreds or thousands of patents and one patent may be applied to many products. Therefore, it is very difficult to assess the value of a patent. Furthermore, the economic benefits not only come from the patents, but also from many factors, including marketing and promotion, which makes it difficult to separate the value of patent from that of others. In addition, the licensed prices and financial books and etc. are the core business secrets of the entity and they are not accessible to the inventor. Last but not least, there are strict provisions for listed enterprises on the release of relevant information, making it impossible to fulfill the foresaid obligations.
Article 21 (3)Where the entity has not entered into a contract with the inventor on the manner and amount of the remuneration, nor has the entity provided it in its rules and regulations in accordance with the laws, it shall draw from the net profits from its transfer of or license for other party to exploit the IP rights a percentage of not less than 20% and award it to the inventor as remuneration.
Pros:Someone is willing to buy an employment invention because of its value, whereas the labor’s value is the major component of the whole value. It is reasonable to draw from the net profits from its transfer of or license for other party to exploit the IP rights a percentage of not less than 20% and award it to the inventor as remuneration. There are similar provisions under other laws, and higher percentages are paid by many enterprises in practice.
In addition, the enterprise may conduct frequent cross-licensing or related transactions for the purpose of business. Under such circumstance, the interests of the inventor will be damaged if the actual licensing or transferring price is used for the calculation of the remuneration to the inventor. Therefore, there should be a stipulation included in the Regulation that the remuneration to the inventor shall be calculated according to the normal market price.
Cons:The percentage of 20% is too high because a high price for license or transfer may not come from the high value of the invention, whereas business operation and other factors may make contributions to the high value.
Article 22The entity shall, in determination of the remuneration, take into consideration the contribution made by every employment invention to the whole economic benefits of the product or process, and the contribution made by every inventor to every employment invention and other factors.
Pros:In order to achieve a fair and reasonable calculation of remuneration, there should be a consideration of the contribution ratio of each employment invention and every inventor or an overall embodiment of the principle at least even if it is impossible to have an accurate calculation.
In addition, it is recommended to establish a pricing system for the invention, which serves as the basis for the calculation of reward and remuneration. It is also suggested that the data open to the public should be the basis for the said calculation.
Cons:Given the complexity of the current trends in research activities, an invention is often used in many products, and a product also includes a number of inventions, which makes it difficult for the enterprise to have an accurate calculation of due remuneration for each patent. Furthermore, it is rather difficult to determine who the inventor is because the current scientific research activities are featured by team-oriented tendency. Meanwhile, it is very difficult to ascertain the major or minor role in accomplishment and contribution where there are many inventors included, not to mention the more difficult operation of interest distribution.
Article 29The benefits from the entity’s exploitation of the employment invention and reward & remuneration the inventor obtains from IP rights shall enjoy preferential taxation policies according to China’s relevant provisions.
Pros:Preferential taxation policies are very useful to motivate the enthusiasm of R&D personnel.
Cons:Specific law should not stipulate concrete taxation policy in order to safeguard the unity and integrity of China’s tax law.
(Translated by Yuan Renhui)
