Inventions have become a driving force for the development of a nation and the whole world; the number of service inventions and patents granted and the respective exploitation rate is a primary standard for judging the innovative capacity of a country. The National Intellectual Property Strategy of the People's Republic of China has explicitly undertaken to "improve the service invention system and establish a profit distribution mechanism that will both stimulate the enthusiasm for innovation of the service inventors and promote the exploitation of the patented technologies".
Legal provisions
Article 6(1) of the Chinese Patent Law (2010) prescribes that: "an invention, made by a person in execution of the tasks of the entity to which he belongs, or made by him mainly by using the material and technical means of the entity is a service invention", wherein the "entity to which he belongs" includes the temporary entity to which a person belongs. This means that there are two types of service invention depending on the way they are made.
The first is the invention made by an inventor in execution of the assignments of the entity to which he belongs. Rule 12(1) of the Implementing Regulations of the Chinese Patent Law contains a further provision that "a service invention made by a person in execution of the tasks of the entity to which he belongs referred to in Article 6 of the Patent Law means any invention made: in the course of performing his duty; in execution of any task, other than his duty, which was assigned to him by the entity to which he belongs; within one year of his resignation, retirement or change of work, where the invention relates to his duty or the other task assigned to him by the entity to which he previously belongs."
The second is the invention made by an inventor mainly by using the material and technical means of the entity to which he belongs, where the material and technical means refer to the entity's money, equipment, spare parts, raw materials or technical materials which are not disclosed to the public.
Ownership
There are primarily two models of ownership of the original right relating to a service invention. The first is the inventor first principle adopted by countries such as Japan and the US, where the right of a service invention is firstly owned by the employee and the employer may obtain the right through contract or company rules. The other is the employer first principle where an invention made by an employee is directly owned by the employer. Article 6 of the Chinese Patent Law prescribes that: "for a service invention, the right to apply for a patent belongs to the entity. After the application is approved, the entity shall be the patentee". In China the second model is adopted, under which the patent right of a service invention is owned by the entity to which the inventor belongs. Both inventions made by a person performing the tasks of the entity to which he belongs and inventions made by him mainly by using the material and technical means of the entity constitute service inventions.
In the case of an invention made by an inventor, mainly or not mainly, using the material and technical means of the entity to which he belongs, Chinese Patent Law prescribes that the entity and the inventor may conclude a contract as to ownership of the invention.
The scope of service invention in China is broader than that in countries such as Japan and the US, where the principle of inventor first is in force. The proportion of service invention patent applications in the total amount of patent applications in China is lower than in these countries. In developed countries, the number of service invention patent applications filed makes up approximately 95% of the total amount of patent applications, while in China, according to State Intellectual Property Office statistics, before 2007, the number of service invention patent applications accounted for less than 50% of the total amount of the three types of domestic patent applications. From April 1985 to February 2006, the proportion was 36.9%. In 2008, patent applications for service inventions amounted to 364,000, which accounted for 50.7% of the total amount of the three types of domestic patent applications and exceeded the number of patent applications for non-service inventions for the first time. In 2010, the number rose to 659,000 and accounted for 59.4% of total domestic applications. At the end of 2011, the total number of service inventions patent applications in China was 324,224, accounting for 83.1% of total domestic patent applications.
Although the proportion of service invention patent applications has continuously increased in China, it is still lower than that in developed countries. This shows that the patent right ownership system relating to service inventions in China is still defective for the following reasons.
Firstly, relevant concepts fail to be defined clearly. The definitions for the concepts "the entity to which he belongs", "in execution of the tasks of the entity to which he belongs", "mainly by using the material and technical means of the entity", "his own duty" and "any task, other than his own duty, which was entrusted to him by the entity to which he belongs" are not clear; neither the inventors nor the entities can grasp the exact meaning in actual practice.
The service invention also has an overly broad scope. The employer first principle is not conducive to stimulating enthusiasm for innovation by inventors or the subsequent patent exploitation and improvement. Patent exploitation in China shows that the Patent Law does not achieve its expected effect of enhancing service inventions by adopting the employer-first principle.
The low rewards for the service inventors, as well as the difficulty in calculating the business profits created by an invention, result not only in inventors not being reasonably rewarded, but legal provisions also not being properly implemented. This fails to represent the economic values of different inventions and discourages inventors' enthusiasm for innovation.
In addition, Chinese Patent Law and other relevant laws fail to provide a perfect mechanism to properly protect the interests of service inventors. Chinese Patent Law does not provide a mechanism for restricting the entity by the service inventors and as a result, service inventors are not in equal positions with regard to rewards and the exploitation of an invention with the entity. Some entities frequently infringe the interests of service inventors by relying on their superior status and it is difficult for the latter to protect their interests and seek remedies.
The ownership system of service inventions in China overemphasises the interests of the entity while caring less about the interests of service inventors. As a result, interests are divided unequally and thousands of patent applications that should be applied for in the name of the entity are applied for in the name of the individual as non-service inventions by the service inventors. Moreover, service inventors or others are motivated to change service inventions to non-service inventions due to problems in the property right management mechanism of the entity. In practice, a number of service inventions are filed under the name of the owner of the entity or the inventor rather than the entity itself. All these lead to potential disputes on patent ownership and are also adverse to the exploitation of patents.
The exploitation problem
Among the top 100 patent applicants in China in 2011, universities and research institutes accounted for over 60% while Chinese domestic enterprises accounted for only 15%. Among the service inventions of the universities and research institutes, many serve as no more than the basis for professional title and reward assessment and are never exploited, meaning they fail to recover their costs or produce economic benefit. Some domestic enterprises file patent applications just to obtain government awards, funds or financing cooperation, rather than to protect their inventions and improve their competitiveness.
The reason is that the rights of service inventions are directly owned by entities, which totally control the disposition, benefit and transfer of the inventions while the inventors do not have the right to know if, when or how his or her invention is being exploited. In actual practice, some entities, in order to avoid paying rewards to inventors, even abandon the patent applications or the granted patents, do not exploit the patents or randomly license or transfer the patents; this not only wastes resources but also discourages the inventors.
Rule 86 of the amended draft of the Implementing Regulations of the Chinese Patent Law published in 2008 for public opinion prescribes that: "where the state owned research institutes and tertiary institutions fail to exploit the patent thereof within three years from the date of the announcement of the grant of the patent right, the inventor may exploit the patent by himself or permit others to exploit the patent through non-exclusive licence". This provision is intended to encourage inventors to exploit a patent when it is not exploited by the relevant entity and is helpful for the protection of the interests of inventors. Hong Kong also has similar provisions. Regrettably however, this provision was not added to the final version of the Implementing Regulations of the Chinese Patent Law.
As the knowledge-based economy presents increasingly severe challenges for China, the quantity and quality of service inventions plays an increasing role in determining whether China can prevail in the fierce global economic competition. The ownership system of service inventions in Chinese laws no longer meets the requirement of technological innovation and economic development in China, and needs to be improved so as to encourage the initiatives of service inventors and entities to invent and exploit inventions.
| William Wenquan Yang |
William Wenquan Yang is a partner and an attorney-at-law of Panawell & Partners. He received his BA in British and American Literature from Sichuan Normal University in 1988 and his LLB in IP law from the Law School of Renmin University of China in 1990. Yang served the Ministry of Supervision of the People’s Republic of China from 1990 to 1995. From 1996, he worked with China Patent Agent (HK) as an attorney and deputy director of the legal affairs department. He joined Panawell & Partners in January 2007.
Yang has broad experience in IPR licensing and assignment, IP Customs protection, unfair competition, anti-counterfeiting and anti-piracy, IP litigation, computer and copyright registration, domain name registration and dispute resolution, domestic and international trade mark clearance and prosecution for domestic and international clients. In addition, Yang has handled a wide range of complex infringement litigation, both at trial and on appeal.
Yang received training from US firms on patent transaction and litigation. He is a frequent speaker at local and international IP seminars and is a member of the Chinese Group of AIPPI, LES China and China Copyright Association. His working languages include Chinese, English and French.
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| Juany Zhijuan Huang |
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Huang is an attorney-at-law at Panawell & Partners. She received her BA of Arts in English and LLB from Southwest University of Political Science and Law in 2005 and joined Panawell & Partners in 2008. Huang has extensive experience in IP counselling, patent litigation, patent search, trade mark anti-counterfeiting and litigation, copyright registration and protection, domain name registration and dispute resolution, IP licensing and assignment and Customs protection. Her working languages include Chinese and English.
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