Individual Inventor Rights In China
and “Service" Inventions
By
C. Frederick Koenig III
Volpe and Koenig, PC
30 South 17th Street
Philadelphia | Pa 19103-4009
215.568.6400 | vklaw.com
“Service” Inventions
In China, inventions made
within the scope of employment
are denominated as
“Service” inventions
The Basic Inventor Right
Upon creation of an invention,
an inventor has the right to apply for a patent
(or to keep it as a trade secret).
• The right can be lost through disclosure.
• The right can be perfected for a limited patent
monopoly by complying with the laws of the
jurisdiction where patent protection is sought.
U.S. “Service” Inventions
• The right to apply is fully assignable to an employer with
employment as full consideration for employee made
inventions.
• Inventions made outside the scope of employment, i.e.
not reasonably related to an employee’s duties, are
generally owned by the individual inventor.
• Inventors are always actual people. AIA provided
specific definitions for “inventors” as individuals, i.e. not
legal entities in new 35 U.S.C.§§100(f),(g).
• Copyright “authors” are different; an employer is the
“author” of works made within the scope of employment.
17 U.S.C. §§101, 201(b).
Non-U.S. Inventor
Compensation Policies
• Germany, Japan, South Korea and
China, all provide individuals with rights
to receive rewards and/or remuneration
for inventions, beyond regular
compensation for employment.
• National goal to provide added
incentives to individuals to be creative
and to work towards advances in
technology
Inventor Compensation Policy
Comparison
• U.S.: Synthetic Diamonds ~ 1954
– Tracy Hall, the inventor of synthetic diamond was employed
at the General Electric Research Laboratory.
– The invention spawned a multibillion-dollar industry.
– GE made a discretionary award to Mr. Hall of a $10 bond.
• Non-U.S.: Blue Laser Diode ~ 1993
– Shuji Nakamura, the inventor of a mass producible blue
LED, was employed by Nichia Corporation and was awarded
a bonus of ¥20,000 (~US$180).
– Nicha Corporation sales of about ¥1.2 trillion ($11 Billion).
– Nakamura sued and won an award for ¥20 billion but
eventually settled an appeal in 2005 for ¥840 million (~US$9
million).
China Inventor
Compensation Policy
Human talents are the most significant resource for
the development of Chinese economy and society.
China's Medium- and Long-Term Talent
Development Plan (2010–2020)
•Articles 29 and 30 of the Law of the People's Republic
of China on Promoting the Transformation of Scientific
and Technological Achievements.
•Article 16 of Chinese Patent Law and Rules 76-78
Current China Law
and Practice
Article 16 of the Chinese Patent Law provides:
• The Entity that is granted the patent right shall award
to the inventor or creator of a service inventioncreation:
– a reward and
– appropriate remuneration, upon the exploitation
of the patented invention-creation, based on the
extent of the exploitation and application and the
economic benefits yielded.
Current China Law
and Practice
Employers can establish their own policies,
but within limits.
• Implementing Rule 76 provides:
– The entity to which a patent right is granted may, on the manner
and amount of reward and remuneration as prescribed in Article 16
of the Patent Law, enter into a contract with the inventor or creator,
or provide it in its internal rules formulated according to the laws.
• Implementing Rule 77-78 provide minimum standards.
Current China Law
and Practice
Rule 77 provides for minimum
fixed “rewards” of about
– $480 for a utility patent and
– $160 for design and utility model patents
Where the entity to which a patent right is granted has not
entered into a contract with the inventor or creator on the
manner and amount of the reward as prescribed in Article 16 of
the Patent Law, nor has the entity provided in its rules, it shall
within three months from the date of the announcement of the
grant of the patent right, award to the inventor or creator of a
service invention-creation a sum of money as prize. The sum of
money prize for a patent for invention shall not be less than
RMB 3,000 Yuan (~$480US); the sum of money prize for a
patent for utility model or design shall not be less than RMB
1,000 Yuan (~$160US).
Current China Law
and Practice
Rule 78 provides minimum remuneration” of:
– 2% of profits from employer’s exploitation of
invention or utility model patents, and
– 0.2% of profits from employer’s exploitation of
design patents
or
– A lump sum “making reference to” the above
percentages
– 10% of licensing revenue
Current China Law
and Practice
Sample Reward and Remuneration Agreement
• Acknowledge that XXXXXXXXXXXXX grants invention
disclosure awards, patent filing awards, and/or patent issuance
awards to inventors;
• Acknowledge the above award(s) received or will receive in lieu
of any reward and/or remuneration pursuant to Rules 77 and 78
any other PRC rules and/or regulations.
• Release XXXXXXXXXX from all claims which may relate to any
reward or remuneration, for the above invention disclosure,
pursuant to PRC Rules 77 and 78 or any other PRC rules and/or
regulations.
Employment Handbook and/or Award Committee
Current China Law
and Practice
Zhu v. Viper
• Zhu, an engineering department manager, was an
inventor of patents issued to Viper, but not paid any extra
for his inventing activity.
• After leaving Viper, Zhu sued for remuneration for seven
design patents that covered designs of Viper’s products.
• Zhu was one of four inventors and relied on Viper’s
Annual Reports to establish Viper’s profits attributable to
the patented designs.
• As remuneration Zhu was awarded 1/4 of 0.2% of the
profits, namely RMB 101,829 Yuan (~$16,500US).
• Viper had paid Zhu RMB 100,000 Yuan when Zhu had
left Viper’s employ, but was unable to document that it
was paid as “remuneration” for the exploitation of the
patents as Viper had contended.
Current China Law
and Practice
Pan v. Shenzhen Company
• Pan was inventor on patents issued in 2004 and 2007,
but had been paid no reward or remuneration by his
employer Shenzhen.
• Shenzhen licensed the patents to its associated
enterprise, Yunnan Science Valley Co., Ltd (“Yunnan”).
• Pan filed a lawsuit against Shenzhen in 2011 seeking
reward and remuneration totaling RMB 20 million.
• Pan was denied any “reward” payment, since he waited
to long to assert claims for the reward that should have
been paid within three months of the patents respective
issue dates, per Rule 77.
• Pan was awarded 1 million RMB (~$160,000US) based
on the exploitation of the patents by Yunnan, not
licensing revenue, since Shenzhen and Yunnan were
related companies.
Proposed New China
Rules and Regulations
In November 2012, China’s State Intellectual
Property Office (SIPO) disseminated new
proposed regulations with respect to Service
Inventions for comment.
Proposed New China
Rules and Regulations
Under proposed Article 21, the Rule 77
minimum rewards of:
– RMB 3,000 Yuan (~$480US) for utility patents and
– RMB 1,000 Yuan (~$160US) for utility model or
design patents
are changed to:
– 200% of the monthly average wage of the employer’s
employees for new varieties of plants, and
– the monthly average wages of the employer’s
employees for all other granted other intellectual
property rights.
Proposed New China
Rules and Regulations
Under proposed Article 22, the Rule 78 minimum
remuneration of:
– 2% of profits from exploitation of invention or utility model patents
and
– 0.2% of profits from exploitation of design patents
are changed to:
– 5% of profits for exploiting patents for new plant varieties, and
– 3% of profits for exploiting other intellectual property rights;
or
– 0.5% of revenue for exploiting patents for new plant varieties and
– 0.3% from the revenue of exploiting the other intellectual property
right;
or
– with references the amount of the first two items, a reasonable
multiple of the personal salary of the inventor or a lump sum
amount.
Proposed New China
Rules and Regulations
Under Proposed Article 22, remuneration in the
Zhu Ruizhen design patent case of:
– RMB 101,829 Yuan (~$16,500US) based 0.2% of
profits
would be
– RMB 1,527,435 Yuan (~$247,500US) based on 3% of
the profits for each of four inventors
Proposed New China
Rules and Regulations
• Proposed Article 22 further increases the
Rule 78 minimum remuneration for
licensing from 10% to 20%.
• Additionally, proposed Article 25
introduces remuneration for exploitation of
technical secrets and Article 29 specifies a
right of first refusal to an inventor where
the employer intends to assign intellectual
property rights.
Proposed New China
Rules and Regulations
The proposed regulations specify significant
record keeping and reporting requirement as
well as government oversight, including:
– Requirements relating to the procedures for reporting
inventions and responding to inventors (Articles 6 and
12-14);
– Authorizing governmental to examine the work
contracts, entity policy, etc., relevant to service
inventions (Article 34).
Practice Points Re
Service Inventions In China
• U.S. Practice is not analogous –
– U.S. citizens enjoy many Constitutionally
protected inalienable rights. However,
inventor rights are fully alienable.
• Think Chinese:
– Consider the CN policy of promoting
innovation through the individual
– Consider whether this is amplified by
workers rights under Communism
Practice Points Re
Service Inventions In China
• Consider budgeting:
– Inventor rewards as a general cost of R & D expenses
– Inventor remuneration as a general cost of production, sales
and licensing
• Document, Document, Document
– Specify employer policy for service inventions in employer’s
standard Handbook or IP Agreement with the employee
– Review/Revise employer policy upon the issuance of new
Regulations
– Indentify reward and remuneration compensation when
provided
– Apportion/track revenues and profits to specific IP
Thank You
JUNE 3, 2013
Symposium with SIPO
Cardozo School of Law - NYC
NYIPLA.ORG
Volpe and Koenig, PC
30 South 17th Street
Philadelphia | Pa 19103-4009
215.568.6400 | vklaw.com