1. Assignment of right to apply for patent or patent right to foreigners, foreign enterprises or any other foreign organizations

Article 10.2 of New Patent Law provides that any Chinese entity or individual that seeks to transfer the right to apply for patent or any patent right to a foreigner, foreign enterprise or any other foreign organization shall go through appropriate formalities in accordance with relevant laws or administrative regulations.

Article 10 of current Patent Law is: if a Chinese entity or individual wishes to assign a right of a patent application or a patent right to a foreigner, it or he must obtain the approval of the relevant department under the State Council.

On the one hand, the new Patent Law has expanded the scope of assignment from the original “foreigner” to “foreigner, foreign enterprise or any other foreign organization”.

On the other hand, “obtain the approval of the relevant department under the State Council” is changed to “go through appropriate formalities in accordance with relevant laws or administrative regulations”. Such kind of change focuses on the restriction of the procedure.

In practice, the following case is very common: the company or organization established by a foreign company in China usually attributes the ownership of the technical achievement to the parent company by means of a contract. According to Article 8 of the New Patent Law, the foreign parent company will obtain the right to apply for patent directly so that the restriction on right assignment stipulated in Article 10.2 of New Patent Law can be avoided and no approval or filing procedure is required. On the contrary, according to Article 2 of the Regulations on the Administration of Technology Import and Export of the People's Republic of China, the Ministry of Commerce usually deems the prescription that the foreign parent company owns the technical achievement through a cooperative development contract or entrusted development contract as an act of transferring technology out of China, and therefore requests approval and filing procedure. This relates the issue of whether relevant legal formalities shall be carried out in the stage of initial acquisition of the right to apply for patent, and it shall be further specified by legislation.

2. joint ownership of patent

The provisions on the exercise of right by joint owners of the right to apply for patent or the patent right are added in the new Patent Law, namely Article 15: where the joint owners of the right to apply for patent or a patent right reach agreement with respect to the exercise of such right, such agreement shall be complied with. Where the joint owners fail to reach such agreement, any of the joint owners may exploit the patent, or permit another party to exploit such patent by means of a non-exclusive license; where another party is permitted to exploit such patent, royalties received shall shared by the joint owners. In addition to the circumstances specified in the preceding paragraph, the right to apply for patent or a patent right which is jointly owned shall not be exercised without the consent of all joint owners.

This Article specifies the exercise of jointly owned patent right and is helpful to guarantee the legitimate interest of the joint owner and to encourage the exploitation of jointly owned patent. The dual value purpose of the Patent Law is realized. In practice, the jointly owned patent is very common. As there is no legislation standard in the past, the jointly owned patent issue can only be handled with reference to the general standard or principle of joint ownership in civil law. However, compared with the joint ownership in civil law, the joint ownership of the right to apply for patent or the patent right is special and unique, especially in the aspect of exploitation of the right. Therefore it is necessary to set force the standard according to the characters of joint ownership of patent.

According to the relevant provisions of the Civil Law, the patent right can be owned jointly. The joint ownership of patent right is generated in different ways, which mainly include: (1) agreement on joint ownership of the right to apply for patent by cooperative developers; (2) agreement on joint ownership of the right to apply for patent by consigner and consignee in project R&D; (3) patent inherit or succession; (4) where more than two applicants file patent application for the same invention on the same date, the applicants reach agreement on joint ownership of the patent right. There are no relevant provisions in the current Patent Law.

The Article 15 of the new Patent Law offers a clear legal basis for the joint ownership of patent right and for the exploitation of the patent right by joint owners. This provision is helpful to encourage the use, protection and management of patent right, especially sufficient and effective exploitation of patent right by the joint owners of the patent. Article 15 of the new Patent Law has two features:

(1)Priority of autonomy of the will
Namely if the joint owners have agreement on the exploitation of patent right, the agreement shall prevail. It is helpful for settling the problem by negotiation among the joint owners.

(2)Scope of and restriction to exploitation of right by joint owners without prior agreement
①. licensing others to exploit the patent by common license, excluding exclusive or sole license. It can guarantee the right of free exploitation of each joint owner over the jointly owned patent and prevent any possible disputes among the joint owners. Since the license is limited to common license, the other joint owners can exploit or further license others to exploit the patented technology.

② except for the above circumstance, the exploitation of joint right is subject to the approval of all joint owners. It is helpful for preventing damages against the legitimate right and interest to one joint owner by another.

③ establish the principle of share of profit. If the patent is license to other party, the royalty shall be shared and distributed among the joint owners. It is helpful to ensure the interest of all joint owners and prevent the major joint owner to monopolize the profit.

It is worth mentioning that although where there is no agreement, this Article actually broadens the capability of the joint owners to grant common license, i.e., there is no premise that “the one joint owner is not able to exploit the patent right and no limitation on the number of common license is set force, yet in practice, it is very possible that one joint owner freely grants common license and thus too many licensees are generated, which will result in the loss of exclusiveness of the patent right owned by the other or more joint owners.

In addition, this article does not prescribe the procedures to determine the standard of royalty for common license, which may result in the abuse of common license by one joint owner via low royalty to damage the interest of other joint owners.

This article does not stipulate how to distribute the money and profit collected by sole exploitation of the joint owner, namely, if one joint owner exploits the patent alone, he/it can enjoy all profits thereof. If the joint owners license others to exploit the patent via common license, the profits thereof shall be shared by all joint owners

In addition, if a company and a research institute jointly own one patent technology but the company may wish not to exploit it in a few years according to its operation strategy; however, the research institute licenses the patent to others for exploitation, which may influence the said strategy and the company is somewhat like being “compelled to license”.

Therefore in the early stage of cooperative development of technology, if the two parties agree to jointly own the right to apply for patent and the patent right, it is necessary to specify how to exploit the patent right and whether the patent can be exploited alone or licensed to others by one party in order to avoid possible damages to the interest.

4.Approval Procedure for applying patents in foreign country for an invention or creation accomplished in China

The Article 20.1 of new Patent Law provides that any entity or individual that seeks to apply for a patent in foreign country with respect to an invention or utility model accomplished in China shall first report the matter to the administrative department for patents under the State Council for confidentiality examination purposes. Matters such as confidentiality examination procedures and duration shall comply with the provisions of the State Council.

The Article 20.1 of the current Patent Law is where any Chinese entity or individual intends to file an application in a foreign country for a patent for invention-creation made in China, it or he shall file first an application for patent with the patent administration department under the State Council, appoint a patent agency designated by the said department to act as its or his agent, and comply with the provisions of Article 4 of this Law.

The amendment on this article has two features:
(1)The applicable scope is more accurate. Any invention or creation accomplished in China, regardless of whether it is a company or an individual and regardless of their nationality, is subject to confidential examination by the patent department under the state council if the owner wishes to apply for a patent right in foreign country for such invention or creation.
(2)The current Patent Law provides that any invention or creation accomplished in China must be filed for Chinese patent firstly, which is not convenient to the owner who does not wish to apply for a patent in China. In the new Patent Law, confidential examination is adopted to replace the Chinese patent application, so the applicant may just apply patent in foreign country instead of Chinese patent.

However this article does not give clear rules on how to define the invention accomplished in China and how to prove it. For example, how to define the nature of an invention of, the one part which is accomplished in China and the other part is accomplished in a foreign country?

A new article, Article 20.4 is added in the new Patent Law: Where a patent application is filed for any invention or utility model for which a patent application is filed in another country in violation of the provisions of Paragraph 1 of this Article, no patent right shall be granted. Namely, if the applicant does not perform the duty stipulated in Article 20.1, the same invention or creation will not be granted a patent right if the applicant files patent application in China. In addition, even the applicant does not file application in China, it does not mean its invention or creation is free of any restriction. According to Article 71 of the new Patent Law, where any person, in violation of the provisions of Article 20 of this Law, files in a foreign country an application for a patent that divulges an important secret of the State, he shall be subject to disciplinary sanction by the entity to which he belongs or by the competent authority concerned at the higher level. Where a crime is committed, the person concerned shall be pursued for his criminal liability in accordance with the law. It can be summarized that if the applicant files a patent application in a foreign country for an invention accomplished in China without reporting to the patent department of State Council for confidentiality examination, and if the applicant neither files for a Chinese application nor divulges important secret of the State, the applicant will not assume any legal responsibility.

The Draft of Implementing Regulations of Patent Law provides that any entity or individual that seeks to apply for a patent in a foreign country or files an international application with respect to an invention or utility model accomplished in China shall first file a request to the administrative department for patents under the State Council and illustrate the technical solution of the invention or utility model in detail. In the mean time, the filing of patent application to China Patent Office or filing of international application will be deemed as the filing of patent application in a foreign country. It is a very flexible means. For the applicant who has already filed patent application in China or international application, it will be deemed that the request of patent application in a foreign country has been filed; for the applicant who does not wish to file patent application in China, it may file such a request alone.

In addition, according to the Draft of Implementing Regulations of Patent Law, for the time limit of confidential examination, if the Patent Office holds that the invention or creation may need to be kept confidential for the sake of national security or interest after accepting the request, it shall notify the applicant duly. If the applicant does not receive such a notice from the Patent Office within 2 months from the filing date, it may file a patent application in a foreign country or an international application. Within 4 months from the issuance of the notice, the Patent Office shall make a decision of whether to keep confidentiality or not. Otherwise it shall be deemed that the patent office agrees the applicant to file the patent application in the foreign country or international application. It will facilitate the patent application of the applicant. The applicant can file the foreign application or international application in 2 months’ time if no confidential notification is received from the patent office, or file the foreign application or international application in 4 months if it receives the notification from Patent Office but no confidential decision is issued later. Due to such an express stipulation on the time limit, the applicant may take into account the possible delay resulting from the confidential examination and make take control of the progress of a foreign patent application.

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