ip implications of undertaking r&d in china

This project has received funding from the European Union’s Horizon 2020 research, and innova=on programme under grant agreement n°645775

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R&D in China and Co-‐funding for Horizon 2020

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Webinar interac+on tools

The China IPR SME Helpdesk Services

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  Start Date: 1/2/2015, End Date: 31/1/2018   Based upon the outputs and the established mechanism of the previous DRAGON-‐STAR project

  The DRAGON-‐STARPLUS is supported by European Commission (H2020), to provide services on three levels:

•  To support the European and Chinese research communi=es to establish collabora=ons under Horizon 2020 and beyond.

•  To provide a coopera=on pla^orm and tools to policy makers, aiming ul=mately to support and enhance the bilateral coopera=on, through the concept of mutual benefit

•  To provide a coopera=on pla^orm to funding agencies for exchanging best prac=ces and for planning joint ac=vi=es.

Dragon Star Plus


The IP implica=ons of undertaking R&D in China

Dr .Thomas PaBloch, Partner at Taylor Wessing, June 15th, 2016

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Name: Dr. Thomas Pacloch, LL.M.Eur Firm: Taylor Wessing Loca+on: Munich, Germany

Thomas Pacloch heads up the IP division of the TW China Group and is located in Taylor Wessing’s Munich office, with regular acendance in the offices in Beijing and Shanghai. He specializes in industrial property rights and technology transfer with a par=cular focus on China. He advises on trademark and patent infringements as well as copyright licensing and supports transac=ons and licensing nego=a=ons, in par=cular in luxury goods, lifestyle and online gaming sector, but also automobile, pharmaceu=cal and electronics industry. Besides advising foreign companies in China, Thomas supports and represents Chinese clients in German courts.

Today’s Speaker

•  Legal Framework

•  Important IP Rights in R&D

•  Patent Law

•  Technology Transfer and Administra=ve Regula=ons

•  Check List R&D in China

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Agenda

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Key issues

•  How much technology should go to China how fast?

•  How to do it?

•  With whom to do it?

•  Risks and rewards •  Legal limita=ons

•  A need for a specific China strategy

Legal Framework

•  Patent Law –  Art 10 PL (transfer of patent applica=ons and patents to foreigners) –  Art 20 PL (applying abroad for an inven=on completed in China) –  Art 6 and 8 PL (employee inven=on, commissioned and joint

inven=ons) •  Contract Law •  Technology Import and Export Administra=on Regula=ons TIER Rules •  Customs Regula=ons/MoF/State Administra=on of Taxa=on on du=es and

taxes on royal=es –  E.g. Measures of GACC for Evalua=on of Royal=es of Imported Goods,

30 May 2003 •  Foreign Trade Law (Art 16-‐18) through restric=ons, quotas, licenses

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Important IP Rights

In China: •  Right to inven=on/right to apply

for a patent –  Economic rights –  Personal rights

•  Patent applica=on right, once applica=on has been filed, before applica=on is rejected or granted

•  Patent right aier grant, before expiry of patent term, invalida=on

•  Copyrights •  Chinese law applies

Outside China: •  Same three types of right for any

inven=on made, but –  Independent from rights in

China –  Following the law of each

country where owner seeks protec=on, thus a bundle of independent rights

•  Copyright •  Foreign law applies in principle,

but does not exclude administra=ve regula=ons or mandatory law in China

Patent Law and transfer of patents and patent applica=ons

•  Any transfer of patents or patent applica=ons in China to a foreigner requires approval/registra=on by SIPO –  Prior compliance with TIER condi=on for registra=on of transfer –  Transfer only valid with successful registra=on

•  No SIPO approval necessary for transfer of right to apply for a patent •  Under Patent Law (not TIER): No mandatory registra=on/approval for

patent licenses

•  Addi=onal: Patent applica=ons abroad for inven=ons completed in China

require compliance with requirement of confiden=ality examina=on

Usual scenarios for technology transfer

Own prodution

facilities in China

Licensing to third parties Sale of technology

>  Broad scope of application of Art. 2 TIER: “Import and Export of technologies in these Regulations refer to the transfer of technologies from outside of the PRC into the PRC or from inside of PRC to outside of PRC by way of foreign trade, investment, or economic or technological cooperation. Such transfer includes assignment of patent rights or patent application rights, patent licenses, transfer of know-how, technical services and other types of technology transfer.”

What is “cross-‐border technology transfer”?

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Restricted Prohibited Free

Approval content and

contract will be examined

Registration no content review; necessary to remit royalties abroad

Illegal

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Category system of technology import and export

Import/Export of technology

Category:

Requirements:

Limita+ons for technology import or export

•  Contract for restricted technology is only valid once approved by authority; contract for free technology is valid upon signing

•  For restricted technology, no substan=al nego=a=on and/or contract signing before obtaining a “lecer of intent for the technology export” by authority

•  For certain restricted technology, confiden=ality review shall be conducted by authori=es

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Why register or obtaining approval?

•  Remimng money abroad (in the past, s=ll required by some banks now)

•  Requests by tax and customs authori=es

•  Transfer of patent right or patent applica=on right from Chinese en=ty or holder to foreigner

•  Compliance with Foreign Trade Law

•  Avoiding viola=on of administra=ve law (offence)

•  Serious consequences in case of restricted or prohibited technology (criminal measures, fines, possible loss of foreign trade license, sequestra=on of illegal income)

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Sanc=ons

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Art. 61(2) and (3) Foreign Trade Law

•  Anyone who imports or exports any technology that is banned from import or export or unlawfully imports or exports any technology that is restricted from import or export shall be ordered by the foreign trade department of the State Council to correct, and be fined two =mes up to 5 =mes the illegal proceeds and the illegal proceeds shall be confiscated. Where there are no illegal proceeds or the illegal proceeds are not as much as 10,000 RMB, it shall be fined 10,000 RMB up to 50,000 RMB. If the offence cons=tutes any crime, it shall be subject to criminal liabili=es.

•  As of the day when the decision on administra=ve sanc=on as described in the two preceding paragraphs takes effect, the foreign trade department of the State Council or other relevant departments of the State Council may, within a period of three years, refuse to accept the offender’s applica=ons for import or export quotas or licenses, or prohibit the offender from engaging in the import or export of relevant goods or technology within a period of one year up to three years.

Limita+ons e.g. for technology import

•  During the validity term of a technology import contract, the achievement of improvements must belong to the party making the improvements

•  Mandatory guarantee for non-‐infringement of third-‐party rights

•  Mandatory guarantee that the imported technology is complete, correct, effec=ve and capable of achieving the pre-‐determined technological objec=ves

•  If not s=pulated in contract, restric=ons on use of jointly innovated technology

•  No “monopolis=c” clauses in contract allowed, such as condi=on for purchase of non-‐essen=al technologies, raw materials etc.

•  “Rule of reason” required for certain other restric=ons

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Risk assessment and best prac+ce

•  Choice of law clause may not exempt the Chinese mandatory liability

•  Risk of loss of ownership for any IP developed or co-‐developed with Chinese partners, if no appropriate agreement is in place

•  Nego=a=on with State-‐owned Chinese partner will be “IP-‐driven“ to secure ownership

–  Low risks for pure licensing contracts –  Higher risks if adapta=ons to processes or further development based on

Know-‐how of licensor

–  Commissioned and joint development

–  Ques=on of access right of Chinese government in case of lack of use in China?

Check list R&D in China

•  R&D environment/policy background: •  R&D capabili=es in China •  R&D incen=ves: Taxes, import du=es, visas •  Government policies (indigenous innova=on) and government procurement

•  Protec=on and use of R&D results •  Use requirements for patents obtained through public funds •  Compulsory licensing in China and An=-‐Monopoly Law •  Level of infringements in China •  Know-‐how protec=on •  Enforcement of locally owned rights •  Enforcement of jointly owned rights


•  Joint innova=on and improvements by partners •  Contractual agreements on (unilateral) grant-‐back clauses •  Contractual agreements on improvements •  Joint inven=ons •  Commissioned research

•  Employee inven=ons •  Remunera=on risks (adequate levels, liable party) •  Securing inven=ons from employees •  “Job-‐related technology results“ and pre-‐emp=ve rights •  Employee crea=ons/copyright and securing ownership


•  Technology transfer: •  Restric=ons on transfer of Chinese owned patents to foreigners: Art 10 Patent Law

•  Technology transfer in and out of China: TIER rules •  Mandatory contractual clauses and warran=es •  Limita=ons in case of technology investments and tech transfer (contribu=on in kind)

•  Taxes •  Patents and protec=on of inven=ons:

•  Patent filing – op=ons and limita=ons for patentability •  Restric=ons on free patent filing: confiden=ality examina=on •  U=lity models and defensive filing strategies


THANKS

ip implications of undertaking r&d in china

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