Individual Inventor Rights In China and “Service" Inventions Volpe and Koenig, PC 30 South 17 th Street Philadelphia | Pa 19103-4009 215.568.6400 | vklaw.com.

Individual Inventor Rights In China and “Service" Inventions

Individual Inventor Rights In China and “Service" Inventions

Volpe and Koenig, PC

30 South 17th Street

Philadelphia | Pa 19103-4009

215.568.6400 | vklaw.com

ByC. Frederick Koenig III

“Service” Inventions “Service” Inventions

In China, inventions made

within the scope of employment

are denominated as

“Service” inventions

The Basic Inventor Right The Basic Inventor Right

• 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.

Upon creation of an invention, an inventor has the right to apply for a patent

(or to keep it as a trade secret).

U.S. “Service” Inventions 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

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

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

China Inventor Compensation Policy

China's Medium- and Long-Term TalentDevelopment 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

Human talents are the most significant resource for the development of Chinese economy and society.

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 invention-creation:

– 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.



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.



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).



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

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





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.



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.

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 RegulationsProposed 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.


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.


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 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.


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



• 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 YouJUNE 3, 2013

Symposium with SIPOCardozo School of Law - NYC

NYIPLA.ORG

Thank YouJUNE 3, 2013

Symposium with SIPOCardozo School of Law - NYC

NYIPLA.ORGVolpe and Koenig, PC

30 South 17th Street

Philadelphia | Pa 19103-4009

215.568.6400 | vklaw.com

Individual Inventor Rights In China and “Service" Inventions Volpe and Koenig, PC 30 South 17 th Street Philadelphia | Pa 19103-4009 215.568.6400 | vklaw.com.

Documents

patent right

chinese patent law

current china law

individual inventor

inventor of synthetic

patent protection

service inventioncreation

limited patent monopoly