Intellectual Property in the Employer and Employee Relationship in China


     By MMLC Group

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This article provides an overview of current laws and regulations in connection with intellectual property ownership of inventions developed by an employee within the scope of employment in China. It also refers to similar developments under the new Patent Law, which is due to be enacted in 2009.

Readers should note that like many jurisdictions, the rules discussed below are essentially subject to an agreement to the contrary between an employer and employee. In this regard, standard government employment contracts in China, rarely deal with intellectual property issues in an adequate manner. So it is vital that MNCs operating in China use properly drafted agreements in relation to work created in the course of employment or intellectual property work agreements to protect the ‘crown jewels’ of the business.

Inventions

In China, the right to apply for a patent of a service invention belongs to the employer. The right to apply for a patent of a non-service invention belongs to the individual inventor, based on the absence of an express agreement stating who has right to apply for a patent and to whom the patent right belongs. Such service inventions have been divided by the courts and regulators into two types: "passive" and "initiative".

The passive service invention mentioned above is an invention made by a person in execution of labor tasks – it includes any invention made in the course of duties performance; or in execution of any task, other than the employees own duties, which was entrusted to them by the employer.

The initiative service invention refers to an invention made by a person mainly by using the material means of the employer. The material means includes the employer’s money, equipment, spare parts, raw materials, or technical data which are not to be disclosed to the public, etc. Under the current law, such inventions are also owned by employer.

The draft of new Patent Law (due to become in force in 2009), amends the provisions mentioned above.

Firstly, the scope of service invention is reduced to executing the tasks of the employer.
Secondly, unless an express agreement exists to the contrary, the rights in relation to inventions made by using the material means of the employer, except for the technical data, belong to individual inventor - in such cases, the employer receives, enjoys the non-exclusive and non-transferable rights of use.

Copyright Works

In accordance with Article 11 of the Copyright Law, copyright created in the course of employment shall belong to its author, and where a work is created according to the intention and under the supervision and responsibility of an employer, such employer shall be deemed to be the author of the work.

Regarding works created during employment, engineering designs, product designs and maps, computer software and other works created during the course of employment mainly with the material and technical resources of the employer, and under its responsibility, the employee enjoys authorship rights, while the employer enjoys the exclusive copyright intellectual property rights over that work.

Except for two categories of special works created in the course of employment as described above, the copyright rights in works created in other ways vests in the author, and the employer retains a priority right to exploit the work within the scope of its professional activities - during a two-year period after the completion of the work, the author cannot, without the consent of the employer, authorize a third party to exploit the work in the same way as the employer is able to.

Given the popularity in China of the use of part time workers, work-from-home employees, rapid employee turnover and significant intellectual property infringement, documenting the employer and employee relationship clearly, will greatly assist in avoiding costly disputes in the future.

ABOUT THE AUTHOR: Yu Du and Matthew Murphy
The MMLC Group is a unique combination of leading Chinese and English speaking international and local lawyers, trademark agents, patent attorneys, scientists, engineers, accountants and business consultants, working together to deliver powerful and results-driven legal and business services for many of the world's leading companies, institutions and government groups.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.