China’s State Council Issues Trial Working Measures for Outbound Transfer of Intellectual Property Rights
On 18 March 2018, the General Office of the State Council issued the (for Trial Implementation) (the “Measures”), effective immediately from the issue date. In recent years, China’s transfer of intellectual property to foreign countries has been increasing year by year. In 2017, the value of the intellectual property exported by China is said to have exceeded US$4 billion.
The Measures cover the assignment of intellectual property, as well as the change of control of the owner of China intellectual property via corporate transactions such as mergers and acquisitions. The types of intellectual property covered include patents, integrated circuits, software and plant variety rights. Trademarks have not been included for now, but as we saw in Coca-Cola’s attempted acquisition of Chinese juice maker, Huiyuan, the Chinese government already is able to regulate the acquisition of key Chinese trademarks/brands by foreign companies, perhaps.
Examinations under the new Measures will focus on whether or not the intellectual property transferred to foreign entities will have a negative influence on China’s national security interests, and whether or not the intellectual property transferred to foreign countries will have a negative influence for China’s key technology areas for innovation and development.
The examination of the assignment of patent rights and integrated circuits designs
1. Technical export operators submit applications for export of technologies to local trade authorities;
2. The local commerce authority will transfer the relevant materials concerning intellectual property rights such as patent rights, exclusive rights of layout-designs of integrated circuits in the application, to local intellectual property management departments;
3. The local intellectual property management department will review the intellectual property transferred and issue opinions in written to the local commerce authority and report to the intellectual property department of the State Council for the record;
4. The local commerce authority then make a decision in accordance with the opinions in written and Regulations of the People’s Republic of China on the Administration of Import and Export of Technologies (2011 Revision) and other relevant provisions.
It seems that SIPO will not be permitted to record any patent assignments, until the local commerce bureau has signed off on the assignment(s) involved.
The examination of the assignment of copyright in computer software
The examination of assignment of copyright of computer software, will be reviewed by both local commerce authority and technologies management department, in accordance with Regulations of the People’s Republic of China on the Administration of Import and Export of Technologies (2011 Revision), Regulation on Computers Software Protection (2013 Revision) and other relevant provisions. In addition, if computer software copyrights transferred have already been registered with computer software registration agencies, local commerce authorities need promptly notify the results of the review to related computer software registration agencies. If computer software copyrights transferred have not been approved by local commerce authorities, the computer software registration authority will not handle the change of ownership after receiving a request to assign rights.
The examination of the assignment of plant variety rights
With regard to the examination of plant variety rights assignments, any transfer plans will be reviewed by both Ministry of Agriculture’s Agricultural Management Department and Forestry Management Department as relevant. The examination will focus on the impact of the assignment on China’s agricultural security, especially food security and seed industry security.
The Chinese government has stated that the tightening of review of the transfer of intellectual property rights, will not affect the use of foreign investment and the opening up of the national policies. On the contrary, it is claimed that the establishment and improvement of the intellectual property rights transfer examination mechanism is a concrete measure that will create a better business environment. Relevant departments will strictly control the scope of the review, and specific review rules will be issued in the near future. It is noted that in the past, the recordal of any assignment of Chinese registered patents from a Chinese entity to a foreign entity, in SIPO, has often been problematic – it is hoped that these new guidelines will improve that system, such that the SIPO examiners are able to process non-controversial assignments more efficiently.
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