Opinion: Inventing the rules on service inventions
March 11, 2013 | BY
clpstaff &clp articles &For the first time, draft Regulations on service inventions have given a procedural framework for defining and reporting inventions, but they are hampered by a lack of clarity
A basic principle relating to service inventions is that an employee, as the inventor, should be reasonably awarded and remunerated for the invention created. Major laws and regulations like the PRC Patent Law (中华人民共和国专利法) govern service inventions and reflect this principle. But the provisions under these pieces of legislation are general and sometimes difficult to enforce.
On November 12 2012, China's State Intellectual Property Office (SIPO) released the Service Invention Regulations (Draft) (国家知识产权局职务发明条例 (草案)) for public comments. The Regulations may embody SIPO's first attempt to clearly and in detail define and regulate the legal rights of employers and employees in terms of service inventions created in China.
Compared with current legislation, the Regulations set out a clear definition of the service invention, which include technical secrets. They establish a reporting system and specify detailed procedures for inventors to obtain remunerations and awards. The Regulations further ensure inventor's right of remuneration by allowing them to know the employer's economic benefit and have the right of first refusal. They limit the validity of agreements between employer and employee and empower government officials to inspect the employer's compliance. These changes may cause concerns to companies, especially R&D centres.
Negotiations and right of first refusal
The Regulations seem to follow a contract-first principle, by providing that the awards and remunerations may be mutually agreed upon by employers and employees, or decided by employers in company policies. The minimum amount of remunerations and awards are set out and should be applied in the absence of agreements and policies. However, the Regulations provide that any agreement or policy eliminating or limiting the right to which the employee as the inventor is entitled is invalid. It is clear as to what constitutes eliminating rights, but the notion “limiting” remains unclear. For example, if the amount of the award and remuneration in an employment agreement is lower than the minimum amount in the Regulations, would the agreement be considered to be “limiting” the employee's right and therefore invalid? If so, the contract-first principle would be pointless. Many companies have suggested deleting the term “limiting”.
Also, under the Regulations, where an employer intends to assign the IP rights in a service invention, the inventor is entitled to the right of first refusal under the same conditions. It is unclear whether this right may be agreed otherwise by the employer and the employee. If not, this provision might cause problems to some companies, which may decide to assign their ownership of service inventions because of business strategies or some pre-existing contractual obligations.
Awards for minor modifications
Under the Regulations, invention includes the eligible subject matter protectable as a technical secret, which is not further defined. The term technical secret could be trade secrets defined in the PRC Anti-unfair Competition Law (中华人民共和国反不正当竞争法) or it could be merely some minor modifications and improvements, which do not have patentability. One of the goals of the Regulations is to promote innovation and creativity, which would not be achieved by having companies waste their recourses awarding and remunerating technologies that are not innovative and creative.
Business information
According to the Regulations, the employer shall disclose the economic benefit obtained through exploitation, assignment or licence of the relevant service invention. This provision may be necessary to ensure the employee's right, but it may also bring risks to the employer. For example, a breach in confidentiality by disclosing the assignment fee of a certain patent. Also, the economic benefit itself may be the employer's trade secret. If it is disclosed to an employee, who later resigns and joins a competitor, the trade secret might be disclosed, causing damage to the employer.
Many companies believe that the Regulations change the current legal regime, which may not be necessarily true. The Regulations include more detailed rules, but some important provisions are consistent with current legislation. For example, provisions under the PRC Law on Promoting the Practical Application of Scientific and Technological Achievements (中华人民共和国促进科技成果转化法) could also be applied to technical secrets and the minimum amounts of awards and remunerations, which may not be agreed otherwise, are consistent with some of those specified in the Regulations.
The Regulations are a response to the State Plan for Medium- and Long-term Development of Quality Human Resources for Science and Technology (2010-2020) (国家中长期科技人才发展规划 (2010-2020年)) published by the State Council, with the intention of improving the legal system of service inventions and to further protect the legitimate rights of inventors. However, due to the lack of clarity, many provisions may prove to be difficult in practice.
Haifeng Huang, Jones Day, Hong Kong
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