Under Article 12 of the Chinese Patent Law “any entity or individual exploiting the patent of another shall conclude with the patentee a license contract for exploitation and pay the patentee a fee for the exploitation of the patent.” Paragraph two of Rule 14 of the Implementing Regulations for the Chinese Patent Law states that “any license contract for exploitation of a patent which has been concluded by the patentee with an entity or individual shall, within three months from the date of entry into force of the contract, be submitted to the patent administration department under the State Council for the record.” Recording of a license contract for exploitation of a patent refers to the action by the Patent Office of the CNIPA to retain the license contract for exploitation of a patent that the parties have concluded, when it takes effect and publicise to the public.
Recording of a license contract for exploitation of a patent is completed on ‘patent announcements’ and recorded in the patent register. Information on records of licensing for exploitation of Chinese patents is freely available on the CNIPA website under ‘China patent announcement’ (http://epub.cnipa.gov.cn/flzt.jsp) For a recorded license contract for exploitation of a patent, the licensor, licensee, main classification number, patent number, application date, authorisation announcement date, type and period of exploitation license, and recording date are announced in the Patent Gazette.
‘Measures for the record filing of patent licensing contracts’ (implemented in 2011) published by the CNIPA sets out detailed regulations on recording procedures and requirements.
Why file a license contract for patent exploitation for the record?
In China, the absence of recording a license contract for patent exploitation will not affect the validity of the license contract. However, it plays an active role in regulating patent licensing transactions, protecting the legitimate rights and interests of parties involved in patent exploitation licensing, etc. Specifically, the recording of a license contract for patent exploitation, if filed, has many purposes.
1.Bona fide third party If a license contract for patent exploitation is not recorded, it will not be against a third party who concludes another license contract for patent exploitation with the patentee without knowing the license contract for patent exploitation.
2.Proof of foreign exchange payment According to the Administration of Foreign Exchange’s ‘Notice on strengthening the administration of the sale and payment of foreign exchange for the imported intangible assets’, a licensee is required to provide a certificate for the record of a license contract for patent exploitation when handling the payment of a license fee to a foreign licensor.
3.Certificate for a customs record A certificate for the record of a license contract for patent exploitation can be used as a certification document for related procedures such as a customs IP record filing.
4.Reference standard for infringement compensation After the Supreme People’s Court has clearly determined the civil dispute of patent infringement, where it is difficult to determine the loss of the infringer or the profit of the infringer, if there is a preceding fact of licensing of patent exploitation, the court may impose a licensing fee for patent exploitation, as a reference to determine the amount of compensation. Under normal circumstances, the amount of compensation is one to three times of the licensing fee.
5.Evidence of pre-litigation injunction Under the Supreme People’s Court ‘Several provisions on the application of legal issues to the suspension of patent infringement before prosecution,’ a licensee of a sole or exclusive license for exploitation of a patent can, when finding that someone infringes the patent right, use a certificate for the record of a license contract for patent exploitation as evidence to request the Supreme People’s Court to impose a pre-litigation injunction against the infringer.
The Procedure of recording the license contract 1. Timing of filing Paragraph two of Rule 14 of the Implementing Regulations for the Chinese Patent Law states that “any license contract for exploitation of a patent which has been concluded by the patentee with an entity or individual shall, within three months from the date of entry into force of the contract, be submitted to the patent administration department under the State Council for the record.” The effective date of a contract is not necessarily the date of concluding the contract, and the effective date clearly agreed in the contract will prevail.
If the parties concerned fail to do so within the time limit, they shall re-conclude a license contract for exploitation of a patent or submit a declaration for validity of the original license contract for patent exploitation signed by both the parties.
2. Documents to be submitted (1) An application form for recording a license contract for patent exploitation signed or stamped by a licensor or its authorized patent agency;
(2) The original copy of a license contract for patent exploitation. It should be noted that if the licensee is a foreigner, foreign enterprise or other foreign organization, the licensor shall also issue a ‘technology export license’ issued by the competent commercial department of the State Council;
(3) Certificates for the legal identities of a licensor and a licensee. For a Chinese enterprise, a ‘certificate for the legal identity’ refers to a business license. For an identity certificate provided by a foreign enterprise, the identity certificate needs to be notarized at the notary office where the foreign enterprise is. For example, for a Japanese enterprise, an identity certificate refers to the ‘certificate of all history matters’ or the ‘certificate of all current matters’ issued by the Japanese Bureau of Legal Affairs. This needs to be notarized by a Japanese notary organization;
(4) The original copy of the power of attorney signed by a licensor, a licensee and a delegate and a copy of the delegate’s ID card; and
(5) Other materials that need to be provided, for example, if the above documents are in foreign languages, a Chinese translation should be attached, and the Chinese translation will take precedence.
Common circumstances not being recorded • A licensor is not the legal patent holder or patent applicant or other right holder;
• A joint patentee violates the law or agrees to conclude a license contract for exploitation of a patent;
• Repeated filing a request for recording the same license contract for exploitation of a patent;
• Conflicting with a recorded license contract for exploitation of a patent;
• A patent right is pledged, except with the consent of the pledgee;
• A period of the licensing of exploitation exceeds the validity period of the patent right;
• A patent right has been terminated or declared invalid;
• A patent right is within a surcharge period for payment of annual fees; and
• A relevant procedure of a patent right is suspended due to a dispute over the ownership of the patent right or the Court ruling to take preservative measures against the patent right.
Points to note •A pending patent application can also be filed for recording a license contract for patent exploitation, but the CNIPA will not make an announcement if it has not been published. After a recorded patent application is published, the CNIPA will make an announcement. Where a patent application is rejected, withdrawn, or deemed to be withdrawn, the parties concerned will promptly go through the formalities for record cancellation.
•Where one license contract for patent exploitation includes both a Chinese patent and a patent from other countries or regions, the CNIPA will only issue a certificate for the record of the Chinese patent in it.
•A licensor and a licensee involving a foreigner or a foreign enterprise must entrust a legally established Chinese patent agency to handle the relevant business procedures for recording the license contract for exploitation of a patent.
