The third revision of the Implementing Regulations of the PRC Patent Law (the Revised Regulations) was issued by the State Council on 11 December 2023, and commenced operation on 20 January 2024. Compared to the second revision of the Implementing Regulations of the Patent Law in 2010, the latest amendments feature significant changes, especially concerning the rewards and remuneration for service inventions. These changes aim to enhance the incentives for inventors to commercialize their technological achievements and foster a more robust environment for technological advancement.
Diversification of Reward and Remuneration Methods
The Revised Regulations encourage patent-granting entities to adopt various methods of rewarding inventors, including equity, options, and dividends, to ensure inventors reasonably share in the benefits of innovation (Article 92).
Increased Rewards Post-Patent Registration The Revised Regulations raise the reward standard for granted patents. For invention patents, the reward increases from RMB3,000 to RMB4,000, and for utility models and designs, the reward rises from RMB1,000 to RMB 1,500, under Article 93 of the Revised Regulations.
Enhanced Remuneration for Implemented Patents
In accordance with Article 94 of the Revised Regulations, if the entity granted the patent right has not agreed with the inventor or designer on the remuneration method and amount, nor stipulated these in its legally established regulations as prescribed in Article 15 of the Patent Law, it shall provide reasonable remuneration to the inventor or designer in accordance with the provisions of the PRC Law on Promoting the Transformation of Scientific and Technological Achievements.
The remuneration standard for implemented patents has significantly increased, as stipulated by Article 45 of the Law on Promoting the Transformation of Scientific and Technological Achievements - If there is no agreement on remuneration, the following statutory standards apply:
1) For transferred or licensed technological achievements, at least 50% of the net income from the transfer or license must be allocated as remuneration.
2) For achievements valued as equity or investment, at least 50% of the resulting equity or investment should be allocated.
3) For self-implemented or cooperatively implemented achievements, at least 5% of the annual operating profit from the successful commercialization must be allocated for three to five consecutive years.
It is worth noting that the priority of agreements is maintained by the Revised Regulations. The distribution ratio of rewards and remuneration for service inventions should prioritize agreements between inventors and employers. However, the need for procedural and substantive fairness ensures that inventors’ rights are protected against potentially exploitative arrangements. This balance between flexibility and fairness is crucial for maintaining a healthy innovation ecosystem. If these agreements are not reasonable in both procedure and substantive content to withstand judicial scrutiny, courts may override such agreements in favor of statutory standards as referred to above.
Comment
The adjustments in the Revised Regulations represent a significant step forward in encouraging innovation and protecting the rights of inventors. The increase in reward and remuneration standards reflects the economic growth and the need to provide more substantial incentives for inventors. The statutory standards, particularly the linkage with the Law on Promoting the Transformation of Scientific and Technological Achievements, provide clear guidelines for the allocation of profits derived from patented technologies. This linkage reduces uncertainty in judicial practice and ensures that inventors receive fair compensation for their contributions.
In conclusion, the Revised Regulations offer a comprehensive framework that supports innovation. Companies are advised to adapt to these changes by reviewing their internal policies, properly managing the qualifications of inventors, developing reasonable internal standards for service invention rewards and remuneration, and timely paying rewards and remuneration to ensure compliance and to maximize the potential benefits of their intellectual property strategies.
Diversification of Reward and Remuneration Methods
The Revised Regulations encourage patent-granting entities to adopt various methods of rewarding inventors, including equity, options, and dividends, to ensure inventors reasonably share in the benefits of innovation (Article 92).
Increased Rewards Post-Patent Registration The Revised Regulations raise the reward standard for granted patents. For invention patents, the reward increases from RMB3,000 to RMB4,000, and for utility models and designs, the reward rises from RMB1,000 to RMB 1,500, under Article 93 of the Revised Regulations.
Enhanced Remuneration for Implemented Patents
In accordance with Article 94 of the Revised Regulations, if the entity granted the patent right has not agreed with the inventor or designer on the remuneration method and amount, nor stipulated these in its legally established regulations as prescribed in Article 15 of the Patent Law, it shall provide reasonable remuneration to the inventor or designer in accordance with the provisions of the PRC Law on Promoting the Transformation of Scientific and Technological Achievements.
The remuneration standard for implemented patents has significantly increased, as stipulated by Article 45 of the Law on Promoting the Transformation of Scientific and Technological Achievements - If there is no agreement on remuneration, the following statutory standards apply:
1) For transferred or licensed technological achievements, at least 50% of the net income from the transfer or license must be allocated as remuneration.
2) For achievements valued as equity or investment, at least 50% of the resulting equity or investment should be allocated.
3) For self-implemented or cooperatively implemented achievements, at least 5% of the annual operating profit from the successful commercialization must be allocated for three to five consecutive years.
It is worth noting that the priority of agreements is maintained by the Revised Regulations. The distribution ratio of rewards and remuneration for service inventions should prioritize agreements between inventors and employers. However, the need for procedural and substantive fairness ensures that inventors’ rights are protected against potentially exploitative arrangements. This balance between flexibility and fairness is crucial for maintaining a healthy innovation ecosystem. If these agreements are not reasonable in both procedure and substantive content to withstand judicial scrutiny, courts may override such agreements in favor of statutory standards as referred to above.
Comment
The adjustments in the Revised Regulations represent a significant step forward in encouraging innovation and protecting the rights of inventors. The increase in reward and remuneration standards reflects the economic growth and the need to provide more substantial incentives for inventors. The statutory standards, particularly the linkage with the Law on Promoting the Transformation of Scientific and Technological Achievements, provide clear guidelines for the allocation of profits derived from patented technologies. This linkage reduces uncertainty in judicial practice and ensures that inventors receive fair compensation for their contributions.
In conclusion, the Revised Regulations offer a comprehensive framework that supports innovation. Companies are advised to adapt to these changes by reviewing their internal policies, properly managing the qualifications of inventors, developing reasonable internal standards for service invention rewards and remuneration, and timely paying rewards and remuneration to ensure compliance and to maximize the potential benefits of their intellectual property strategies.