According to PRC law, employee inventions (whether patented or not) are owned by the employer. However, the employer shall pay a remuneration to the employee inventor, who created the employee invention.
For patented employee inventions, rules on remuneration are provided in the Implementation Regulations of the PRC Patent Law (“Implementation Regulations”). The employer and the employee inventor are allowed to reach an agreement on the method and amount of remuneration of patented employee inventions. Without such agreement, the statutory remuneration standards set forth under the Implementation Regulations will apply.
Rules on remuneration for non-patented employee inventions (e.g. know-how, software copyrights, etc.) are stipulated in the PRC Law for Promoting the Transformation of Scientific and Technological Achievements (“LPTSTA”), which was promulgated on 15 May 1996. The LPTSTA does not give room for an agreement on the remuneration. In other words, the statutory remuneration standard in the LPTSTA is mandatory. On 29 August 2015, the PRC Standing Committee of the National People's Congress revised the LPTSTA. The revised LPTSTA will take effect on 1 October 2015. It brings the following main changes on the remuneration for non-patented employee inventions:
1. Agreement on remuneration is now permitted
The current LPTSTA prohibits an employer and an employee inventor from agreeing on the method and amount of remuneration for non-patented employee inventions. Instead, the employer must pay the employee inventor according to the statutory remuneration standard set out under the current LPTSTA.
Under the revised LPTSTA, the employer and the employee inventor are allowed to reach an agreement on the method and amount of remuneration for non-patented employee inventions. Alternatively, the employer is allowed to establish a company policy, which provides for the method and amount of remuneration for non-patented employee inventions. In the absence of such agreement or company policy, the statutory remuneration standard will apply. Such amendments on remuneration for non-patented employee inventions mirror the relevant stipulations of remuneration for patented employee inventions under the Implementation Regulations.
2. Higher statutory threshold for remunerations
Compared with the current LPTSTA, the revised LPTSTA sets a higher statutory threshold for remunerations. The statutory remuneration standards are amended as follows (Note: the amendments are highlighted in red):
Click here to view table.
The amendment of the LPTSTA indicates that the Chinese government intends to strengthen its efforts to protect the interests of employee inventors. Besides the amendment of the LPTSTA, it is worthwhile to note that the PRC State Council published the draft PRC Regulations on Employee Inventions (“Draft Regulations”) for public comments on 2 April 2015. The “public comments” stage was completed on 2 May 2015. However, until now, the Draft Regulations have not been enacted by the State Council. According to some Chinese media, this will follow soon after the amended LPTSTA has come into force.
The Draft Regulations contain similar stipulations as the revised LPTSTA. Further, compared with the revised LPTSTA, the Draft Regulations provide for more detailed rules on remuneration of employee inventions. For instance, any company policy, which abrogates employee inventors’ right of obtaining remuneration for employee inventions from employers, shall be regarded as null and void. These rules are favorable for employee inventors.
Overall, it is advisable for employers involved in research and development of new technologies in China to reach a separate agreement with employee inventors on remuneration of employee inventions, or provide for the same in the company policy. In order to avoid possible disputes, the amount and/or method of remuneration shall be expressly introduced in the above agreement or company policy.
Please note that the agreed amount of remuneration can be lower than the statutory standards, as stipulated under PRC law. However, in judicial practice, a court may, at its discretion, adjust the agreed amount if such amount is deemed unreasonably low. Therefore, the agreed amount should be reasonable by taking reference to the statutory threshold for remuneration.