On April 1, 2014, the State Intellectual Property Office (“SIPO”) released the latest draft regulations on employee service inventions (“Service Invention Regulations”) pending approval by the State Regulations Council.
The draft Service Invention Regulations have kept many of the controversial provisions from an earlier draft issued in 2012. The most noteworthy one is that, under the Service Invention Regulations, even if an invention is not granted a patent but is treated as a technology secret or knowhow by the employer, the employee inventor(s) are still entitled to receive reward and remuneration by reference to the requirements for a normal invention patent. In contrast, the current PRC Patent Law and its implementing rules only require compensation for patented inventions.
Another significant set of provisions is the large increase in the compensation payable by employers. For instance, in the absence of an agreement or company policies, the minimum reward payable to the employee inventor(s) would be twice the average monthly salary of all the employees of the employer, in contrast to the
RMB 3,000 under the current regulations. Likewise, the annual remuneration payable to the employee-inventor(s) would be increased from 2% of the operational profits to 5%. The percentage
of any license fees derived from the invention that are payable to the employee inventor(s) are also significantly increased.
On the other hand, the draft Service Invention Regulations seem to indicate that companies can pre-empt the default requirements on service invention compensation by reaching agreements with employees or implementing their own policies, provided that the
agreements or policies do not deprive employees of their legitimate rights nor set unreasonable conditions on the employees’ claim
for and use of such rights. Only in the absence of an agreement or policies would the statutory default compensation rules apply.
In light of the potential increased compensation requirements, companies have an even greater impetus to reach agreements with employees or adopt company policies regarding employee inventor compensation, so as to have more control over compensation costs for service inventions.