China introduced a new Foreign Investment Law on March 15, which, among other things, aims to encourage cross-border technological cooperation. In this LawFlash, Shanghai partner Todd Liao discusses related amendments to various Chinese regulations that affect technology transfer deals between foreign technology owners and Chinese licensees.

China has long been criticized for enacting regulations allowing discriminatory technology licensing practices against foreign technology owners. These regulations restricted the ability of foreign technology owners to negotiate market-based terms for the transfer of technology into China, which effectively amounted to forced technology transfer to Chinese licensees in some cases. In contrast, purely domestic technology transfer contracts between Chinese licensors and licensees are not subject to such restrictions. The most recent amendments to the technology transfer regulations aim to address these criticisms by removing problematic provisions.

Starting January 1, 2020, foreign licensees, among other things, will be free to negotiate longer license terms, include typical grant back provisions, and limit their liability for third-party claims.