On November 12, 2012, the State Intellectual Property Office (SIPO) released proposed regulations that would govern the ownership and remuneration for employee-created inventions. Formally entitled the “Service Invention Regulations”, the draft regulations would supplement provisions in the Implementing Regulations of the Patent Law.
The regulations govern inventions created by employees that may be protected as patents, new plant variety rights, integrated circuit design rights or technical know-how. The regulations are subject to a public comment period that ends on December 3, 2012.
Highlights from the draft regulations include:
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“Service Invention” is defined to be an invention created within the course of employment, which may include inventions created one year after termination of employment. Inventions created by employees that fall outside this definition would be treated as “non-service inventions”.
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Employers must implement a reporting mechanism for employees to disclose inventions to employers and claim the invention as a service invention or non-service invention.
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Employers own the right to file for patents on service inventions. An employee has the right to file for a patent if the employer does not claim a right within a certain period of time or abandons the right.
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Remuneration includes awards for the creation of inventions and compensation for the use of the inventions. The minimum amounts are higher than those set forth in the Implementing Regulations of the Patent Law.
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Award requirements range from 100-200% of the employer’s average monthly salary. Compensation requirements, subject to certain caps, may range from 3-5% operating profit or 0.3-0.5% of sales revenue, and at least 20% of net revenue if the rights are assigned or licensed.
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An employer may opt out of statutory compensation requirements by issuing company compensation policies or entering into contracts with the employees. The employer may pay compensation in a lump sum, provided that the sum is a reasonable estimation of the minimum compensation figures. Contracts that unlawfully restrict and employees rights to remuneration are void.
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Employees engaged in work for “temporary employers” would be covered, but the regulations are not clear whether these employees would include dispatch employees and interns.
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Remuneration may be in cash or company shares.
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Employers are required to continue paying compensation to employees after the employees are terminated or resign. Employee rights may be inherited.
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Employers who implement invention remuneration systems will be entitled to favorable tax policies.