New measures for the REGISTRATION of patent licences in China
02 August 2011
Key changes include making SIPO responsible for patent licence registration nationwide, amending the type of documents required for registration, setting minimum content requirements for patent licences, extending the reasons for rejection of registration applications, and setting out deregistration procedures for early termination of patent licences. While the changes are largely ministerial in nature, they are relevant to those who register their patent licences in China.
On 27 June 2011, the Chinese Patent Office, also known as the State Intellectual Property Office (SIPO), issued new rules governing the process of registering patent licences in China. The Measures for the Registration of Patent Licence Contracts (the New Measures) are due to replace the existing Administrative Measures for the Registration of Patent Implementation Licence Contracts (the Old Measures) from 1 August 2011.
Under the Patent Law of the People's Republic of China (the Patent Law), a patent licence must be in writing (Patent Law Article 12). Moreover, patent licences must be registered with the relevant patent authority within three months of the effective date of the licence (Implementing Regulations of the Patent Law of the People's Republic of China, Article 14). Either the licensor or the licensee can register. Of course, such registration must be done in Chinese. Once received, the authority has seven business days to either approve or reject an application for registration. If approved, the registration goes into a public database, maintained by SIPO, which records all registered patent licences. While the existence of the licence is known to the public via the database, the terms of the licence are not made public.
The Old Measures and from 1 August 2011 the New Measures set out the rules that govern the registration process, which are discussed below.
Key differences between the Old and New Measures
A centralised registration authority
Under the New Measures, SIPO will be the authority for patent licence registration on a national scale (New Measures, Article 2) and is not allowed to delegate registration to its local branches, contrary to the position under the Old Measures (Article 2). The requirement to register within three months of the effective date of a patent licence continues (Old Measures, Article 5, New Measures, Article 5).
More patent agencies to handle registration
Under both Measures, foreign companies who wish to register a patent licence can only do so via a Chinese patent agency. The Old Measures required such an agency to be an entity designated by SIPO to handle foreign related matters; but the New Measures widen the scope to include any authorised patent agency in China (New Measures, Article 6, Old Measures, Article 11). Therefore, foreign companies have more choices in selecting a patent agency for registration of patent licences in China.
Documents required for registration
Under the Old Measures (Article 13), the documents required for registration included the registration application form, a copy of the relevant licence contract, a copy of the patent certificate or notice of acceptance of patent application, the ID of the licensor and other documents. Under the New Measures (Article 8), the parties are required to submit the application form (which the New Measures specifically require to be signed or stamped by the licensor or patent agency of the licensor), the original patent licence contract (as opposed to a mere copy), identification documents of both parties – not just the licensor, the power of attorney giving the patent agency its authority to act and other materials (not just mere documents) that may be requested by SIPO. For corporate entities, a business licence or certificate of good standing can serve as a company's identification document.
Minimum content requirement for patent licences
Both Measures require the patent licence to be in writing (Old Measures, Article 9 and New Measures, Article 4, respectively) but unlike the Old Measures, the New Measures also stipulate minimum content requirements, namely:
the names and addresses of the parties;
the number of patents being licensed, as well as each patent's title, patent number, application date and issue date; and
the type and term of the patent licence.
(New Measures, Article 9)
Reasons for rejection of a registration application
Under both Measures, the authorities have the right to reject patent licence registrations under certain circumstances. The New Measures retain some of the existing reasons for rejection but also add new ones. The comparison table below lists the reasons under the Old and New Measures.
Old Measures (Article 15)
New Measure (Article 12)
1. The underlying patents are no longer valid or the underlying patent application has been rejected or withdrawn.
1. The underlying patent has been terminated or declared invalid.
2. The patent licence contract was concluded without the consent of all the patent holders or applicants.
2. The party purporting to be the licensor is not on the patent register and is not entitled to grant the licence in question.
3. The parties are making a repeat application in respect of the same patent licence contract.
3. The licence contract does not conform to the minimum content requirements set out in Article 9.
4. The term of the patent licence exceeds the validity period of the underlying patent(s).
4. The term of the patent licence exceeds the validity period of the underlying
5. Other circumstances in which relevant laws are infringed.
5. A joint holder of the underlying patent(s) is in violation of relevant laws or agreements by entering into the patent licence.
6. The underlying patent(s) is or are subject to overdue patent annual fees.
7. Ownership of the underlying patent(s) is in dispute or under preservation measures issued by the people's court such that the relevant procedures relating to the patent are suspended.
8. The parties are making a repeat application in respect of the same patent licence contract.
9. A security interest has been granted over the underlying patent (unless the beneficiary of such security interest consents to the registration of the patent licence.
10. The registration would conflict with a previously registered patent licence.
11. Other circumstances in which registration is to be rejected.
Early termination of patent licence
If the parties decide to terminate the patent licence prior to its expiry date, the parties must inform SIPO within a certain time period via registration cancellation procedures. Under the Old Measures (Article 21) this had to be done within ten business days of the termination; the New Measures (Article 17) give the parties 30 business days. The New Measures (Article 17) also appear to require the parties to complete registration cancellation procedures once the licence terminates at the end of its original term and not only when it terminates prematurely. In addition, the New Measures (Article 18) require the parties to cancel a registration if the underlying patent is declared invalid or terminated. Similarly, under both the Old and New Measures, if the patent licence is extended, the parties must notify the authorities and alter the registration; under the Old Measures (Article 22) this had to be done at least two months prior to the original patent licence's expiry, while the New Measures (Article 16) require it to be done within the two months prior to original licence expiry.
Evidence as patent infringement damages
Under the Old Measures (Article 8) the people's court and patent administration authorities could take into account factors such as the nature of the licence, scope, term and licence fees for mediation purposes or to determine the amount of damages for infringement. Under the New Measures (Article 19) such factors (type and term of the licence, the amount and method of calculation of the licence fees) are to be used by the patent administration department for mediating the amount of compensation for infringement – the people's court is no longer mentioned. This does not mean that courts cannot rely on an existing patent licence in determining reasonable royalties. Rather, they have the discretion to accept or reject such patent licence in damages calculations.
The New Measures for patent licence registration in China seem to have created additional burdens on registrants. Therefore, in determining whether to register patent licences, the potential benefits of registration should be weighed against the potential burdens and costs. One benefit for registering a patent licence is that such registration is effective against a subsequent bona fide purchaser for value. Another benefit is that the registration certificate can be a substitute for the actual patent licence in dealing with some local governments. However, there does not appear to be any penalty for failing to register patent licences.
It is important to note that registration of patent licences at SIPO does not fulfil one's obligation to register the same licence with the Ministry of Commerce or its local branches for compliance with China's technology import and export regulation, and vice versa. In some cases, registration with both SIPO and the Ministry of Commerce or its local branches should be carried out.