Technology Transfer of Research Results Protected by Intellectual Property: Finland and China

Transcription

1 Technology Transfer of Research Results Protected by Intellectual Property: Finland and China Rainer Oesch (ed.), Olli Kotila and Liguo Zhang Tekes Review 259/2009

2 Technology Transfer of Research Results Protected by Intellectual Property: Finland and China Rainer Oesch (ed.) Olli Kotila Liguo Zhang Tekes Review 259/2009 Helsinki 2009

3 Tekes, the Finnish Funding Agency for Technology and Innovation Tekes is the main public funding organisation for research and development (R&D) in Finland. Tekes funds industrial projects as well as projects in research organisations, and especially promotes innovative, risk-intensive projects. Tekes offers partners from abroad a gateway to the key technology players in Finland. Tekes programmes Tekes choices for the greatest impact of R&D funding Tekes uses programmes to allocate its financing, networking and expert services to areas that are important for business and society. Programmes are launched in areas of application and technology that are in line with the focus areas in Tekes strategy. Tekes allocates about half the financing granted to companies, universities and research institutes through the programmes. Tekes programmes have been contributing to changes in the Finnish innovation environment for twenty years. Copyright Tekes All rights reserved. This publication includes materials protected under copyright law, the copyright for which is held by Tekes or a third party. The materials appearing in publications may not be used for commercial purposes. The contents of publications are the opinion of the writers and do not represent the official position of Tekes. Tekes bears no responsibility for any possible damages arising from their use. The original source must be mentioned when quoting from the materials. ISSN ISBN Cover photo: Liisa Ewart Page layout: DTPage Oy

4 Foreword and acknowledgments This project was commissioned by Tekes, The Finnish Funding Agency for Technology and Innovation. The aim of this report is to clarify the use and exploitation of research results made in scientific and technological research projects, both national and international. Quite often these projects are joint research projects arranged between different parties (researchers, universities and companies). The main focus of this report is to gather knowledge and information concerning the current status of protection of intellectual property and the possibilities for effective exploitation of research results that can be protected by these rights. This report focuses on two countries, Finland and China. Japan has been one of the target countries of the study also, but this phase of the study reports only on these first two countries. Special attention has been paid to the ownership and transfer of intellectual property rights, in particular, patent rights within research projects. These may involve participants and partners from different countries. The most important intellectual property rights in this report are held to be patents and copyrights. Not all copyright is regarded as equally important here, but computer software and the right to publish the research results with possible restrictions is considered to be of particular interest here. Other intellectual property rights (such as trademarks and trade names) are mainly excluded from this study. The basic questions concerning intellectual property rights within joint international research projects are as follows: Who is entitled to get the rights originally (the original right holder, the original ownership)? To whom are the rights transferred or assigned in practice (transferee or assignee in practice, cessio legis or ex contractu)? Are the rights effectively transferred from research to industry (does the judicial framework smoothly and effectively support the transfer of technology from research to industry)? Of course the last question is not totally judicial in nature, but more a matter of managerial or administrative statements than judicial evaluation. There are, of course, many other questions and points of details that could be dealt with, but this report focuses principally on the above points. This is with the aim to collect information about the general judicial framework and details in practical applications in the transfer of technology from research to industry in order to give some guidance to those involved.

5 Special thanks go to the individuals who have been interviewed, contributors, initiators, helpers in local places including personnel from the local Tekes Offices. In particular we would like to mention following: Liisa Ewart, from the Tekes Helsinki Office, Jaani Heinonen, from the Tekes Shanghai Office, Jukka Viitanen, from the Tekes Tokyo Office and Juho Rissanen, from the Tekes Beijing Office and all those who have been helping us in carrying out this task, especially those who have given their time for our interviews in Finland, China and Japan. The report has been compiled by the following persons. The leader and supervisor of this project and report and the main writer and commentator has been Rainer Oesch, Professor of Commercial law, University of Helsinki, Department of Private Law. Oesch is responsible for the Introduction, Japanese section, and the Summary & Conclusions and additionally for all editorial work. Olli Kotila, LLM, MSC (Econ), Law Office Lexia, Helsinki has originally written the Finnish part, and I have commented and edited it. Liguo Zhang, a researcher at the IPR University Center, University of Helsinki has written the Chinese section, with comments by me and I have added and written the part of field interviews and conclusions based on them. Jaakko Ikävalko, a researcher at the Helsinki University of Technology, has written out memorandum on the interviews and commentated and helped with practical tasks in writing the report. Helsinki 11 th June 2009 Rainer Oesch, Professor Department of Private Law, University of Helsinki

6 Contents Foreword and acknowledgments 1 Introduction...1 Rainer Oesch 1.1 Background of the study Purpose, scope and methods of the study Object and research questions Research material Methods and goals of the study Intellectual Property Rights, Technology transfer and contracts An ideal judicial framework for the promotion of technology transfer from research to industry? An ideal agreement on definition and transfer of rights? Finland: technology transfer and rights in research results in Finland....8 Olli Kotila and Rainer Oesch 2.1 Background and the legal framework of technology transfer The Act on Inventions made at Universities in detail Case law Ownership of research results (innovation) Remuneration Pricing policy of technology transfer Confidentiality Publication of research results Commercialization Summary / Conclusions The Rights in Research Results in China...17 Liguo Zhang 3.1 The Legal Framework Regarding Scientific Research in China The Chinese legislative system...17 Legislation by the National People s Congress (NPC) State Council...17 Departments of the State Council...17 Local Regulations Judicial Interpretation...17 International Treaty Legislation concerning intellectual property issues...17

7 3.2 Ownership of patents Patentable inventions...18 General requirement for patentability...18 Subject of matter of patentability Ownership of a patent Employee Invention Joint invention and commissioned invention The Right to Publish Research Results Ownership of Joint Developed Software in China Technologies Assignment and Licensing in China Policies Concerning Implementation of Hi-Tech and New Technologies in China Some Practical Aspects Certain universities policies and rules regarding the ownership of research result...22 University R&D Administration University internal rules governing research results Contract...23 The laws regarding technological contracts...23 Is the Chinese university qualified to sign a contract? The legal effect of MOU and NDA in China Some evidence rules relating to IPR disputes Private international law issues Conclusion...25 Appendix The process of applying a domestic patent at Fudan University...26 Field Interviews China Oesch and Ikävalko; November December Discussion China Tekes Reviews in English...29

8 1 Introduction Rainer Oesch 1.1 Background of the study Research and development contracts have become very important tools for global industrial markets. In the area of technical research, researchers are seeking promising solutions to certain problems or finding ways to meet particular needs. After the initial research phase, if there are potential applications, there normally follows the product development phase. During this stage, a team normally consisting of other persons than researchers tries to develop a commercially viable product on the basis of the research results. Technology transfer as a process from research to industry is very complex. This is partly due to the fact that there are a great many expectations held by a variety of stakeholders, internal and external interests groups. These comprise researchers, universities and other organisations of higher learning, technology licensing organisations (either according to the national law or agreements) often so-called non-profit organisations, industrial companies that are using and/or financing the research projects, and external organisations such as external financing organisations (venture capitalists, support and funding organisations etc.). Research cooperation for industrial purposes has become international. Researchers in their work are crossing borders and taking part in various research projects in other countries than their home countries. For instance, a Finnish researcher has the possibility to work in another country, such as Sweden, China or Japan. Internet connections have made it easier for researchers to work globally. A researcher or an expert (or a group of researchers) is able to produce a patentable innovation or create a work protected by copyright during the course of his work in a company, university or any other organisation in Finland, USA, China or Japan. A Chinese university teacher can work in Finland in a research and development project at a Finnish university or company, and take part in a biological research project that can lead to a protected pharmaceutical product or a method leading to a pharmaceutical product. A Finnish researcher can make, or participate in making, a computerimplemented innovation in a research project in a Chinese or Japanese company. This report discusses different judicial problems concerning possible intellectual property rights in international joint research projects. The following questions concerning protecting and transferring of intellectual property rights are among those that can be identified: which country s law governs the relationship between the employee and the employer (company, university or a research organisation) (i.e. are questions of international private law involved)? who acquires intellectual property rights in international research projects? who are the rightholders originally? who gets the rights after the transfer, either according to a provision in the law or according to the agreements made between the parties to the research project? to what extent are these rights vested in different parties involved in the research activity? are the rights transferred directly according to a provision in the law (so-called transfer ex lege)? are the rights transferred through contracting and if so, in what way (oral agreements, written contracts)? Are there standardized contracts? are researchers in international technological research projects obliged to sign a ready-made 1

9 contract in order to transfer the rights as would normally be the case in the USA? what happens with the intellectual property rights when a research project is completed? Is the researcher entitled to take something with him/her or obliged to adher to a transfer or assignment according to the law or agreements? Laws and judicial principles varies in different parts of the world in this field. The USA has had its Bayh-Dole Act (653/1980) in force since 1980 and gathered considerable experience in this field, but whilst America is an interesting and noteworthy example, it has not been our focus here. 1 Also Japan has very advanced judicial framework (legislation) supporting technology transfer from research to the industry. The Japanese system will be described and evaluated later. There is a growing need to know about the judicial environment in this context and especially the details of the principles governing who has the power to decide about the exploitation of research results, especially if these lead to patentable innovations. In the current global market for innovations and especially in countries like China and Japan where the number of patents granted is extremely high, we can presume that the forms of exploitation are of some consequence. A particularly interesting related question concerns how contracting is normally done. As for the frequency of patents, there is a WIPO World Report from 2008 that shows a considerable increase in certain Asian countries and a considerable decrease in certain European countries filing of national patents. For example, in 2006, Japanese residents ( ) received the largest number of patents. Chinese had over The USA and Korea had around each. Finland and Sweden have experienced a considerable decrease in recent years (some hundred national applications each year only). 3 This trend can be partly, but only partly, explained by the fact that applicants from European countries are patenting through the European Patent Office in addition or instead of pure national patenting. This trend of using more international patenting routes holds for other applicants as well. Western companies are patenting more and more in Asian countries like China, India and Japan. With the patenting system these countries are nearly exploding with the dissemination of information from western technologies. This will have one important consequence: Asian countries will probably remain at the top of technological research and development the years to come. So research projects in Asia (or with an Asian connection) are mostly interesting when seen from the western companies, universities and research organisations point of view. Patents form a considerable basis for contracting when transferring technology. Put simply it is important to patent and important to license. It follows that it is essential to clarify and analyse the basics of patent protection, what is a patentable innovation, who gets the rights originally, what the rights consist of and what are the consequences for protection in the research environment. For judicial applications and research it is also important to clarify the basic concepts such as licensing and assignment, inventive step and other requirements. These basic concepts should not be neglected in specific cases. Here the focus is on technology transfer activities in the practical workings of the organisations. The report also considers how many complicated details in contracting are managed and administered, because this is essential for the formation of contracts on a practical level. The main purpose is to find out and describe the general judicial framework which determines the transfer of protected research results. 1 See Tekes Report 1/1998 by Kari Kankaala and Markku Lampola about Commercialization of Research Results in USA mechanisms and regulations (in Finnish with an English summary). Helsinki Between 1995 and 2005 there was an increase of 834% of domestic filings in China and non-domestic filings of 819%. during the same period. See Joseph Strauss, Is there a Global Warming of Patents? The journal of World Intellectual Property (2008) Vol 11, pp See 2

10 1.2 Purpose, scope and methods of the study The purpose of this study report is to give an overview of the legal framework in certain countries (Finland, China), especially concerning the intellectual property rights in research projects, and the legal framework for protecting and transferring intellectual property rights raised in connection to research activities which are carried out either at universities, industrial parks, research organisations or within start up companies. The aim is to concentrate on rights in research results (rightholders, transferees, powers to agree, division of rights, practice). A further aim is to identify the main problems and find out some practical guidance and information for the actors of interest groups in the field. Special emphasis is on patent rights, but copyright in computer software is also looked at. Research projects carried out by several persons/units in China, Japan and Finland will be taken into account (joint research projects) Special attention is also paid to judicial instrumental questions i.e. the questions relating to the contractual situations in relation to IPRs in research results (silent agreements, written agreements, the standardisation of agreements, main contents, main actors in the field etc.). As a basis for the research traditional legal material is used: but legislation, contracts and practice are also used. Applicable case law and legal writings have been also been used. The study also draws upon several field interviews with experts in the field coming from different kinds of institutions. 1.3 Object and research questions The object of the study are the legal environments as systems as a whole but especially also the legal norms that form and determine the environment on technology transfer in research projects. The following related questions are seen as relevant: how are research results, which can lead to patentable inventions, protected in respective countries (the patent law, trade secret law or copyright law), is there specific legislation in the field related to IPRs in general and specifically to patents in university research? who owns the patentable research results? who is able (authorised) to agree about the transfer of intellectual property rights in research results (e.g. the individual researcher, employer, university, organisation)? what are the effects of publishing the results of the research: is the researcher entitled always to publish the research results, or are there any restrictions (like an obstacle to patenting, because the invention must be absolutely new)? what are the consequences for the relationship between the parties, if there are several participants in the research project several inventors, transferees, companies or organisations? is there a co-ownership of rights and how are the rights then divided and managed (joint inventions, joint rights)? are there obligations to announce about the inventions made within the research projects? at what stage and to whom by whom, and within what time limits are the announcements (if any) made? is there an obligation to publish, e.g. in scientific journals? is there an obstacle to publish the research results (either in law or practice)? computer programs and copyrights in works of literature are they treated differently from patents and patent rights? 1.4 Research material As research material the laws and other judicial principles in respective countries case law and legal writing are included. As a geographical area, China is central to this report. Finnish law is used more as background material and as a framework for identifying the problems. The commissioner of the report, Tekes, has information and other support about the contractual prac- 3

11 tice from respective countries. Contractual practice has been the main focus of the field interviews conducted in Shanghai and Beijing. The interviews were carried out by Prof. Oesch and Mr. Ikävalko. 1.5 Methods and goals of the study In order to get information about the existing laws and systems around the exploitation of intellectual property rights on a practical level, several methods were used. First is the description and analysis of the legal framework for technology transfer. Governing laws and enforcement by authorities have been given some weight. Describing the contents of laws and regulations has been seen as important. Additionally, the enforcement level and agreements have been examined. Primarily the traditional judicial background (law texts, preparatory works, case law, contracts and literature) have been taken into account. Besides traditional judicial methods, field interviews have been done with experts from different companies, groups and organisations. This has been done in order to find out, what kind of contractual practice there exists, if any, in the area. The specific purpose has been to find out how the transfer of rights is carried out nowadays between the different stakeholders and parties. This clarifies to whom the rights originally belong and normally are granted and to whom these rights are transferred and how (in what forms, announcements, remuneration schemes are there any?). The commercialization procedures are in focus here. At the same time we must admit there can be a long way from identification and protection of technology to the commercial exploitation of an invention. This can be stated without even considering commercialization of ready-made products (which lies even more far away than commercialization of an invention). The level of the study has been a practical one t.i. to give information about the practice in the technology transfer sector in a specific environment and fulfill the need for the contracting for organisations and responsible persons (e.g. management personnel) in them. The method is not rigorously scientific in the sense that this report would cover and examine all the possible judicial problems and interpretations therein, although the scientific methods and basic principles are taken into account. Rather the aim has been to meet the needs of information about different judicial cultures and their interactions in the described area. 1.6 Intellectual Property Rights, Technology transfer and contracts The term intellectual property rights (IPR) covers both copyright and industrial property. IPRs in general are exclusive property rights for the benefit of the rightsholder. Exclusivity gives the original rightholder, inventor or creator a strong bargaining power in any negotiations concerning the utilization of rights. In a wider sense trade secrets and confidential information in business are also regarded to be a part of intellectual property. Copyright also protects computer programs which are to be held as literary works. Research results which are published in scientific journals in the form of articles are normally also to be regarded as works protected by copyright. Industrial property protects e.g. patents, utility models, designs and trademarks. In this report the general patent protection and the specific copyright protection for computer software are regarded as essential. The term transfer of technology covers various situations. Patent and know how licenses between a researcher and an organisation (e.g. a right holder and a company) are seen to be most important in this report. Additionally of course there are other important relations like universities-industry-relation. As for contract models there are not so many of them in international context. But in the area of business to business licensing, where companies are parties of a technology licensing contract, e.g. 4

12 ORGALIME s models for license agreements are one classic example ( Also the world business organisation called the International Chamber of Commerce (ICC) has during the last time been working with a Draft Model Contract on Technology Transfer. ICC Publication No 674. In this model agreement a package of transferred rights (know how, patents and copyright) is seen as more important than separate rights individually. The model covers the situation where a company (the licensor), which itself manufactures certain products, licenses to another company (the licensee) a global package of information, technical assistance, or any industrial property rights etc. necessary for enabling it to manufacture the contractual products to the quality standards of the licensor and with the licensor s technology. Draft Model deals with license agreements to manufacture not only transfer rights as such. The Draft Model does not deal specifically with research and development contracts. This is also a model like ORGALIME s meant for company company licensing, not e.g. between an individual researcher and an organisation. In this report the focus is on the relationship between a researcher (or a group of researchers) as a rightholder and the organisation administering the research and the intellectual property rights therein. So possible standardized researchers contracts would be more essential here, although in concrete situations the contract positions as a whole should be taken into account. The possible contents of researchers contracts and other technology transfer contracts are varying from country to country and from case to case. At the other end we can see the US Model in which a researcher transfers all transferable rights like copyrights and rights to obtain patents to the laboratory, organisation or university where she is employed. On the other hand a researcher in USA is in most cases entitled or granted a certain percentage of the respective rights. The contents and object of the transfer is dependent on the concrete fact, what kind of new contributions or innovations the original rightholder and licensor can offer. Anyway there are also similarities in various contracts, because the objects are often similar (IPRs or a part of them). Also the obligations such as non-disclosure, warranties and many others are of a similar nature. In business-to-business transfer the contractual framework is normally more detailed than in the relationship between an individual researcher and his organisation. 1.7 An ideal judicial framework for the promotion of technology transfer from research to industry? One may ask what kind of judicial environment is the best one to enhance the rapid applications from the research level to the industry. This is a judicial instrumental question to a large extent, and not one that can be answered in detail here. In any event, technology transfer is indeed a complex process where the subject matter and right holders (both original and derivative right holders) have to be identified and defined. It seems that at least on a general level the intellectual property rights must be somehow respected (because of international treaties and national laws). At the legislative level this means that there exists some kind of protection for both copyrights and patent rights for researchers and their organisations. This is now true in all of the countries that are mentioned here. Each of them have even ratified and are party to the latest international convention, TRIPS (WTO). This international agreement has raised the level of both international and national protection of intellectual property rights, t.i. between the states and on a national level (like the enforcement of rights). Secondly one may ask whether a general framework model law should be enacted according to the Japanese model. On the other hand, some countries have been working with their national IPR strategies. China has already adopted its national strategy in 2008, as Finland is still preparing the same kind of program document at the be- 5

13 ginning of 2009 and published it finally in march Thirdly, one may ask if a separate act concerning the transfer of intellectual property rights from the research, such as from university research to industry, should be enacted. Japan has enacted such legislation about ten years ago, Finland has a much newer act which has been in force about two years, and China is lacking legislation in this field. One of the pioneers in the area concerning the university research and intellectual property ownership and exploitation has been the US Bayh-Dole Act from as early as 1980, which has been mentioned above. The main principles and provisions according to the Association of University Technology Transfer Managers ( in this act are: Non-profits, including universities, and small businesses may elect to retain title to innovations developed under federally-funded research programs Universities are encouraged to collaborate with commercial concerns to promote the utilization of inventions arising from federal funding Universities are expected to file patents on inventions they elect to own Universities are expected to give licensing preference to small businesses The government retains a non-exclusive license to practice the patent throughout the world The government retains march-in rights. The Bayh-Dole Act is instrumental in encouraging universities to participate in technology transfer activities. Here we can see a more corporate-based approach to the problems on innovation politicial issues within academia. The goal, to encourage researchers to innovate and create or even innovate in order to get patentable inventions as results, is not mentioned in this listing An ideal agreement on definition and transfer of rights? There is no ideal agreement on transfer of intellectual property rights in international research collaboration agreements. The formation and contents of a contract are strongly dependent on the judicial environment in a certain country. The specific results of negotiations are determined case by case. A contract consists of the tasks and obligations of the parties. In particular, the tasks of the researchers should be specified in order to clarify the mutual positions and obligations. In contractual documents in technology transfer from research to industry the following aspects should be taken into account: to define the type of work the researchers are determined to do and to name what kind of results in the form of IPRs are expected to come from the project. After this there is a need to define the original rightholders in order to enhance the transfer activities and to make them as smooth as possible. The field of research can also have a different impact on the formation of contracts: in biotechnology and the pharmaceutical industry the circumstances differ from those in IT technology, and the contracting has different traditions and contents. Some important and essential elements of a possible agreement concerning research collaboration and intellectual property rights in an international and global context can be listed here. The main elements that should be included in a normal technology licensing contract are: Purpose and Background of the Contract Parties and Responsible Persons Negotiation and Forming of the Contract structure of the contract, language Non-disclosure agreements (NDA) separate agreements are included as provisions in the license agreement the scope of obligations the term of secrecy obligations possible sanctions for a breach of NDA Ownership of Intellectual Property Rights definition of Intellectual Property Rights within the context of the agreement (such as copyrights, patents and trade secrets like confidential technical know-how), a statement of the fact who is the original right holder according to the law applicable in the context of the agreement, 6

14 Ownership and Exploitation of Results questions on the ownership and exploitation of results arising out of the co-operation, in this Agreement especially the following questions should be settled: identification of parties: who is to be held as the original right holder of different specific rights? who is to be regarded as an assignee of rights or as a licensee of the assigned and transferred rights? related questions: who is to be regarded the owner of rights in improvements to the products/services? joint inventions who is entitled to administer, transfer or assign and under what conditions? which rights are to be licensed or assigned? the nature and scope of the license: the nature and characteristics of the licence (exclusive, simple, sole) what is the scope of the licence: development, manufacturing, distribution or other activities (material scope but also geographic and temporal scope) what are the limitations on activities? remuneration, taxation and publication: what are the remuneration schemes: royalty (calculation basis) or royalty-free? The basis for the calculation of the royalty? Taxation and transfer? obstacles to publication (i.e. limits on a researcher s right to publish) before a patent application has been filed? Termination and consequences of termination of a contract consequences of termination to utilization of intellectual property rights consequences of termination to other obligations that are not directly linked with IPRs, following the expiration of the licence? practical implications: what can a researcher do after the research project is completed (non-disclosure obligations, denial to work for possible rivals of the parties, can the researcher use his general experience gained in the research project etc.) Linked to the questions on intellectual property are warranties who warrants that he is able to grant a lawful licence to the necessary IPRs. Also clauses on settlement of disputes (arbitration or court procedure) and what laws are of importance here. An ideal structure of a research and development contract between organisations or an organisation and a researcher or group of researchers covers at least the following aspects: Title of the contract (R&D contract, transfer of licence in business to business) Aims of the contract (Preamble or Background) Parties Definitions Research field Contract period Obligations of the Licensor of the Licensee Intellectual Property (industrial property, copyright; including trade secrets) what a researcher has or owns; what is assigned to the commissioner or partially transferred to the commissioner or any other party? non-disclosure obligations transfer of know-how not allowed transfer of the contract or licensee s rights? Reports (laboratory diaries, interim and final reports) Publication of research results Warranties Royalties and other forms of compensation (dates of payments, amount determinations, method of payment) Termination and time scales (no commercial success, key researchers leave outside) after notice if there is a material breach of the contract immediate termination after insolvency of the other party Dispute settlement (arbitration or court) Applicable law Researcher s Contract (individual organisation) 7

15 2 Finland: technology transfer and rights in research results in Finland Olli Kotila and Rainer Oesch 2.1 Background and the legal framework of technology transfer In Finland the general interest in protecting the results of research and transferring them to industrial use has increased with the growing investments put into research and development. This is the case with publicly-funded scientific research where it is very important that the research results are actively transferred to the industry as society s tax revenue is used as a support to create economic and industrial progress. In the context of this report the results of research mainly mean inventions, in other words, solutions to technical problems. Depending on the specific nature of the technical invention, the main means to protect it in Finland are keeping the invention secret, a utility model and a patent. Copyright protects computer programs as literary works. In relation to technology transfer of rights in research results, Finland s legal framework consists of two main Acts: Act on Employee Inventions (656/1967) and Act on the Right in Inventions made at Higher Education Institutions (369/2006) also called the Act on Inventions made at Universities. In addition to that, the following Acts are also of importance here: the Patent Act (550/1967) with several amendments the Copyright Act (404/1961) with several amendments the Universities Act (645/1997) (which is under revision) Also some other laws such as laws on competition restrictions can be important here, but of primary importance to this research report is the Act on the Right in Inventions made at Higher Education Institutions. Patents Act It is provided for in section 1 of the Finnish Patents Act that anyone who has made an invention which is susceptible of industrial application, or his successor in title, shall be entitled, on application, to a patent and thereby to the exclusive right to exploit the invention commercially, in accordance with the Patents Act. Accordingly, a patent is essentially a right of prohibition; the right to the invention and its commercial exploitation belongs solely to the inventor or to anyone who has acquired the rights to the invention from the original inventor. In order to qualify for a patent an invention has to be new in relation to what is known before the filing date of a patent application and it also has to differ essentially therefrom. 4 Competition law One aspect of legislation that can easily be overlooked when considering technology transfers from publicly-funded research institutions to, for example, a private company or some other external party is competition law. This subject cannot be described in detail here but competition legislation is of special interest when the state has supported the research and the results are then trans- 4 Section 2 of the Finnish Patent Act. 8

16 ferred to private use. The competitors of the transferee may claim that the transferee has wrongly benefited from the research and the market situation has thus been distorted. In order to avoid these kinds complaints, special attention has to be paid to the integrity of the procedure applied when transferring the research results. One of the most important factors to be taken into consideration is the level of compensation the research institution receives for the transfer of the research results. It has to be close to fair market value. Decisions to transfer research results should be made on an arms length basis, that is, the parties need to be able to show that the transaction was conducted no differently than it would have been for an other party. The Finnish Act on the Rights on Employee Inventions (Nr. 527/1988 ) According to Finnish labour law, the main principle is that the employer owns all rights to the results of the employees working results. For example, a company owns the ready made physical products produced in its factory. But as for intellectual property rights the starting point is different: it is the original right holder (the inventor or creator), who owns the intellectual property rights according to the different intellectual property law). In order to clarify the contradictory position between labour law and intellectual property law the aim of the Right in Employee Inventions Act is to balance any conflict that may arise, say, between the Patents Act and the labour law. The Employment Contracts Act (55/2001) is general in its scope and applied to all working relationships except personnel of the institutions of higher education, such as researchers and lecturers. The Right in Employee Inventions Act obliges the inventor, working under an employment contract, to inform the employer of all patentable inventions. However, at the same time the employee/inventor still retains his/her position as the original inventor. After learning of the invention, the employer has, depending on what kind of connection there is between the inventor and the invention to the employer, either extensive or restricted rights to the invention. However, the employee/inventor is entitled to receive a reasonable compensation for the invention. In the event that the employer and the employee are not able to reach an agreement, a court of first instance will settle the dispute. 2.2 The Act on Inventions made at Universities in detail Background The Act on Inventions made at Universities is a new act (hereinafter also the Act ) which entered into force on (369/2006) The Act is applied to personnel of institutions of higher education. The definition of an institution of higher education is quite comprehensive since besides universities (defined in the Universities Act) it includes universities of applied sciences, the National Defence University and independent institutions under all these educational institutions. However, it is not always clear whether the Act on Inventions made at Universities or the Right in Employee Inventions Act is applicable as situations change and can get complicated. For example, a researcher can be employed by a private company owned by an institution of higher education (not an independent institution as meant in the Act) and then the Right in Employee Inventions Act is usually applicable. Thus the applicable law is personal in the sense that, for example, in a research group there may be both researchers to whom the Right in Employee Inventions Act is applied and on the other hand researchers to whom the Act on inventions made at Universities is applied. Or there are researchers who do not fall into either category, and are totally free inventors (they own their results). Furthermore, as a preamble it is very important to keep in mind that the Act does not cover any other intellectual property rights besides patents 9

17 (patentable inventions). Thus, for example, copyright to computer programs written while working at an institution of higher education is not covered by the Act. Depending on the type of research rights to computer programs may belong to the researcher or the academic institution. 5 Types of research In the Act a fundamental division is made between three types of research: open research, contract research and other research. The so-called open research is related to the freedom of science and is funded from the basic financing of the institution of higher education. The contract research is research where there is external financing involved and the research is carried out under the commission of an outside party (from outside the university). The financing for contract research is typically provided by private companies that want to use the results of the research in their business. The funding can partly or in its entirety come from an external source as there is no lower limit on how much external funding there has to be in order for the research to qualify as contract research. The third category of research is research in other situations than open or contracted research. The practical importance of this type of research is quite marginal. The division between open and contract research is now very important in the context of the Finnish law. The contract research can be compared to research done in the private sector in the sense that the institution of higher education has the primary right to take for itself the rights to the results of contract research. On the other hand, the results of open research belong to the researcher and the institution of higher education has only a secondary right to take and use these results if the researcher does not utilize them. Notice of invention and time limits The researcher has a legal obligation to inform the institution of higher education in writing when the researcher considers to have made a patentable invention. In order to facilitate the work of the institution of higher education the notice has to include the researcher s opinion on whether open or contract research is applicable and also adequate information on the invention so that the institution can evaluate the invention. This notification opens up the negotiations between the parties. There are several time limits set in the Act. For example, the researcher has to give notice about invention without delay. Upon receiving the notification, the institution of higher education has to respond to the researcher within two months, and it has six months to decide if it wants to take the rights to an invention made in a contract research project. In cases of so-called open research, the institution of higher education has a secondary right to take the rights to an invention if the researcher in question has not, in six months (calculated from the time of giving the notice of invention), made the invention public or informed the institution of higher education of his/her intention to utilize the invention. Invention made in contractual research Notice to the university University s notice to the inventor (2 months) The following procedure is adopted when the university is entitled to take the right to patent in contractual research: notice for example by using an invention disclosure form, the university has to inform within two months what it is entitled and able to do, university informs within four months what it will do with the invention, and the inventor has a right to fair remuneration this expires within ten years after the university issues notice. 5 Section 40 b of the Finnish Copyright Act. 10

18 2.3 Case law As the Act on Inventions made at Universities is only a few years old there is as yet no relevant case law. However, with regard to the Act on the Right in Employee Inventions, there have been some cases concerning fair remuneration. But so far there is no case law concerning the applications of the specific Act of University inventions. The Board for Employee Inventions of the Ministry of Trade and Industry is able to give a statement about the level of fair remuneration in cases of university inventions as well. The statement is an expert opinion, and can be further challenged in the courts. Practice All Finnish institutions of higher education are obliged to comply with the Act on Inventions made at Universities. Most have at least written invention guidelines. However, in practice, the policies applied differ between the institutions. The Act is fairly new and it takes time to adjust. Some of the differences are also attributable to the fact that not all institutions of higher education produce a significant amount of patentable inventions. Some, such as Helsinki University of Technology (HUT), have centralized the processing of all inventions from the very beginning of research agreement negotiations up to the commercialization of the (patented) innovation. HUT has a special department, called Otaniemi International Innovation Centre, whose task it is to provide innovation, patenting and technology transfer services to the whole institution, that is Helsinki University of Technology. It remains to be seen what will happen in the future when Helsinki University of Technology will be united with Helsinki School of Economics and the University of Art and Design Helsinki (This institution will be called Aalto University). Other institutions of higher education let faculties or even individual research project leaders decide what happens to the research results and there is little support available. One other possibility is to outsource the whole process of complying with the Act to an external partner who takes care of the whole patenting and technology transfer process after having been informed of an invention. An example of this is Licentia Oy LTD, owned by the University of Helsinki. Those institutions of higher education that have implemented invention policies and guidelines usually also have general terms and conditions of contract research and also standard agreements on the assignment of rights generated in research projects which receive funding from external sources. So, much depends on the policy applied at the institution in question. Some have written invention regulations or guidelines and follow a very detailed process; at other institutions the arrangements fall some way short of this. University of Helsinki has accepted following guidelines and models: Innovation programme of the University of Helsinki Invention guidelines Invention disclosure form Models for NDAs Models for Assignments for Rights The practical commercialization between the University of Helsinki and industry is supported by the university-owned company Licentia Ltd. They have approved and applied individually-formulated models for licensing agreements for their procedures but these are not published on the Internet. Licentia Oy LTD for activities, see Ownership of research results (innovation) When considering the exploitation of an invention the obvious first step is to decide whether there is a patentable invention. After this evaluation follows the clearing of rights related to the invention. The commercial exploitation of the invention is a long and cumbersome procedure involving several stages. Moreover, completing this process is not practically possible if there is confusion about who the rights to the invention originally belong to or to whom these rights are transferred either according to the relevant law or 11

19 contractual obligations. The transferee cannot take the risk of further developing and using an invention if there is any confusion as to the ownership of the rights. It is to be recommended that there is a clear division of rights between the stakeholders, e.g. 25 % university, 75 % company or 25 % university, 25 % inventor, 50 % company. Even co-ownership can create problems and is usually not advisable in the long run. Instead it is better if there is only one owner and other parties interested in the innovation are granted licences or other kinds of rights to use the invention. If the co-owners are not unanimous about the use (licensing or assignment) of the invention in toto, the dispute can easily be taken to court. Joint ownership can always cause problems, and an agreement about the division and management of rights is recommended. In general the original ownership of research results (patents or copyrights) belong to the inventor or the creator. As for patentable inventions the university s right is dependent on what kind of research the innovation is based on: contractual, open or other research. However, according to the new Act, if the patentable results originate from a project financed by an external partner (contractual research), for example a company, then the university is able to obtain the rights according to the particular procedure set out in the Act and described above. Any external partner of the contract research project or other transferee is usually granted a parallel, perpetual right to use the results of the research project in question in its business activities. However, the parties may also agree that the results of a contract research project are totally transferred to the external partner. If this total transfer of rights is known before the start of a contract research project, it has to be taken into account in the pricing of the research project. The external partner also usually has to pay to the institution of higher education the remunerations payable to the original inventors. Multiple researchers and the international dimension The ownership is much more complicated if there are one or two visiting or foreign researchers taking part in the research project. If the possibility of joint ownership is not taken into account in the research agreements, then the group should decide jointly about the utilization. It is very advisable to do as some institutions of higher education already do in Finland; they always draft written research agreements in advance before the contract research project commences. So as to head off some of the possible problems that could emerge at a later stage. Furthermore, all laboratories and other such places of research should keep or even are nowadays keeping logbooks or otherwise monitoring who enters the research facility and what kind of research each individual researcher is actually carrying out. It is not uncommon that during the technology transfer and commercialization phase of an invention, a Finnish institution of higher education receive demands from foreign or visiting researchers who claim they should be included in the distribution of any revenues generated by the invention. In Finland the researchers of a research project group are usually given similar contract terms at the same university. These are normally standard terms adopted by the individual universities and these model contracts are normally to be found on the web pages of the universities, also in English (such as the University of Helsinki and the University of Oulu). If there are only researchers from one institution involved, they usually decide among themselves to what extent each individual researcher is involved in the research project and how any remuneration will be divided. It is highly recommended to agree in advance between all researchers, foreign and domestic, on how the rights to the research will be divided. 12

20 2.5 Remuneration The researcher who has made a patented innovation during a contract research project is in Finland entitled to receive reasonable (or equitable) compensation for the innovation. In any case, the Act differs from the general Act on Employee Inventions. The remuneration according to the Act on University inventions is dependent on how much income the invention has generated. Remuneration is possible only at a relatively late stage, after the invention or even a product has been commercialized. The threshold here is stricter than in cases of normal employee inventions. Some academic institutions have special incentives in place in order to make sure that all inventions are correctly and in a timely manner reported to the institution of higher education. They may for example give to the researcher a fixed sum of money when the researcher makes an invention notification and further payments are made when a patent has actually been applied for and when the patent is finally granted. In most cases the services of the institution of higher education are free to the researchers. The institution will cover up to some point the very significant costs of filing and maintaining a patent application and a patent. The income sources of a patent department of an institution of higher education can be linked with the general budget of the institution of higher education, payments made by external research partners and also a percentage of the licensing royalties received from the commercialized innovations. However, these fees and other charges are usually quite modest and the researcher is left with a reasonable share of, for example, the royalty received from the commercial utilization of his of her invention. The break-down for example might be 40 to the researcher, 40 to the researcher s department/faculty and 20 to the costs of processing inventions. However, the exact amounts are usually negotiated case by case. 6 It is to be noted that the calculation of remuneration can become complicated in cases involving different kinds of researchers (freelancers, employed inventors and university personnel) taking part in one and the same joint research project. Their rights are determined by different provisions. 2.6 Pricing policy of technology transfer If Finnish society has to some extent supported the research, some kind of price has to be put on the technology transfer. In many cases valuation of technology is always a difficult task. In cases of technology transfer from the research to industry the method is often based on licence royalties, but royalty calculation as such already can become difficult. Sometimes in usual business more innovative solutions are possible, but can also be for example like giving shares in a new company, or a simple one-time monetary compensation or the possibility to research for a dissertation. The pricing is a question of evaluation. Other kinds of incentives than those mentioned here are also sometimes used. A new company can be given very reasonable terms for the starting phase but after the initial stage has passed the company has to begin paying normal royalties. 2.7 Confidentiality One practical problem is related to confidentiality issues and the publication of research results. General research agreements include confidentiality clauses. These confidentiality clauses are very similar to those found in any intellectual property rights related agreements. Sometimes the external partners (companies) would like the researchers to personally sign their own confidentiality agreements, a practice which is not recommended by the institutions of higher education. It can for example create problems when the researcher would like to publish the results of the research. Meanwhile the universities have become more aware of confidentiality matters and can require NDAs from their researchers. 6 Interview at Otaniemi International Innovation Centre

21 2.8 Publication of research results The publication of research results may involve serious problems. These relate to general freedom of expression of researchers and confidentiality needs of the parties involved. When research is funded by external partners, they would in general want to keep the results confidential as long as possible and at least until a patent application has been filed with the National Board of Patents and Registration of Finland. On the other hand, the researchers might wish to publish the results as soon as possible. This conflict is especially characteristic in the case of theses and dissertations. The research agreements used should (and do) in an explicit way address this issue. Usually it is provided in the agreements that all theses and dissertations prepared in connection with the research project are public documents. The researchers are given the right to publish their works as otherwise, for example, there would not be as much incentive to participate in the research project. Also one of the missions of the academic institutions is to promote (free) research and scientific and artistic education, 7 which to some extent requires that research results are published. However, the publication can be reasonably delayed if the patenting process so requires and actually there is a precise prohibition to publish in the Act on Inventions made at Universities University Inventions when the results of contract research are owned by the academic institution. 8 Also the external partner usually has the right to review and approve the publications based on the contract research project. The external partner, however, has to have reasonable grounds for withholding the consent to publish and furthermore the external partner cannot totally forbid the publication. Instead it has to explicitly indicate what kinds of changes are required in order for the consent to be granted. The parties will then together work to make the necessary changes. 2.9 Commercialization In Finland, institutions of higher education have several duties in accordance with the relevant legislation (such as the Universities Act), one of which is to promote co-operation between the institutions and society at large. 9 The institutions have no desire to collect for themselves large patent portfolios but would like to see the inventions commercialized in a way that is most beneficial to the academic institution, the researcher and to society in general. The employees of institutions of higher education who are responsible for the commercialisation processes do not personally benefit from the commercialisation of the research results or for example any royalties that licensing a patented innovation might generate. Usually it is decided in close co-operation with the researcher what is the best way to commercialize the research results, even though the institution of higher education might have the final say in the matter. The researcher has the best knowledge of the invention and his expertise is needed, for example, when the patent claims are being drafted and when the patent is finally utilized by industry. One of the main difficulties of commercialising the research results of institutions of higher education is that they may be, especially in the field of biotechnology, inventions at an early stage. Thus much further research and investment is required in order for them to become commercially viable. This considerably complicates the processes. Finding funding and interested partners for the joint research project may prove to be difficult. 10 The main routes for the exploitation of a patent in Finland are: the researcher establishes a company and becomes an entrepreneur himself, licences are granted to third parties or the whole patent is sold i.e. assigned to a third party. The method used depends on the field of research 7 Section 4 subsection 1 of the Universities Act. 8 Section 11 subsection 1 of the Act on Inventions made at Universities. 9 Section 4 subsection 1 of the Universities Act. 10 Lecture at the University of Helsinki, Charlotta Heikinaro Licentia

22 and the specific characteristics of each individual case. For example, as mentioned above, in the field of biotechnological research, results may be inventions of an early stage. This often means that the contribution of the researcher is usually required in the ongoing development of the innovation, which usually limits the potential for commercial exploitation or at least has to be taken into consideration. The intensity of technology transfer within the institutions of higher education cannot be measured solely according to the amount of filed national or EPO patent applications and granted national or EPO patents. This is due to the fact that in many cases the invention is transferred already at the application stage to an external partner (e.g. a company that has been involved as a funder from the beginning in a contracted research project) who then completes the patenting process. As mentioned above, the institutions of higher education do not want to collect large patent portfolios. They seem to be more interested in getting some hopefully successful key technologies into circulation. In some cases it is very easy and beneficial for the researcher to allow the employees of the institution of higher education (who are also subject to official liability for their actions) to take care of the commercialization process of even open research innovations. The services of the people responsible for the commercialization are now much in demand. The universities in Finland have either established special units inside their universities or formed outside organisations such as Licentia Ltd for the University of Helsinki or the Innovation Center in the Helsinki University of Technology. These entities have special knowledge and licensing skills. Their work also leaves the researcher free to pursue his or her academic aspirations Summary / Conclusions It is hoped that the new Act on University Inventions will improve the environment for innovations at the universities. At least the new Act has simplified the ownership questions so that in contractual research the universities are entitled to get the rights, and the concentration of rights make the transfer more efficient and simpler than before. In any event, the art of licensing and the assignments of rights is not an easy task for all the universities. The largest universities (Helsinki area) and universities with numerous contacts to international research (e.g. Oulu) have been at the forefront in adopting new internal guidelines and provisions. University of Helsinki has adopted both an Innovation Programme of the University of Helsinki , and Invention Guidelines (of the University of Helsinki). As for contract forms, there are several forms for agreements besides labour contracts, such as non-disclosure agreements, agreements on assignment of rights to the University of Helsinki. The University of Oulu has also published principles for innovations made at the University of Oulu. Normal procedure seems to be that first there is disclosure of the possible invention using a separate individual form for identification of the innovation. Then the researcher and the university agree on non-disclosure, transfer of rights normally in the form of the assignment, especially in cases of contractual research and often also in other situations. It is quite typical that if the technology transfer process has been taken seriously, the new Act on the Right in Inventions made at Higher Education Institutions did not bring with it any significant changes. As in the past, research agreements are 15

23 still signed before starting a contract research project. In these agreements it is agreed on relevant details of the research project such as rights to the research results, remuneration and the publication rights that should be dealt with. One of the main factors for this is that the new Act does not cover any other intellectual property rights besides patents. So, without an agreement, for example, copyright belongs solely to the researcher except the rights in computer programs created by the employees. The rights belong than to the employer, but there is a researcher exception, which means that it is for the benefit of researchers. Technology transfer from research to industry can become challenging and cumbersome, especially if there is no unanimous will (or preferably written agreements) about the transfer of rights and other obligations. But the climate for contracting seems to be activated, and actually there is a growing tendency to take IPRs into account. One can even speak about certain oversensitiveness in this respect. The licensing units around bigger universities seem to have more know-how about protection, exploitation and especially transfer activities than smaller universities. All the same, ongoing education in this field is seen as important, and also carried out by some of the research organisations, including funding organisations. Technology transfer too is quite difficult, if there is no unambiguous knowledge as to whom the rights to the research results belong. 16

24 3 The Rights in Research Results in China Liguo Zhang 3.1 The Legal Framework Regarding Scientific Research in China The Chinese legislative system Legislation by the National People s Congress (NPC) In deciding cases, Chinese courts rely on legislation enacted by the NPC, the State Council and Provincial congress. The laws made by the NPC are supreme in the whole legal system, and override legislation at any other level. State Council The State Council is the second-tier legislative body, which make administrative statutes. The administrative statutes specify the law made by the NPC or regulate some areas where there is no NPC legislation. Departments of the State Council Departments under the State Council make up the third level of the legislative. These departments may also make rules and regulations. Local administrative bodies apply these rules during their routine operations. Courts usually do not apply these rules to judge a case, but where necessary, they may make reference to these rules. Local Regulations The provincial and municipal people s congress is entitled to draft regulations to specify the legislation by the NPC and the State Council or to stipulate special issues that are not covered by the legislation by the NPC and the State Council. The local regulations enacted by provincial and municipal people s congress are binding; the court shall apply these regulations to judge any case that takes place in the territory of the province or municipality. However, in the field of intellectual property rights, there is very little if any such local regulation. Judicial Interpretation The Supreme Court makes judicial interpretations on law, which are more like statute than case decision. The judicial interpretations are binding on all the courts in China. International Treaty In China, the courts do not directly apply international treaty law to decide cases. Only after the contents in an international treaty are incorporated into national legislation, can the international treaty have a legally binding effect Legislation concerning intellectual property issues The Chinese legal system is similar to the civil law system in Europe. At the NPC level, the General Principles of Civil Law (1986) govern the general issues regarding any civil activities, including contract, property, patent, trademark, copyrights, tort and so on. However with only 156 clauses, the provisions in the General Principles of Civil Law (1986) are very simple. Certain special civil legislative instruments were drafted to specify the rules in the General Principles of Civil Law (1986), such as the Patent Law (1984), 17

25 the Copyright Law (1990), the Trademark Law (1988), the Contract Law (1999), the Property Law (2005) and so on. With respect to technological Research and Development, the ownership of the research results and the assignment of and licensing of IPR are covered by the Patent Law, Copyright Law, Trademark Law and Property Law and Contract Law. Certainly, there are a few special issues covered by some other legislation, for example business secrets are stipulated for in the Unfair Competition Law. The IP laws: The Trademark Law (adopted 1982, amended 2001) The Patent Law (adopted 1984, amended 2008) The Copyright Law (adopted 1990, amended 2001) The Computer Software Protection Regulation (adopted 2002) The Regulations for the Protection of New Varieties of Plants (adopted 1997) The General Principles of Civil Law (adopted 1987) The Contract Law (adopted 1999) The Property Law (adopted 2007) The Regulation for the Protection of Integrated Circuits (adopted 2001) The Science and Technology Promotion Law (adopted 1993, amended 2007) The Promotion of Commercialization of Scientific and Technological Achievements (adopted 1996) 3.2 Ownership of patents The Patent Law was first enacted in 1984, and has since undergone several amendments. The latest amendment was in It has been further clarified by the Implementing Regulations of the Patent Law of the PRC. The patent can be granted for an invention, utility model and design. In this report, only the invention patent is covered Patentable inventions General requirement for patentability The invention patent is granted for a new technical solution pertaining to a product, a process or improvement thereof. For it to be granted a patent, the invention must be new, involve an inventive step and be capable of industrial application. An invention is considered to be new if it does not form part of the state of the art, which comprise, before the date of filing, everything that have been available to the public both in China and abroad; and no patent application for the identical invention has been filed previously by any others with the China State Intellectual Property Office (SIPO). An invention is considered to involve an inventive step if it presents outstanding substantial features and notable improvement in the state of the art. (see secion 4 of the Guideline of Examination) Subject of matter of patentability Article 25 of the Patent Law enumerates five categories of technology that are not patentable. These are: Scientific discovery; Rules and methods for mental activities; Methods for the diagnosis or for the treatment of diseases; Animals and plants varieties; and Substances obtained by means of nuclear transformation. However, the process to produce animal and plant varieties is patentable. According to Article 5 of Patent Law, inventions which violate law, social morality, public interest are not patentable. In addition, while an invention relies on a genetic resource, if the attainment or utilization of the genetic resource which the invention relies on breaks a law or administrative 18

26 regulation, the invention is denied the granting of a patent Ownership of a patent In China, the patent owner does not have to be the inventor of the patented invention. Where an invention is the result of carrying out an employed job, or of commissioned agreement, ownership of the patent is determined by agreement between the inventor and its employer or by law. Inventor is the person who has made a creative contribution to the substantial features of the invention. Persons who are responsible only for organizing, facilitating the utilization of material and technical resources or conducting ancillary works are not the inventor. 12 In China, the inventors can only be natural persons rather than a company or any other institutions. 13 Inventors have the right to be named as such in the patent document Employee Invention Under Article 6 of the Patent Law, an employment invention is an invention made by the employee while performing the task assigned by the employer, or made by the employee primarily using the employer s facilities and technological resources such as funding, devices, spare parts, materials and undisclosed technical documents. In such cases, the right to apply for a patent remains with the employer. The employer shall own the patent application right, and if approved, the patent right. The inventions made while performing any task assigned by the employer comprise the invention that is completed in the course of performing their duties as employees; the invention that is completed while performing any task assigned by the employer to the employee which is out of the scope of the employee s normal duty; the invention that is completed within one year of the employees resignation, retirement, or change of job, and that is relevant to the employee s duty or task with the previous employer. 15 The employer may include a temporary employer. While an invention is made by an employee using the employer s material and technological resources, if an agreement between the employer and employee exists, that agreement applies. The patent owner of an employment invention shall award the inventor, and, upon exploitation of the patented invention, shall pay the inventor a reasonable remuneration based on the extent of and the economic benefits of exploitation of the patent Joint invention and commissioned invention For an invention jointly created by two or more entities or individuals, or created by an entity or an individual in performing a commission by others, the right to apply for patent belongs, unless otherwise agreed upon, to the entity or the individual that created, or jointly created the invention. After the application is approved, the applicants will be the patentee. 17 Regarding the exercise of a joint patent, unless otherwise agreed, each joint owner or joint applicant of a patent is entitled to exercise the patent respectively, or grant non-exclusive licence to exercise the patent. However, the royalties shall be allocated among all joint owners. With the exception of the abovementioned, however, other activities involved in exercising the joint patent shall be agreed by all joint patent owners Patent Law, 2000, sec Implementation Rules of the Patent Law, 2002, sec Ibid. 14 Patent Law, sec Implementation Rules of the Patent Law, sec Patent Law, sec Ibid., sec Ibid., sec

27 3.3 The Right to Publish Research Results According to the Copyright law (2001), foreigners works are protected by the law only if the country of the author has an agreement with the Chinese Government, or has joined a same international treaty with the Chinese government which defines the relevant copyright issues, or the work is first published in China. As China has signed the Berne Convention, WCT and WPPT, as well as joined the WTO, the protection of foreigners works whose country is a member of one of these treaties or organization is not a problem. If a work is created by two or more authors, the copyrights remain with the co-authors. If the joint work can be exploited separately, each author respectively owns copyrights to the part that the author has created. Exploiting such separated copyrights shall not infringe the whole copyrights in the work. 19 If the work cannot be separated, the exploitation of the work should be agreed upon by all the co-authors; in the event that such agreement cannot be reached, one shall not, without reasonable justification, prevent other authors from exploiting the work except assigning the work, the profit resulting from such exploitation should be allocated reasonably among all the co-authors. The copyrights in a work made in the course of employment, which is created by an individual to carry out the job assigned by a legal person or other institution (the employer), remains with the author; however the employer has priority over exploiting the work. Within two years after the work is finished, the author shall not, without the employer s permission, license others to exploit the work in the same way as its employer does. 20 However, with respect to some special employment works which embrace engineering designs, product designs, maps, software that the employer takes responsibility for, and that are completed on the employer s facilities, the copyrights in them remain with the employer. The author only has the right of authorship. 21 The ownership of copyrights in a commissioned work shall be agreed upon in a contract between the commissioning and the commissioned parties. In the absence of a contract or of an explicit agreement in the contract, the copyrights in such a work shall belong to the commissioned party. 22 The owner of the copyrights has the right to publish its work. However the entity where the author works may impose some limitations on the author, for example, not to publish a paper comprising patent data before the patent application is filed. 3.4 Ownership of Joint Developed Software in China In China, the ownership and protection of software is stipulated in Copyright Law (2001) and Regulations on Computer Software Protection (2002). Unless otherwise provided for in these Regulations, the copyrights of software belong to its developer. The natural person, legal entity or other organization whose name is indicated on the software shall, in the absence of proof to the contrary, be its developer. 23 Where software is developed jointly by two or more natural persons, legal entities or other organizations, the ownership of the copyrights shall be agreed upon in a written contract between the co-developers. Where, in the absence of a written contract or an explicit arrangement in the contract, if the joint software can be separated into independent parts and exploited separately, each co-developer may enjoy independent copyrights on the part which he or she has developed, but the 19 Copyright law, 2001, sec Ibid., sec Ibid. 22 Ibid., sec Regulations on Computer Software Protection, 2002, sec

28 exploitation of such copyrights shall not extend to the joint software as a whole. Where the joint software cannot be separated into independent parts and exploited separately, its copyrights are owned jointly by those co-developers and exploited under agreement. In the absence of such an agreement, any co-developer shall not prevent, without justification, the other(s) from exploiting the copyrights except the right of assignment; however, the profit resulting from exploiting the joint software shall be reasonably shared between all the co-developers. 24 Where software is developed on commission, the ownership of the copyrights shall be agreed upon in a written contract between the commissioning and the commissioned parties. In the absence of a written contract or an explicit arrangement in the contract, the copyrights shall be owned by the commissioned party. 25 Where software is developed under an assignment set by a state authority, the ownership and exploitation of its copyrights shall be stipulated in a project assignment document or in a contract. In the absence of an explicit stipulation in the project assignment document or the contract, the copyrights shall be owned by the legal entity or other organization that has taken on the assignment. 26 Where software is developed by a natural person employed in a legal entity or other organization, involving one of the following circumstances, the copyrights therein shall be owned by such legal entity or organization, which may reward the natural person for development of the software: 27 (1) The software is developed according to the development goal explicitly set for the developer s job; (2) The software is an anticipated or natural outcome of the duty carried out by the developer; (3) The software is developed mainly with the material and technical resources of the legal entity or other organization, such as funds, special equipment or unpublished special information, and the legal entity or other organization bear the liability for the software. 3.5 Technologies Assignment and Licensing in China Patents and the right to apply for a patent are assignable. However any assignment of patents or the right to apply for a patent to a foreigner, by a Chinese entity or individual, has to follow procedures laid down in the relevant legislations. 28 In the Administrative Regulations on Technologies Exportation and Importation (2001), technologies are classified into three categories: export prohibited, export restricted and export free. To assign or license the export-restricted technologies beyond Chinese territory, approval is needed; to assign or license the export-free technologies, the assignment contract or the license contract should be registered with a competent authority. 29 According to the Patent Law, if the owner of an invention which has been completed in China wants to first file patent application abroad, the owner should file an application for confidential review with the SIPO in advance. If the applicant fails to do so, the invention will be denied the granting of the patent in China Ibid., sec Ibid., sec Ibid., sec Ibid., sec Patent Law, sec Administrative regulations on technologies exportation and importation, 2001, sec. 32,33,34 30 Patent Law, sec

29 3.6 Policies Concerning Implementation of Hi-Tech And New Technologies in China To promote the technology advance and technology implementation, the Congress enacted the Science and Technology Progress Law (2007) and the Law on Promoting the Transformation of Scientific and Technological Achievements (1996). The laws encourage Chinese science and technology research institutions, universities, researchers, and other R&D organizations and undertakings to carry out international coperation and communication. 31 The laws also provide means to reward organization or individual that has signifcantly contributed to scientific and technological advance, 32 and establishing foundations to finance research and innovation activities, 33 and some tax exemption measures for certain R&D activities and technology transfer. 34 The patent, software, layout design of integrated circuits and new plant variety resulting from an R&D project supported by funding from government resource belong to the undertaker who carry out the project, except that involving national security, national interests, and significant public interests. 35 While patent, software, layout design of integrated and new plant variety resulting from an R&D project supported by funding from government resource belong to the undertaker that carry out the project, government may implement such research result for the purpose of national security, national interests, and significant public interests without compensation. If the right owner would assign such IPR or grant exclusive to a licensee beyond Chinese territory, approval by the project administration is needed. 36 Foreigners or foreign organizations may establish an R&D institution independently or establish a joint R&D institution with Chinese citizens or Chinese institutions. 37 Excellent foreign researchers who are doing R&D in China are given priority when applying for permanent residency in China Some Practical Aspects The foregoing has described the legal environment that stipulates ownership of research results. This section focuses on some practical issues regarding the enforcement of such rules Certain universities policies and rules regarding the ownership of research results We searched several Chinese universities websites to determine the university s policies and rules governing ownership and protection of research results in the university. However, only a few universities have published their IPR rules on the website, so our description and analysis will be based on this relatively scant. University R&D Administration Most of Chinese Universities boast a scientific and research department (in Chinese Keyanchu or Kejichu ) which is responsible for all the administrative details of research projects and results. 31 Science and technology advance law, 2007, sec Ibid., sec Ibid., sec Ibid., sec Ibid., sec Ibid., sec Ibid., sec Ibid., sec

30 University internal rules governing research results Some universities have published some rules that stipulate the ownership and application procedure regarding the research results produced at the universities. The first question to be answered is whether these internal rules have a binding effect on the researchers at the university and joint researchers from beyond the university. These internal rules are valid only when they are not in conflict with the national law and they are made by due process. Typically these rules just reiterated in detail and detailed the provisions in the national laws, and specified the administrative procedures at the university. For example, the IPR protection and administration rules of Nanjing University stipulated issues such as: who will be covered by the rules? What kind of IPR are covered by the rules? Which office is responsible for the IPR administration at the University? What is the internal ratified procedure to apply for a patent? What kind of research result should belong to the University? How should the researchers and postdoc personnel comply with the rules, rewards and punitive measures etc.? So, the researchers and partners that intend to establish a joint research relationship with a Chinese university should know if the university has internal rules governing research results and if these rules apply to the joint research project. If one party is not willing to be bound by the rules, they should try to make a written agreement explicitly excluding the application of such rules to the joint research project Contract Although the laws stipulate the ownership of patent and other IPR, such ownership is usually allowed to be changed by agreement between parties. So, to enter into an agreement in advance governing ownership of patent and other IPR arising from joint research activities is an effective way to avoid, or at least minimize disputes. Without such an agreement, the law will automatically apply to determine the ownership. The laws regarding technological contracts Chapter 18 (Article ) of Contract law stipulates technological contract issues, specifically technology R&D contracts, technology transfer contracts, technology consultant contracts, and technology service contracts. According to Contract law, the contents of a technology contract are determined by contract parties. Usually a technology contract may embrace the following provisions: the name of the project; content, scope and requirements of the subject matter; schedule, progress, period, venue, territory and means for realising the contract; confidential information; the allocation of risk; ownership and profit share of technology; the criteria and method of examination and acceptance; price, remuneration or expense and payment thereof; liquidated damages; dispute resolution. 39 The Ministry of Science and Technology of the People Republic of China has made some standard contracts regarding technology R&D and transfer, which can be found on the Ministry website ( However those standard contracts are not binding, contract parties may feel free to choose those standard contracts or make contract provisions by themselves. Furthermore, in China, a contract can be in writing, oral or involving other formalities. Parties may feel free to choose among those formalities when entering the contract. However, laws or administrative regulations may require that a contract be in writing, or the parties to a contract may agree that the binding contract should be in writing. A written contract includes the normal agreements in writing, as well as letters, and electronic documents. 40 Nonetheless, some laws and regulations may require approval or registration of a contract, and the contract is not valid until the ap- 39 Contract law, 1999, sec

31 proval or registration is completed; or the contract is valid, but the property rights stipulated in the contract are not transferred until the registration is completed. 41 Is the Chinese university qualified to sign a contract? In China, an organization s competence to sign a contract depends on whether it has legal personality. According to Chinese Higher Education Law (1998), the higher education institutions enjoy legal personality. Hence, in China, universities and colleges are competent to sign a contract. However, since departments or faculties of a university do not have legal personality, they can sign a contract only if they get the authorization from the university, which will be responsible for the enforcement of the contract in the event that the departments or faculties fail to meet the contract obligations. The legal effect of MOU and NDA in China A memorandum of Understanding in China is not typically a kind of contract, since it does not establish civil rights and obligations for the signatory parties, hence it does not have legal binding effect. 42 However, if a document boes by the name of Memorandum of Understanding, its content and formality matches the requirement of forming a contract; it is actually a legal contract no matter what title it uses. In some cases, even though the memorandum of understanding is not a contract, breaching the memorandum of understanding may constitute culpa in contrahendo. 43 A non-disclosure agreement usually establishes civil obligation for both parties, and breaching the agreement may raise the contract liability. In addition, according to China s Unfair Competition law, only if the holder of secret information has taken appropriate steps to safeguard the confidentiality of that information, can such information be deemed a legal protectable business secret. Therefore, a NDA may serve as evidence that the holder of the business secret has taken measures to protect the confidentiality of such a secret Some evidence rules relating to IPR disputes In the event of a dispute, the burden of proof is on the parties to support their claims. 44 According to the Supreme Court Evidence Regulation for Civil Actions, usually a plaintiff bears the burden to prove its claims. However, in certain exceptional circumstances, a defendant may have to prove its non-obligation, for example in infringement of process patents cases. So, during the process of negotiation and carrying out joint research projects, parties should keep any relevant documents which might constitute important evidence in case legal disputes arise Private international law issues According to Art.126 of the Contract law, parties to a contract which involves foreign elements may choose the applied law regarding the disputes resulting from the contract, unless otherwise provided by law. Where parties do not make the choice, the laws of the country that are in the most significant relationship with the contract shall apply. Thus, if joint research activities take place in China, the court may assume the Chinese laws are in the significant relationship with the joint R&D contract in question when parties did not make a choice. So, in this case, if the parties would exclude the application of Chinese law, they should make an explicit agreement in the contract, otherwise the Chinese law will be applied. 40 Ibid., sec. 10, Interpretation on Contract Law, 19/1999, Supreme People s Court of China. 42 Ibid., sec Ibid., sec Civil procedure law, 2007, sec

32 The parties to a contract may choose arbitration or litigation to resolve disputes resulting from the contract. If the parties choose arbitration, litigation will be excluded. While the parties would resolve dispute through litigation, they can choose which court is competent to hear cases, however. According to Chinese Civil Procedure law, the parties to a contract may choose a court that locates at: one party s domicile, or the contract performance venue, or the contract signature venue, or the subject matter venue. If there is no agreement on the competent court, the court located at the defendant s domicile or the contract performance venue will be competent to hear cases Conclusion The Chinese authorities encourage Chinese and foreigner to enter into joint research activities. Patent law, copyright law, and software protection regulations clearly define ownership of joint and commissioned research results, although, in most cases these rules can be excluded by agreement. Therefore it is very important that the joint research parties enter into a contract to define rights and obligations regarding allocation of research results in advance. Since most Chinese universities and research institutions have their internal rules governing research issues, foreign researchers should know how these rules may apply to them before they start a research project. Moreover these rules may be excluded by agreement. When negotiating such an agreement between foreign researchers or a foreign university and Chinese university, the foreign partner should be aware if there are special agreements between the Chinese partner and the financial resource provider, since such special agreements may define ownership of research resulting from the project. The agreement between Chinese universities and foreign partners must not conflict with the compulsory rules in Chinese law, which can not be excluded by agreement; otherwise the agreement, or part of the agreement, will be invalid, and the compulsory rules in law will prevail. The foreign partners who would like to share research results and exploit them outside of China has to make it clear before they commence a research project whether the target research result belongs to the category in which the technologies are exportable according to relevant Chinese law. 45 Ibid., sec. 24,25. 25

33 Appendix 1. The process of applying a domestic patent at Fudan University. (Source: Fudan University website: accessed in October 2008) Project researchers finished an invention The inventors assess if the invention fulfills the patent requirements: novelty, inventive step and industrial application The inventors place a request with the IPR office of the University Scientific and Research department to apply for patent, and submit the required technical documents The IPR office invites inventors to jointly evaluate the possibility of getting patent in its economic, legal, and technological aspects. If necessary, the inventor may be requested to submit a relevant documents search report Decide what type of patent to apply for, determine the rank of the inventors; in the case of joint invention with others, to determine the rank of joint applicants The University authorizes a patent agency to prepare the patent application documents The inventors review and conclude the application documents The patent agency files the patent application with SIPO and handle all the application proceedings After the patent is granted, the patent certificates and documents are sent to the University archives The inventors apply with the University for the funding to cover the patent application and maintenance. The IPR office applies with local authority for the financial support for the patent application 26

34 Field Interviews China Oesch and Ikävalko; November December 2008 People at following institutions, universities, research institutes, authorities and private entities were interviewed: Shanghai Shanghai Intellectual Property Service Center, Vice Director Xu Wei Hua, Deputy Manager Viola Shao, IP Promotion Manager Sheng Xia Ning, Shanghai Supreme People s Court, Deputy Chief Judge Zhu Dan, Judge Wang Jing Intellectual Property Administration, Shanghai Office, Deputy Director Yan Rui Fudan University, Division of Science and Technology, Research & IP Office, Deputy Chief Li Gao Ping, Professor LL.D. Zhang Naigen, Ph.D. Student of International law Yang Jian Feng Beijing China Beijing Equity Exchange, IPR Transfer Center, Director Asssistant Zeng Yun Chinese Academy of Social Science, Intellectual Property Law Center, Director Professor Mingde Li, Professor Dr, Guan Yuing, Ph.D. He Yuodong EU Delegation in China, Thomas Pattloch, Intellectual Property Officer, Trade and Investment Section, Center for Intellectual Property Rights Studies (CIPRS) at China University of Political Science and Law (CUPL), Professor Chu Zhang, Dr. Ted Xu, Peking University, Professor Zheng Shengli and Professor Zhang Ming from PU R&D Office, Chief Division for IP, Office of Science and Technology Development, Gu Qiulan, PU and OSTD. Discussion China China has no specific legislation concerning the transfer of technology from research to industry. General principles of contract law apply. Hence the contractual level is of utmost importance when determining to whom the IPRs is vested and under what conditions the technology can be transferred. No general conclusions can be drawn on the question of how the contracts should be made except a written agreement following all the formalities required by the law and recommendations about administrative practice. There were different approaches towards the possibility of licensing and assigning state-owned property. In earlier times the transfer of state property was not possible or was only possible with strict requirements. However, the Chinese Patent Act allows both licensing and assignments. Contractual practice in China is now developing. The focus of the courts so far has been very much on cases of enforcement of IPRs, not so much on utilisation of intellectual property. The same is true about the research. However, 27

35 the general climate is changing, and more attention is given to utilisation, agreements on IPRs etc. Already the 2008 national strategy is a symptom of this change. In conclusion, there are two important things to be noted in resent Chinese developments from the last time: Firstly, the amendments to the Chinese patent law were passed on December 27, 2008 as explained above (no English version available so far), and secondly, the National Intellectual Property Strategy of China was issued by the State Council of the People s Republic of China on June 5, In national strategy, the benefits of utilising IPRs and the increased importance of this activity are underlined. In particular, enterprises are to be encouraged to realize the market value of their IPRs through rights transferring, licensing, pledging or other means. In national strategy, the following measures are held to be essential here: 2. Encouraging the Commercialisation and Utilisation of IPRs (41) Guide more innovative elements towards enterprises, support the commercialisation of innovations made by higher education institutions and research institutes to enterprises, stimulate the application and industrialisation of intellectual property in enterprises, and shorten the time for applying it in industrial production. We need to launch various kinds of pilot or demonstration projects for intellectual property, and to improve the overall capacity to utilize intellectual property and handle competition in intellectual property. (42) Encourage and support market entities to improve their management systems for technological data and trade secrets, and to establish a value assessment, a statistics and an auditing system for intellectual property. They are also encouraged to work out an information search system for intellectual property and an early-warning system for major events, and improve the system for the administration of intellectual property in foreign co-operation. (43) Encourage market entities to actively respond to intellectual property infringements and lawsuits in accordance with the law, and to improve their capacity for handling intellectual property disputes. 28

36 Tekes Reviews in English 259/2009 Technology Transfer of Research Results Protected by Intellectual Property: Finland and China. Rainer Oesch. 28 p. 254/2009 Evaluation of Bioprocessing Expertise in Finland. Colja Laane. 22 p. 242/2008 Foresight for Our Future Society Cooperative project between NISTEP (Japan) and Tekes (Finland). Mikko Syrjänen, Yuko Ito and Eija Ahola (editors). 59 p. 241/2008 FinNano Programme Intermediate Evaluation. Pekka Koponen, Juho-Kusti Kajander and Matti Kuusisto. 20 p. 239/2008 BioRefine Programme Yearbook Eija Alakangas & Tuula Mäkinen, eds. 130 p. 236/2008 Major challenges for the governance of national research and innovation policies in small European countries. Mari Hjelt, Pim den Hertog, Robbin te Velde, Mikko Syrjänen and Paavo-Petri Ahonen. 65 p. 232/2008 Future of Enterprise Mobile Devices From Tornado Age through Value Mess onwards to Mobile Things That Think. J. Kotovirta and M. Nurmela. 19 p. 231/2008 Mobile Enterprise Applications and Business Models. 24 p. 228/2008 MASI Technology Programme Yearbook /2008 Social challenges as the basis for foresight Cooperative project between NISTEP (Japan) and Tekes (Finland). Mikko Syrjänen and Alina Pathan (Eds.) 127 p. 224/2008 Nanosafety in Finland a summary report. Tuomas Raivio, Piia Pessala, Mari Hjelt, Pirita Mikkanen, Hanna Kahelin. 17 p. 219/2007 VICTA Virtual ICT Accelerator. Final Report. 25 p. 214/2007 Universities, industrial innovation and regional economic development. A report of local innovation systems. Editors: Richard K. Lester and Markku Sotarauta. 231 p. 213/2007 Trends and Opportunities in Packaging R&D in the US. Niels Hauffe, NWV Market Discovery, Inc. 54 p. 212/2007 Consumer Packaging in Poland, Czech Republic and in Moscow Area. 50 p. 207/2007 MASI Technology Programme Yearbook Eija Alakangas & Pekka Taskinen (eds.) 206/2007 Update of GIGA-VAMOS Technology Roadmap. Mikael von Hertzen, Juhani Timonen, Pekka Huuhka. 93 p. 205/2007 Seizing the White Space: Innovative Service Concepts in the United States. Peer Insight. 76 p. Subscriptions:

37 Technology Transfer of Research Results Protected by Intellectual Property: Finland and China Tekes Review 259/2009 The Finnish Funding Agency for Technology and Innovation Kyllikinportti 2, P.O. Box 69, FIN Helsinki, Finland Tel , Fax , tekes@tekes.fi July 2009 ISSN ISBN