Session 2: Essential IP Knowledge to Protect your Technology in China Dr. Martin Seybold Kanzlei Dr. Seybold, Beijing
Dr. Martin Seybold Kanzlei Dr. Seybold, Beijing Founder: Kanzlei Dr. Seybold - legal consultancy in Beijing since 2005 Before: Legal Counsel at Headquarters of Fraunhofer-Gesellschaft, Europe s biggest institution for applied research Focus on structuring of China businesses for European companies and org anisations Specialisation in IP strategies and IPR protection Intellectual Property Expert at the China IPR SME Helpdesk
Agenda How to manage technology transfers Different structures for technology transfers Specific risks related to technology transfers and how to manage them Precautions against unwanted loss of technology and IPR
Regulations of the People's Republic of China on Administration of Import and Export of Technologies, Effective since January 1, 2002 Import and export of technologies in these regulations refer to the transfer of technologies from outside of the People's Republic of China ( PRC ) into or out of the PRC through foreign trade, investment, or economic or technological cooperation. Such transfer includes assignment of patent rights or rights to apply for patents, licensing of rights to implement patents, assignment of technical know-how, technical service etc. Admin Mesasure, dated March 1 2009, states: and other contracts concerning technology import and export. Very wide definition, as Contract Law states: A technology contract is a contract the parties conclude for establishing their rights and obligations in respect of the development or transfer of technology, or in respect of technical consulting or service.
Basic Differentiation Direct/immediate effects through technology transfer Validity of contract Transfer of money Indirect consequences for your IP ownership of IP IP brought in Joint IP, improvements new developments background IP: IP brought in foreground IP: IP derived / generated through a project Specific dangers for your IP: Construction industry: copies of engineering drawings/blueprints Public procurement: often transfer of technology to Chinese co-operation partner pre-conditi on Chinese certifications: often disclosure of extensive know-how to Chinese inspections, even inspection of facilities in Europe.
Intermediate result There is no IP protection without knowing your IP You should know what IP you have You should know which IP you bring in and how you bring it in You should know how your IP is protected in China Technical know-how and business know-how Even better: You already know the outcome of your intended technology transfer Easy when service/product is defined, difficult in case of research co-operation See it before you do it
Different structures Overview: Three different structures, from a technology transfer to China point of view - 1. Contractual Technology Transfer 2. Transfer into Joint Venture (JV) (also now: Foreign Invested Partnership) 3. Transfer into Wholly Foreign Owned Enterprise (WFOE)
Contractual Technology Transfer Different kinds: such as: Licensing of IP, Assignments of IPR, Consultancy (!), Research Co-operations (see also Contact Law) Biggest issue here: No technology import license, no money! Your Contract partner needs to be a Technology Transfer Importer even if there is only consultancy involved Advice: Check your contract concerning technology transfer issues before signing, including tax issues and agent fees Open field to make your contract void. Choice of law may help, but be careful, Chinese regulations might still apply Don t forget to clarify with your contract partner how far the transferred technology will be used. Example: Delivery of prototype what about licenses in case the prototype becomes a product? What about the protection of the generated IP Rights of the prototype? Right of use is one thing, ht to register the IP in China is another. rig
Technology Transfer through JVs Preliminary remark: Setting up a JV can be useful to take advantage of the local partner s contacts or existing facilities, but there will be more IP risk involved because you will have less control over your IP assets. Biggest issue here: Flow of know-how to your JV partner. Often pulling in different directions, rather than rowing in the same direction Possible precautions: Black box strategies (to be covered in the next sess ion), careful management of own know-how, non-competition clauses It is the purpose of a JV to have a joint IP
Technology Transfer through ow n WFOE Even if technically speaking it is technology transfer, the above stated issues are not very important here. If necessary, there are different means to transfer money, validity of a technology transfer contract is usually not an issue. Biggest issues here: Unwanted loss of IP through employees Registration of your IP and registrations of your IP by Chinese companies Solutions: Non-disclosure agreements (NDAs), and non-competition clauses with your employees (but be careful with labour law) Don t forget IP protection when entering the market Make registration of your IP in China an issue when coming to China, don t wait un til it is too late
Lessons Learnt Your homework: Accumulate knowledge on the different possible technology transfer structures in China; Be aware of your own IP portfolio and the specific dangers deriving from it; Identify and manage the key assets that make your company competitive; File for protection of your IPR in China in time: patents, trademarks, copyrights, domain names. Use the system apply to authorities; Take necessary actions against infringements; Build a network with other companies in your sector; Involve your IP expert in time. Get specific IP expertise for your intended technology transfer before you sign any contract.
Q & A Dr. Martin Seybold Kanzlei Dr. Seybold, Beijing Tel: +86 / (0)10 6590 6045 Mobile: +86 / 136 9914 1584 Email: m.seybold@seybold-partner.com www.china-anwalt.com