Who shall be the Right Owner of the Service Invention Invented by the Personnel Dispatched by Affiliates?

A Japanese Company M appointed Mr. A to serve as the head of the R&D department of its subsidiary in China. Just few months later, Mr. A created a significant invention. Company M and its subsidiary had different opinions on the ownership of this invention, the amount of the remuneration, and the payer.

Article 6 of the “Patent Law” stipulates that a service invention is an invention completed by an employee in the course of performing duties for the employer or completed by substantially using the material and technical conditions of the employer. The employer shall have the rights to apply for patent for a service invention; upon approval of the application, the employer shall be the patentee. In the above case, the problem is who should be deemed as the “employer”.

Article 12 of the “Implementation Regulations for the Patent Law” stipulates that the employer referred to in Article 6 of the Patent Law shall include temporary workplace. Regarding the scope of the “temporary workplace”, from the perspective of judicial practice, it could be determined based on an employment relationship, or a temporary service relationship on specific tasks, such as (2017) Jing 73 Min Chu No. 1588, and (2017) Hu 73 Min Chu No. 350. In other words, whether the personnel dispatched by affiliates has signed an employment contract with the domestic subsidiary is not the only element on identifying the ownership of the service invention.

The key element is the duties regarding the invention, and the material and technical conditions (e.g. funds, equipment, parts and components, raw materials, or technical materials not disclosed to the public and etc.) used in creating the invention. In order to avoid the dispute like Company M’s case, it is recommended to make an agreement on the ownership of the service invention in advance.

The agreement shall stipulate the ownership, and it would be better to stipulate the issues related to the rewards and remuneration, such as the amount and payer. In addition, it is highly recommended to obtain the confirmation of the personnel. According to Article 78 of the “Implementation Regulations for the Patent Law”, where an organization which has been granted has not agreed with the inventor or designer on the issues related to remuneration, the remuneration shall be equal to a certain percentage of the organization’s business profit or royalties. If the personnel had signed an employment contract with the domestic subsidiary, both parties agreed that the service invention shall belong to the oversea party, but failed to agree on the rewards and remuneration, then the judicial departments would likely to support the personnel’s claim on demanding rewards and remuneration related to the service invention. The typical case is the “3M” service invention case, the court holds that, “according to the law, after the implementation of a patent, the unit shall pay a reasonable remuneration to the inventor based on the scope of implementation and economic benefits. In this case, 3M company and its affiliates have signed an agreement, and 3M Innovation Company is authorized to applied for and obtained the relevant patent right. However, the provisions on remuneration to inventors in the “Patent Law” is intended to guarantee the inventor’s right to obtain reasonable remuneration of labor, and this right should not be harmed by the internal agreement among the multinational enterprises. Therefore, 3M China is Weifeng Zhang’s employer, even though it is not the patentee of the invention involved, it still shall pay the remuneration for service inventions.”