New draft rule on patent rewards draws support

A draft of the regulation of service invention recently released by the State Council's Legislative Affairs to gather public opinion has triggered much discussion over the financial payments awarded to inventors.

The proposed regulations, which cover patents, new plant varieties, integrated circuit designs and technical knowledge, provide several options for financial rewards for inventions in case agreements between inventor and employee are absent.

In the draft, a company employee responsible for an invention will receive twice their monthly salary from the employer once the innovation receives an invention patent or a new plant variety. Once the service invention has been commercialized or industrialized, the employee will then receive at least 5 percent of the annual profit or at least 0.5 percent of the product's annual sales.

The regulation draft emphasizes the priority given to contracts between inventors and their employers, said Yang Wu, president of the All-China Patent Attorneys Association, at a forum on intellectual property in late April.

Even for existing contracts, if the reward agreed upon is much lower than the options as stated in regulations, a court can rule whether a contract shows "obvious unjustness", Yang said.

Yan Xin, director of Huawei Technologies' intellectual property division in Beijing, pointed to a Shanghai court ruling at the end of 2014 in which the judges invalidated a contract because of the wide difference between the reward agreed upon and regulations governing patent rewards.

Under such a circumstance, "whether a contract is binding is a common concern in the industry", Yan said.

"A lack of steady validity for an agreement will cause anxiety over related contracts in businesses."

As both a campaigner for China's innovation-driven development and a beneficiary of the nation's patent system, Huawei has invested at least 10 percent of its sales into research and development, he said.

It spent 40 billion yuan ($6.44 billion) on R&D in 2014. Over the past decade, total R&D expenditure has surpassed 190 billion yuan, he said.

The heavy investment has paid off - thousands of its intellectual property rights have been generated worldwide annually, he said.

To spur innovation in employees, Huawei has designed various remuneration systems in different countries for its domestic and overseas operations, he noted.

"Inventors and employers have common interests," Yan said. "They have mutually beneficial relations, rather than incompatible ones like fire and water."

Song Jianhu, director of the State Intellectual Property Office's law and treaty department, agreed with Yan.

"In terms of innovation, inventors and companies are mutually dependant on each other. We have considered a balance between the interest of companies and that of inventors," Song said.

The concept of a service invention is not new in China - the 1984 edition of Patent Law has related regulations, she added.

Yet the work on drafting the regulation on service invention began in 2010 when China released its outline for the national long- and middle-term professional development plan.

The regulations under discussion provide insight into the increasing value of professionals, analysts said.

"We can see that the idea behind the legislation is tilting in favor of inventors' interests," said Yang, the president of the All-China Patent Attorneys Association.

"I believe it helps inspire tech company's employees to make innovations, which is in line with the country's goal of promoting inventions and encouraging innovation," he said.

The new draft will have a greater impact on large corporations, which by way of their sheer size, will likely have a higher number of inventions and thus, a greater amount of financial rewards to dole out.

Yan at Huawei said he believes financial rewards as stated in the draft rule are high compared with what judges would likely hand down in compensation cases in court.

He cited an infringement compensation survey conducted by the Zhongnan University of Economics and Law that found that 97.25 percent of infringements resorted to legal proceedings and granted an average of 80,000 yuan in compensation between 2008 and 2012 in China.

The average compensation was $4.9 million in the United States from 2007 to 2012, according to a third-party report, he said.

"If we could also be granted such a high compensation for damage in court, none would consider the suggested rewards in the draft excessive."