IP Focus: Issues with R&D centres

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clpstaff &clp articles

In 2000 China had 100 foreign R&D centres. That number now stands at 1600 and is set to increase. Foreign companies need to understand the IP challenges in operating a R&D centre

As Chinese customers call for higher supply of products and services, multinational companies and SMEs need to develop tailor-made solutions to cater for this ever-growing market. From pharmaceutical to automotive, from textile to machinery, product creation moves closer to its new end-users. This also reflects in more R&D centres being set-up in China, either as a wholly foreign-owned enterprise or as a joint-venture with a PRC shareholder. R&D activities of foreign companies enter the radar of PRC laws. IP-related issues shall therefore be considered now from a PRC law perspective.

Invention ownership

From a legal perspective, this is probably the main issue for foreign investors. In practice, R&D activities are normally carried out by researchers hired through an employment agreement. The PRC Patent Law (中华人民共和国专利法) and the Implementing Rules for the PRC Patent Law (中华人民共和国专利法实施细则) grant to the employer the ownership of the invention as long as this is a service-invention, which is defined as the invention having been accomplished:

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