Licensing and IP Transaction
Group Leader: Hongyi Jiang
Tel: +86 10 8525 3366
In 2010, the Supreme Court issued its final decision on a patent infringement case involving Fuji of Japan Water Industries, Ltd., regarding the transfer of a non-patented technology to a Chinese company in China. The ruling found that the transferee's implementation of the technology infringed on the patent of another Chinese company. Consequently, Fuji of Japan was ordered to compensate the patent owner for more than RMB 50 million.
The case illustrates the huge infringement risk that can occur in cross-border patent licensing and non-patent technology transfers between Chinese and non-Chinese companies. Concerns of foreign companies have grown exponentially in recent years since many are engaged in cross-border technology trade with Chinese companies.
"Regulations on Technology Import and Export Administration of the People's Republic of China" are mandatorily applied to the cross-border technology trade. Article 24 of that document states, "the technology transferor to a technology import contract shall ensure that he or it is the legitimate owner of the technology supplied or one who has the right to assign or license the technology …Where the transferee to a technology import contract infringes another person's lawful rights and interests by using the technology supplied by the transferor, transferor party shall be found liable therefore."
In keeping with the legal provisions of mandatory application, it seems that foreign companies exporting technology to China cannot share with their Chinese counterparties or be exempted from liability as the result of an infringement of a third party's patents in China by their Chinese counterparties importing the technology. Instead, foreign companies are subject to corresponding liability.
In such scenarios, foreign companies can face unpredictable risks when exporting technology to China, especially when applying for a package of patent licensing involving many patents.
To help our clients deal with this issue, LexField has developed unique insights and legal resolutions based on years of in-depth study of Chinese laws and relevant international treaties. We know how to resolve legal risks that can arise from the mandatory application of the "Regulations on Technology Import and Export Administration of the People's Republic of China" to related technology import and export contracts, and we have a proven record of doing so for numerous multinational clients.