Law and Justice

Posts Tagged ‘Protection’

The nation’s top court has issued its long anticipated opinion rejecting the patentability of

the controversial Bilski case. The decision is both surprising for what it does and for

what it does not do. The Justices did not offer a clear interpretation as to what constitutes

patentable subject matter in the narrow classification known as ‘business methods.’ But

they did clarify certain points of the lower court’s ruling. Inventors and businesses

seeking patent coverage are well advised to study the oracles emanating from the

Supreme Court in order to get a patent that can pass muster in the existing case law.

The field of ‘business method’ patents includes a variety of transactions having to do

with commerce, banking, taxation, electronic transaction processing and more. Patents

have been granted in this field for at least two centuries before the present case even saw

the light of day. However, the policy of the government agency overseeing patents, the

United States Patent & Trademark Office (USPTO), has evolved from those earlier grants

to one that assumed that patents could not be granted for these very same methods.

Since the advent of the web, a rainstorm of patents claiming financial transaction

processing began to arrive at the doors of the USPTO forcing a change in direction. The

patent office was compelled by the deluge to examine numerous cases having both a

technological application as well as crossing the line into financial processes that it would

have preferred not to. As a matter of daily practice, the office simply instructed

examiners not to evaluate a patent application to determine if it could be a business

method or not. This would change when the Federal Circuit Court decided the landmark

State Street Bank decision (1998).

This decision swung open the gates of what could be patented generating a chorus of

complaints against State Street even though many informed observers point out that it

may not have been entirely responsible after all. In any case, the Federal Circuit did

indeed indicate that an invention would be eligible for a patent if it involved some

practical application and produced a useful, concrete and tangible result. The US Patent

Office responded by making it part of their official policy to require a technological

connection for the method to be patentable. In doing so, the agency overstepped the

bounds of its constitutional mandate since it could not be proved that these requirements

existed in the current body of law (Ex Parte Lundgren, BPAI 2005).

In the year 2008 business methods hit a brick wall with the Federal Circuit’s Bilski

decision wherein business methods were rendered patentable only if they passed certain

tests. In particular, the Federal Circuit indicated that processes transforming an item

from one thing into another are patentable and that those processes not having a

transformative step may be granted a patent if attached to a machine. This nebulous two-

prong test left many patent attorneys scratching their heads since what items could be

considered transformable was left clouded in mystery. The transformation of minerals

with the application of mercury into silver dust was clearly a patentable item but how

about the manipulation of financial information in a computer register through a complex

financial algorithm? Could this be considered an item under transformation?

Additionally, what constituted a machine that could render non-transformative processes

into patentable processes? Nor was there an answer to the most basic question of

whether or not the machine itself had to be unobvious or would the blending of the

machine with the non-transformative process be sufficient to permit patentability?

All of these questions were in play when the highest court prepared to decide Bilski. To

some observers its recent decision to reject the patentability for a method of hedging risks

because it represented an abstract concept left many unanswered questions. In doing so it

modified the Federal Circuit’s opinion in a variety of ways. In particular and most

importantly, the Supreme Justices ensured that the lower court’s test involving a machine

or transformation was utilized only as a test of patentability, not as a general rule for

denying protection. Inventions that do not pass this test may still be patentable under the

new decision; as a consequence, inventors having an idea that neither is attached to a

machine nor transforms an item still might be eligible for a patent grant.

Adding to the confusion were four Justices who indicated that they believed that

historically speaking, business methods were not favored with a patent and that the

practice of not patenting them should continue. Another four of the Justices contradicted

the first set by stating that the opposite was true; that indeed certain methods of doing

business could be granted patent protection. However, in indicating this they did not

provide a coherent methodology of how to determine this nor did they offer examples to

guide the community. Absent legislation or further guidance from lower courts the

system will muddle on in the penumbra of abstractions so typical of legal rulings.

The US patent system is presently choking with an enormous backlog of cases many of

which are directed to this very same subject matter. When guidance will come from the

legislature or lower courts only Heaven knows.

Every individual needs to protect their intellectual property by getting its patent. This necessitates the need to file a patent application so that all your business and ownership rights are well protected and no one is able to strip you off your rights. You should not allow anyone to get a patent on your hard work or invention. If you do not prepare any Dallas patent application and submit it to the concerned authorities, you will soon lose your invention and someone will get credit for your own invention. Do not let this happen to all your hard work – the process is simple! You will just need to hire a Dallas patent attorney who shall make an application on your behalf, to get your patent.

It is crucial to get the Dallas patent application in the right format so that the approving authorities approve the application and grant the patent to the applicant as soon as an application is made. This is not always easy as the authorities check many things before approving the patent application. If you are submitting your patent application for the first time you need to know about the different ways of filing your documents and application so that your application gets approved straight away. You might not have the relevant knowledge and experience to file the application without any mistake – in such a case, you can take help of anyone who has specialized knowledge and experience in filling of such application forms.

Any person, who has worked in the patent and trademark office as an examiner for some years, shall be the best person to advice you and guide you with your Dallas patent application. Such people shall help you in every possible way to write your patent application so that you can do your best to protect your patents. There are many patent attorneys who work relentlessly to get patents approved for their clients. Most of such attorneys have years of experience in getting patents done for their clients. You can hire any such person who has experience and expertise in such patent approval tasks. You can get in touch with any such Dallas patent attorney who will be ready to offer you guidance and help to get your patent approved. This is where attorneys find the need of getting their Dallas patent application done in the correct format so that the concerned authorities approve the application as soon as possible.

If you are able to hire the right company or the best Dallas patent attorney, you will be able to develop and implement a great strategy for your patents which shall ensure that all your intellectual properties get all the rights and respect which they actually deserve. Most attorneys offer the initial consultation completely free and for the rest of the guidance and help, you might be charged an amount which is very little when compared to the benefit you receive. You just need to decide whom you wish to hire and when you want to make an application for patent. The rest shall be done by your expert Dallas patent attorney.

Nature and critical importance of intellectual property vary across industries and types of business. Software development outsourcing requires high level of knowledge sharing between customer organization and vendor. Consequently, IP rights of stakeholders are involved in one form or another. Thus intellectual property management and data protection issues have become increasingly important for businesses utilizing offshore/nearshore outsourcing.

Intellectual property that can be transferred to the vendor may include software, data, business and technology processes, trade secrets, inventions, know-how as well as other confidential information and works of authorship. Furthermore some of it may belong to third parties and require licensing.

Both customer and vendor must properly administer their IP and stick to overall business objectives in order to effectively manage information sharing. Benefits of sharing IP assets must outweight risks associated with outsourcing.

The World Intellectual Property Organization (WIPO) emphasizes two critical IP-related concerns in offshore outsourcing: ownership of IP and “inadvertent, accidental or willful disclosure of confidential information and trade secrets” (loss of business knowledge). But in most cases these concerns can be overcome by properly conducting IP due diligence, thoroughly evaluating the vendor and taking appropriate IP-protection measures.

IP Due Diligence

Prior to concluding any outsourcing initiative customer organization should conduct IP due diligence and risk assessment. As a result the company will be able to safeguard its intellectual property and clearly define which functions should be kept in-house and which can be outsourced.

IP due diligence may include the following indicative steps:

• Identify areas of critical importance to your business

• Carefully assess business knowledge and determine if moving it outside the company or to an offshore location will compromise company practices

• Identify and document all of the IP assets associated with the outsourced task

• Determine ownership rights in the identified IP

• Carefully review third-party or jointly-owned IP

• Identify existing or alleged breaches of contract, infringements, disclosure of confidential information and trade secrets

• Assess how well the legal infrastructure in the foreign country will protect IP rights

• Determine jurisdiction and enforcement (applicable laws, their enforceability, dispute resolution mechanisms)

• Define termination, expiration or exit clauses of arrangement

• Determine other IP-related responsibilities if applicable: ongoing maintenance and upgrades to the IP; payments of transfer fees; product liability, IP insurance, etc.

Having conducted IP due diligence, the organization can proceed to evaluation of potential outsourcing partner. Results can be used during negotiation of outsourcing agreements to provide for IP-related issues that may arise.

Practical business negotiations should be initiated only after being satisfied with vendor’s reputation, resources and compatibility of business culture. They should focus on the steps needed to be taken by both parties in order to safeguard and ensure proper use, sharing, licensing, development and improvement of the IP during and after the relationship. It should also include any relevant IP assets of third parties.

Selection of the outsourcing vendor in the context of IP-related issues

When outsourcing, customer organization should scrutinize potential partner’s ability to safeguard confidential information of commercial value against misappropriation, misuse, sabotage, loss or theft.

• Check that the vendor has a documented and enforceable information security management policy in place

• Review outsourcing vendor’s data security and IP protection practices as well as processes they have in place to protect customer’s confidential information

• Check whether additional security policies can be implemented to protect your sensitive data

• Provide vendor with only the minimum proprietary technology or data needed to complete the project

• Insist on clear documentation of all source code of your project as it becomes your company’s property and is legally protected

• Scrutinize physical security and personnel practices, policies and procedures

• Demand tight human resources screening, look for employee retention figures

• Find out whether vendor does business with your competitors; if yes, ensure that there is no contact between respective teams

• Choose an established partner that complements your business strategy and understands how to implement required level of security

Practical measures for protection of intellectual property

Intellectual property is one of the company’s most valuable assets. This is especially true for SMEs and startups where it can be the only tangible assets. Risks of not protecting IP are further escalated when outsourcing comes into play. That’s why customer organizations must effectively deal with related issues and use all types of IP protection: physical, electronic and legal.

Physical and electronic protection of intellectual property

• Treat data security as an exigency

• Limit the number of people who have access to the full information

• Make sure that outsourcing vendor has a physically secure facility (mechanical and electronic access control, intrusion detection, video monitoring etc)

• Check whether offshore team uses computers without removable media to reduce the risk of unauthorized access to your IP

• Ensure that in-house employees understand what information can and cannot be shared

• Use firewalls, VPN, encryption and other measures to prevent breaches of security in electronic environment, which may lead to disruptions in the supply chains

• Protect important information, such as source code, with passwords and access codes, and make sure that they are not widely available (both onsite and offshore)

• Always maintain original copy of the source code

• Make sure that any test data being used does not reveal real information

Legal protection of intellectual property

• Determine what country’s legal system will govern and have jurisdiction over contract disputes

• Work to understand the legal system and culture of both countries

• Find out how IP rights enforcement works in provider’s country

• Negotiate a clearly stated contract that specifically addresses business knowledge and IP-related issues and make vendor responsible for the actions of its employees. This will allow to ensure appropriate protection, avoid disagreements and prevent litigation

• Clearly define compliance audit procedures prior to engaging into outsourcing relationships

• Clarify licensing and source code ownership

• Consider open source software issues

• Enforce individual privacy in the context of database protection obligations (if applicable)

• Rely on non-disclosure and non-compete agreements with the vendor or its team members for keeping vital business information confidential

• Define mechanism for possible dispute resolution and arbitration

IP protection and data security: Intellias practices

Intellias is very security-conscious and devoted to protecting intellectual property and business

knowledge of its clients. We recognize importance of protecting customers’ information and express strong commitment to safeguarding their privacy. Hence, respective ethical rules and privacy policies have been adopted at Intellias.

Modern encryption and access sharing technologies are commonly utilized at Intellias. This results in essentially secure infrastructure which provides reliable protection of information from unauthorized access by third parties.

Furthermore, we maintain high level of employee credibility through Non-Disclosure Agreements that comply with international standards and are designed for thorough protection of project information. All sensitive information that is passed on to Intellias during the project life cycle is stored in a secure environment.

Explicit authorship waiver agreements guarantee that the customer becomes the only owner of the code. Representative office in Switzerland enables Intellias to effectively deal with contractual and legal requirements as well as ensure compliance with European and international law.

A consumer in simple terms is that person who buys and purchases items in exchange for a token. Consumer Forum promotes and protects the rights and interests of consumers. Consumer Forum is a means to guard consumer protection rights. Online consumer forums are available in the internet which helps distressed customers to fill up their consumer complaint letter. General public need to keep a constant check of their rights so that their customer rights could be protected. Many people are unaware of their rights and so they become victim of injustice and a Consumer Forum helps customer to demand those rights.

Consumer protection laws are implemented by the Government. Some of the Consumer protection rights are Right to Safety, Right to Information, Right to Choice, Right to be heard, The Right to Redress, The Right to Consumer Education. Consumer forum India has helped many to realize their rights.

Consumer complaints are a legal way of filing a claim. Our Government has assigned us certain freedom and certain consumer protection rights. It is the duty of the organizations and the Government to safeguard these rights.

Consumer forum is a response towards the unending conflict between the customers and their protection. The consumer forums file the complaints of the customers and advice them on the related issues. The aim of consumer forum is to enforce consumer protection. Sometimes customers are not aware of their rights. The interest of the customers can be protected by encouraging healthy competition in the market which serve the customers and not harm their veracity. These complaints can be registered in a consumer forum.

Consumer Law is part of the Civil Rights practice, as well as Constitutional Law, Discrimination, Human Rights, Native Populations, Privacy Law, Public Law, and Sexual Harassment. Consumers are the largest economic group in a country’s economy, affecting and affected by almost every public and private economic decision. Consumers should be protected against the marketing of goods which are injurious to health or life. They should be assured, wherever possible, should get accessed to a variety of products and services at competitive prices and in those industries where competition is not workable and Government regulation is substituted, an assurance of satisfactory quality and service at fair prices. Consumer interests will receive full and sympathetic consideration in the formulation of Government policy and he will get fair and prompt action in its administrative committee. Consumers are given rights so that they could appeal to the Government against violation of their rights and can restore it.

Sometimes we don’t find the right platform to protest against any malformation. Here in Complaints Forum one can complain against any product or services which is engaged in deception or specified unfair practices from gaining an advantage over competitors.

Consumer forum paves the way for communication between different people on matters related to customer complaints. Customers in a consumer forum fill up a form to register their complaints. The complaints are then reviewed and necessary measures are then taken. Thus, consumer complaint helps public appreciate their value as a customer.

A lot of small businesses are founded on high technology or a breakthrough concept. If you’re a technopreneur, and the inventor of a property (software, technology, idea or process), have you looked at how to protect your ownership of the same? Don’t look puzzled – protection of your intellectual property (IP) rights is as important as creating the property itself.

Many entrepreneurs have got into a mess by not paying adequate attention to intellectual property rights. Let’s say for example, that Mr. Smith has invented a new engineering process while being employed with a company. The company may have patented the same and acknowledged Mr.Smith as the inventor. However, the patent belongs to the company and not to person who invented it. If Mr.Smith decides to start his own business, he has no right to use the same technology.

There may be other cases where a trademark or copyright infringement might occur inadvertently – for example with a brand name or logo that bears a strong similarity to another. Think twice before you model your business logo after the Big Blue, regardless of how much inspiration you’ve drawn from them.

Undoing an intellectual property rights violation fiasco may be expensive and fraught with difficulty. Therefore, it is best to take adequate precaution beforehand.

Start by taking a look at the ways in which intellectual property can be protected.

Patent

Patents protect ideas (or processes or products). It takes a long time to procure one and is an expensive business. However, this works to protect the owner of the patent from future claims of ownership of the same idea.

Patents are valid for a limited period, after which the idea becomes free for others to use. They are also awarded for a certain geographic area – and in today’s global environment, a really BIG idea may need to be protected worldwide.

Copyright

Acquiring a copyright is the way to protect written works such as books, software, or even music. However, a copyright only protects the intellectual property from being duplicated, as in the case of software products. On the other hand, a person can take “inspiration” from an idea belonging to someone else, tweak it a bit, and get away with it, scot free. Don’t we see that happening all the time?

Trademark

A trademark protects a property that is used to make a company or product marketable – for example a brand name or logo. In case of the use of generic sounding names, trademarks protect the visual rendition but not the name itself.

Other examples of intellectual property protection are

• Prevention of the theft of trade secrets, although this can be quite difficult to achieve

• Non disclosure agreements that prevent employees or vendors from divulging confidential or sensitive information to others

It must be noted that protection of intellectual property rights is a specialized legal science by itself, and you will need to engage the services of an IP lawyer to take care of your interests. Be sure not to overlook them.

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Exhibition industry, belonging to the field of trade in service, is a fresh troop in information industry. As the economic globalization intensifies, various exhibitions in China also started being carried out like a raging fire. The core of exhibition industry itself is creativity, and related contents involving intellectual property rights should be protected legally. However, as the most important chain of exhibition industry, the exhibitor is the exhibition project owner and cares most about how to protect the intellectual rights of exhibition project, preventing the project from being imitated.

So far in China, there are no explicit laws and regulations on the intellectual property protection of the exhibitors or designers, and exhibition industry has not formed a national association yet, in addition, qualification authentication for exhibitors is blank. Therefore, many famous and effective exhibitions are imitated frequently and some even only change the name of district. Based on the above situations, this paper will introduce the ways and strategies to protect intellectual property to exhibitors on the basis of China’s current intellectual property legal frameworks.

1.Protection on the exhibition emblem

Exhibitors can apply for registered trademark according to China’s Trademark Law in order to protect exhibition emblem form being plagiarized, misappropriated or cloned. Trademark registration is a sort of legal procedure. Trademark registrant firstly files an application, and if there is no objection or the raised objection is inconsistent within three months after the preliminary examination and public announcement, the registration of trademark would become effective and be protected by law. The trademark registrant will have the exclusive right of this trademark. It takes one year or one and a half years from application to approval of registration. The validity of the registered trademark is 10 years, since the date of approval of the registration. If registrant needs to use the registered trademark sequentially, he can apply for renewal of trademark registration.

Once the behaviors of violating the registered trademark are found, one may first issue a warning letter to the infringing party, and ask them to stop the infringement. If the other party still disregard totally, one can request for investigation to the industrial and commercial administrative department above the country level. In this way, if you are a foreigner or foreign enterprise, you should handle it through the designated trademark agency. And the third way is, if the infringement is serious, one can lodge a complaint to the People’s Court where infringer lives or the infringement occurs.

2.Protection on the exhibition projection

However, exhibition registered emblem is only one aspect among exhibitors’ intellectual property protection. Exhibitors care more about intellectual property protection on “originality” in exhibition project, such as the subject and content. Some personal opinions will be discussed as followed:

According to China’s current laws, exhibition can not register with its name, thus, in order to protect the intellectual property from being infringed, the owner of exhibition project should try to determine the intellectual property in texts or graphics before the exhibition is held, for example, nail down the theme of the exhibition in the approved prospectus, define the designs and plans to express or highlight the theme. In addition, in order to prevent the design scheme being plagiarized during the whole designing and producing process, confidentiality agreements should be signed by the partners.

However, only these prevention methods are far from enough. China’s exhibition industry is still in the stage of growth and the corresponding legal norms and industry rules are immature, so it will give some illegal businessmen possibilities to copy or plagiarize exhibition project. Therefore, exhibitors need to find out promptly the exhibitions with similar projects all over the country to ensure their projects are not counterfeited. Once the similar exhibitions are found out, exhibiters should collect evidences immediately, for example, the same exhibition project themes, similar exhibition design and emblem. After obtaining enough reliable evidences, the exhibitors can win the initiative role when assert one’s rights, and inhibit others infringing his intellectual prosperity.

If imitation is indeed the sincerest form of flattery, then the Chinese can be very sincere flatterers indeed. But if you prefer prosperity over flattery it would be wise to take precautions against losing your shirt (or at least the rights to it) in one of the world’s most dangerous IP jungles. It isn’t that the legal regime is deficient – it’s enforcement that’s lacking. For the present at least, China is a net importer of intellectual property. A relatively lawless IP environment is advantageous to China’s short-term interests, just as a strictly enforced IP environment suits the interests of net IP exporters such as the United States. This issue has been constant irritant in relations between China and Western nations, as well as Japan. Nevertheless, China’s enforcement of intellectual property has steadily improved in recent years.

Protecting intellectual property (IP) in China requires a multi-pronged strategy including registration, workplace security, employee contracts, commercial contracts and enforcement.

Registrations

China’s IP registration regimes are more or less consistent with international standards.

Trademarks – are protected on a first-to-file basis, with an exception for well-known trademarks. Do not rely on the “well-known” exception, however (unless you are Coca-Cola), because whether a particular trademark is “well-known” or not is a time-consuming argument that keeps IP lawyers in business all over the world. If a trademark uses words, the Chinese language equivalent should also be registered.

China has adopted the international Classification of Goods and Services under the Nice Agreement, and has also adopted the international registration regime under the Madrid system.

FIE Business Names – must be in Chinese and registered with the local Administration of Industry and Commerce before an application to set up a Foreign Invested Enterprise can be submitted (see this site’s Company Startup Guide for details on company name registration). Since China does not have a national register of business names, registrations are valid only within a particular locality (and an FIE business name cannot be registered in any location except its location of establishment). Trademark registrations offer better protection in this respect.

Patents & Designs – are protected on a first-to-file basis. China is a member of the Paris Convention, so filings in a member country within applicable time limits can also gain priority in China. More ominously, compulsory licenses may be granted (i) to qualified enterprises if the owner of the patent fails to license the patent on reasonable terms, and (ii) in the event of a national emergency. Because of this, many foreign companies do not register patents for sensitive technology in China. See Technology Transfers and Licensing for related information.

Copyrights – Copyrighted material may be registered with the China National Copyright Administration. As in the United States, copyrights are not granted on a first-to-file basis. Registration does serves as useful evidence of ownership of a copyrighted work, but it is not a legal precondition to enforcement.

Software – is considered copyrighted material and may be registered with the China National Copyright Administration. Registration requires the filing of source code (with some code blacked out). As a consequence, many foreign companies refuse to register their software in China.

Domain Names – are protected on a “first-to-file” basis. A foreign company
must have an FIE or Representative Office in order to register a “.cn” domain name in China.

Workplace Security

It is strongly advised to create a “plumbing” system to control IP leakage in the workplace.

IT systems and any hard copies of IP should be kept in an access-restricted, secure location.

Confidential information should be distributed on a strict “need to know” basis.

Confidential material should be marked “Confidential Information” in Chinese in anticipation of possible litigation in Chinese courts.

Employees

Independently investigate the reputation and trustworthiness of applicants for sensitive positions during the recruitment process.

Labor contracts should be prepared carefully. You should consider including the following in all labor contracts:

Confidentiality obligations

Non-compete clauses – Post-termination non-competition clauses should be limited to a reasonable geographic area and time limit. Compensation is also required to be paid during the period of non-competition.

Assignment – Although China recognizes the work-for-hire principle, the labor contract should clearly assign ownership of intellectual property created in the course of employment; otherwise IP rights may prove practically impossible to enforce against an employee who creates an IP-related work for hire.

Product Selection

Despite the additional tax breaks and incentives available, think carefully before manufacturing products that require new and sensitive technology in China. Components requiring new and sensitive technology may be imported into China in a secure manner for integration with the rest of the product.

Commercial Contracts

Since many commercial arrangements, even sourcing materials and components, can necessitate an exchange of intellectual property, adequate protections should be included in the contracts and associated documentation.

Administrative Enforcement Action

Various government organs have the power to take administrative action against IP infringers:

National Copyright Administration – The NCA is the “big gun” of the Chinese IP enforcement arsenal and is endowed with broad enforcement powers. They may order cessation of the infringing activities, confiscate illegal income, confiscate and destroy illegal copies, and impose fines.

State Administration of Industry and Commerce – The SAIC and its local AICs have a reputation for efficient trademark enforcement action, including investigations and raids. The SAIC also handles disputes regarding business names, registered trademarks, trade secrets, and passing off activities.

Customs – may confiscate products that infringe trademarks, copyrights and patents.

China Patent Office – may help with patent enforcement through investigation, mediation and raids.

General Administration of Quality Supervision, Inspection and Quarantine – may get involved if product quality and health issues are at issue.

Administrative enforcement is a relatively inexpensive and efficient alternative to litigation, and it is easier to win a conviction.

Litigation

If administrative action fails to bring the desired result, litigation may have to be resorted to. Chinese courts can issue injunctions and award damages, although in practice their enforcement powers are typically weaker than in Western nations.

Criminal Prosecution

Criminal liability, including imprisonment, can be imposed for IP violations, although successful prosecutions are rare. Financial thresholds that must be met before criminal liability can be assessed can be difficult to prove. These thresholds include:

RMB50,000 turnover for knowingly selling goods with counterfeit registered trademarks

RMB50,000 turnover or RMB30,000 profits if trademarks are applied to goods without authorization

International Enforcement

Products that infringe intellectual property rights can be interdicted by customs at the destination port. It is also possible to seize the overseas assets of infringers located in China.

Technology Transfers and Licensing

Foreign investors often license technology and intellectual property such as trademarks, patents, copyrighted material and trademarks to the FIEs they invest in. A foreign party may also license technology to unaffiliated Chinese companies, such as in manufacturing or management contracts. Unlike joint venture contracts, licensing contracts can be governed by foreign law.

Proper licensing will help the foreign party control its technology and secure the payment of royalties (registration is required for the latter). Only the brave, however, will dare to license sensitive technology to an entity which the foreign party does not control.

Technology transfers are understandably less common than licensing and are usually used as part of the foreign investor’s contribution of technology to a Foreign Invested Enterprise as Registered Capital.

Technology Restrictions

Chinese foreign trade law recognizes three categories of technology: Permitted, Restricted, and Prohibited. These are contained in a catalogue that lists specific technologies.

Permitted technology is simply technology which has not been classified as Restricted or Prohibited.

Restricted technology may not be imported without a license, and is generally related to the chemical, petrochemical, biochemical, biological, and petroleum refining industries.

Prohibited Technology is technology that is considered to endanger national security, the public interest, or public morals by placing people’s lives or health at risk or destroying the environment.

Paperwork

A license for restricted technology must be approved by and registered with the Commission of Foreign Trade and Economic Cooperation (COFTEC). COFTEC will adjudicate a license application within 30 days. Licensing contracts for Restricted technology are effective only after COFTEC issues the corresponding Technology Import License.

Prohibited technology may not be brought into China.

Certain types of Permitted technology, while not subject to licensing requirements, are still subject to filing with COFTEC.

Technology transfers relating to certain major projects must be registered with and approved by the Ministry of Commerce. Trademark licenses must be filed with the
China Trademark Office within three months of execution in order to remit royalties out of China. Foreign trademarks must be recorded at the China Trademark Office in order to remit royalties out of China. Trademark recordation takes about a year and a half.

Improvements

A foreign company may not prohibit a licensee from improving the licensed
Technology, and these improvements become the property of the improver.

Technology as FIE Capital Contributions

Technology may be contributed as part of an FIE’s Registered Capital; however, the FIE will then become the owner of the technology and the foreign contributor will have to license the technology from the FIE if it wants to use it.

Technology contributed as capital is required to be appraised upon importation and should also be appraised by the Ministry of Commerce or the relevant local COFTEC as soon as the FIE is approved.

Since the Company Law requires 30% of the Registered Capital of an FIE to be contributed in currency (20% of the initial installment of Registered Capital), it follows that alternative forms of contribution, including technology, cannot total more than 70% and 80%, respectively.

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