Editor's note: China was only a manufacturing base for low-tech consumer products 20 years ago. But since the end of the 1990s, a growing number of multinational companies have established their research and development (R&D) centers in China. It is a core strategy of their localization in China as they try to better accommodate the demand of the Chinese market by using the local technology talents.

But a problem for these companies is how to transfer their technological breakthroughs achieved in China abroad. They are challenged by how to implement their patent strategies to better protect their R&D achievements in China.

Tian Junfeng, an attorney with Unitalen Attorneys at Law, analyzed China's Patent Law and Foreign Trade Law and gives some suggestions in this article. China Business Weekly will run the article in several issues. Last week the author compared two drafts of the revision to the Patent Law. Below is the third part of it. The views expressed here are the author's own.

The legislative purpose here lies in two points: the first point is that any entity or individual may file an application for patent directly in a foreign country for its or his invention-creation made in China, without filing first with the patent administrative organ under the State Council in China; the second point is that as long as the R&D achievements are achieved in the Chinese territory, the filing of a patent application in a foreign country must be subject to the secrecy examination by the patent administration department under the State Council, no matter whether the R&D body belongs to China or not.

However, according to Article 4 of the current Patent Law, where an invention-creation for which a patent is applied for relates to the security or other vital interests of the State and is required to be kept secret, the application shall be treated in accordance with the relevant prescriptions of the State, which means that under the current Patent Law, the application for a patent cannot be filed directly in a foreign country without filing first with the patent administrative organ under the State Council in China. But it is not required to perform secrecy examination for all the applications to be filed in foreign countries. It is required to perform secrecy examination only when the application relates to the security or other vital interests of the State and is required to be kept secret.

While according to the above amendment, all the applications to be filed in foreign countries are subject to a secrecy examination. Thus, the act of filing an application in a foreign country is further regulated in the sense of the Patent Law.

Article 64 in the second draft remains unchanged. Corresponding to the above amendment to Article 20, however, Article 64 stipulates that where any entity or individual, in violation of the provisions of Article 20 of this Law, files in a foreign country an application for patent that divulges an important secret of the State, it or he shall be subject to disciplinary sanction by the entity to which he belongs or by the competent authority concerned at the higher level, where a crime is established, the person concerned shall be prosecuted for his criminal liability according to the law. That means that although any entity or individual may file an application for patent directly in a foreign country for its or his invention-creation made in China, it or he shall be subject to disciplinary or even criminal liability, if secrecy examination is not performed by the patent administration department under the State Council and thus an important secret of the State is divulged.

As can be seen from the proposed amendments to the provisions both in the first and the second Draft Opinion on the Third Revision of the Chinese Patent Law, the legislative purpose apparently shown herewith is to further regulate acts of filing the patent application for the invention-creation made in China and to make all relevant measures taken thereby more concrete and more accurate, though they are not yet finally approved with the examination of the legislative body.

Regarding this issue, other than relevant provisions of the Chinese Patent Law, the Foreign Trade Law and the Regulations of the People's Republic of China on Technology Import and Export Administration also contain the corresponding regulations. Based on this, the Administrative Rules for Technologies Prohibited and Restricted from Export further specify more regulations in detail.

Article 2 of the Regulations of the People's Republic of China on Technology Import and Export Administration stipulates that the technology import and export as referred to in these regulations means acts of transferring technology from outside the territory of the People's Republic of China into the territory of the People's Republic of China or vice versa by way of trade, investment, or economic and technical cooperation.

The acts mentioned in the preceding paragraph include assignment of the patent right, assignment of the patent application right, licensing for patent exploitation, assignment of technical secrets, technical services and transfer of technology by other means.

As can be seen, the objective coverage defined in the regulations is much broader than that of the current Patent Law. Apart from the assignment of the patent right and assignment of the patent application right, it also includes licensing for patent exploitation, assignment of technical secrets, technical services and transfer of technology by other means. The objects of transfer include the patented technology as well as the non-patented technology.

To be continued

(China Daily 02/09/2009 page9)