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China Law and Its Development

Enforcing and Implementing Patent Protections in China:

Chinese cultures and legal systems are very different from those in other counties.  The rule of law has never been the dominant philosophy in China; instead, the Chinese relies mostly on mediation or other sources outside of the court system to resolve their disputes.  Although the Chinese government has engaged in significant efforts to enact IP protection, the lack of effective enforcement of these laws in China has been a long-standing problem.

The first essential issue for the lack of enforcement of IP laws is the education and cultural issue.  For centuries, Chinese believe that inventions and creative works belong to society, and should be freely shared or owned by the Chinese Government.  Therefore, as traditional Chinese culture does not consider IP rights as private rights, the entire concept of IP protection is quite new.  Many Chinese and business entities are not aware of their IP rights and the need to seek protection; and many infringers do not know that their activities infringe other’s private rights.

Second, since IP rights and protections are a new concept in the Chinese legal system, most Chinese lawyers and judges have no experience in this field.  Currently, China is short of lawyers specialized in patent and other IP law, and the judges who are dealing with patent and other IP disputes are mostly inexperienced law school graduates.  There are no clear judicial tests to determine infringement, and disparate treatment and inconsistent results would be obtained from different courts.


China Intellectual Property Licensing Agreeemnt


A licensing agreement can be used when you (the licensor) grant certain legal rights to another business (the licensee) to use your intellectual property (IP) under licence. If you license another business to use your IP, that business is allowed to sell products and services based on it. In return, they pay you royalties based on the income that your IP generates for them.

The agreement needs to set out the relationship between the licensor and the licensee clearly to avoid ambiguity.
This document illustrates the types of clauses you might find in an IP licensing agreement. It refers to clauses that you might find in all licences, regardless of the IP, and clauses that are more specific to particular types of IP.

Please note that you should always seek professional advice from an IP lawyer when drafting a licensing agreement.

This normally refers to the date that the licensing agreement is signed by both parties. Sometimes it may refer to a specific date upon which the licence is to start, or it may link the start date to a specific event (eg, the date of delivery of certain technology to the licensee).

The names and details of the licensor and licensee, eg:
[COMPANY NAME], a company incorporated in [China] (registration number [number]) having its registered office at [address] (the 'Licensor'); and
[COMPANY NAME], a company incorporated in [China] (registration number [number]) having its registered office at [address] (the 'Licensee').


China Patent Due Diligence

Due diligence is a necessary first step before embarking on any kind of business transaction and particularly important when considering entering into a long-term business relationship such as a license agreement. If you would like to do a patent due diligence in China, we advise you to retain our China Patent lawyer to do this job. Having identified one’s short- and long-term strategic objectives and how entering into a licensing agreement, whether it is to license-out technology or to license-in technology, fits into those objectives, it is imperative to engage in an exercise of due diligence. Such an exercise is the process of gathering as much information as possible on the potential licensor or licensee, the technology and other similar technologies available in the market or being developed, the market, the legal and business environment (local or international, as the case may be) and any other information that would enable the potential licensor or licensee to be better informed. The exercise must be conducted in a legitimate manner, keeping in mind one’s financial and time constraints, and undertaken within the bounds of the law.

It is difficult to prioritize or identify any one or more items of information as the most important in a due diligence exercise and it would be misleading to do so. What information is important depends on a variety of factors which vary from situation to situation. However, it may be useful to point out that in a due diligence exercise information is often sought with respect to the following: the ownership of the technology, is it proprietary and have all proper procedures been followed to ensure its protection in the relevant markets, are there any third parties claiming rights over the intellectual property asset, can it deliver, in that, will it serve to reduce costs, improve performance or deliver other identifiable benefit, do other intellectual property rights need to be acquired to fully implement the technology in question, what in fact is its economic and strategic value, in that, to what extent does it fit into and further the business objectives of the alliance?


China Severance Pay Agreement

A very important remind for those foreign employees: you have to hold a working visa and work permission booklet in order to get any severance pay. Check with your employers, whether they have applied for a work permission booklet for you.

Severance pay, also called separation pay, termination pay and continuation pay, is money (and benefits) provided by the employer to an employee who is laid off, fired, or resigns. On top of a specific contractual obligation, an employment policy or practice, China employers are required to provide severance pay is a default rule. Many employers, however, offer a severance pay package in exchange for the employee's agreement not to sue (release of claims against the employer).

What Does A Severance Pay Agreement Typically Require?

For a severance pay agreement to be valid there must be a bargained for exchange. Both the employer and the employee must give each other a benefit not required under the law. The employee, for example, may agree to: (1) release claims against the employer; (2) continue working for a period of time; or (3) provide a certain amount of notice before quitting in exchange for a severance pay benefit. The employer, may agree: (1) to pay a "lump sum" payment, or an additional 1 week's wage for each year the employee worked for the employer; and/or (2) to provide certain benefits such as a letter of recommendation, an educational course(s), a continuation of health benefits for a specified period of time, use of the company's office to look for a new job, etc..


China General Partnership Agreement Sample

The following partnership agreement is a typical partnership agreement used in China. The agreement includes basic terms and conditions of main concerns of the partners. Please keep in mind that you have to retain lawyers to draft the agreement for you according to you specific circumstance. If you are in Beijing, you should find a Beijing lawyer; if you are in Shanghai, you should find a Shanghai lawyer.

This Partnership Agreement is made on [Insert Date] between [Insert Name of Party 1] and [Insert Name of Party 2].

1.Name and Business
The parties hereby form a partnership under the name of [Insert Business Name] to produce [Insert Business Product/Service]. The principal office of the business shall be [Insert Address].

The partnership shall begin on [Insert Date], and shall continue until terminated.

The capital of the partnership shall be contributed in cash by the partners as follows:
• A separate capital account shall be maintained for each partner.
• Neither partner shall withdraw any part of their capital account.
• Upon the demand of either partner, the capital accounts of the partners shall be maintained at all times in the proportions in which the partners share in the profits and losses of the partnership.

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I am a licensed China lawyer. Most clients are foreign nationals and companies. China Lawyer Blog have associates in Beijing, Shanghai, Tianjin, Guangzhou, Suzhou, Nanjing, Qingdao, Fuzhou, Hainan, Hefei, Wuhan, Xian, Changsha, Xiamen and Hangzhou. Learn More

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This China Lawyer Blog is aiming at providing better knowledge and understanding of Chinese law for foreigners. Should you have any legal issue in China, do not hesitate to contact China Lawyer Blog for consultation. Preliminary consultation is free. Further legal service, however, will be charged in due rate and in due course.

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China Lawyer BLog AuthorPeter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.