CHANG TSI
Insights
In the thriving era of the knowledge economy, intellectual property (IP) has become a core asset and a key source of competitive advantage for enterprises. As an important component of corporate IP, service inventions are directly linked to a company’s innovative vitality, economic interests, and sustainable development capacity. Issues concerning ownership determination, rewards, and remuneration for service inventions have a significant impact: clear ownership definitions and reasonable incentive mechanisms can effectively motivate employees to engage in innovation and creation, while ensuring that enterprises retain lawful rights to such achievements, thereby promoting technological progress and enhancing market competitiveness. Conversely, unclear ownership may easily lead to disputes between enterprises and employees, result in needless waste of innovation resources, and even cause loss of core technologies, posing serious obstacles to corporate growth. Thus, an in-depth exploration of issues related to service inventions, and from there deriving practical recommendations for corporate IP management, is of substantial practical relevance.
According to Article 6 of the Patent Law of the People’s Republic of China:“An invention-creation made in the course of performing the tasks of the entity to which the inventor belongs or made mainly by using the material and technical conditions of the entity is a service invention-creation. The right to apply for a patent for a service invention-creation belongs to the entity; once the application is granted, the entity shall be the patentee. The entity may lawfully dispose of the right to apply for a patent and the patent right for such service invention-creation so as to promote implementation and utilization of the invention-creation concerned.”
The Implementing Regulations of the Patent Law further clarify that “invention-creations made in the course of performing the tasks of the entity” refer to:
A. Inventions made in the inventor’s regular job duties;
B. Inventions made in executing tasks outside regular job duties assigned by the entity;
C. Inventions made within one year after retirement, transfer, or termination of employment, that are related to the inventor’s regular job duties or tasks previously assigned by the entity.
1. Whether the Invention-creation Is Related to “Regular Job Duties”
When determining whether an invention is related to an inventor’s regular job duties, the labor contract terms regarding job responsibilities are typically the most direct basis. However, labor contracts often cannot fully capture the scope of work performed. Determinations should also consider actual job content, corporate business profile, industry characteristics, and performance appraisal metrics.
This view is confirmed in Zuigaofa Zhiminzhong (2023) No. 2157, involving Changzhou Technology Co., Ltd. and Chen. The Court stated that job duties should first be determined based on contractual job description, but actual work content should also be considered, together with business and industry characteristics, to comprehensively assess relevance.
The Court further clarified that for current employees, the threshold for determining relevance should be moderately relaxed compared with that for former employees, balancing corporate interests with encouraging research personnel to innovate. Unlike patent infringement determinations, relevance here does not require the technical solution of the disputed invention to be substantially identical to existing corporate solutions. If there is continuity in technical field, theme, or concept based on the inventor’s responsibilities, authority, and access to technical information, the invention can be presumed to fall within regular job duties.
2. Determining "Mainly Using" the Entity’s Material and Technical Resources
In accordance with the Implementing Regulations, material and technical conditions refer to funds, equipment, components, raw materials, or non-public technical information and documents belonging to the entity. However, mere usage of such conditions does not automatically constitute a job-related invention — the use must be primary, meaning indispensable and of decisive importance relative to other resources used.
In Zuigaofa Zhiminzhong (2020) No. 1848, involving Zhengzhou Technology Co., Ltd. and Song, the Court held that although the inventor’s exposure to company equipment inspired the invention, the invention’s technical solution differed significantly from the equipment’s design, and thus did not constitute a job-related invention. The Court emphasized that primary use requires that such conditions be essential and prevailing over other sources.
3. Ownership Determination for Inventions Completed by Former Employees
According to Article 13, Paragraph 1, Item 3 of the Implementing Regulations of the Patent Law of the People’s Republic of China, an invention-creation made within one year after an employee’s retirement or departure from the entity, and related to the employee’s essential duties or tasks assigned by the entity, shall be deemed a “service invention” (i.e., an invention made in the course of performing the entity’s tasks).
Therefore, in determining the ownership of an invention-creation completed by a retired or departed employee, two key factors should be considered: one is whether the invention was completed within one year after the inventor’s retirement or departure; the other is whether the invention is related to the essential duties undertaken by the inventor in the original entity, or tasks assigned by the original entity.
(1) Requirement concerning Completion Time
In practice, it is common for employees engaged in relevant R&D at their original entity to form new research ideas based on their technical knowledge and professional expertise, and subsequently develop them into inventions after leaving employment, achieving results post-departure. The one-year limit prescribed in the Implementing Regulations for treating such post-departure inventions as service inventions takes into full account the continuity characteristic of technical R&D. It protects the legitimate interests of the original entity while supporting normal mobility of personnel and safeguarding employees’ right to employment.
(2) Relevance between the invention and duties during employment
In the retrial case Shenzhen Technology Company v. Li and Shenzhen Equipment Company (Zuigaofa Minshen (2019) No. 6342), the Supreme People’s Court emphasized that determining whether an invention completed by a retired or departed employee constitutes a service invention should focus on balancing interests between the original entity, the departed employee, and the employee’s new employer. The Court held that a comprehensive determination should consider:
a. the specific content of the essential duties or assigned tasks undertaken at the original entity;
b. the particulars of the patent in dispute and its relationship to those duties or tasks;
c. whether the original entity had carried out relevant technical R&D activities, or whether the related technology had another legitimate source;
d. whether the patentee/inventor can provide a reasonable explanation for the R&D process or the source of the patented technology.
The Guangzhou Intellectual Property Court, in its judgment (Yue 73 Zhiminchu (2022) No. 2351), pointed out that when determining the ownership of an invention completed by a departed employee, the focus is on examining the correlation between the technical field of the employee’s duties or assigned tasks, work content, responsibilities, technical subject matter, and technical concept. It does not require the specific technical solution to be identical. In establishing whether the disputed invention-creation constitutes a service invention, it is generally unnecessary to perform a one-to-one comparison of technical solutions, nor to require that the technical solution of the disputed invention be substantially the same as that already formed by the original entity.
Ownership issues concerning service invention-creations have profound implications for corporate IP management, directly affecting technological innovation, market competitiveness, and sustainable growth. When the ownership of a service invention-creation is unclear, it can lead to the loss of a company’s core technologies — for example, when an employee departs and brings related technology to a new employer — potentially causing the company to lose its competitive position in the market and suffer substantial economic losses.
Therefore, enterprises should attach significant importance to ownership issues of service invention-creations in their daily operations, particularly within IP management. They should continuously improve IP and human resources management systems, and explicitly address ownership of service invention-creations in labor contracts and internal management policies in advance.
Moreover, in disputes over ownership of service invention-creations, the enterprise bears the evidentiary burden when asserting that a particular invention-creation qualifies as a service invention-creation. Accordingly, companies should strengthen process management of R&D activities to ensure that the development process is properly documented and traceable, thereby providing evidentiary support in any potential ownership disputes concerning service invention-creations.
