Employment Invention Regulation (Regulation), accompanied with disputes, had been finally submitted to the State Council for consideration and had been included into the legislation plan, it took three years for the draft from the beginning of the research in 2010 to completion in 2013.

The Regulation, which apparently aims to protect employee innovators, seems to fall into a rather awkward situation, neither enterprises nor employee innovators are satisfied with it. Enterprises believe that they are being forced to take heavier costs and burden while the employee innovators hold that they have been deliberately placed at odds with their bosses. The Department of Treaty and Legal Affairs of SIPO, which is responsible for the draft work, had to face various challenges from different parties.

Does the law interfere too much or is the law even urgently needed? As established on the basis of labor relations, the nature of employment invention remuneration system determines that the Regulation must face some pains when it is first introduced. Confronted with severe challenges from the IP industry, the related legislative work, including research and expert verification and opinion soliciting meetings, had progressed in an orderly manner. Transparent and open, while improving the quality of legislation, the legislator seems to convey an attitude: balance and guidance.

Accompanied with controversies, we will wait and see where the legislation goes.

SIPO

SIPO’s 2013 research revealed that in the employee invention disputes in China, 90% were against employee inventors. On the one hand, the employee inventor takes the invention that belonged to the former enterprise to his/her new employer, which depresses the old boss; on the other hand, although the law gives the employee inventor the authorship and remuneration right, these rights are difficult to be truly implemented because of employer’s power. As revealed in the report on employment invention system delivered by Beijing Juntu Management and Consulting Co. Ltd. : among 200 employee inventors of enterprises, 57.1% of them clearly stated that rights related to invention rewards can hardly be guaranteed. Zhang Yonghua, deputy director of the Department of Treaty and Legal Affairs of SIPO said on an employment invention system legislation conference that the raised disputes should be attributed to lacking procedural mechanisms in the existing system to some extent.

Enterprises who claim, “Let the market solve the problem,” are more often heard in the debates on the draft of Regulation. However, employee inventors, as the leading character of the legislation, can hardly express their thoughts. Journalist of China IP learned that in the expert appraisal meeting held by SIPO, several employee inventors of well-known enterprises who had been invited could not show up because of interference of their companies; and one opinion soliciting conference held for employee inventors turned out to become a gathering of their bosses. Even they are given the face-to- face opportunity to propose suggestions, they are not able to give professional legal advice and claim their legal rights properly.

Similar situations occur repeatedly. It reflects SIPO’s original legislation intention: employment invention problems cannot be solved simply by the market. Depending entirely on laws to regulate and adjust the interests between employee inventors and enterprises seems inadequate, it is unfavorable to employee inventors and may affect the innovation mechanisms of the whole society. From the perspective of legislators, employee inventors are more like a special group of vulnerable people. But for this vulnerable group of people, protection through laws seems insufficient. Under the “agreement prevailing principle,” and “statutory minimum standard,” the Regulation tries to explain that the statutory minimum standard is not a compulsory regulation. Invention remuneration amounts can be lower than the statutory minimum standard, as long as employee inventor and enterprise agreed in advance. Such situation leave room for the remuneration bottom line, it formalizes the fairness but makes it hard to achieve. Meanwhile, in the eyes of many inventors, these laws and regulations are hard to be implemented in practice, which makes the Regulation meaningless. OPPO legal director Min Yonggang told China IP that incentives, remunerations and contribution rates are hard to calculate and claim, especially after the employee leaves the former company. The provisions are hard to operate, if they cannot be implemented, it will cause employee inventors discontented, add uncertainty to personnel affairs and disturb normal management of enterprise.

In face of these contradictions, Zhang Yonghua said, “We hope to guide the two parties so they can establish a balanced and transparent system through legislation, as to form a harmonious labor relationship, let the enterprises be aware of the value of employee inventors and promote innovation across the whole society.” He held that the draft received a lukewarm reaction from society, the legislators hope more employees and enterprises can participate in legislation and give suggestion, to further improve the legal mechanism and legislation quality.

Enterprise

Who is the backbone of the invention, the inventor or enterprise? Which of them should be prioritized in the innovation incentive mechanism? These questions cause intense discussions which become endless debates in the end.

For enterprises, the legislative logic of the Regulation is not clear in the first place. Legislators think the interests of employee inventors and enterprises are conflicting, but the truth is the two parties’ interests are the same. Enterprises’ revenue is determined by the market, innovation can bring market competitiveness, and therefore are pursued by enterprises. Using laws to improve employee inventors’ interests and guarantee their power are not so reasonable as using the incentive system formed through market competition. Stimulating innovation by assigning rights to employee inventors may not maximize the inventors’ interests.

The employee invention report system, incentive methods on technology secrets, and “contribution rate” index, all make enterprises complain: though hard to be implemented in practice, these measures increase companies’ review workload and make statistic and computing work more difficult, which directly increases their management costs and legal risks. Especially for high-tech enterprises who have large amounts of patent applications, using mandatory provisions to clarify the ownership of every right brings extraordinary management burden to them. The Regulation aims to protect employee inventors, but somehow weakens the enterprises’ enthusiasm for innovation. It seems contrary to the original intention and purpose of the Regulation legislation. In fact, it could also bring negative influence to the inventors as well. An engineer that works on patent R&D in the Internet Industry once told China IP that the employee inventors who can bring real value to enterprises are often “big figures” of the company, they don’t care about petty rewards. Mandatory reward provisions in fact encourage rubbish patent making staff and protect those who fish for trouble. Some people believe that once the Regulation is implemented, it will cause a “polarization between rich and poor” employee inventors. Enterprises who bear high cost pressures will expel a group of inventors from the innovation system and will regard them as ordinary technical personnel; meanwhile the real employee inventors who will get more remuneration, will be assigned with more work and afforded higher responsibilities and risks. The situation will be get worse especially once the Regulation is implemented under the circumstance of high volume of applications.

Confronted with debates and bouts, enterprises put forward their proposal: they hope the Regulation can play the guiding role, and leave more room for enterprises to establish their own employment invention regulation which can flexibly adapt to the industry’s environment. In fact, there are many enterprises that had already formed a comprehensive and complete incentive mechanism on employee inventors, which is not only limited to patent application but with a wider array of contents far beyond the Regulation. In addition to remuneration incentives, it also includes other incentive measures like chance of promotion.

In this regard, SIPO had to face objections from enterprises and it appears that SIPO tries to seek balance in allocation of benefits and rights in the system design. “Legislation is quite necessary, but we need to keep a balance. The law cannot interfere too much otherwise it may deprive the enthusiasm of both enterprises and employee inventors.” Zhang Yonghua said. He believed that after debates, some of the disputed provisions of the Regulation were gradually eliminated and amended.

Along with controversy, for the legislators, it has more realistic significance to slow down the pace than radically promoting the law. As Min Yonggang said to China IP, laws should not interfere too much to the problems that can be solved by the market. Sometimes it is better to take one’s hands off than have a hand in.

(Translated by Emily Tan)