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The Case Law of Service and Non-service Inventions
date: 2018-03-01Jocelyn Guo

As we know, general inventions made by employees during their employment are known as Service Inventions, and only employers can decide if the inventions are applied for patents. Furthermore, employees who make the inventions have a right to be rewarded and signed as inventors.  However, under employment, what kind of inventions could be owned by the employees as Non-service Inventions? And how does one distinguish Service and Non-service Inventions? These are very important issues to both employers and employees, but there are no clear principles to guide judicial practices.

On August 17, 2016, High Court in Hubei Province gave a judgment on Service and Non-service Inventions in the civil retrial case No.8. In the decision ((2016)鄂民再8号), in which the judges illustrated the difference between Service and Non-service Inventions based on regulations in patent law and legislative purpose. This case has the possibility of becoming an important precedent for future disputes of this nature.

In this case, the employee, Mr. Wang was a fitter with no fixed term labor contract in Wuhan Marine Machinery Plants Co.,LTD (WMMP). During his employment in WMMP, he invented a positioning pin in hydraulic pump and applied for a patent in his own name. WMMP believed that they had the patent application right, so they initiated a lawsuit against Mr. Wang.

This case was first launched in the Wuhan Intermediate People's Court, and appealed to the Hubei Provincial High Court, then applied to the Supreme Court for a retrial. The Supreme Court ordered a retrial in the High Court in Hubei Province. Finally, High Court in Hubei Province upheld that Mr. Wang should be the patentee.

Regulations in the Patent Law and its Rules of Implementation

In the Chinese Patent Law, there are two main provisions about Service Invention.

According to Article 6 of Chinse Patent Law, an invention that is accomplished in the course of performing the duties of an employee, or mainly by using the material and technical conditions of an employer shall be deemed a Service Invention. For a Service Invention, the employer has the right to apply for a patent. After such an application is approved, the employer shall be the patentee.

For a Non-service Invention, the inventor or designer has the right to apply for a patent. After such an application is approved, the said inventor or designer shall be the patentee. In cases that inventions are made by using the materials and technical conditions of an employer, if the employer has concluded a contract with the inventor or designer stipulating agreements concerning the right to apply for the patent or the ownership of the patent right concerned, such agreements shall prevail.

According to Article 12 of the Implementing Regulations of the Patent Law, "A service invention-creation made by a person in execution of the tasks of the entity to which he belongs" referred to in Article 6 of the Patent Law means any invention-creation made:

    (1) In the course of performing his own duty;

    (2) In execution of any task, other than his own duty, which was entrusted to him by the entity to which he belongs;

    (3) Within one year from his retirement, transferring out of the original entity or termination of labor or personnel relation, where the invention relates to his own duty or the tasks assigned by the original entity.

"The entity to which he belongs" referred to in Article 6 of the Patent Law includes the entity in which the person concerned is a temporary staff member.

"Material and technical means of the entity" referred to in Article 6 mean the entity's money, equipment, spare parts, raw materials or technical materials which are not disclosed to the public.

 

Distinguishing between Service and Non-service Inventions

According to the regulations as above, the key point is to determine if the invention is made by the employee:

    1) In the course of performing the employee’s responsibilities;

    2) In execution of any task, other than the employee’s responsibilities, which was entrusted to him by the entity;

    3) In main use of the entity's money, equipment, spare parts, raw materials or technical materials which are not disclosed to the public.

With regards to point 1), Mr. Wang was only a fitter at WMMP, so his development and invention in the hydraulic pump was outside his responsibilities of his employment relationship with WMMP.

With regards to point 2), the entity, WMMP, had not entrusted Mr. Wang with any new task to improve the hydraulic pump, and Mr. Wang insisted that he completed the invention by himself during his personal time.

As to point 3), the burden of proof lies with the entity. In other words, the invention is not a Service Invention unless WMMP provides sufficient evidence to prove that Mr. Wang had “mainly used” their money, equipment, spare parts, raw materials or technical materials which are not disclosed to the public. In which, “mainly use” refers to the invention being made completely or mostly by using these material conditions, and these material conditions contributed substantively to the invention. In this case, WMMP failed to prove so, therefore, High Court in Hubei Province did not uphold them.

In the decision, the judges cited the legislative statement of“Draft Patent Law”first submitted to the Standing Committee of the National People's Congress for deliberation and pointed out, "the achievement of technological invention is the product of labor, and it condenses the inventor's creative mental work. In many cases it also embodies materialized labors such as test and research instruments, equipment and test materials and some auxiliary manual labor, but creative brain work is the decisive factor. " Additionally, the judges also cited the "Draft Amendment to Patent Law (draft for review)" published by Legislative Affairs Office of the State Council Legislature on December 2, 2015, in which Article 6.4 has been proposed to amend the existing provisions into "for the invention and creation in the use of the material and technical conditions of the entity, if the inventor and the entity reach an agreement upon the patent application right and the ownership of the patent right in the contract, such agreement should be complied with. If there is no agreement, the right to apply for a patent belongs to the inventor.”The judges decided that "the revised draft, to a certain extent, reflects the trend of legislation.”

In conclusion, according to existing legal provisions and legislative trends, judges tend to determine the patentee from whom the creative contribution mostly comes, other than from material and financial conditions.


Employer's solutions to Service Inventions

Employers who would like to have ownership over all the creative labor of all their employees could be advised to do as follows.

Firstly, they should clearly list the job responsibilities and/or tasks of each employee in the labor contract, so that the employee’s creative work is covered by his or her duties. They can also sign a clear agreement with employees about intellectual property ownership during the employment, since such an agreement is preferred.

Secondly, they are advised that they should build up an IP management system to protect inventive and creative ideas and activities, trade secrets, etc. For example, classify all important technical documents into different confidentiality levels, and keep them secret. A company should stipulate detailed borrow and reading rules with signatures. In addition, a company could require employees to report their inventive and creative ideas and activities accompanied with compensation and rewards to employees. 

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