Part I: Lessons Learned from Technology Transfer and Essential IP in China/HK

June 16th, the European Chamber of Commerce in Hong Kong (ECCHK) organised together with the European Union Business Information Programme of Hong Kong and Macao the 3rd annual China IPR SME Helpdesk seminar, this time about 'Technology Transfer and Essential IP Strategies for EU SMEs in Mainland China and Hong Kong'. 

For all companies that are involved in adding or acquiring technology to and from China and want to remit the Renminbis earned, this seminar could not have come more timely.

Veronica Llorca, Project Director-European Union Business Information Programme

Photo: Danny Friedmann

Veronica Llorca (ECCHK) gave the kickoff of the event followed by Peter Cremers, chairman of ECCHK, who in his introductory words illustrated the importance of technology transfer and IP. Mr Cremers stressed that public awareness of IP is the guarantee for companies' long term success.

Peter Cremers, Chairman ECCHK
Photo: Danny Friedmann

Maria Castillo, Head of Office, EU Delegation to Hong Kong & Macau concisely described the high costs of IP infringements for EU industry. 

Maria Castillo, Head of Office, EU Delegation to Hong Kong and Macao
Photo: Danny Friedmann

Then Catherine Sun, managing director of China Intellectual Property Limited in Shanghai gave a presentation about the 'practical considerations for European companies engaging in technology transfer. Ms Sun gave an overview of the legal framework. 

Catherine Sun, Managing Director, China Intellectual Property Limited
Photo: Danny Friedmann

• Regulations on Administration of Technology Import and Export adopted by the State Council on October 31, 2001, promulgated on December 10, 2001, effective since January 1, 2002; 
• Catalogue of Technology of Which China Prohibits or Restricts the Import (First Batch) promulgated by MOFTEC and SETC on December 30, 2001, into force on January 1, 2002, but repealed on November 23, 2007, with the implementation of Catalogue of Technology Which China Prohibits or Restricts the Import, promulgated by MOFTEC on Decmber 12, 2001, in force on January 1, 2002, revised on November 1, 2008;
• Catalogue for Guidance on Foreign Investment in Industries issued by the State Development Planning Commission, SETC, MOFTEC on March 11, 2002, into force on April 1, 2002;
• Regulations on Guiding the Direction of Foreign Investment promulgated by the State Council on February 11, 2002, into force April 1, 2002; 
• Notice on How to Adjudicate Disputes on Technology Contracts by Intellectual Property Courts issued by the Supreme People's Court on June 19, 2001; 
• The Supplemental Notice Concerning Strengthening Administration for Technology Imnport Contracts and the Sale and Payment of Foreign Exchange issued by MOFTEC and SAFE on March 19, 2001; 
• Catalogue for Technology and Products that are Encouraged for Import, issued by National Development and Reform Commission, MOFCOM and Ministry of Finance on July 22, 2009. 

For dispute resolution Ms Sun made clear that Hong Kong and Singapore are preferred locations for arbitration, and considered politically acceptable by China. She also touched upon articles 24 and 25 Technology Import & Export Regulations 2002 that the technology to be transferred is “complete, error-free, valid, and capable of accomplishing contracted technical objectives.”

This is not because China does not want later improvements, but it means that China wants that the innovator is acknowledged: article 27 Technology Import & Export Regulations 2002 provides that during the validity of the contract, ownership of improvements in technology shall be vested in the improving party. Foreign transferors are advised to limit the geographical area of use of the licensed technology and its improvements, and to negotiate for a nonexclusive license and an exclusive license outside China for use of the improved technology.

Article 26 Technology Import & Export Regulations 2002 require assignees and transferees to keep trade secrets and know-how received from assignors and licensors confidential during the validity of the technology contract.

Although confidentiality is required by government employees responsible for approving and registering technology import and export contracts when they received trade secrets and know-how from transferors and/or transferees, irregularities can happen.

Ms Sun has written extensively about the topic and also about trade secrets.

Part II you can find here.

Part III you can find here.