Technology licensingassignment to China

Technology licensing/assignment to China

As a recipient of technology transfer, China has been seen as lagging behind the rest of the industrialized world by maintaining overly-protective regulations, and by affording insufficient IP protection, that, in fact, keep cutting edge technology out of the country. It made a great leap forward in 2001 with adoption of the following in order to comply with the WTO's Trade- Related Aspects of Intellectual Property Rights agreement: Technology Import and Export Administrative Regulations, Tentative Procedures for the Administration of Trade in the Import and Export of Technology, Administrative Measures on Prohibited and Restrictive Technology Imports and the Catalogue of Technologies Prohibited and Restricted for Imports . These laws and regulations govern the import of technology. The import of restricted technology must be approved by MOFTEC (for major projects) or by COFTEC (for projects not deemed major). The import of unrestricted technology must be registered with, but not approved by MOFTEC (except where the technology is to form part of a contribution to registered capital) or by COFTEC. While not completely satisfactory to technology providers, they are a significant improvement over the old system and bring China's black letter law closer to international standards.

Registration involves submission of documentation, and is supposed to take three days from the date of completed submission. The contract is effective when duly signed and before registration. Registration is required by law, however, and the resulting registration certificate is needed for purposes of banking, tax, customs and foreign exchange purposes.

Application for approval for the importation of restricted technology may take two paths:

1. The application is submitted to the approval authority and, if approved, a Proposal for Technology Import Licence is issued. With this document the parties may enter into a contract, which is then submitted for approval. On approval, an import licence is issued and only then does the contract take effect; or

2. A signed contract may be submitted with the import application for a decision by the authority, and, if approved, the import is licensed.

The new regulations are more lenient than the old regarding the content of the technology transfer contract. They contain fewer obligatory provisions and allow the parties to negotiate compensation amounts and forms, guarantees , usage after expiration of the contract, and the term of confidentiality obligations. They still prohibit provision for tie-ins, clauses restricting improvements or use of improvements by transferee, and clauses restricting the transferee from using competing technology. The new regulations will allow 'reasonable' clauses restricting the following: sources of equipment and raw materials, products produced with the technology and export channels. Under the new regulations, however, improvements made by the transferee belong to the transferee.