Chapter XVIII Technology Contracts

Section I Common Provisions

Article 322 A technology contract is a contract made by the parties to define their rights and obligations for technology development, transfer, consultation or service.

Article 323 The making of a technology contract shall be conducive to the advance of science and technology, and shall accelerate the transformation, application and dissemination of the results achieved in science and technology.

Article 324 The contents of a technology contract shall be stipulated by the parties, and generally, shall contain the following clauses:

(1) name of the project;

(2) contents, scope and requirements of the targeted matter;

(3) plan, schedule, period, place, area and manner of performance;

(4) confidentiality of technical information and materials;

(5) sharing of risk liabilities;

(6) ownership over technological results and proceeds distribution method;

(7) criteria and method of the inspection for acceptance;

(8) price, remuneration or royalty and methods of payment thereof;

(9) calculation method of penalty for breach of contract or compensation for losses;

(10) method for dispute settlement; and

(11) definition of technical terms and expressions.

Materials such as technical background, feasibility studies and technical evaluation reports, project task paper and plans, technical standards, technical norms, original design and technique documents, as well as other technical documents which are relevant to the performance of the contract may, as agreed upon by the parties, constitute component parts of the contract,

If a technology contract involves any patent, it shall indicate the designation of the invention or creation, the applicant and the patentee, the date of application, application number, patent number and duration of the patent rights.

Article 325 The methods of payment for prices, remuneration and royalty in a technology contract shall be stipulated by the parties, and they may adopt the methods of overall computation and lump payment or overall computation and installment payment, and may also adopt the method of percentage-deduction payment or such payment plus an anticipated initial payment.

When the percentage-deduction payment is agreed upon, such payment may be calculated at a specific percentage of the price of the product, of the newly-increased output value and profits attained from the application of patents and exploitation of technological know-how, or of the sales revenue of the product, and may also be computed according to the other methods agreed upon. The percentage of such payment may be a fixed percentage, or an annual progressively increased or decreased percentage.

When payment by deducting a percentage is agreed upon, the parties shall specify in the contract the method for checking and consulting the relevant accounting books.

Article 326 If the right to use or transfer of a service-related technological result belongs to a legal person or any other organization, the legal person or that organization may conclude a technology contract on the said service-related technological result. The legal person and or that organization shall deduct a certain percentage of the proceeds from using and transferring the service-related technological result so as to give rewards or remuneration to the person(s) achieving the service-related technological result. When the legal person or that organization concludes a technology contract to transfer the service-related technological result, the person(s) achieving the service-related technological result shall have the priority to acquire the transfer on equal conditions.

"Service-related technological result" refers to a technological result achieved in the performance of a task assigned by the legal person or any other organization, or achieved primarily by making use of the materials and technical conditions of the legal person or any other organization.

Article 327 The right of use or transfer of a non-service-related technological result belongs to the person(s) achieving the result, and the person(s) achieving the non-service-related technological result may conclude a technology contract on that result.

Article 328 The person achieving a technological result has the right to indicate on the documents relevant to the technological result that he is the person achieving the result, as well as the right to obtain certificates of honor and rewards.

Article 329 Any technology contract that illegally monopolies technologies, impedes technological progress or infringe upon technological results of others is null and void.

Section II Technological Development Contracts

Article 330 A technological development contract is a contract made by the parties concerning the research and development of any new technology, new product, new technique or new material, as well as the system thereof.

Technological development contracts include commissioned development contracts and cooperative development contracts.

Technological development contracts shall be in written form.

Contracts concluded by the parties on the application and transformation of any technological result with a value for industrial use shall be made with reference to the provisions for the technological development contracts.

Article 331 The client of a commissioned development contract shall pay funds for research and development and remuneration as contracted, provide technical materials and firsthand data, complete all cooperative work and accept the results of the research and development.

Article 332 The researcher-developer of a commissioned development contract shall work out and implement research and development plan in accordance with the contract, rationally use the research and development funds, complete the research and development work as scheduled, deliver the results of research and development, and provide related technical materials and necessary technical instructions so as to help the client to master the research and development results.

Article 333 Where the client violates the contract and causes thus the standstill, delay or failure of the research and development work, the client shall bear the liability for breach of contract.

Article 334 Where the researcher-developer violates the contract and causes thus the standstill, delay or failure of the research and development work, the researcher-developer shall bear the liability for breach of contract.

Article 335 The parties to a cooperative development contract shall make investments as contracted, including investment in the form of technology, participate in the research and development work divided into them respectively, and cooperate and coordinate in the research and development.

Article 336 Where either party to a cooperative development contract violates the contract and causes thus the standstill, delay or failure of the research and development work, the party in question shall bear the liability for breach of contract.

Article 337 Where the technology stipulated as the targeted matter of a technology development contract is revealed to the public by others, rendering thus the performance of the contract meaningless, the parties may dissolve the contract.

Article 338 Where insurmountable technical difficulties arising in the performance of a technology development contract lead to the total or partial failure of the research and development, the risk liability shall be stipulated by the parties. If the risk liability is not stipulated or not clearly stipulated, nor can it be determined pursuant to the provisions of Article 61 of this Law, the parties shall reasonably share the liability.

Where either party finds, as specified in the preceding paragraph, that a situation may cause the total or partial failure of the research and development, the party shall promptly notify the other party and take appropriate measures to minimize the loss. Where the party fails to promptly inform and take appropriate measures and causes thus the aggravation of the loss, the party in question shall be liable for the aggravated part of the loss.

Article 339 For any invention or creation achieved through the commissioned development, the right to apply for patents belongs to the researcher-developer, unless the parties stipulate otherwise. If the researcher-developer obtains the patent right, the client may exploit the patent free of charge.

If the researcher-developer transfers its right of application for patent, the client enjoys the priority to acquire the transfer on equal conditions.

Article 340 For any invention and creation achieved through the cooperative development, the right of application for patent belongs jointly to all parties to the cooperative development, unless the parties stipulate otherwise. If one of the parties transfers its joint right of application for patent, any other party enjoys the priority to acquire the transfer on equal conditions.

If a party to a cooperative development waivers its joint right of application for patent, any or all of the other parties to the cooperative development may make exclusive or joint application. If the patent right is obtained by the applicant(s), the party that has waived its right of application may exploit the patent free of charge.

If one party to a cooperative development does not agree to apply for patent, the other party or parties may not apply therefor.

Article 341 The right to use, the right to transfer and the method of proceeds distribution of the secret technological results achieved through the commissioned development or cooperative development shall be stipulated by the parties. If they are not stipulated or are not clearly stipulated, nor can they be determined pursuant to the provisions of Article 61 of this Law, all the parties concerned shall enjoy the rights to use and to transfer. However, the researcher-developer of a commissioned development may not transfer the research and development results to a third party before their delivery to the client.

Section III Technological Transfer Contracts

Article 342 Technological transfer contracts include contracts for the transfer of patent right, transfer of the right to apply for patent, transfer of technological know-how and license for exploitation of patents.

Technological transfer contracts shall be in written form.

Article 343 A technological transfer contract may stipulate the scope for the transferor and transferee to exploit the patent or to use the technological know-how, but may not restrict technological competition and technological development.

Article 344 A patent exploitation license contract shall be valid only within the period of continued existence of the patent. If the valid duration of the patent right expires or the patent right is declared invalid, the patentee may not conclude a patent exploitation license contract relating to that patent with others.

Article 345 The transferor in a patent exploitation license contract shall, as contracted, permit the license transferee to exploit the patent, deliver technical materials related to patent exploitation and provide necessary technical guidance.

Article 346 The license transferee in a patent exploitation license contract shall exploit the patent as contracted and may not allow a third party outside the contract to exploit the patent; and shall pay royalties as contracted.

Article 347 The transferor in a technical know-how transfer contract shall, as contracted, provide technical materials, give technical guidance, guarantee the practical applicability and reliability of the technology, and maintain confidentiality.

Article 348 The transferee in a technical know-how transfer contract shall, as contracted, utilize the technology, pay royalties, and maintain confidentiality.

Article 349 The transferor in a technological transfer contract shall guarantee its legitimate ownership over the technology provided and guarantee the technology provided to be complete, errorless, effective, and capable of attaining the contracted goal.

Article 350 The transferee in a technological transfer contract shall, in accordance with the contracted scope and period of time, maintain confidentiality regarding the parts of the technology provided by the transferor and not yet been disclosed to the public.

Article 351 The transferor that fails to transfer the technology as contracted shall refund the royalties in part or in full and bear the liability for breach of contract. The party that exploits a patent or utilizes technical know-how beyond the contracted scope, or allows an unauthorized third party to exploit the patent or utilize the technical know-how in violation of the contract shall stop its contract-breaching acts and bear the liability for breach of contract. The party that violates the contracted obligation of maintaining confidentiality shall bear the liability for breach of contract.

Article 352 The transferee that fails to pay royalties as contracted shall make up the payment of royalties and pay a penalty for breach of contract as contracted, and, if failing to make up the payment of royalties and pay the penalty, shall stop its exploitation of the patent or utilization of the technical know-how, return the technical materials and bear the liability for breach of contract. The transferee that exploits the patent or utilizes the technical know-how in excess of the contracted scope or allows a third party, without the consent of the transferor, to exploit the patent or to utilize the technical know-how shall stop its contract-breaching acts and bear liability for breach of contract. The transferee that violates its contracted obligation of maintaining confidentiality shall bear the liability for breach of contract.

Article 353 Where the exploitation of the patent or utilization of the technical know-how by the transferee as contracted infringes upon the legitimate rights and interests of others, the liability therefor shall be borne by the transferor, unless the parties stipulate otherwise.

Article 354 The parties to a technological transfer contract may, in accordance with the principle of mutual benefit, stipulate the method for sharing any subsequently improved technological result obtained from the patent exploitation or utilization of the technical know-how. Where such method is not stipulated or not clearly stipulated, nor can it be determined pursuant to the provisions of Article 61 of this Law, the subsequently improved technological result achieved by one party may not be shared by any of the other parties.

Article 355 Where laws and administrative regulations stipulate otherwise on contracts for technology import and export or on contracts for patents and patent applications, the relevant provisions thereof shall govern.

Section IV Technical Consultation Contracts and Technical Service Contracts

Article 356 "Technical consultation contracts" include contracts for providing reports concerning a specific technological project on such subjects as feasibility study, technical projection, special technological investigations, and analysis and evaluation.

A "technical service contract" refers to a contract whereby one party uses its technical knowledge to solve specific technical problems for the other party, while not embracing the construction project contract and the work contract.

Article 357 The client to a technical consultation contract shall, as contracted, state the issues for consultation, provide background technical information and related technical materials and data, and accept the work results of the agent and pay remuneration.

Article 358 The agent to a technical consultation contract shall complete the consultation report or solve the problems within the contracted time limit, and the consultation report submitted shall meet the stipulated requirements.

Article 359 If the client to a technical consultation contract fails to provide necessary materials and data as contracted and thus affects the progress and quality of the work, or the client fails to accept the work results or delays the acceptance, the paid remuneration may not be reimbursed, while the unpaid remuneration shall be paid.

The agent to a technical consultation contract that fails to submit the consultation report as scheduled or submits a report failing to meet the contracted requirements shall bear the liability for breach of contract in form of reduction or waiver of its remuneration.

Any losses caused by the decision made by the client to a technical consultation contract according to the agent's consultation report and advice that meet the contracted requirements shall be borne by the client, unless the parties stipulate otherwise.

Article 360 The client to a technical service contract shall, as contracted, provide working conditions, accomplish cooperative work, accept the results of the work and pay remuneration.

Article 361 The agent to a technical service contract shall, as contracted, complete the service items, solve technical problems, guarantee the quality of the work, and impart the knowledge for solving technical problems.

Article 362 Where the client to a technical service contract fails to perform its contracted obligations or performs its obligations in a manner inconsistent with the contracted requirements, thus affecting the progress and quality of the work, or fails to accept the work results or delays its acceptance, the paid remuneration may not be reimbursed, while the unpaid remuneration shall be paid.

The agent to a technical service contract that fails to complete the service work as contracted shall bear the liability for breach of contract in the form of waiver of its remuneration, and etc.

Article 363 In the course of the performance of a technical consultation contract or a technical service contract, new technological results achieved by the agent with technical materials and working conditions provided by the client shall belong to the agent. New technological results achieved by the client on the basis of the work results of the agent shall belong to the client. If the parties have agreed otherwise, their agreement shall govern.

Article 364 Where laws and administrative regulations stipulate otherwise on technology brokerage contracts and technical training contracts, the relevant provisions thereof shall govern.