China Technology Transfer and IP Licensing: Legal and Cultural Differences

Ting Zhang in the article "Technology Transfer and IP Licensing in China" refers to the Legal and Cultural Differences. The article is published in IPR Bulletin Vol. 40, December 2008, Universidad de Alicante, Spain.

Chinese law does not allow restriction on licensees carrying out enhancement. In addition, licensors have to provide warranties, such as guaranteeing the ownership of the technology, no glitches and that the technological objectives will be achieved as described in the contract. Even if a signed contract is subject to foreign law, when it comes to filing lawsuit in China, the Chinese laws and regulations still apply.

There are also other risks and problems associated with licensing technologies in China. In general, know-how (trade secret) is hard to protect in China, and many IP lawsuit cases involve know-how leak from former employees. While there is the well-known different interpretation of the term "contract" between Western and Chinese businesses, some post-contract risks also exist. For example, disputes usually start when Chinese companies become familiar with the technology licensed. There are problems collecting royalties from the licensees and getting the money remitted out of China. Last but not least, there is a cultural and historic mindset about the value of IP that needs to be kept in mind. However, protection of intellectual property rights is possible through a carefully drafted contract and, more importantly, through effective implementation and ongoing monitoring.

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