China establishes patent open licensing system

For a long time, China's patented technology has had problems such as low commercialization rate, asymmetry of supply and demand information for patent licenses, and insufficient commercialization services. In order to solve these problems, the fourth revision of China's Patent Law introduced a patent open licensing system, which is specifically embodied in the revised Articles 50, 51 and 52. The system stipulates that the patentee can voluntarily declare to CNIPA that the license is open, clarifying the payment method and payment standard of the license fee, which will be announced by CNPIA. During the patent open license period, any unit or individual that is willing to implement the open-licensed patents, may notify the patentee in writing, and after paying the license fee in accordance with the announced licensing fee payment method and standard, the patent implementation license will be obtained.

The patent open licensing system has the following advantages:

1. conducive to promoting the connection between the supply and demand of patented technology, and to promoting the spread and application of patented technology;

2. reducing the difficulty of license negotiation and saving the cost of contract negotiation;

3. reducing legal risks caused by rights defects in patent licensing transactions because open-licensed patents are valid patents recognized by CNIPA, and open-licensing of utility models and design patents requires a patent right evaluation report; and

4. the patent annuity can be reduced or exempted during the implementation period of the open license, which can save the patentee’s maintenance costs of patent rights.

However, because the current Patent Law only provides basic provisions for open licensing, specific supporting provisions are needed to fully tap the advantages of the system when it is actually implemented. The unresolved issues may include the followings:

1. How much annual patent fees can be reduced or exempted for the implementation of open licenses?

2. Whether and how to adjust the license fee during the open license period?

3. Whether a patent can both be open licensed and generally licensed through negotiation by both parties?

4. How to regulate false open licenses for the purpose of reducing or exempting patent annual fees?

In any case, the patent open licensing system is a system that is conducive to the transformation of patent implementation, and both patentees and licensees can benefit from it. Therefore, we recommend that patent holders use this system to evaluate the value of patents as soon as possible after the patent is granted. This is especially so for companies with a certain number of patents. They should evaluate and classify the granted patents, and for example, consider open licensing their patents that are not directly used/intended to be used on their own products so as to save costs and maximize the value of their patents.

By Dang Xiaolin and Li Jianzhong