Han Zhongling (Partner)

Senior patent agent and lawyer

Proficient in patent application, retrieval, evaluation, investigation and consultation, examination opinion response, invalidation, litigation, and patent capitalization in the fields of electromechanical, communication, automation, Internet of Things, computer, semiconductor, blockchain, etc. Essential patent evaluations for standards such as 3G/4G/5G, WIFI6, AV1/VP9, etc. Familiar with technology research and development and full process management of industrialization, familiar with the securities investment market, with multiple industry experiences, able to provide clients with comprehensive legal and intellectual property integrated solutions from multiple perspectives in complex backgrounds.

Lv Jungang (Partner, Process and Overseas Patent Director)

Senior Patent Agent

Proficient in drafting, applying for, responding to examination opinions, reexamination and invalidation, patent administrative litigation, patent infringement litigation, patent search, and necessary patent evaluation for 3G/4G/5G, WIFI6, AV1/VP9 standards in the fields of electromechanical, mechanical manufacturing, communication, electronic technology, computer software and hardware, and semiconductor technology.

The Legal Framework and Type System of Intellectual Property Licensing in China

Intellectual property licensing refers to the legal act of authorizing others to use their intellectual property within a specific period and scope without changing ownership, covering various types such as patents, trademarks, copyrights, trade secrets, etc. Under the Chinese legal system, intellectual property licensing activities are mainly regulated by laws and regulations such as the Civil Code of the People's Republic of China, the Patent Law of the People's Republic of China, and the Trademark Law of the People's Republic of China, forming a framework of intellectual property licensing system with Chinese characteristics.

01 Legal Basis and Institutional Composition

Articles 862 to 877 of the Civil Code systematically define the basic legal nature of technology licensing contracts, which are defined as "contracts entered into by the legal owner of technology who licenses the relevant rights of existing specific patents and technical secrets to others for implementation and use". This regulation provides a basic legal framework for intellectual property licensing and clarifies the formal requirements for licensing contracts - that is, technology transfer contracts and technology licensing contracts should be in written form (Article 863 of the Civil Code). At the same time, Article 864 of the Civil Code establishes the principle of free agreement on the scope of licensing, but also sets restrictive boundaries: "Technology competition and development shall not be restricted", which lays the foundation for subsequent anti-monopoly compliance requirements.

At the specialized legal level, Articles 50 to 62 of the amended Patent Law in 2020 provide detailed rules for special licensing of patent implementation, including special arrangements such as open licensing system and compulsory licensing situations. It is worth noting that Article 42 of the Patent Law clearly stipulates the term of patent rights: "The term of invention patent rights is 20 years, the term of utility model patent rights is 10 years, and the term of design patent rights is 15 years, all calculated from the date of application. This time limit directly affects the validity period of the license contract, because according to Article 865 of the Civil Code, "a patent implementation license contract is only valid during the duration of the patent right. If the patent right expires or is declared invalid, the patentee shall not enter into a patent implementation license contract with others for the patent.

02 License Type System and Legal Effect

Chinese legal practice recognizes three basic types of licenses, which are basically consistent with international norms but have local characteristics:

Exclusive license: The licensee has exclusive use rights within the agreed territory and period, including excluding any third party including the licensor. In the field of patents, exclusive licensees usually enjoy independent infringement litigation rights and can directly sue for infringement without the consent of the patent owner. This type of license gives the licensee the strongest market position, but correspondingly, the license fee is also the highest.

Exclusive license: The licensee has the right to use within the agreed scope, and the licensor reserves the right to implement it on their own, but may not license any third party to use it. In this mode, the licensor and licensee form a "symbiotic competition" relationship, where both parties can use the technology simultaneously in the market, but exclude the intervention of other competitors.

Ordinary license: The licensor reserves the right to use and sublicense to third parties while authorizing the licensee to use it. Ordinary licensees usually have no right to directly file infringement lawsuits and rely on the licensor to exercise their rights. This licensing model is commonly used in technology promotion and brand expansion strategies.

In practice, the choice of license type directly affects the design of other terms in the contract. For example, in an exclusive license, the licensor typically requires a minimum performance clause to ensure that the licensee actively implements it; In ordinary licenses, the licensor pays more attention to non competition clauses to prevent the licensee from gaining excessive advantages. It is worth noting that Chinese law has clear provisions for situations where the parties have not explicitly agreed on the type of license: "If the parties have not agreed on the license method or the agreement is unclear, it shall be deemed as a general license". This provision highlights the importance of clarity in contract terms.

▼

Core considerations for selecting two types of licenses

In the practice of intellectual property licensing in China, the choice of license type is not only related to the distribution of commercial interests, but also involves complex legal effectiveness and market strategy considerations. Enterprises need to comprehensively evaluate the legal effects and economic value of different licensing models based on their own development stage, market positioning, and intellectual property strategy.

01 Balancing Market Strategy and Legal Effectiveness

Exclusive licenses are usually applicable to situations where technology importers seek a market monopoly position, and are commonly used in patent pool construction or industry key technology acquisition scenarios. The licensee obtains a competitive advantage in the market by paying a high licensing fee in exchange for the exclusive right to implement technology in a specific field. From the perspective of legal effectiveness, the licensee of an exclusive license enjoys independent litigation rights and can directly file a lawsuit against infringement without the consent of the rights holder, which provides a powerful weapon for protecting the market monopoly position. However, this licensing model also carries significant risks - if the licensee fails to effectively implement the technology, it may result in dual losses of technology idleness and market monopoly.

Exclusive licensing is applicable in situations where the licensor wishes to retain its own implementation rights but restricts competitors, commonly seen in industry university research cooperation or technology sharing between affiliated enterprises. In this mode, the licensor and licensee form a "competitive relationship", where both parties can use the technology simultaneously in the market, but exclude the intervention of other competitors. In legal practice, the arrangement of exclusive litigation rights is relatively complex, usually requiring a contract to clearly stipulate whether the licensee enjoys independent litigation rights, as well as the conditions and procedures for exercising litigation rights.

Ordinary licenses are often used for technology wide promotion or brand expansion strategies, with the licensor maximizing revenue through multiple authorizations. In this mode, the licensee receives the weakest protection and usually has no right to directly sue for infringement, relying on the licensor to exercise its rights. Ordinary licensing is common in mature technology or well-known brand licensing, where the licensee primarily leverages technological or brand advantages to enhance product competitiveness rather than seeking market exclusivity.

02 Selection considerations in enterprise practice

At the practical operational level of enterprises, the selection of license types requires comprehensive consideration of multiple factors:

Enterprise size and market position: When small and medium-sized enterprises introduce key technologies, they often tend to choose exclusive licensing to gain market competitive advantages, although they need to bear higher licensing fees; Large enterprises, on the other hand, may choose ordinary licenses to compensate for insufficient protection through their own market position.

Technology lifecycle: For core technologies in the active innovation period, enterprises are more inclined to choose exclusive licenses to ensure the recovery of R&D investment; For mature or near obsolete technologies, regular licensing becomes a more economical option.

Regional market strategy: Multinational corporations often adopt a hybrid licensing model, using exclusive licensing in core markets, exclusive licensing in emerging markets, and general licensing in edge markets to achieve differentiated global market strategies.

It is worth noting that there are special rules for determining license types in Chinese legal practice. The Supreme People's Court has clarified in relevant judicial interpretations that "the content of the exclusive right to use a licensed work is stipulated in a contract. If the contract does not stipulate or the agreement is unclear, it shall be deemed that the licensee has the right to exclude anyone, including the copyright owner, from using the work in the same way. This provision means that in cases where the contractual agreement is unclear, the court may assume the establishment of a de facto exclusive license, which poses significant legal risks for the licensor.

▼

Design and Risk Prevention of Key Terms in Three Contracts

Intellectual property licensing contracts are the most complex and highly specialized type of contracts involving intellectual property terms. During the drafting and negotiation process, the design of the following key clauses is directly related to the achievement of the contract purpose and the protection of the rights and interests of all parties.

01 Scope of Authorization and Boundary of Rights Clause

The scope of authorization clause is the core of the license contract, which needs to clearly define the three-dimensional boundaries of the licensed rights in terms of territory, time, and domain. In Chinese legal practice, the design of this clause requires special attention to:

Product Scope Definition: For patent licensing, the licensee should be required to provide a list of their product brands. In cases where the brand holder is separated from the product manufacturer (such as OEM, ODM, and third-party labeled products), it must be clearly agreed whether they fall within the scope of the licensed product. Vague definitions may lead to disputes in subsequent implementation, such as in the 2018 case of a technology company in Shenzhen suing a manufacturing enterprise in Dongguan, where the lack of clarity on whether ODM products were within the scope of licensing resulted in losses of over 10 million yuan for both parties.

Improvement technology processing: The contract must clearly stipulate the ownership of subsequent improvement results based on licensed technology. There are two common modes in practice: one is to agree that the ownership belongs solely to the buyer; The second is to agree on mutual ownership between both parties. If there is no clear agreement, according to relevant provisions of the Civil Code, the improvement results may belong to the completing party. To avoid disputes, it is recommended to clearly stipulate in the agreement that "the improvement results belong solely to the buyer, but the licensor enjoys non exclusive and non transferable free use rights".

Rights restrictions: License contracts usually include restrictions on sub licensing rights, and unless explicitly agreed, the licensee shall not license a third party to implement the patent (Article 867 of the Civil Code). In addition, attention should be paid to the issue of export restrictions, especially when the exported technology belongs to the restricted export technology in the "Catalogue of Technologies Prohibited from Export and Restricted by China", it must be submitted for approval and review according to the procedures.

02 License fees and payment mechanism design

The payment arrangement of license fees is the focus of license contract negotiations and also a high-risk area for subsequent disputes. The common payment methods in the Chinese market include:

One time payment: suitable for small-scale licensing projects, requiring high payment ability from the licensee. The advantage lies in the simple legal relationship and controllable risks; The disadvantage lies in the failure to reflect the dynamic value of technology implementation.

Installment commission payment: Installment payments are made based on the actual production or sales situation, usually calculated as a certain proportion of sales revenue or profit. In this way, the licensee needs to report the production or sales situation to the licensor, and the licensor may request audit rights to verify sales data.

Hybrid payment model: The most common method is to add an entry fee and commission, which balances the risk protection of the licensor and the cash flow pressure of the licensee.

It is worth noting that there is controversy in the Chinese legal community regarding the method of commission payment. Experts have put forward seven reasons for opposition, including difficulty in accurately measuring technological contribution, complex profit calculation and easy disclosure of trade secrets, potential disputes, impact on the listing process, and disputes over the distribution of benefits from subsequent technological iterations. Therefore, some experts suggest making a one-time payment and avoiding commission fees as much as possible, even if there is a slight compromise in the pricing of the purchase. However, in practice, commission payment remains the mainstream model, and the key lies in designing a reasonable supervision mechanism and dispute resolution clauses.

03 Intellectual Property Defects Guarantee and Infringement Liability

The defect guarantee clause is the core of risk allocation in the license contract, requiring the licensor to ensure that it has complete rights to the licensed subject matter and does not infringe on third-party intellectual property rights. Under the legal framework of China, the design of this clause should pay attention to:

Validity guarantee of rights: The licensee shall conduct due diligence before signing the contract to verify the legal status of intellectual property rights (including payment of annual fees, whether they have been declared invalid, etc.). For patent licensing, special attention should be paid to whether there is a pledge registration, as the pledge right may constitute substantial restrictions on the implementation of the license.

Non infringement guarantee: The licensor shall promise that the delivered results do not infringe on the intellectual property rights of any third party, and clarify the method of assuming liability for infringement. In procurement contracts, dominant suppliers may refuse to provide comprehensive guarantees, and in such cases, risks need to be balanced through price adjustments or liability limits.

Challenge clause: Unlike Germany, Chinese law has a more complex attitude towards non dispute clauses (prohibiting licensees from challenging the validity of intellectual property). Although the "Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude or Restrict Competition" does not directly prohibit such clauses, contracts containing non dispute clauses in patent implementation license contract filing may face stricter scrutiny. In practice, it is recommended to use the "termination right" instead of direct prohibition - stipulating that when the licensee challenges the validity of the right, the licensor has the right to terminate the contract.

▼

The boundary between antitrust compliance and restrictive clauses

Restrictive clauses in intellectual property licensing agreements may cross antitrust red lines, especially when it comes to companies with dominant market positions. The Chinese Anti Monopoly Law and its supporting regulations have set clear compliance boundaries for the exercise of intellectual property rights, and violators may face huge fines and legal consequences such as contract terms being deemed invalid.

01 Core Restricted Behavior Recognition

According to relevant regulations such as the Anti Monopoly Guidelines of the State Council Anti Monopoly Commission in the field of intellectual property, the monopoly risks that need to be particularly vigilant in intellectual property licensing include:

Bundling behavior: requiring the licensee to accept unwanted intellectual property or goods, such as a "package license" that may constitute bundling. Six factors need to be considered when analyzing whether it constitutes illegal bundling: (1) whether it violates the wishes of the counterparty in the transaction; (2) Whether it complies with trading practices; (3) Whether to ignore the differences in the nature of intellectual property rights; (4) Whether there is a reasonable necessity; (5) Whether to exclude restrictions on competition; (6) Whether to restrict consumers' right to choose.

Non questioning clause: Prohibit the licensee from questioning the validity of intellectual property rights. Although China has not completely banned such clauses, the State Administration for Market Regulation has clarified in the "Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude or Restrict Competition" that operators with a dominant market position shall not require licensees to provide non challenge obligations.

Feedback clause: Require the licensee to grant exclusive feedback of the improved technology to the licensor. Exclusive feedback may constitute an abuse of market dominance unless it can be proven to have positive effects on promoting innovation and improving efficiency, and will not severely restrict competition in the relevant market.

Transaction restriction clause: conditions that restrict the licensee from trading with third parties, or prohibit trading with specific operators. Operators with a dominant market position who impose such restrictions without justifiable reasons may constitute abusive behavior.

02 Safe Harbor Rules and Defense Reasons

The anti-monopoly system in China provides safe harbor rules and a legitimate defense mechanism for intellectual property licensing

Safe Harbor Rule: If the operator's market share is below a certain standard (usually 20%) and the agreement does not involve core restrictive clauses, it is presumed that they will not exclude or restrict competition. This rule provides relatively loose license terms design space for small and medium-sized enterprises.

Conditions for positive impact of competition: Even if the agreement contains certain restrictions, if all five conditions can be met simultaneously, exemption can still be claimed: (1) there is a causal relationship with promoting innovation and improving efficiency; (2) Restricting competition has a relatively smaller impact; (3) Will not exclude or severely restrict market competition; (4) Will not seriously hinder innovation of other operators; (5) Consumers can share the benefits of innovation.

In the field of Standard Essential Patent (SEP) licensing, China adopts the "FRAND principle" (fair, reasonable, and non discriminatory) to regulate licensing behavior in practice. SEP rights holders with market dominance shall not charge unfairly high licensing fees without justifiable reasons, and there shall be no unreasonable differential treatment in licensing conditions. In the Huawei v. IDC case, the Chinese court established for the first time the calculation method for FRAND licensing fees, providing important guidance for subsequent SEP licensing practices.

▼

Requirements for Contract Filing and Administrative Procedures

China has a statutory filing system for patent implementation license contracts. Although filing is not a requirement for contract effectiveness, it has important legal significance and practical value. According to Article 15 of the Implementing Regulations of the Patent Law and Article 5 of the Measures for the Filing of Patent Implementation License Contracts, a patent implementation license contract entered into between a patentee and another person shall be filed with the patent administrative department of the State Council within three months from the effective date of the contract.

The Legal Effect and Practical Value of 01 Filing

The filing of patent implementation license contracts has multiple legal effects:

Adversarial effect: Filing is a prerequisite for a license relationship to confront a third party in good faith. A license that has not been filed cannot confront a subsequent transferee or licensee who acquires the same intellectual property rights in good faith.

Basis for Rights Protection: In patent infringement litigation, filing proof is an important evidence for the exclusive or exclusive licensee to claim independent litigation rights.

Tax preferential certificate: The filing certificate is a necessary document for technology transfer income to enjoy enterprise income tax reduction and value-added tax preferential treatment.

Prerequisite for Pledge Registration: The registered license contract is one of the basic documents for handling intellectual property pledge registration, which is of great significance for expanding the financing channels of enterprises.

02 Filing Operation Process and Material Requirements

The filing process includes three key steps:

1. Material preparation: The application form for filing the patent implementation license contract, the original contract (stamped with the saddle seal), identification documents of both parties, power of attorney, etc. need to be submitted. The original contract must contain three core contents: (1) the names and addresses of the parties involved; (2) Number of patent rights and information on each patent; (3) Types and duration of implementation permits.

2. Filing change: When there is a change in the content of a registered contract, it is necessary to submit materials such as a filing change application form, a change agreement, and the original filing certificate. It is worth noting that changes in licensing methods (such as changing from a regular license to an exclusive license) must be registered for change, otherwise the new licensee will not be able to obtain the corresponding legal status.

3. Registration cancellation: When the contract is completed or terminated in advance, the registration cancellation application form, contract completion or early termination agreement, original registration certificate, etc. should be submitted to handle the cancellation procedures.

For international licensing contracts, special attention should be paid to technology export control requirements. When the exported technology belongs to the restricted export technology in the "Catalogue of Technologies Prohibited and Restricted from Export in China", and involves intellectual property rights such as patent rights and exclusive rights of integrated circuit layout designs, it should be submitted for approval and examination in accordance with the relevant provisions of the "Measures for the Transfer of Intellectual Property to Foreign Countries (Trial)". This requirement is particularly important in the context of the China US trade friction, where multiple technology companies are facing administrative penalties for failing to comply with relevant procedures.

▼

Conclusion : Building a compliant and efficient intellectual property licensing system

In the era of knowledge economy, intellectual property licensing has become a core component of implementing intellectual property strategies for enterprises, driving innovative economic development through value mining and maintenance management. To build a compliant and efficient intellectual property licensing system, the following key points need to be grasped:

Pre due diligence is the foundation. The licensee shall verify the legal status of intellectual property rights (including stability of rights, pledge status, etc.), and avoid accepting license objects with inflated value or defects in rights. The licensor needs to evaluate the implementation capability and reputation of the licensee to ensure that the purpose of the contract can be achieved.

The design of contract terms is the core. Clearly define key terms such as license type, geographical scope, product area, and ownership of improvement results to avoid legal risks caused by vague expressions. For licensing fees, a reasonable sales report and audit mechanism should be designed under the installment commission model, balancing supervision needs and trade secret protection.

Antitrust compliance is a red line. Avoid setting core restrictive clauses such as mandatory bundling, non questioning obligations, and exclusive feedback. Enterprises with market dominance need to pay special attention to the fairness and reasonableness of licensing conditions, avoiding differential treatment and high price licensing.

The fulfillment of administrative procedures is a guarantee. Timely handle the filing of patent implementation license contracts (within 3 months from the effective date) to ensure legal effectiveness against third parties. For technology exports, strict review and approval procedures must be followed to prevent cross-border compliance risks.

With the improvement of China's intellectual property legal system and the strengthening of law enforcement, intellectual property licensing is upgrading from a simple transaction to a complex strategic tool. Enterprises need to build a professional intellectual property management team to balance commercial interests and legal risks in licensing negotiations, fully utilize diverse models such as open licensing and cross licensing, and maximize the market value of intellectual property.