On December 10, the practice guidance and training committee of BXLA held Xicheng Lawyers Case Exchange Seminar 2021. J's and multiple other law firms attended the seminar, shared the classic cases handled by each firm and discussed difficulties and corresponding ideas in handling of cases.

At the seminar, Zhimei SUN, lawyer of J's, shared the classic case handled by the firm-a series of cases of disputes over the patent application right ownership between Shenzhen Edan Instruments Co., Ltd. (hereinafter referred to as Edan) and Guangzhou Wondfo Biotech Co., Ltd. (hereinafter referred to as Wondfo), Bin YANG, Yuanqiang LAI and Jihua WANG. J's, representing the plaintiff Edan, won in both trials of the four serial cases of disputes over the patent application right ownership. The case is listed in the Judgment Digests of the Intellectual Property Court of the Supreme People's Court (2020).

Case Brief

The patent application in the case relates to the core technology of Edan i15 Blood Gas and Chemistry Analyzer, a rapid near-patient test equipment. Wondfo has applied for the patents closely related to the core technology by recruiting Edan's ex-employees. The dispute focus of the case is whether the invention-creation involved is a service invention of Edan's ex-employees, and whether the application right should belong to Edan?

Both parties expressed their own opinions on the dispute focus of the case. The defendant Wondfo and its agents argued as follows: although the inventors in the case are Edan's ex-employees, Wondfo has invested hugely in material and technological conditions, and therefore, the related invention should be at least shared by both Edan and Wondfo. If it is just held that any invention-creation accomplished by an employee in the same or similar field within one year after demission shall be owned by the former organization, this would severely undermine the real inventor's initiative on science and technology research and development (R&D) and is also obviously unfair to the new organization investing hugely in material and technological conditions. Therefore, the possibility of independent R&D by the new organization and the R&D contribution of the new organization cannot be negated directly.

However, Edan, the former organization of the inventors, and its agents argued as follows: according to the meaning and legislative spirit of Article 6 of the Chinese Patent Law (CPL) and Rule 12 of the Implementing Regulations of the Chinese Patent Law (IRCPL), the invention involved shall be exclusive to Edan. Determination of ownership of a service invention is unrelated to whether the new organization has invested in material and technological conditions, but rather mainly depends on two factors, i.e., the time standard (within 1 year after the employee left the former organization), and the relevance standard, that is, whether the content of the invention-creation is related to the employee's job or assigned tasks in the former organization. In the case that the relevance can be determined, it is not necessary to consider whether the inventor conducted new R&D activities in the new organization after demission.

The relevance standard indicated by Edan's agents is based on the principle that if the ex-employee, together with the new organization, intentionally possesses his/her R&D achievement in the former organization, he/she can completely hide the creativity arising in the former organization in head, and then organize a totally different team in the new organization to reproduce a perfect R&D process, thereby proving a different inventor for the invention. As such, the provisions of the CPL and IRCPL are neutered as an empty shell, which is not conducive to the protection of legitimate rights and interests of the former organization, thereby causing its hesitation in investing in R&D costs and training talents, and hindering technological progress.

In the end, the judgments made by the courts of the first instance and second instance were both in favor of Edan. Guangzhou Intellectual Property Court of the first instance ruled that the patent application right of the invention-creation of patent involved shall belong to Edan, and that Wondfo shall go through the relevant change procedures within twenty days from the effective date of the judgment. The Intellectual Property Court of the Supreme People's Court of the second instance rules that the appeal of Wondfo is rejected and the judgment of the first instance is upheld, i.e., the application right for the patent shall belong to Edan.

The Supreme Court held: the two employees who left Edan and were hired by Wondfo make creative contributions to the substantive features of the invention-creation involved, and are the inventors of the invention-creation involved. According to the provisions of Rule 12.1 IRCPL, the invention-creation involved, which was accomplished within one year after the two employees involved left Edan and was related to their jobs in Edan, matches the circumstance of being determined as a service invention-creation. Therefore, the invention-creation involved is a service invention of the employees involved in Edan, and the application right for the patent should belong to Edan; and Wondfo's claim of appeal that the application right for the invention-creation involved should be owned by Wondfo, or co-owned by Wondfo and Edan, lacks legal basis and is not upheld.

Case Analysis

The core issue of the case is the attribution of the application right for a patent for service invention. That is, in the case that an ex-employee accomplishes an invention-creation related to his/her job or task in the former organization using the material and technological conditions of the new company within one year of his/her demission, whether the patent right for invention should be shared by the new and former organizations or solely owned by the former organization? The Supreme Court indicates the following four clear conditions for determination:

1. Whether the inventor who made the invention-creation was an employee of the former organization claiming the right;

2. Whether the employee made a creative contribution to the substantive features of the invention-creation;

3. Whether the invention-creation was made within one year after the employee's demission; 

4. Whether the content of the invention-creation is related to the employee's job in the former organization or the tasks assigned by the former organization.

If the above four conditions are met, the patent right for the invention-creation should belong to the former organization, regardless of whether the new organization has invested in material and technological conditions.

Case Conclusion

The four elements adopted in the case on attribution of the patent right for a service invention of an ex-employee provide a clear reference standard for the future cases of similar disputes. Disputes over the ownership of invention rights caused by ex-employees mostly occur among high-tech enterprises. It is not easy for an enterprise to pay for vast material and technological conditions for technical research. It is suggested that the enterprises enhance protection of core technologies including improving management of the outgoing technical staff. The enterprise should negotiate in advance with such employee on non-competition, confidentiality and other related agreements, keep the record of the employee's employment and departure, as well as his/her main job and content of tasks, and at the same time, pay timely attention to the trend of competitors' applications for inventions, including timely detection of whether the ex-employee has become an inventor for a competitor. In the unlikely event that the enterprise needs to defend its rights through civil litigation, all of the above can serve as important evidence to prove the ownership.