Technology
Contract Law
(Adopted
on June 23, 1987 by the 21st Session of the Standing Committee of
the 6th National People's Congress)
CHAPTER I General Principles
Article 1. This Law is formulated in order to
give impetus to scientific and technical development, to promote the
service of science and technology for the construction of socialist
modernization, to protect the legitimate rights and interests of the
parties to technology contracts and to maintain order in the
technology market.
Article 2. This Law applies to contracts made
between legal persons, between legal persons and citizens, and
between citizens, which establish civil rights and obligations in
technical development, technology transfer, technical consultancy
and technical service. It does not apply however, to contracts in
which one party is a foreign enterprise, other foreign organization
or foreign individual.
Article 3. The formation of a technology
contract shall be in conformity with laws and regulations, be of
benefit to the progress of science and technology and accelerate the
application and dissemination of scientific and technical results.
Article 4. The formation of a technology
contract shall conform to the principles of voluntary participation
and equality. mutual benefit and compensation, and trust and
integrity.
Article 5. Where the content of a technology
contract touches on national security, or where the greater interest
demands confidentiality, this shall be handled in accordance with
the relevant State regulations.
Article 6. Technical results arising out of the
execution of a unit's tasks or as a result mainly of the utilization
of the material technical resources of a particular unit shall be
professional technical results. The right to utilize and transfer
professional technical results. The right to utilize and transfer
professional technical results lies with the unit concerned, which
has the right to conclude technology contracts relating to those
professional technical results. The unit shall reward the individual
responsible for achieving the said technical results in accordance
with the income obtained by the unit through the utilization or
transfer of the professional technical results.
The right to utilize and transfer non-professional technical
results lies with the individual responsible for achieving those
results, who shall have the right to conclude technology contracts
relating to the non-Professional technical results.
Application for patent and the award of patent rights with regard
to professional or non-professional technical results shall be
handled in accordance with the Patent Law and relevant regulations.
An individual responsible for achieving technical results shall
have the right to state clearly on documents relating to the
technical results that he is the person responsible for achieving
them, and shall have the right to obtain a certificate of honor and
a reward.
Article 7. The relevant State Council department
in charge and the people's governments of the provinces, autonomous
regions and directly administered municipalities shall have the
right as required by the national and common social interest, to
decide upon the dissemination to and utilization by designated units
of non-patented technical results of major significance achieved by
units under the ownership of the whole people, which fall within
their particular system or scope of jurisdiction. A unit utilizing
technical results has the responsibility to maintain the
confidentiality of those results. The utilizing unit shall pay a fee
for use in accordance with the agreement between the two parties. If
the two parties are unable to reach an agreement, the designating
organ shall determine a reasonable fee.
The dissemination for use of non-patented technical results
achieved by collectively-owned units or by individuals, which are of
major significance to the national or common social interest, shall,
where necessary, by handled in accordance with the aforementioned
provisions, following approval by the relevant State Council
department in charge.
Article 8. The bodies responsible for
administering technology contracts shall be stipulated by the State
Council.
CHAPTER II Formation, Performance, Modification And
Termination of Technology Contracts
Article 9. The formation, modification and
termination of a technology contract shall all be in written form.
Article 10. A technology contract shall be
formed once the parties affix their signatures or personal seals to
the contract. Where State regulations require approval by relevant
organs, the contract shall be formed from the time of approval.
Article 11. The parties may stipulate guarantees
for technology contracts. A contract under which a third party is
guarantor shall be formed once the guarantor and guarantee affix
their signatures or personal seals to the contract.
Article 12. The price or remuneration in a
technology contract and its method of payment shall be stipulated by
the parties to the contract.
Article 13. A party may appoint an agent to form
a technology contract on his behalf. The appointing party shall
provide the agent with a power of attorney. The agent shall, within
the scope of authority granted to him by the appointing party,
conclude a contract in the name of the appointed party.
Article 14. Any body which provides introductory
services in the formation of a technology contract which complies
with the provisions of this Law and abides by the principle of trust
and integrity may accept reasonable compensation therefor.
Article 15. The articles of a technology
contract shall be stipulated by the parties. They shall generally
include the following items:
(1) Name of the project;
(2) Content, scope and requirements of the object of the contract;
(3) Performance plan, progress projection, duration, place, and
method of performance;
(4) Confidentiality of technical information and data;
(5) Liability for risk;
(6) Ownership and Sharing of technical results;
(7) Standard and method of acceptance;
(8) Price or remuneration and method of payment;
(9) Method of calculation of penalties or damages;
(10) Dispute resolution method;
(11) Definition of names and technical terms.
Technical background material relevant to the performance of the
contract, and feasibility and technical evaluation reports, project
task and planning documents, as well as drawings, tables, data and
photographs may, as agreed between the parties, form an integral
part of the contract.
Article 16. A technology contract formed in
accordance with the law shall immediately become legally binding.
The parties shall perform their duties fully as stipulated in the
contract. One party may not, of its own accord, modify or terminate
the contract.
Article 17. If one party fails to execute a
technology contract or if their performance of their contractual
obligations does not conform to the stipulated conditions, thereby
rendering them in breach of contract, the other party shall have the
right to demand performance or to adopt remedial measures, as well
as have the right to demand damages.
The liability for compensation by the party in breach of contract
shall be equivalent to the loss suffered by the other party as a
result of the breach, but shall not exceed the amount which should
have been foreseen by the party in breach at the time of forming the
contract.
The parties may agree in the contract that if one party is in
breach of contract it shall pay a stipulated monetary penalty to the
other party. They may, alternatively, stipulate a method for the
calculation of damages.
A party which suffers a loss as a result of breach of contract by
the other party shall promptly take appropriate steps to prevent the
loss form increasing. Should it fail to promptly take appropriate
action, thereby causing an increase in the loss, it shall not have
the right to demand compensation for the additional loss.
Article 18. If all parties are in breach of
contract, they shall all bear equivalent liability.
Article 19. If one party is unable to fulfil its
contractual obligations as a result of the actions of a higher
authority it shall, as stipulated by the contract, compensate the
other party for damages or adopt other remedial measures, after
which higher authority shall be responsible for dealing with the
loss incurred in doing so.
Article 20. If a party is unable to perform a
technology contract for reasons of force majeure, it shall be
relieved form its liability for non-performance.
Article 21. The following technology contracts
shall be invalid:
(1) Those which violate the law or regulations or which are
harmful to the national or common social interest;
(2) Those which illegally monopolize or obstruct the progress of
technology;
(3) Those which violate another's legitimate rights or interests;
and
(4) Those concluded by way of deception or coercion.
An invalid contract shall have no legally binding force from the
time it is made. The invalidity of a portion of a contract shall not
affect the remainder of the contract which shall retain its validity.
Article 22. If the formation of a technology
contract which violates the law or regulations or which is harmful
to the national or common social interest involves an illegal
activity, administrative or criminal liability shall be investigated
and determined in accordance with the law.
Article 23. If the parties are in unanimous
agreement, a technology contract may be modified or terminated.
The modification or termination of a contract approved by a
relevant organ shall be agreed to by the original approving body.
Article 24. If any one of the following
circumstances arises, rendering the performance of a technology
contract unnecessary or impossible, one party shall have the right
to notify the other party of termination of the contract:
(1) Breach of contract by the other party;
(2) Force majeure;
(3) Public disclosure by another person of the specific
technology of a technical development contract.
Article 25. The modification or termination of a
contract shall not affect the rights of the parties to demand
damages.
Article 26. Within the period of validity of a
technology contract, one party may not, without the agreement of the
other party, transfer its rights or obligations in whole or in part
to a third party.
CHAPTER III Technical Development Contracts
Article 27. A technical development contract
refers to a contract concluded between parties for the research and
development of new technology, products, new processes, new
materials and their systems.
Technical development contracts include commission development
contracts and co-operative development contracts.
Article 28. A commission development contract
refers to a contract under which one party commissions another party
to engage in research and development.
The primary obligations of the commissioning party shall be:
(1) To pay research and development fees and remunerations as
stipulated by the contract;
(2) To provide technical material and original data and to
co-operate in the completion of tasks as stipulated by the contract;
and
(3) To take delivery on time of the results of the research and
development.
The primary obligations of the party undertaking the research and
development shall be:
(1) To formulate and implement a research and development plan;
(2) To make reasonable use of research and development funds; and
(3) To complete research and development and hand over the
results of the research and development on time, to provide relevant
technical data and necessary technical guidance and to assist the
commissioning party to gain an understanding of the results of the
research and development.
Article 29. If the commissioning party is in
breach of contract, thereby causing disruption, delay or failure of
the research and development work, it shall pay a penalty or damages.
If the party undertaking the research and development is in
breach of contract, thereby causing disruption, delay or failure of
the research and development work it shall, in addition to adopting
remedial measures for the continued performance of the contract, pay
a penalty or damages. Where failure of the research and development
is caused, the party shall refund all or part of the fee or
remuneration for research and development and shall pay a penalty or
damages.
Article 30. A co-operative development contract
refers to a contract concluded between parties for the purposes of
joint research and development.
The primary obligations of all parties to a co-operative
development contract shall be:
(1) To invest (including the provision of technology as
investment) as stipulated by the contract;
(2) To share research and development work as stipulated by the
contract; and
(3) To co-operate and co-ordinate with the other parties to the
contract
Article 31. If any one of the various parties to
co-operative development is in breach of the contract, thereby
causing disruption, delay or failure of the research and development
work, it shall pay a penalty or damages.
Article 32. The principles of ownership and
sharing of technical results arising out of the performance of a
technology contract are as follows;
(1) The right to apply for patent of a discovery or invention
which results from commissioned development shall, unless otherwise
stipulated by the contract, lie with the party which undertook the
research and development. If the party which undertook the research
and development obtains patent rights, the commissioning party may
implement the patent free of charge.
If the party which undertook the research and development
transfers its right to apply for patent of its discovery or
invention, the commissioning party may have the right of first
refusal of such transfer.
(2) The right to apply for patent of a discovery or invention
which results from co-operative development shall, unless otherwise
stipulated by the contract, lie jointly with the parties to the
joint development. If one party transfers its joint rights of patent
application, the other party or parties may have the right of first
refusal of such transfer.
If one party to co-operative development declares the
relinquishment of its jointly-held patent application right, the
other party may submit a sole application, or the other parties may
submit a joint application. Once a patent right is granted, the
party which relinquished its patent application right may implement
the patent free of charge.
If one party to a co-operative development does not agree to the
patent application, the other party or other parties shall not be
allowed to submit a patent application.
(3) The rights to utilize and transfer non-patented technical
results of commissioned or co-operative development, as well as
details of the method of distribution of profit shall be stipulated
by the parties in the contract. If the contract contains no
stipulation, all parties shall have the right to utilize or transfer
the technical results. The party commissioned to undertake the
research and development may not, however, transfer the results of
the research and development to a third party prior to handing those
results over to the commissioning party.
Article 33. The parties shall stipulate in the
contract the liability for risk in the case of total or partial
failure of the research and development due to insurmountable
technical difficulties during the performance of a technology
development contract. If the contract contains no stipulation, the
parties shall each bear a reasonable share of the liability.
If one party discovers the existence of one of the abovementioned
circumstances which could lead to the total or partial failure of
the research and development, it shall promptly notify the other
party and adopt appropriate measures to reduce the loss. If one
party fails to promptly notify the other party and to adopt
appropriate measures, thereby causing an increase in the loss, it
shall bear liability for the additional loss.
CHAPTER IV Technology Transfer Contracts
Article 34. A technology transfer contract
refers to a contract concluded between parties for the transfer of a
patent, transfer of patent application rights, a licence to
implement a patent or for the transfer of non-patented technology.
Article 35. A technology transfer contract may
stipulate the scope of patent implementation or utilization of
non-patented technology by the transferor and transferee. The terms
of the contract may not be used however, to restrict technological
competition or development.
Article 36. The formation of a contract for the
transfer of patent rights or of patent application rights shall
conform to the Patent Law and relevant regulations.
Article 37. The primary obligations of the
transferor in a contract of licence to work a patent shall be:
(1) To permit the transferee to work the patent within the scope
stipulated by the contract; and
(2) To hand over technical data relevant to the working of the
patent and to provide the necessary technical guidance.
The primary obligations of the transferee in a contract of
licence to work a patent shall be:
(1) To work the patent within the scope stipulated by the
contract and to not permit a third party not included in the
contract to work the said patent; and
(2) To pay royalties as stipulated by the contract.
Article 38. a technology transfer contract which
involves a patent shall clearly specify the name of the discovery or
invention, the patent applicant and the patentee, the date and
number of the application and the period of validity of the patent
right.
A contract of licence to work a patent shall be valid only for
the term of validity of the patent right. Upon the expiry of the
validity of the patent right, or following declaration of the patent
right as invalid, the patentee shall not conclude with another
person a contract of licence to work the said patent.
Article 39. The primary obligations of the
transferor in a contract for the transfer of non-patented technology
shall be:
(1) To provide technical data and carry out technical guidance as
stipulated by the contract;
(2) To guarantee the applicability and reliability of the
technology;
(3) To undertake the obligation of confidentiality as stipulated
by the contract.
The primary obligations of the transferee in a contract for the
transfer of non-patented technology shall be:
(1) To utilize the technology within the scope stipulated by the
contract;
(2) To pay fees for use as stipulated by the contract;
(3) To undertake the obligation of confidentiality as stipulated
by the contract.
Article 40. If the transfer is in breach of
contract, it shall undertake liability as follows:
(1) If the party does not transfer the technology as stipulated
by the contract it shall, in addition to refunding all or part of
the fee for use, pay a penalty or damages.
(2) If the party works a patent or utilizes non-patented
technology beyond the scope stipulated in the contract, or breaches
the contract by the unauthorized granting to a third party of
licence to work the said patent or utilize the non-patented
technology, it shall cease the action which is in breach of contract
and shall pay a penalty or damages.
(3) If the party is in breach of the contractual obligation of
confidentiality, it shall pay a penalty or damages.
Article 41. If the transferee is in breach of
contract, it shall undertake liability as follows:
(1) If it fails to pay the fee for use as stipulated by the
contract, it shall make up the fee and, in addition, pay a penalty
as agreed in the contract. If it fails to make up the fee or pay a
penalty, it must cease to work the patent or to utilize the
non-patented technology, return the technical data and pay a penalty
or damages.
(2) If it works a patent or utilizes non-patented technology
beyond the scope stipulated in the contract, or if it, without the
agreement of the transferor, grants licence to a third party to work
the patent or utilize the non-patented technology, it shall cease
the action which is in breach of contract and shall pay a penalty or
damages.
(3) If it is in breach of the contractual obligation of
confidentiality, it shall pay a penalty or damages.
Article 42. If the violation of another person's
legitimate rights or interests is caused by the transferee's working
of a patent or utilization of non-patented technology, the
transferor shall undertake liability.
Article 43. The parties may, in accordance with
the principle of mutual benefit, stipulate in the contract a method
of sharing ongoing improvements to technical results following the
working of a patent or the utilization of non-patented technology.
If the contract contains no stipulation, no one party has the right
to share the ongoing improvements to the technical results of
another party.
CHAPTER V Technical Consultancy Contracts And Technical
Service Contracts
Article 44. A technical consultancy contract
refers to a contract concluded for the supply by one party to
another party of feasibility evidence, technical calculations and
the findings of specialist technical surveys and analysis and
evaluation relating to specified technical project.
Article 45. The primary obligations of
commissioning party in a technical consultancy contract shall be:
(1) To clearly state the problem for consultancy and to provide
technical background material and relevant technical data and
figures as stipulated by the contract;
(2) To accept on time the results of the work of the advising
party and to pay remuneration.
The primary obligations of the advising party in a technical
consultancy contract shall be:
(1) To utilize its own technical knowledge to complete a
consultancy report as stipulated by the contract or to answer the
questions of the commissioning party;
(2) To submit a consultancy report which meets the requirements
stipulated in the contract.
Article 46. If the commissioning party in a
technical consultancy contract fails to provide the necessary
figures and data as stipulated by the contract, thereby affecting
the progress and quality of the work, it may not recover that
remuneration already paid and shall pay in full any remuneration
still owed.
If the advising party in a technical consultancy contract fails
to submit its consultancy report on time, or if the report submitted
does not conform to the stipulations of the contract, it shall
receive a reduced remuneration or no payment and shall pay a penalty
or damages.
Any loss suffered by the commissioning party in a technical
consultancy contract as a result of a decision taken on the basis of
a consultancy report or opinion provided by the advising party in
conformity with the requirements of the contract shall be borne by
the commissioning party, unless otherwise stipulated by the contract.
Article 47. A technical service contract refers
to a contract under which one party uses its technical knowledge to
resolve a specified technical problem for another party. It does not
include contracts for construction engineering survey, design or
construction, for installation or for contract processing.
Article 48. The primary obligations of the
commissioning party in a technical service contract shall be:
(1) To provide working conditions and complete complementary
tasks to facilitate the service, as stipulated by the contract;
(2) To accept on time results of the service work and to pay
remuneration.
The primary obligations of the service party in a technical
service contract shall be:
(1) To complete the contractually stipulated service task on
time, to resolve the technical problem and to guarantee the quality
of the work;
(2) To transfer the knowledge used to solve the technical problem.
Article 49. If the commissioning party in a
technical service contract is in breach of contract, affecting the
progress and quality of the work and does not accept or is late in
accepting the results of the service work, it shall pay the
remuneration in full.
If the service party in a technical service contract fails to
complete its service as stipulated by the contract, it shall not be
paid and shall pay a penalty or damages.
Article 50. Any new technical results achieved
by the advising party or service party during the performance of a
technical consultancy or technical service contract and utilizing
technical data and work facilities supplied by the commissioning
party shall belong to the advising party or the service party. Any
new technical results achieved by the commissioning party by
utilizing the results of the work of the advising party or the
service party shall belong to the commissioning party, unless
otherwise stipulated by the contract.
CHAPTER VI Arbitration And Litigation of Technology
Contract Disputes
Article 51. Disputes arising from technology
contracts may be resolved by the parties through consultation or
mediation. If the parties are unwilling or unable to resolve the
dispute through consultation or mediation they may, in accordance
with the arbitration clause of the contract or a subsequently
concluded arbitration agreement, request arbitration by an arbitral
organ stipulated by the State.
If one party fails within the designated time to perform the
terms of an arbitration award granted by the arbitral body, the
other party may apply to a people's court for enforcement of the
award.
If the parties have not included an arbitration clause in the
contract and have not subsequently concluded an arbitration
agreement, they may initiate litigation in a people's court.
Article 52. The period of limitation of actions
with regard to disputes arising from a technology contract and the
limit for application for arbitration shall be one year, to be
calculated from the day a party becomes aware or should become aware
of the violation of its legitimate rights or interests.
CHAPTER VII Supplementary Provisions
Article 53. The Economic Contract Law shall not
apply to technology contracts formed after the implementation of
this Law.
Article 54. The State Council departments in
charge of science and technology may formulate implementing rules on
the basis of this Law. These implementing rules shall be implemented
following approval by the State Council.
Article 55. This Law shall come into force on
November 1, 1987.
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