Laws of the People's Republic of China

LAW OF THE PEOPLE'S REPUBLIC OF CHINA
ON TECHNOLOGY CONTRACTS

 (Adopted on June 23, 1987 by the 21st Session of the Standing
Committee of the 6th National People's Congress)

 

 

 

SUBJECT: TECHNOLOGY CONTRACT

ISSUING-DEPT: STANDING COMMITTEE OF PEOPLE'S CONGRESS

ISSUE-DATE: 06/23/1987

IMPLEMENT-DATE: 11/01/1987

LENGTH: 4483 words

TEXT:

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 modernisation, 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 howerver, to contracts in which one party is a foreign enterprise, Other foregn organisaton 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 confidentality, 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 utilisation of the material technical resources of a particular unit shall be professional technical results.  The right to utilise and transfer professional technical results.  The right to utilise 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 utilisaton or transfer of the professional technical results.

The right to utilise 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-[rofessional 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.

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[Article 7] The relevant State Council department in charge and the people's governments of the provinces, autonomous regions and directly adminsitered municipalities shall have the right as required by the national and common social interest, to decide upon the dissemination to and utilisation by designated units of non-patented technical resuluts of major significance achieved by units under the ownership of the whole people, which fall within their particular system or scope of jursidiction.  A unit utilising technical results has the responsibility to maintain the confidentiality of those results.  The utilising 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 conllectively-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, follwing 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 payment 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 its performance of its contractual obligations does not conform to the stipulated conditions, thereby rendering it 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 forseen 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 liablity 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 monopolise 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 shally 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 utilise and transfer non-patentd 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 utilise 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 utilisation 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 cntract.

The primary obligations of the transferee in a contract for the transfer of non-patented technology shall be:

(1) To utilise 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 utilises non-patented technology beyond the scope stipulated in the contract, or breaches the contract by the unauthorised granting to a third party of licence to work the said patent or utilise 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 utilise the non-patented technology, return the technical data and pay a penalty or damages.

(2) If it works a patent or utilises 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 utilise 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 utilisation 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 follwing the working of a patent or the utilisation 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 prmiary obligations of the advising party in a technical consultancy contract shall be:

(1) To utilise 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 fuall 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 utilising 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 utilising 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, requeest arbitration by an arbitral organ stipulated by ths 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.