Examining regulations amended for tech import and export

By Quan Xianzhi and Fu Jianjun, Longan Law Firm
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The State Council promulgated the Decision on Amending Certain Administrative Regulations (Order No. 709 of the State Council) on 18 March 2019, to amend some provisions of 49 administrative regulations, including the amendment in article 38 to some provisions of the Regulations of the People’s Republic of China on Technology Import and Export Administration.

Main contents amended

The following contents in chapter 2 ,“Technology Import Administration”, are deleted:

First of all, the original paragraph 3 of article 24 is deleted, which provided that, “If the transferee of a technology import contract uses the technology provided by the transferor in accordance with the contract and infringes the legitimate rights and interests of others, the transferor shall bear the responsibility.”

Before the amendment, the paragraph mandatorily provided that the infringement liability should be borne by the transferor. After the amendment, both parties have more autonomy in the issue of assuming infringement liability. Reference may be made to article 353 of the Contract Law for the issue of infringement liability, that is, the agreement between the contracting parties shall be applied first to determine the infringement liability, and, in case of no agreement, the transferor should bear the liability.

Second, the original article 27 is deleted, which provided that, “The achievements of improved technology shall belong to the improving party in the period of validity of a technology import contract.”

Before the amendment, the regulations provided that the technical improvement achievements should be owned by the improving party. After the amendment, the attribution of the improved technology can be determined by reference to article 354 of the Contract Law, that is, it should be settled based on the autonomy of the parties, and the improving party shall own the improved technology in the case of no clear agreement, and failure to reach a supplementary agreement.

Quan-Xianzhi-Senior-Partner -Longan-Law-Firm
Quan Xianzhi
Senior Partner
Longan Law Firm

Third, the original article 29 is deleted, which provided that, “Any technical import contract shall not contain the following restrictive provisions: (1) requiring the transferee to accept any conditions that are not essential for the import of technology, including purchase of non-essential technologies, raw materials, products, equipment or services; (2) requiring the transferee to pay the royalties or assume relevant obligation for the technology, the patent of which has expired or been declared void; (3) restricting the transferee from improving the technology provided by the transferor, or from using the improved technology; (4) restricting the transferee from obtaining other technologies similar to, or competing with, the technology provided by the transferor from other sources; (5) unreasonably restricting the channel or source through, or from which, the transferee purchases raw materials, components, products or equipment; (6) unreasonably restricting the production quantity, type or sales price of the transferee’s products; and (7) unreasonably restricting the export channel of products made by the transferee with the imported technology.”

Before the amendment, no technology import contract was allowed to include the provisions of the above seven types of restrictive provisions. After the amendment, the transferor and the transferee can impose various reasonable restrictions on the technology contract, subject to the provisions on prohibition of illegal monopoly technology, impediment to technological progress, or infringement on the technical achievements of others as provided in article 329 of the Contract Law.

Impact on practice

As indicated above, the contracting parties can freely agree on those matters when signing import and export contracts in the future due to the deletion of mandatory provisions on infringement liability for import and export of technology, attribution of improved technology achievements, and certain restrictions.

Fu-Jianjun-Partner -Longan-Law-Firm
Fu Jianjun
Partner
Longan Law Firm

For the technology import and export contracts that have already been signed, some of the provisions can be changed through signing a supplementary agreement. After consulting the Beijing Municipal Commission of Commerce, the authors confirm that previously registered contracts can be amended through signing a supplementary agreement. If the amended item does not fall within the scope of the Registration Certificate for Technology Import and Export Contract and the Data Sheet of Technology Import and Export Contract, such item is not required to be re-registered.

The items in the Registration Certificate for Technology Import and Export Contract and the Data Sheet of Technology Import and Export Contract include contract number, contract name, supplying company, technology provider, receiving company, contract effective date, contract validity period, patent list, payment method and total contract price. It can be seen that the assumption of infringement liability and attribution of improved technology achievements involved in this amendment are not within the required scope of re-registration.

The amendment to the Regulations of the People’s Republic of China on Technology Import and Export Administration clears possible concerns of the parties, especially the transferor, reaching a technology import and export contract, which greatly increases the autonomy of the transferor and transferee of imported technology, and exerts a very positive impact on improving the enthusiasm of foreign companies to licence/transfer technology to Chinese companies, and promoting the development of international trade, especially intellectual property trade.

Quan Xianzhi is a senior partner and the deputy director of the Intellectual Property Committee at Longan Law Firm. She can be contacted on +86 10 8809 6573 or by email at quanxz@longanlaw.com

Fu Jianjun is a partner and a member of the Intellectual Property Committee at Longan Law Firm. He can be contacted on +86 10 88096573 or by email at fujianjun@longanlaw.com