Lier Company's Incentive and Remuneration Dispute Case

China IP,[Patent]

 

Units cannot refuse to pay patent remuneration on the ground that the employee inventor has previously obtained equity incentives. The provisions of patent remuneration are stipulated in Article 16 of China’s Patent Law, which stipulates that “a unit granted a patent right shall reward the inventor or designer of a service invention-creation; after the invention-creation patent is implemented, it shall be based on the scope of its promotion and application. For the economic benefits obtained, reasonable remuneration will be given to the inventor or designer.”
 
First-instance case number: (2014) Mianyang Intellectual Property Court Civil Judgement No. 9
 
Second-instance case number: (2015) Sichuan Intellectual Property Court Final Civil Judgement No. 89
 
Retrial ruling: (2017) Supreme People’s Court Civil Judgement No. 4902
 
Retrial case number: (2018) Sichuan People’s Court Civil Judgement No. 615
 
【The main takeaway of the trial】
 
As the service inventor of the patent involved, the plaintiff, in this case, has the right to claim remuneration from the patentee after the implementation of the patent, and the patentee has no right to refuse. The performance salary and equity incentives granted by the patentee based on the technical contributions made by the service inventor before the patent implementation are not included in the Patent Law and the Details for the Implementation of the Patent Law as the reward or remuneration after the implementation of the patent. There is no factual and legal basis for the patentee's refusal to pay the service inventor's patent implementation remuneration on this ground.
 
【Case Introduction】
 
Applicant for retrial (plaintiff in the first instance, the appellant in the second instance): Huang Zhiwei
 
Respondent in the retrial (defendant in the first instance, appellee in the second instance): Lier Chemical Co., Ltd. (referred to as Lier Company)
 
The name of the patent involved is "Synthetic method of a new herbicide (4-amino-3,5,6- trichloropyridine-2-carboxylic acid)" (hereinafter referred to as the "patent involved"), and the patent number is ZL200610021917.5. On May 14, 1999, Lier Company and the R&D Department of Lier Company, where Huang Zhiwei is located, signed the Contract for the Development of Picloram Chinese Synthetic Technology, and Huang Zhiwei started the research and development of the patents involved as a service inventor. On May 28, 2001, Lier Company signed the Research and Development Project Contract with Huang Zhiwei's R&D Department as the person in charge, stipulating that "A certain percentage of the income from the use and transfer of the technological achievements of the project shall be extracted as a reward or remuneration for the individual who completes the technical contract of the project". On February 4, 2004, due to Huang Zhiwei's outstanding contribution to the development of the Picloram Project, Lier Company awarded him a performance award of RMB 100,000 from January to December 2003. From 2004 to 2006, Lier Company implemented equity rewards for the company's management and technical teams. Huang Zhiwei acquired 1% of Lier Company's shares because of his special contribution to technology research and development.
 
On September 22, 2006, Lier Company filed an application with the China National Intellectual Property Administration. On December 17, 2008, the patent involved was granted authorization. The service inventor was Huang Zhiwei, and the patentee was Lier Company. In January 2009, Lier Company awarded Huang Zhiwei a prize of RMB 3,000 (patent certificate award) on the topic of Picloram. In 2012, the patent involved was awarded the 14th China Patent Invention Award, the patentee won a medal, the inventor received a certificate, the patent involved won the first Sichuan Patent Award in 2013, and Lier won an incentive of RMB 100,000 funds.
 
After the implementation of the patent in question, it has brought huge operating profits to Lier Company for many years and has successively won many awards. However, Lier Company did not pay the service inventor Huang Zhiwei after the patent implementation. In August 2014, Huang Zhiwei filed a lawsuit against the Intermediate People's Court of Mianyang City, Sichuan Province, where Lier Company is located. The Mianyang Intermediate People's Court rejected Huang Zhiwei's request for patent remuneration on the grounds that Lier had already paid Huang Zhiwei through performance bonuses and equity incentives. Huang Zhiwei refused to accept the first-instance judgment and appealed to the Sichuan Higher People's Court on September 9, 2015. The Sichuan Higher People's Court held that the facts ascertained in the first-instance judgment were clear, the applicable law was correct, and the trial procedures were legal. The judgment rejected the appeal and upheld the original judgment. Huang Zhiwei filed a retrial with the Supreme People's Court on August 30, 2016. The Supreme People's Court made a ruling and ordered the Sichuan Higher People's Court to retry the case. The Sichuan Higher People's Court made its final judgment on December 16, 2019, revoking the first-instance judgment of the Mianyang Intermediate People's Court and ruling that Lier Company should pay Huang Zhiwei a one-time payment of 1.5 million yuan for patent implementation.
 
As the agent of the plaintiff Huang Zhiwei in this case, the lawyer of Beijing Weibo Law Firm participated in the first instance of the Intermediate People's Court of Mianyang City, Sichuan Province, the retrial of the Supreme People's Court and the retrial procedures of the Higher People's Court of Sichuan Province.
 
【Typical meaning】
 
Units cannot refuse to pay patent remuneration on the ground that the employee inventor has previously obtained equity incentives. The provisions of patent remuneration are stipulated in Article 16 of China’s Patent Law, which stipulates that “a unit granted a patent right shall reward the inventor or designer of a service invention-creation; after the invention-creation patent is implemented, it shall be based on the scope of its promotion and application. For the economic benefits obtained, reasonable remuneration will be given to the inventor or designer.” According to Article 16 of the Patent Law, it can be known that “the entity shall provide reasonable remuneration to the inventor or designer after the implementation of the inventioncreation patent”.
 
In this case, Huang Zhiwei is the inventor of the involved patent, and has the right to claim remuneration for service invention implementation from Lier Company in accordance with the law or the agreement between the two parties, regardless of the performance given to Huang Zhiwei by Lier Company on February 4, 2004 which was the award of RMB 100,000, or Lier Company’s 1% of the company’s equity in Huang Zhiwei, occurred before the patent in question was granted. The above-mentioned rewards do not belong to the rewards or remunerations of Lier Company for the involved patents claimed by Huang Zhiwei based on the relevant provisions of the Patent Law. At the same time, the Contract signed on May 28, 2001 stipulated that "a certain percentage of the income from the use and transfer of the technological achievements of the project shall be drawn as a reward or remuneration to the individual who completes the job technology contract". This Contract also occurs before the patent application. It is an agreement on rewards or remuneration for the conversion of technological achievements into profits, not an agreement on remuneration for patent implementation. The VDMS rules formulated by Lier Company on November 7, 2009 are not specific provisions for patents. The "bonus" mentioned in the rules cannot, of course, be understood as patent implementation remuneration. Therefore, service inventors have the right to claim remuneration after patent implementation from the patentee in accordance with the law, and the unit shall not refuse to pay patent remuneration on the ground that the service inventor has previously obtained equity incentives.
 
All in all, it is an obligation stipulated by the law to provide rewards and remunerations for service inventors to service inventors, and it is also an important measure to encourage innovation. After applying for a patent, a service invention realizes its value through implementation, licensing, transfer, etc. The patentee extracts a certain amount of remuneration from the patent income to pay the patent inventor, matching the economic value created by the inventor or designer, reflecting the principle of fairness, is the basic requirement of the reward and remuneration system for service invention and creation.

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