China’s top 20 patent cases of 2020: Lertech v. MDT

China IP,[Patent]

 

Docket number of the case in the first instance: No. 527, first instance (初), intellectual property (知), (2019) Suzhou Intermediate People’s Court (苏05)
Docket number of the case in the second instance: No. 1356, second instance (终), civil case (民), (2020) IPR Division of the Supreme People's Court (最高法知)
 
[Prefatory Syllabus]
As there is no agreement between the inventor and the company, including any written labor contract, whether the working relationship between two parties is labor relationship or temporary working relationship required for service inventions should be comprehensively judged according to the actual relationship between the inventor and the company claiming the service invention.
 
[Basic Facts]
Appellant (Defendant in the case in the first instance): Wuxi Lertech Co., Ltd. (hereinafter, “Lertech”)
Appellant (Third-party defendant in the case in the first instance): Mr. Wang
Appellee (Plaintiff in the case in the first instance): MultiDimension Technology Co., Ltd. (hereinafter, “MDT”)
 
The plaintiff MDT is a high-tech enterprise dedicated to R&D and production of TMR sensor chips. The third-party, Wang, used to serve as COO and Director in MDT before leaving for some reason, and later engaged in the same business as the plaintiff with the defendant Lertech as the main body. During his tenure and within a year after leaving office, Wang filed a number of patent applications related to the plaintiff’s R&D contents, with Lertech as the patentee.
 
Holding that a number of patents for which Wang is the inventor should be for service inventions, the plaintiff MDT filed a lawsuit with the Intermediate People’s Court of Suzhou, Jiangsu Province, requesting a ruling that the patents in dispute belong to the plaintiff. The first instance of the Intermediate People’s Court of Suzhou, Jiangsu Province ruled that the patents in dispute belong to the plaintiff, on the grounds that “the patents in dispute are innovations and creations related to his work in MDT made within one year after the termination of the labor relationship between Wang and MDT, and are service invention-creations”.
 
Lertech and Wang refused to accept the verdict of the first instance, and appealed to the Supreme People’s Court. The focus of the dispute between the two parties is whether there is a labor relationship between Wang and MDT without a labor contract, and whether the patents in dispute are related to Wang’s own work.
 
The second instance of the Supreme People’s Court holds that, as there is no agreement between Wang and MDT, including any written labor contract, whether the working relationship between two parties is labor relationship or temporary working relationship required for service inventions should be comprehensively judged according to the actual relationship between the inventor and the company claiming the service invention. As suggested by multiple pieces of evidence such as Wang’s position as COO in the company, social insurance payment records, salary records, personal income tax payment records, coverage about Wang’s media interviews, and email exchange within the company, during the disputed period, Wang was working in the company, and engaged in work related to the development of new products. Accordingly, it should be determined that there is a de facto labor relationship between Wang and MDT, which is required for the service invention. The second-instance verdict discusses the relevance between the patents in dispute and Wang’s work in MDT from two dimensions, i.e., the application field and invention content of patents in dispute, and Wang’s work contents. On this ground, the second instance dismissed the appeal and upheld the original judgment.
 
The attorneys of Beijing Chaocheng Law Firm, who acted as the agent of the plaintiff in the first trial and the appellee (MDT), participated in the proceedings of the first and second instances.
 
[Typical Significance]
In this case, one focus of the dispute is the identification of the working relationship in the service invention identification process. The objective circumstances of the case include that the original labor contract between the inventor, Wang, and the plaintiff was destroyed, and Wang also served as the legal representative of the defendant. In the course of litigation, the defendant held that the inventor was not an employee, but only a director of the plaintiff. As it happened a long time ago, relevant materials were lost, leading to objective difficulties in collecting evidence. After in-depth investigation and analysis, the agent provided evidence of various aspects, such as social security, personal income tax, industrial and commercial registration, the plaintiff’s application record for service invention, the inventor’s interview, papers published, and work emails, and proved the fact that there is an actual working relationship between two parties with objective evidence.
 
The plaintiff proved the relevance between the patents in dispute and Wang’s work from many aspects, and provided substantive contents that meet legal provisions on “relation to his own work” based on a detailed comparison. Regarding the defendant’s defense that the patents in dispute stem from the inventor’s work before joining the plaintiff, the second-instance judgment held that, as the plaintiff has submitted sufficient evidence to prove that there is a clear and specific correlation between the patents in dispute and Wang’s own work in MDT, the professional background and competence of the inventor are not sufficient to negate the conclusion that it belongs to service invention.
 
Moreover, the Supreme People’s Court further makes it clear that, in the absence of obvious evidence that proves the patents in dispute are prior art, whether the prior art has disclosed partial technical contents of the patents in dispute, and whether the patents in dispute meet the conditions for patent licensing, etc., fall outside the scope of the trial of disputes over ownership of patent rights.
 
The typical significance of this case is how to prove a working relationship or even a labor relationship between the inventor and the company in cases where there is not a labor contract. Meanwhile, this case also suggests, employers shall, in a timely manner, enter into a written contract with the inventor, including but not limited to, a labor contract, a confidentiality agreement, and an intellectual property ownership agreement, and keep records of the R&D process, so as to prevent disputes or gain an advantage over the opponent in disputes, avoid the loss of intangible assets, and safeguard the legitimate rights and interests of the company.

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