Laws of the People's Republic of China

(Effective Date 1984.07.14)

   Article 1. The present set of regulations is drawn up in accordance with relevant laws and decrees of the People's Republic of China.

   Article 2. The regulations apply to the SEZ enterprises and institutions and other economic organizations (hereinafter referred to as the licensee) import or transfer of technology with payment from foreign or Hongkong, Macao and Taiwan enterprises, other economic organizations and individuals (hereinafter referred to as the licensor).

   Article 3. The technology thus acquired must be both practical and advanced, and may bring about marked economic benefits. Technology here is meant to include:

(1) technology with valid patent right;

(2) technology with its patent right being applied for; and

(3) proprietary technology.

   Article 4. Technology that produces the following effects is forbidden to be imported:

(1) that which harms public order of society or violates social ethics; and

(2) that which undermines ecological balance and harms the environment.

   Article 5. Technology transfer or acquisition may take any of the following forms:

(1) licensing;

(2) technical consultancy or technical service;

(3) using patented technology or proprietary know-how as capital contribution in investment, or entering into joint operation with the licensee;

(4) compensation trade or co-production; and

(5) projects under contract or other forms.

   Article 6. The licensee (recipient) may enjoy special preferential terms set by the Xiamen City People's Government if the imported technology meets one of the following conditions, and may apply to a SEZ-based state bank for low-interest loans or financial assistance:

(1) technology which is examined and proved by the state scientific and research department as up to the world advanced level;

(2) that which can markedly improve the competitiveness of the products on the international market;

(3) that which may bring about marked economic results when applied to the technical upgrading of enterprises; and

(4) that which is indispensable to the requirements of the Xiamen City People's Government.

   Article 7. In technology acquisition, the licensee should apply in writing to an organization authorized by the Xiamen City People's Government and should attach a letter of intent about the technology to be acquired and a report on the feasibility study. When examined and approved, a contract is to be signed between the licensee and licensor (supplier) and submitted to the higher authorities for approval. The approval department should reply within 44 days after receipt of the application.

The contract comes into force on the date of approval, and it may be cancelled by the approval department if it is not implemented within six months. The parties involved are allowed to apply for an extension before expiry if they have a valid reason(s).

   Article 8. Contracts must also have the following provisions apart from those that are generally included in Sino-foreign economic contracts:

(1) definition of key terms;

(2) subject and scope of the technology involved, list of technical information and the date of delivery;

(3) progress of implementation, technical service and technical training;

(4) the use of trademark;

(5) warranty, checking and acceptance of the technology;

(6) the rights and obligations of both sides to use and improve the technology;

(7) secrecy clause;

(8) the way to work out and pay the remuneration for the technology; and

(9) liquidated liabilities (damages).

   Article 9. Invalidation of technology transfer agreement clauses if they are formed to include any of the following provisions:

(1) payment for expired or invalid patent rights;

(2) restrictions on the licensee to licensing-in technology from other sources;

(3) restrictions on improvement or development of the technology in the course of application;

(4) obviously unreasonable conditions attached.

   Article 10. In transferring patented technology of an unexpired life, the licensor should provide the licensee with a manual on the patent and a duplicate or a copy of the letters patent. The certificate of patent right transfer, if any, should also be provided.

In transferring technology for which the patent is pending, the licensor should provide the licensee with such patent application documents as the letter of application, a manual on the invention and its abstracts, charts, and the letter requesting proprietary rights, and a progress report on the application process. Documentary evidence on the right to transfer one's eligibility, if any, of patent application should also be provided.

In transferring proprietary know-how, the licensor should provide the licensee with the relevant design blueprints, the rules for the manufacturing processes, illustrated instructions, technical data, prescriptions, formulae, key equipment, models, samples, list of materials and materials specifications, operating instructions, detailed regulations on on-site operations, and the relevant information and data regarding technical demonstrations, on-site guidance, product quality control and inspection procedures, repair procedures and equipment, and other commercial information.

   Article 11. The licensor should, within the time limit set by the contract, conduct training for the required number of people specified by the licensee with regard to technology, design, management and marketing so that the licensee may master the full range of the technology provided.

   Article 12. If the licensor is re-licensing the same technology, the licensee has the right to demand that a duplicate of the original licensing agreement be provided as well.

   Article 13. If the licensor's patent lapses before the expiration of the agreement, or the application for patent right is rejected, or if it is found that the know-how does not belong to the licensor, the licensee has the right to demand for changing or terminating the agreement. The licensor is to be held responsible for any losses arising therefrom, and answerable to any legal proceedings concerning the patent rights instituted by the third party concerned.

The licensor should make sure that the technical data are complete, correct and reliable. If, for reasons the responsibility for which rests solely on licensor himself (herself), the technology is found to be not up to the requirements as stipulated in the contract, the licensor should bear the responsibility for violations of the contract and for payment of the liquidated damages.

   Article 14. The licensee undertakes to discharge the secrecy clause obligations as stipulated in the contract regarding the imported technology. In case of violations of the secrecy clause, the licensor has the right to withdraw all the relevant information and data, terminate the contract, and demand compensation from the licensee for the losses resulting therefrom.

Anyone who has access to the technical secrets because of his (her) duties or job responsibilities must not divulge the secrets or use them without authorization; violations as such shall be legally accountable.

   Article 15. The relevant department of the Xiamen City People's Government undertakes the necessary monitoring of and control over the effects of the transfer and application of the technology. In cases where environmental pollution is found or where the expected technical and economic targets cannot be reached, the department shall demand that the Xiamen City People's Government suspend the preferential terms granted to the parties concerned, and take the appropriate actions to rectify the situations.

   Article 16. The present regulations come into force on the date of promulgation.