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The Newly Amended Regulations on Technology Import and Export Administration of the People’s Republic of China


Sai CHEN
Partner, Chinese Attorney-at-Law

The “Decision of the State Council on Amending Certain Administrative Regulations” aiming to amend some of the provisions of 49 administrative regulations was promulgated by Order No. 709 of the State Council of the People's Republic of China
 
on March 18, 2019. The decision shall come into force on the date of issuance.

Among them, substantive amendments were made to “Regulations on Technology Import and Export Administration of the People’s Republic of China” as follows:
 
1. Paragraph 3 of Article 24, i.e., “where the receiving party to a technology import contract infringes another person’s lawful rights and interests by using the technology supplied by the supplying party, the supplying party shall bear the liability therefore” is deleted.
 
2. Article 27, i.e., “within the term of validity of a contract for technology import, an achievement made in improving the technology concerned belongs to the party making the improvement” is deleted.
 
3. Article 29 , i.e., “A technology import contract shall not contain any of the following restrictive clauses:

(1) requiring the receiving party to accept any additional condition unnecessary for the technology import, including buying any unnecessary technology, raw material, product, equipment or service;

(2) requiring the receiving party to pay exploitation fee for a technology when the term of validity of the patent right in which has expired or the patent right of which has been invalidated, or to undertake other relevant obligations;

(3) restricting the receiving party from improving the technology supplied by the supplying party, or restricting the receiving party from using the improved technology;

(4) restricting the receiving party from obtaining technology similar to that supplied by the supplying party from other sources or from obtaining a competing technology;

(5) unduly restricting the receiving party from purchasing raw material, parts and components, products or equipment from other channels or sources;

(6) unduly restricting the quantity, variety, or sales price of the products the receiving party produces; or

(7) unduly restricting the receiving party from utilizing the channel for exporting products manufactured using the imported technology” is deleted.
 
Comment
 
The entry into force of this decision means that the compulsory provisions of the “Regulations of the People’s Republic of China on the Administration of Import and Export of Technologies” on the third-party tort liability, the attribution of improved technological achievements and restrictive clauses which are always controversial are invalidated.
 
In the future, the technology import contract may also according to the relevant provisions of Article 353 of the Chinese Contract Law: the parties may agree on the tort liability for the infringement of the third party’s rights in the implementation of the transferred or licensed technology; in the absence of an agreement, the liability shall be borne by the transferor. Since the “Case of Fuji Kasui”, the foreign parties who choose to cautiously transfer or license technology to Chinese companies due to the huge risks caused by being unable to completely eliminate the third-party tort liability can now expressly stipulate the liability bearer and the scope of liability in technology transfer or license contracts to control the risks. To this end, technology imports are expected to increase.
 
Regarding the attribution of the improved technical achievements, according to the provisions of Article 354 of the Contract Law, the attribution and sharing of the improved technology can be agreed on the basis of mutual benefit; if there is no agreement or the agreement is not clear, the improved technology belongs to the party that makes the improvements. Therefore, although the provisions on the mandatory attribution to the party that makes the improvements in Regulations of the People’s Republic of China on Administration of Import and Export of Technologies are deleted, the parties may agree on the attribution and sharing of the improved technology, but the agreement shall comply with the principle of mutual benefit, otherwise it may belong to “Restricting one party from making new research and development on the basis of the contractual subject technology, or restricting this party from using the improved technology, or the conditions for both parties to exchange the improved technologies with each other being not reciprocal, including such circumstances as requiring one party to gratuitously provide the other party with the improved technology, to transfer the improved technology to the other party non-reciprocally, to gratuitously and solely occupy, or jointly own the intellectual property of the improved technology” as stipulated in paragraph 1 of Article 10 of the Interpretation of the Supreme People’s Court concerning Some Issues on Application of Law for the Trial of Cases on Disputes over Technology Contracts, and hence is considered to be “illegally monopolizes technology, impairs technological advancement” as asserted in Article 329 of the Contract Law, and then be regarded as an invalid agreement.
 
The deletion of Article 29 of the Regulations of the People’s Republic of China on Administration of Import and Export of Technologies does not mean that the restrictive clauses mentioned in Article 29 can be arbitrarily specified in the technology import contracts. Because Article 329 of the Contract Law expressly stipulates that the technical contract which “illegally monopolizes technology, impairs technological advancement” is invalid; moreover, Article 10 of the “Interpretation of the Supreme People’s Court concerning Some Issues on Application of Law for the Trial of Cases on Disputes over Technology Contracts” lists the cases of “illegally monopolizes technology, impairs technological advancement” and the listed scope basically covers the restrictive clauses in Article 29 of the Regulations of the People’s Republic of China on Administration of Import and Export of Technologies.
 
In summary, this revision of the Regulations of the People’s Republic of China on Administration of Import and Export of Technologies removes three controversial articles. It does not mean that these three aspects are no longer legally binding, but it can be said that the equality between the foreign-related technology contracts and the domestic technology contracts in the application of law is achieved and the revised regulations are more respectful of the agreement between the parties.
 
Time: March 22 2019
Source: Linda Liu & Partners
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