Operational Guidelines for IP Rights Licensing released in Shenzhen

The Operational Guidelines for Intellectual Property Rights Licensing in Shenzhen, the first official guide on IP rights licensing, were issued by the Shenzhen Municipal Intellectual Property Office on September 24 2008.

The guidelines, which are for reference only, provide useful guidance to enterprises, universities, scientific research centres and other entities in Shenzhen with regard to the acquisition and grant of IP rights licences. The guidelines aim to:

promote the efficient utilization of IP rights;
enhance the profitability of IP assets; and
minimize the economic and legal risks associated with licensing.

First, the guidelines provide guidance on how to proceed with licensing negotiations - from the composition of the negotiation teams to the formulation of strategies for resolving differences and maximizing gains. The guidelines suggest that the parties discuss technical matters first; this would then provide the basis for negotiating legal and commercial issues.

The guidelines also set out the key issues that the parties should include in a licensing agreement, including:

the scope of the licensed rights, the type of licence, the period concerned and the territory covered;
the restrictions placed on the licensee (eg, the prohibition to alter the licensor’s trademarks and engage in reverse engineering);
the duty of confidentiality;
the assurance that the licensed rights will not infringe the rights of third parties, together with a provision on liability in the event of such infringement claims;
a confirmation that the licence will effect no transfer in ownership of the IP rights;
a provision on dispute resolution specifying the forum in which any disputes arising between the parties will be resolved, as well as the applicable law (for foreign-related disputes, the guidelines suggest arbitration at the Hong Kong International Arbitration Centre or the Singapore International Arbitration Centre);
the obligation to conduct an IP audit on the licensee;
the licensee’s obligations to provide sales reports and/or sales estimates; and
the termination of the licence.

In addition, separate chapters provide more detailed guidance on licensing agreements for patents, copyrights (with a focus on software licensing) and trademarks.

Shenzhen has long been at the forefront of China’s modernization. Today, the city is a major manufacturing centre, an economic powerhouse and a technology hub in China. In light of the volume of activities that involve the use and/or the transfer of IP rights, it is expected that the guidelines will be a useful guide for small and medium-sized businesses.

Yvonne Chua and Campos Cheng, Wilkinson & Grist, Hong Kong

Operational Guidelines for IP Rights Licensing released in Shenzhen

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