When Employees Depart, Who Owns Their Inventions?

In China, employees who make an invention within one year of leaving a company often lose ownership to the ex-employer. This is because China’s Patent Law says such post-employment inventions belong to the prior company if related to the actual work done there. However, determining “relatedness” is difficult and requires looking closely at the facts.

A recent ruling ((2022)最高法知民终1229号) by China’s highest court, the Supreme People’s Court (SPC), shows the need to examine the specifics of both the employees’ old duties and new invention.

The case involved two engineers, Chen Zhongliang and Long Yongbo, who left automotive company Chunfeng Motor. Within a year, they patented an “air filter and all-terrain vehicle equipped with same”. Chunfeng Motor claimed ownership of the patent under the 1-year rule.

During employment, Chen worked as Chief of Quality Technology, overseeing areas like market quality issues, product inspection standards, technical changes and new product development. Long held a position as R&D engineer, serving as project manager for developing new vehicle models, helping draft industry standards, and managing cost control and parts verification.

The SPC disagreed with Chunfeng Motor’s claim upon reviewing their work duties, which did not specifically involve designing or producing air filters. While Chen and Long’s positions concerned new vehicle development, air filters were merely one small component, and they did not personally work on air filters during employment. The key features of their new air filter and how it worked were different from Chunfeng Motor’s existing products. Other patents Chen and Long made for Chunfeng Motor during their employment did not relate to air filters either. The SPC said these facts showed Chen and Long’s invention was unrelated to their work at Chunfeng Motor. So ownership properly belonged to their current employer, who had retained them within a year of their resignation from Chunfeng Motor.

Mere opportunity to gain related technological experience did not prove the invention came from work done for the prior employer. If that were enough justification, employees in China would effectively lose the right to start over in their field and utilize their skills at a new job. The court avoided this overly simplistic view and achieved a balanced result.

This judgment shows sophisticated treatment of employee inventions beyond rigid time-based rules. At minimum, it highlights the need for factual precision and balance in these issues under any legal system. Overall, this case shows China courts look closely at the details of the employee’s old job tasks and their new invention to determine who it truly belongs to. For companies doing business in China, the key is keeping good records to build evidence on each side.