*AI-generated translation, for reference only.

Recently, the Intellectual Property Court of the Supreme People's Court rendered a final judgment in a series of cases regarding patent ownership disputes, clarifying that patents obtained by senior corporate officers for themselves or others, which are related to the business of the company they serve, lack a legitimate basis if obtained in violation of their duty of loyalty and non-competition obligations. The Court affirmed that 11 patents (including the patent-in-suit) and patent applications constituted service inventions.

Yu Yao Gao [REDACTED] Company was a wholly foreign-owned enterprise established by U.S.-based H Group, with its main business including fitness equipment. From March 2014 to March 2021, Qiao [REDACTED] jia served as the General Manager of Yu Yao Gao [REDACTED] Company, exercising leadership and management authority over major matters such as the company's operational direction, human resources, and organizational structure. Their labor contract contained confidentiality and non-competition clauses. During his tenure, Qiao [REDACTED] jia registered several affiliated companies in his own name or in the names of interested parties (including Ning Bo Dao [REDACTED] Company and De [REDACTED] Shanghai Company), whose business substantially overlapped with that of Yu Yao Gao [REDACTED] Company. He leveraged his position to benefit himself and his affiliated companies, utilizing Yu Yao Gao [REDACTED] Company's resources to conduct research and development for a series of patents, including the patent-in-suit. In this case, Ning Bo Dao [REDACTED] Company, established by Qiao [REDACTED] jia, filed a patent application for the invention-in-suit with the China National Intellectual Property Administration in April 2020, listing Qiao [REDACTED] yi, Qiao [REDACTED] jia's son, as the inventor. In May 2021, Ning Bo Dao [REDACTED] Company transferred the patent right of the invention-in-suit to De [REDACTED] Shanghai Company, an affiliate of Qiao [REDACTED] jia, without compensation. Yu Yao Gao [REDACTED] Company filed a lawsuit, asserting that the patent right of the invention-in-suit constituted a service invention created by Qiao [REDACTED] jia and should belong to Yu Yao Gao [REDACTED] Company.

The court of first instance found that Yu Yao Gao [REDACTED] Company had preliminarily completed research and development on related pull-wire motors prior to the application date of the patent-in-suit, and its technical solution was similar to that of the patent-in-suit. Qiao [REDACTED] jia had knowledge of, participated in, and guided the relevant technical improvement work at Yu Yao Gao [REDACTED] Company before the application date of the patent-in-suit. In the absence of evidence proving that Qiao [REDACTED] yi actually developed the patented invention, the court determined that Qiao [REDACTED] jia should be considered the de facto inventor. The patent-in-suit constituted a service invention and should be owned by Yu Yao Gao [REDACTED] Company. The transfer of the patent right between Ning Bo Dao [REDACTED] Company and De [REDACTED] Shanghai Company without compensation constituted malicious collusion and was therefore invalid. Ning Bo Dao [REDACTED] Company, De [REDACTED] Shanghai Company, Qiao [REDACTED] jia, and Qiao [REDACTED] yi all appealed against the first-instance judgment.

In the second instance, the Supreme People's Court held that Ning Bo Dao [REDACTED] Company and De [REDACTED] Shanghai Company lacked a legitimate basis for obtaining the patent right of the invention-in-suit, and that the patent-in-suit constituted a service invention by Qiao [REDACTED] jia and should belong to Yu Yao Gao [REDACTED] Company. The appeal was dismissed and the original judgment was affirmed. The main reasons are as follows:

1. Qiao [REDACTED] jia seriously violated his duty of loyalty and non-competition obligations during his tenure as General Manager of Yu Yao Gao [REDACTED] Company. Consequently, the acquisition of the patent right of the invention-in-suit by Ning Bo Dao [REDACTED] Company and De [REDACTED] Shanghai Company lacked a legitimate basis. First, as a senior officer of Yu Yao Gao [REDACTED] Company, Qiao [REDACTED] jia bore statutory duties of loyalty and diligence, and the parties had additionally agreed upon confidentiality and non-competition clauses, which Qiao [REDACTED] jia was obliged to strictly observe. Second, Qiao [REDACTED] jia utilized resources he accessed during his employment at Yu Yao Gao [REDACTED] Company to support the development of his affiliated companies, attempting to seize business opportunities belonging or potentially belonging to Yu Yao Gao [REDACTED] Company and encroach on its market share. Finally, Qiao [REDACTED] jia used Yu Yao Gao [REDACTED] Company's resources for patent research and development for his personal benefit.

2. The patent-in-suit constituted a service invention by Qiao [REDACTED] jia and should be owned by Yu Yao Gao [REDACTED] Company. First, Qiao [REDACTED] jia possessed relevant technical expertise. During his employment at Yu Yao Gao [REDACTED] Company, he held significant operational and management authority, enabling him to access the company's technical information and participate in technical improvement work. Second, the patent-in-suit related to a pull-wire motor device, which was the same type of product as Yu Yao Gao [REDACTED] Company's existing pull-wire motor products. Prior to the application date of the patent-in-suit, Yu Yao Gao [REDACTED] Company had already undertaken technical improvement work on technical solutions related to the patent-in-suit. Design drawings for pull-wire motors found in multiple email exchanges between Qiao [REDACTED] jia and employees of Yu Yao Gao [REDACTED] Company were identical to some of the figures in the specification of the patent-in-suit. Finally, the recorded inventor of the patent-in-suit, Qiao [REDACTED] yi, was Qiao [REDACTED] jia's son. They had an interest in each other, and Qiao [REDACTED] yi failed to submit any evidence of research and development related to the patent-in-suit. Furthermore, Qiao [REDACTED] jia had de facto control over Ning Bo Dao [REDACTED] Company. Filing the patent application for the invention-in-suit in the name of Ning Bo Dao [REDACTED] Company, with Qiao [REDACTED] yi listed as the inventor, was in fact an attempt to circumvent legal provisions and the terms of the labor contract.

3. The transfer of the patent right of the invention-in-suit between Ning Bo Dao [REDACTED] Company and De [REDACTED] Shanghai Company was made without compensation and demonstrated malicious intent to harm the legitimate interests of Yu Yao Gao [REDACTED] Company. The first-instance judgment's finding that this transfer was invalid was supported by facts and law.

The second-instance judgment in this case further clarified the criteria for determining service inventions created by senior corporate officers. Where a senior corporate officer, during their tenure, engages in the same line of business as their employer's company for themselves or for others, and during their tenure or within one year of resignation, files a patent application highly relevant to their employer's business, listing themselves or an interested party as the inventor and their own company or an affiliate as the applicant, such patent or patent application may be deemed a service invention of the senior officer. This judgment not only equally protects the lawful rights and interests of Chinese and foreign parties in accordance with the law but also establishes rules of conduct and conveys value orientation through fair adjudication, representing a vivid judicial practice actively fostering a law-based business environment.