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posted 2 years ago
Cross-border technology transfers can be challenging to navigate in China. As China categorizes technology transfers into three groups (prohibited, restricted, and free), the transfer can be subject to certain limitations or requirements. For foreign companies transferring technology in or out of China, it is crucial to understand obligations and reduce legal risks.
In China, technology transfers are primarily regulated by the Civil Code of the People’s Republic of China adopted on 01 January 2021 (Civil Code), and the Foreign Trade Law of the People’s Republic of China (Foreign Trade Law”), adopted by the Standing Committee of the NPC on 12 May 1994 and last revised on 07 November 2016. We provide a Q&A on technology transfers in China.
Technology transfers (exporting or importing technology) refers to the acts of transferring technology from outside the territory of China into the territory of China or vice versa. Transfer can conduct through trade, investment, or economic and technical cooperation. Technology acquisition may include any of the following:
Technology transfers are classified into three categories; prohibited import and export technologies restricted import and export technologies, and free import and export technologies. Importing and exporting restricted technology is subject to license control. Whilst free import and export technology may be imported or exported without a license, it is important to note that import or export contracts shall be registered.
The technology transfer may be prohibited or restricted under any of the following reasons:
Technology transfers are required to fulfill the following criteria:
Transfer contracts must be written and contain mandatory clauses including the name of the project, the content, scope, and requirements of the object, the plan, place, and manner of performance, the confidentiality of technological information and materials, the ownership over the technological achievements and the method of proceeds distribution, the criteria and method of the inspection for acceptance, interpretation of terminologies, and the like.
The technology transferer shall guarantee it is the “lawful owner” of the technology or obtained the right to transfer or authorize the use of the technology.
The technology provided by the transferer must be complete, accurate, and effective, and fulfill the technical objectives specified in the contract.
Improvements conducted to technology during the term of the contract shall belong to the improving party. Thereafter, parties may negotiate the continued use of the technology under the principles of fairness and equity.
The Technology Transfer Regulations oblige the technology recipient to preserve the technology as confidential. Such obligation is based on the condition that the technology is not publicly disclosed. Moreover, the confidentiality obligation is limited to the “scope and duration” agreed in the contract.
A technology contract that illegally monopolies technologies or infringes upon others’ technological work product is invalid. Illegal monopolies are defined as the following:
All technology import/export contracts shall be registered at the Ministry of Commerce or the competent authorities in charge of commerce at the provincial level or cities.
At Horizons, we have advised on several cross-border transfers, especially in dual-use technology led by Managing Regional Partner Roberto Gilardino. If you would like to discuss more technology transfers in China, please contact us at [email protected]
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