Infringement of third party rights
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.
Art 353 of PRC Contract Law:
Where the exploitation of the patent or utilization of the technical secrets by the transferee as contracted infringes upon legitimate rights and interests of others, the liability therefor shall be borne by the transferor, unless the parties stipulate otherwise.
Prohibited Terms in a technology contract
A technology import contract shall not contain any of the following restrictive clauses:
(1) require the receiving party to purchase unnecessary raw materials, products, equipment or services;
(2) request royalty payments for expired and/or invalid patents;
(3) restrict the receiving party from improving the licensed technology or using the improvements;
(4) restrict the receiving party from acquiring similar or competing technologies from others;
(5) unreasonably restrict the channels for the receiving party to purchase raw materials, parts or components, products or equipment;
(6) unreasonably restrict sales quantity, product models, or prices of the products the receiving party manufactures;
(7) unreasonably restrict the channels for the receiving party to export the products manufactured using the technology.
Art 329 of PRC Contract Law:
It provides that a technology contract that illegally monopolises technology, impairs technological progress or infringes upon the technological achievements of others will be rendered null and void.
Art 343 of PRC Contract Law:
It provides that a technology transfer contract shall not restrict technology competition and development.
Art 10 of 2004 Supreme People's Court Judicial Interpretation on Application of Law for Technology Contract Disputes:
Restrictions which illegally monopolize technology or impair technological progress include:
(1) restrict making improvement or use of the improvement;
(2) restrict acquiring similar or competing technology from others;
(3) set unfair exchange conditions for the improvements, such as requesting (exclusive/non-exclusive) grant-back without consideration;
(4) restrict the licensee's reasonable exploitation of licensed technology according to market demand, including unreasonably restricting sales quantity, product models, price and channels;
(5) require the assignee or licensee to accept conditions that are not necessary for implementing the technology, including purchasing unnecessary technology, raw materials, products, equipment, services or accepting unnecessary personnel;
(6) unreasonably restrict the licensee's channels to purchase raw materials, components or devices;
(7) prohibit or restrict the counterparty to challenge validity of the intellectual property rights.
Additionally, Art 8-10 of the 2015 Regulations on Prohibition of Conduct Eliminating or Restricting Competition by Abuse of Intellectual Property Rights also provide that a business undertaking with a dominant market position, without a justifiable reason, shall not engage in abuse of IPR behaviours such as refusal to grant licence on reasonable terms, unjustified tie-in, requesting exclusive grant-back to use the improvement, restriction on challenging validity of IPRs, restrictions on business dealings with others, discriminatory treatments, etc.