Companies with research and development operations in China face two separate questions: who owns an employee's invention, and what the employee inventor must be paid. For a service invention, Chinese law generally vests the right to apply for and own the patent in the entity, but ownership does not settle the payment question. The employee inventor normally has a statutory right to an award after the patent is granted. If the patented invention is later used and produces economic benefits, the inventor also has a right to reasonable 
remuneration. The payment of ordinary salary, the execution of a general intellectual property assignment, or the transfer of the patent to another company in the same corporate group does not automatically satisfy, in whole or in part, the entity's obligations.

This is manageable if the company has a clear China-specific policy. Chinese law gives the relevant entity considerable freedom to determine how payments will be calculated. Without a valid agreement or policy, statutory default rules may apply and may produce larger, less predictable liabilities. Recent Supreme People's Court decisions also address factors such as product profits, former employees, group transfers, and patent enforcement income.

What Counts as a Service Invention

Article 6 of the Patent Law of the People's Republic of China provides the basic rule. An invention is a service invention if it is accomplished in the course of executing the tasks of the entity to which the employee belongs or mainly by using the entity’s material and technical conditions. For such a service invention, the right to apply for a patent belongs to the entity. Once the patent is granted, the entity becomes the patentee. The Implementing Regulations further specify what constitutes “executing the tasks of the entity” by identifying three important categories: inventions made in the course of the employee's regular work; inventions made in performing a task assigned by the entity outside the employee's regular duties; and inventions made within one year after retirement, transfer away from the entity, or termination of the labor or personnel relationship, where such inventions relate to the employee's former duties at the entity or tasks assigned by the former entity. Material and technical conditions include funds, equipment, components, raw materials, and non-public technical information and materials. For an R&D center, this may include laboratory equipment, proprietary data, internal technical documents, software tools, test results, and other research resources. This is an illustrative example; the legal test remains whether the employee mainly used the entity’s material and technical conditions to accomplish the invention.

The company should therefore record each employee's duties, project assignments, use of the entity's material and technical conditions and other resources, and the timing of the inventive work. This is especially important when a former employee later files a related patent application.

Award and Remuneration Are Different Payments

Article 15 of the Patent Law requires the entity granted a patent to reward the inventor or designer of a service invention. It also requires reasonable remuneration after the patented invention is exploited, taking into account how widely the invention is used and the economic benefits it produces.

Chinese law therefore recognizes two payments. The award is linked to patent grant. Remuneration is linked to use and commercial value. If the entity makes one lump-sum payment, the policy and payment record should clearly state that it covers both.

Rules 92 to 94 of the current Implementing Regulations give the entity two main ways to set the payment method and amount. The entity may reach an agreement with the inventor, or it may set the rules in an internal policy that has been adopted in accordance with law.

If neither an agreement nor an applicable policy exists, the default rules apply. The entity must pay the grant award within three months after the patent grant is announced. The minimum is RMB 4,000 for an invention patent and RMB 1,500 for a utility model or design patent.

The default rules for remuneration can have a much greater financial effect. Rule 94 refers to the Law on Promoting the Transformation of Scientific and Technological Achievements. Article 45 of that law provides the following default standards where the entity has not set another arrangement:

at least 50 percent of net income when the achievement is transferred or licensed to another party;

• at least 50 percent of the equity or capital contribution received when the achievement is used as an investment; or
• at least 5 percent of annual operating profit for three to five consecutive years after successful commercialization when the entity exploits the achievement itself or with another party.

For an ordinary enterprise, a properly adopted agreement or internal policy can generally replace these default formulas. By contrast, a state-established research and development institution or university must ensure that its own arrangement meets the standards in Article 45, first paragraph, items (1) to (3), even when it adopts its own arrangement. Companies should therefore confirm which category the Chinese R&D entity falls into rather than assuming that the same rules apply to every organization.

Designing a Workable Company Policy

Chinese law does not require every entity to use a percentage of profits. An entity can use fixed amounts, staged payments, formulas, equity incentives, or a combination of these methods. A fixed or lump-sum approach is often easier to administer, especially when one product uses many patents, and the value of a single invention is difficult to isolate.

The policy should nevertheless be specific. It should explain when a payment becomes due, how the amount is calculated, what happens when there are several inventors, and how the entity will deal with different forms of exploitation. Those forms may include the entity's own manufacture or use, licensing, assignment, capital contribution, cross-licensing, settlement payments, and damages recovered in infringement proceedings.

The policy should explain how patent contribution will be assessed. One patent may be only a small part of a product that also depends on other patents, know-how, manufacturing, regulatory approvals, and later improvements. A documented contribution factor can prevent the whole product profit from being attributed to one patent.

The procedure used to adopt the policy also matters. Article 44 of the Law on Promoting the Transformation of Scientific and Technological Achievements requires the entity to hear the views of its scientific and technical personnel and to make the rules known within the entity. The entity should retain consultation records, the approved policy, evidence of internal publication, and its effective date.

Blanket waivers and clauses giving the entity complete discretion over whether to pay are risky because Article 
15 creates a statutory right. A safer policy uses objective rules and limits discretion to matters such as assessing 
the relative contributions of several inventors through a recorded review process.
Continued employment should not be a condition for payment. The entity may have to pay after the inventor resigns, retires, or moves to another entity. Its policy should cover payments to former employees and the contact information needed to make them.

Court Decisions with Practical Lessons

Case 1: Annual Profit and Evidence Controlled by the Company

In Supreme People's Court case (2024) Zui Gao Fa Zhi Min Zhong No. 907, decided on June 24, 2026, a former pharmaceutical R&D executive claimed remuneration for a patent used in a biologic product. The company had an award policy, but it had not established a separate remuneration arrangement. The Court therefore applied the statutory default rules.

The Court looked at operating profit for each year after the product was commercialized. It did not accept the company's argument that no remuneration was due because the product remained loss-making when all years were considered together. The Court also required the company to provide product revenue and profit records because the company controlled that information.

When calculating the payment, the Court found that the patented formulation contributed 20 percent of the product's value. Six inventors were named on the patent. Because there was no evidence showing different levels of contribution, the Court divided the inventor share equally among them. It awarded the former employee RMB 800,000.

The case shows why a grant-only policy is not enough. Companies should keep product-level financial data and evidence of patent and inventor contributions. Courts may require them to produce records under their control.

Case 2: A Group Transfer Does Not Remove the Employer's Obligation

In (2021) Zui Gao Fa Zhi Min Zhong No. 1172, an employee had worked on a patented food preservation method. The patent was held by the employer's controlling shareholder rather than by the employing company itself. The employer argued that it should not have to pay because it was not the registered patent owner.

Case 3: Patent Enforcement Income May Be Included

In (2019) Zui Gao Fa Zhi Min Zhong No. 230, the patent covered a portable refillable spray bottle. The had obtained a total of RMB 1.125 million in damages through separate patent infringement cases. The argued that it had not exploited the patent and had not earned income from ordinary product sales.

The Supreme People's Court treated the economic benefit from the infringement awards, after deduction of necessary enforcement costs and expenses, as operating profit relevant to inventor remuneration. It upheld an award of RMB 200,000 to the inventor.

Remuneration procedures should therefore cover settlements and court awards as well as sales and licence income. The company should document legal fees and other deductions. Statements about a patent's use or value in an infringement case may also matter in a later inventor claim.

Priority Actions for China Research and Development Centers

Action One: Adopt a Clear China-Specific Remuneration Policy

The most important step is to put a written policy in place before a dispute arises. The policy should deal separately with the grant award and remuneration for exploitation. It should state the payment triggers, amounts or formulas, timing, allocation among several inventors, and treatment of former employees. It should also cover the main ways in which the entity may obtain value from a patent, including internal use, licensing, assignment, investment, settlement, and infringement damages.

The entity should retain proof of consultation, adoption, and internal publication. It should remove blanket waivers and unlimited sole-discretion clauses. A global policy will usually need a China-specific schedule.

Action Two: Keep Records from Invention to Commercialization

The second priority is to establish a single record system that follows an invention throughout its life cycle. During the R&D stage, the entity should keep job descriptions, project assignments, invention disclosure forms, laboratory records, technical review materials, and inventor contribution statements. When several inventors are involved, their relative contributions should be recorded while the work is fresh rather than reconstructed years later.

After the patent application is filed, the record should show when the patent is granted and exploited, which products or processes implement it, and what economic benefits it produces. It should also contain each calculation, approval, payment, and proof of receipt, including payments to former employees.

Action Three: Align Group Ownership with Payment and Information Flows

The third priority is to map the full corporate chain of ownership and exploitation. The entity should identify the Chinese entity, the patent applicant, the final patent owner, every entity that implements the invention, and every entity that receives licensing, transfer, product, settlement, or enforcement income.

Intercompany agreements should allocate the cost of inventor remuneration and require relevant affiliates to provide the Chinese entity with the information needed to calculate payments. A patent transfer should never be treated as fully discharging the entity's obligations to the employee inventor. For a multinational R&D structure, ownership, income, information, and payment responsibilities need to work together.

Conclusion

China gives entities meaningful flexibility to design an inventor remuneration system, but the issue cannot be ignored. For an ordinary enterprise, a properly adopted policy can replace potentially expensive statutory default formulas with a predictable arrangement supported by technical and financial records. State-established research and development institutions and universities must still ensure that their arrangements meet the statutory minimum standards.

For a company operating an R&D center in China, the practical objective is simple: decide the payment rules in advance, keep the evidence needed to apply them, and ensure every relevant group entity provides the necessary information. That approach helps protect the company while giving employee inventors a clear and credible incentive to innovate.