Employer of Record Arrangements against a WFOE Payroll
EOR structures in China face strict 10% labor dispatch caps and high PE tax risks, making WFOE direct payroll financially superior within 12 months.
Article 6 PRC Patent Law
Meaning
Patent legislation defines the default ownership rules for technical creations made by employees during their period of service at an enterprise or using specific resources. This provision distinguishes between inventions produced for an employer and those produced through an individual’s private initiative without the use of corporate tools. Under the typical reading of article 6 prc patent law, an invention that results from the performance of duty or is generated using the financial and material assets of the firm belongs to the entity itself.
The inventor retains the right to be named and the right to receive compensation, but the economic exploitation is centralized within the organizational structure. This legal boundary prevents disputes over who controls intellectual property developed within the industrial supply chain or in corporate research laboratories.
Employee Invention Mechanism
Determination of ownership rests primarily on the conditions under which the discovery occurred. If a researcher finishes a project within the official scope of their job description, the organization automatically gains the right to apply for a patent. In the same manner, if the employee uses proprietary machines or secretive data belonging to the company, the invention belongs to that entity.
The statute recognizes that corporate investment fuels technical progress, granting the employer the priority to secure the results. However, once the patent is granted, the law imposes a strict duty on the employer to reward the individual inventor. This reward follows a sequence of initial payment upon grant and subsequent profit sharing from the exploitation of the technology.
Organizations usually set these terms in their internal intellectual property handbooks to avoid administrative interference.
Property Rights Separation
Differentiation between individual creativity and corporate asset management happens through a review of documentation related to job descriptions and task assignments. If the creative work is outside the assigned scope and uses zero corporate support, the right to apply stays with the individual. This separation protects researchers from overreach by companies that might try to claim ownership of private projects finished during off hours.
When a dispute arises, court proceedings look at the time, location and specific tools involved in the development. Employers often draft specific contracts to clarify these boundaries, but the statutory floor in article 6 prc patent law cannot be contracted away entirely. In cases where no agreement exists, the specific text of the law dictates the financial split.
Procedural Limits
Legal ownership transfers occur successfully only if the company takes active steps to patent the innovation or maintains it as a secret trade process. If the entity neglects to protect the work, questions arise about the abandonment of its priority. Furthermore, the provision stops applying once the relationship of employment has been over for a specified standard period, typically one year if the invention is directly related to previous work.
This ensures that former employees can eventually return to their private careers without being permanently tied to an old employer’s IP policy. The law maintains a balance between the company’s need for security and the worker’s need for future growth.