Inventorship Dispute over Invention Patent for ATM

Civil Case

Invention Patent

–Interpretation of Technology Contract Clause

[Headnotes]

The interpretation of technology contract clauses should pay attention to the intangibility and abstractness of the technology, and reasonably determine the scope and content of the technology involved in the clause,  so as to avoid tangential interpretation and inappropriate broadening of the rights and obligations, apart from following the rule of "evidence first and interpretation second" to ascertain true intention of the parties by proper interpretation. 

[Synopsis]

First Instance: (2016) Yue 03 MinChu No. 687, 1706-1708, and 2349-2353

Second Instance: (2017) YueMinZhong No. 2968-2976

Appellant (Defendant below): Oki Electric Industry Co., Ltd. (Oki), Oki Electrical Industry (Shenzhen) Co., Ltd. (OSZ), Oki Electrical Industry Financial Equipment (Shenzhen) Co., Ltd. (OSZ Financial Equipment)

Appellee (Plaintiff in original instance): Shenzhen Yihua Computer Co., Ltd. (Yihua)

OSZ and OSZ Financial Equipment are direct or indirect affiliates of Oki. Oki applied for and was authorized by the China National Intellectual Property Administration for 9 invention patents related to cash recycling, over a period from 2009 to 2013, from China National Intellectual Property Administration for "Cash ATM" for use with automatic teller machines. Yihua contends that it should be the owner to the patents according to the contract the parties concluded.

Starting from 2005, OSZ began to sell Yihua the ATM model No.ATM21S with the permission of Oki. Between April 2008 and December 2010, Yihua commissioned OSZ and OSZ Financial Equipment to manufacture ATM model CDS6040T and CDS6040W, and they entered into 15 equipment authorization and commission contracts. The preamble of the contracts conforms that "the authorizing party (Yihua), by the power of Chinese Trademark Registration No. 3334990, as the owner of 'CDS Cash Machines', owns all intellectual property rights for 'CDS Cash Machines', and the authorized parties shall not divulge in any way the related technologies of such products to third parties."

Between July 2013 and April 2014, Yihua and OSZ Financial Equipment entered into 21 sales contracts which provided that Yihua shall purchase parts and components of model CDS6040T and CDS6040W ATM from OSZ Financial Equipment. One version of the contracts provides in Clause 6: "Both parties to this agreement confirm that the parts and components purchased by Party A (Yihua) are used for CDS6040T equipment (some contracts refer to CDS6040W), for which the trademark shall be owned by Party A, and Party A has the right of final explanation for the intellectual property rights related to the parts and components." These words are not in another version of contracts. At this time, the signees discussed the wording of "Yihua has the right of explanation for intellectual property right of the products and components." Oki preferred the obscure term of "right of explanation" which is convenient for Yihua to obtain approval from China Securities Regulatory Commission. Yihua and OSZ entered into an Agreement for Designing Parts for YH-6040T, which provides that Yihua has commissioned OSZ for the development and design of parts for its "YH" brand CDS6040T ATM, with a design payment of 650 thousand Yuan. This Agreement does not specify the date of conclusion, nor the specific parts.

The first instance court took the position that the contracts dominate and ruled that the patents belong to Yihua. The second instance court reversed the judgment on basis of insufficient support from the contracts as to related patent technologies, and dismissed all Yihua's claims.

[Typical Significance]

Interpretation of technical clauses of a contract is complex in judicial practice. This case provides useful hints for the interpretation of technical clauses:

The rule of "evidence first, interpretation second". Interpretation of contract involves the finding of facts and application of law. Finding of facts must be made by proper admission of evidence; only then will the application of law become possible.

The rule of interpretation must be executed by procedure. Fully exploring the intention of the parties is to take literary interpretation first, then interpret the structure, purpose, custom, and eventually the good faith. By literary interpretation, distinction should be made as to core intentions and peripheral intentions of the contract provisions which, due to their different closeness to the presumptive meeting of the minds, require different admission of evidence. The expression of the parties' intentions may be further clarified by the interpretation of structures, purposes, and custom, etc. The good faith interpretation should be made narrowly which, when clarifying and modifying the aforementioned interpretational conclusions, should not be applied loosely to assume what might be the intention of the parties.