Provisions for unfulfilled intellectual property rights: definition, legal framework, dispute resolution, damage assessment, remedies, and legal advisory

I. Current issues relating to provisions for unfulfilled intellectual property rights 

At present, in various business contracts and product-development cooperation agreements, provisions on unfulfilled intellectual property rights have become increasingly common.

One prevailing issue involves the unauthorized use of intellectual property rights. The licensee or the party granted permission to exploit or use the intellectual property often breaches its commitments by copying, utilizing, or otherwise exploiting the rights beyond the scope agreed upon in the contracts/agreements.

Additionally, the failure to safeguard the rights and interests of the owner is a notable concern. The absence of monitoring mechanisms, reporting duties, or royalty-payment frequently leads to infringements of the owner's legal interests, thereby diminishing the effectiveness and economic value of the contract.

Moreover, when arising any breach, disputes are often prolonged due to difficulties in collecting evidence or determining each party’s contractual responsibilities.

Such circumstances do not merely affect economic interests but also undermine the parties’ reputation, brand value, and long-term intellectual property rights. 

II. Legal provisions governing provisions for unfulfilled intellectual property rights

To fully understand such an issue, it is necessary to clarify the concept of provisions for unfulfilled intellectual property rights and examine how the law regulates the handling of related violations.

1. What are provisions for unfulfilled intellectual property rights?

Provisions for unfulfilled intellectual property rights refer to contractual commitments or agreements regarding the use, exploitation, protection, or transfer of intellectual property rights that one party fails to execute fully or correctly as agreed.

Common examples include:

• Using intellectual property rights beyond the scope of commitments or agreements;
• Failing to pay royalties, license fees, or other financial obligations;
• Failing to protect the owner’s rights against third-party infringements.

These provisions serve as the legal basis for enforcing sanctions, claiming damages, and applying statutory remedies.

2. May contractual sanctions be imposed when provisions for unfulfilled intellectual property rights are not fulfilled?

Under Article 301 of the Law on Commerce 2005, parties may agree upon contractual sanctions, provided it does not exceed 8% of the value of the breached contractual obligation.

Accordingly, when intellectual property rights-related obligations are violated, the injured party may impose contractual sanctions but not exceeding 8% of the value of the breached contractual obligation.

3. Which authority has jurisdiction over disputes concerning provisions for unfulfilled intellectual property rights?

Disputes over provisions for unfulfilled intellectual property rights may be resolved by:

• The People’s Courts: Pursuant to Article 30 of the Civil Procedure Code 2015, disputes concerning intellectual property rights fall under the jurisdiction of the People's Courts of provinces and centrally run cities; 
• Commercial Arbitration: Parties may agree to resolve disputes over intellectual property rights through commercial arbitration under the Law on Commercial Arbitration 2010;
• Commercial Mediation: If agreed upon, disputes may be resolved through commercial mediation under the Law on Commercial Mediation 2010.

The competent authority depends on the parties’ agreement and relevant legal provisions.

III. Questions regarding provisions for unfulfilled intellectual property rights 

To resolve disputes concerning provisions for unfulfilled intellectual property rights, it is essential first to establish evidence of damage as the basis for claiming compensation or applying remedial measures.

1. What evidence is required to prove damage resulting from provisions for unfulfilled intellectual property rights?

Evidence must demonstrate both the infringement and the actual damage suffered. Under Article 584 of the Civil Code 2015, any person who infringes upon the lawful rights and interests of another and causes damage must compensate for such damage.

Relevant evidence includes:

• Contracts and agreements defining intellectual property rights;
• Documents showing the breach (unauthorized use, copying, failure to pay royalties, etc.);
• Evidence of economic loss or other damages;
• Records or information obtained from IP authorities, partners, or customers.

Such evidence forms the basis for compensation claims and other remedies.

2. May the partner terminate the contract if provisions for intellectual property rights are not fulfilled?

Under Article 422 of the Civil Code 2015, a contract may be terminated in several cases: upon completion, by agreement, when the contractual object no longer exists, or when a party unilaterally terminates the contract under Article 420.

Specifically:

• If the failure to fulfill intellectual property rights renders the principal contractual purpose unattainable or the product/service unusable, the contract may be deemed impossible to execute under Clause 5, Article 422;
• If the breach constitutes a serious contractual violation affecting contractual benefits, the injured party may unilaterally terminate the contract under Article 420;
• If the breach is not serious and does not affect the contract’s core purpose, the injured party may only demand performance or compensation, not allow to terminate the contract.

Thus, termination rights depend on the severity of the breach.  

3. How are breaches addressed when provisions for intellectual property rights are not fulfilled due to unintentional fault?

If provisions for intellectual property rights are breached unintentionally, the following legal regulations apply:

• Under the Civil Code 2015 (Articles 420 and 422), termination is permitted only for serious or fundamental breaches;
• Under the Law on Intellectual Property (Articles 198, 204, and 205), the injured party may demand execution, cessation of infringement, and compensation.

Even unintentional breaches still cause liability, and the injured party may request execution and compensation. Compensation is based on actual damage, regardless of fault.

4. What remedies are available when provisions for intellectual property rights are not fulfilled?

Remedies may include:

• Requiring performance of contractual obligations (licensing, transferring rights, product modification);
• Claiming compensation for actual material loss and reputational damage;
• Requesting cessation of infringements, restoration to the original condition, destruction or correction of infringing products;
• Requiring public correction or apology, where necessary.

These measures protect the injured party's rights and ensure the contract’s validity and legal compliance.

5. What should be noted when drafting contracts to avoid provisions for unfulfilled intellectual property rights?

To prevent provisions for unfulfilled intellectual property rights, parties should ensure:

• Clear identification of IP subject matter and scope of rights, including usage rights, duration, territory, and limitations;
• Specific responsibilities and enforcement mechanisms, including monitoring, reporting, and compliance obligations;
• Defined remedial measures in case of breach;
• Legal review prior to signing to ensure compliance and enforceability.

Transparent and detailed contract provisions reduce risks and safeguard the parties’ legal interests.

IV. Legal advisory services related to provisions for unfulfilled intellectual property rights 

When provisions for intellectual property rights are not fulfilled, various legal issues concerning contract execution, damage compensation, and remedial measures may arise. NPLaw provides specialized advisory services, including contract review, assessment of the validity and enforceability of such provisions, and guidance on remedies such as performance enforcement, compensation, and corrective actions. We also assist in drafting and amending contracts to mitigate legal risks.