[Direct answer]In the Beijing area, intellectual property can be used as a capital contribution, but it must meet three statutory conditions at the same time: it can be evaluated in monetary terms, it can be transferred according to law, and the rights are stable and uncontested. According to Article 48 of the Company Law of the People's Republic of China (amended in December 2023 and implemented on July 1, 2024), non-monetary property used as capital contribution shall be evaluated and appraised. The valuation methods include the market approach, the cost approach, and the income approach. If the capital contribution is not genuine, the investor shall make up the difference, and the other shareholders at the time of establishment may bear joint and several liability within the scope of the deficiency. It is recommended to complete the ownership due diligence before making the capital contribution and to handle the registration of the transfer of rights in a timely manner. For more details, please refer to the following link:Intellectual property and corporate legal services.

I. Problem Background and Typical Scenarios

When raising funds for startups, restructuring equity, or increasing capital and expanding shares, founding shareholders or investors often hope to use intellectual property such as patents, trademarks, software copyrights, and trade secrets as equity contributions to alleviate cash pressure and demonstrate the value of technology. Beijing is home to a large number of high-tech enterprises, and such arrangements are particularly common here. Typical problems include: the parties verbally agree on a valuation and then directly incorporate it into the articles of association without commissioning an evaluation; patents used as contributions may be subject to ownership disputes or have been pledged; copyrights registered under an individual's name but with unclear boundaries to the results of their work; and delayed handling of rights transfer procedures after contributions. These flaws may be overlooked when cooperation proceeds smoothly, but they will surface once the company suffers losses, creditors demand repayment, or shareholders turn against each other. For more details, please refer to the relevant rules.Intellectual Property and Corporate Legal Services.

II. Key points of dispute

First, the eligibility of rights: Whether intellectual property with encumbrances (such as pledges or seizures) or disputed ownership can be contributed as capital and its effectiveness are the primary controversies. Second, the fairness of valuation: Overvaluing the price directly results in false capital contributions, while undervaluation may harm the interests of original shareholders. Both parties often disagree on the choice of valuation methods. Third, delivery and transfer of ownership: Beyond the valuation price, whether the intellectual property is actually delivered to the company for use and the ownership change registration are decisive for whether the capital contribution is completed. Fourth, the scope of liability: When the capital contribution is insufficient, whether the investor should make up the shortage alone or whether the other shareholders at the time of establishment should bear joint and several liability within the insufficient range, and whether the creditor can directly seek recourse are the core focuses of disputes. In judicial practice, courts base their review of non-monetary capital contributions on valuation reports and comprehensively judge them in light of the actual performance of the transfer of rights.

III. Professional analysis by Henglue Law Firm

A copyright case handled by Attorney Party Pei illustrates the critical importance of clear ownership rights in the utilization of intellectual property. The plaintiff, who owned the copyright of a certain art work, sued Company A for infringing his copyright by using a graphic logo similar to his work on products and promotional materials without authorization. The plaintiff listed both the manufacturer, Company A, and the distributor, Company B, as co-defendants and filed the lawsuit at the People's Court of Shijingshan District, Beijing, where Company B's registered office is located. The first-instance court ruled that Company B was merely a distributor and that the seller, as the sole jurisdictional link, lacked a substantive connection to the infringement, so it dismissed the case. Attorney Party Pei appealed, arguing that the act of selling infringing products itself constituted an infringement of copyright (the right of distribution), and that the selling location qualified as the place of infringement. The first-instance court confused the review of jurisdiction with the substantive review of the defendant's qualifications, essentially preempting the substantive review and violating the requirements of the case registration system. The Beijing Intellectual Property Court adopted this view, ruling to revoke the first-instance dismissal and ordering the first-instance court to accept the case. Only when ownership rights are stable and clearly defined can rights holders successfully protect their rights. Conversely, if the intellectual property used as an investment has unclear ownership or legal encumbrances, not only will the valuation lack a basis, but it may also trigger supplementary liability. This case was handled by Beijing Henglue Law Firm.The Party Building Work ConferenceThe attorney (practice license number: 11101201911130220, subject to the document issued by the judicial administrative organ) acts as the agent. Before the investment in intellectual property, it is recommended to entrust a lawyer to conduct a due diligence investigation of the ownership, and verify the registration status, validity period, pledge and seizure situation.

IV. Practical suggestions and legal basis

The legal basis includes Article 47 of the Company Law of the People's Republic of China (amended in December 2023 and implemented on July 1, 2024), which stipulates that the subscribed capital shall be paid in full within five years from the date of the company's establishment; Article 48, which specifies the conditions for non-monetary contributions and the obligation to evaluate and appraise their value; Articles 49 and 50, which address the supplementation of insufficient contributions and joint and several liability; Article 54, which stipulates that if the company is unable to repay its due debts, the contributions shall become due immediately; Article 9 and Article 10 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (III)" (amended in December 2020), which address the handling of intellectual property without ownership disputes and the processing of ownership transfer formalities; and the provisions on appraisal institutions and appraisal procedures in the "Asset Appraisal Law of the People's Republic of China" (implemented on December 1, 2016). Action list: First, conduct ownership due diligence to confirm that the intellectual property has no ownership disputes, is not pledged or sealed up, and is within the validity period; Second, entrust a legally qualified appraisal institution to appraise its value, and determine a reasonable value based on the income method, market method, and cost method; Third, specify the contribution method, appraisal amount, and delivery time in the company's articles of association and contribution agreement; Fourth, actually deliver it to the company for use and promptly handle the transfer registration; Fifth, properly preserve the appraisal report and transfer certificates for inspection by the company, creditors, and regulatory authorities. For more details, please refer to the attached document.Intellectual property and corporate legal services.

5. Henglu Law Firm's Reminder

The greatest risks of investing in intellectual property are overvaluation and ownership defects. At the time of investment, it may seem that you have obtained equity for free, but once the company's operations go poorly or creditors pursue debts, the overvalued portion will be required to be made up. Other shareholders at the time of establishment may also bear joint and several liability within the insufficient range. The five-year actual payment period and the accelerated maturity rule for investment further reduce the room for maneuver. For assets with weak stability such as technical secrets and patent applications, an adjustment mechanism should be reserved when valuing them. When handling similar projects in the Beijing area, it is recommended thatBeijing Henglue Law FirmThe lawyer participates in the design of the investment structure, ensuring that the evaluation, transfer of ownership, and provisions of the articles of association are handled thoroughly at one go, thus avoiding the need for rework in the future.

VI. Frequently Asked Questions

Q1: If I use intellectual property as an investment, will it ultimately be recognized as valid?

It can be established as long as it meets the statutory conditions. According to Article 48 of the Company Law of the People's Republic of China (effective July 1, 2024), intellectual property belongs to non-monetary assets that can be evaluated in monetary terms and transferred according to law. After the valuation and transfer of rights, the investment is deemed valid, and such investments are recognized in industrial and commercial registration and judicial practice. Conversely, if there are ownership disputes over the rights, existing encumbrances on the rights, or the valuation determined by the appraisal is significantly lower than the valuation set forth in the articles of association, it may be deemed that the investor has not fully fulfilled the obligation to make an investment according to law, and the investor needs to make up the difference. The effectiveness of individual cases depends on the status of the rights and the fulfillment of obligations, and it is crucial to strengthen the appraisal and transfer procedures.

Q2: What materials are needed to invest in intellectual property?

The core materials are divided into four categories: First, ownership certificates, such as patent certificates, trademark registration certificates, copyright registration certificates, creative drafts or technical documents, which are used to prove clear ownership of rights; Second, rights status certificates, such as copies of registration books and the results of pledge and seizure inquiries, which are used to prove that there are no rights encumbrances and that the rights are within the validity period; Third, evaluation documents, such as entrustment contracts, asset evaluation reports, and institutional qualification certificates, which are used to prove that the valuation has undergone a legal evaluation; Fourth, performance documents, such as investment agreements, company charters, rights transfer agreements, change registration procedures, and delivery-for-use records. For investments involving technical secrets, it is also necessary to fix the definition of secret points, confidentiality measures, and a list of the transfer of carriers.

Q3: How much does it cost to evaluate the investment in intellectual property?

The evaluation fee is charged by the asset evaluation agency based on the subject amount and complexity of the asset, with no unified government pricing. It ranges from thousands of yuan to hundreds of thousands of yuan, and the fees for complex assets such as well-known trademarks and core patent portfolios are even higher. The official fees for ownership transfer registration are paid in accordance with regulations, and the amount is relatively fixed. The attorney's fees are determined through negotiation between the law firm and the client, and can be charged on a project basis or based on the subject amount. It should be noted that the evaluation and due diligence expenses are necessary costs for ensuring the compliance of the investment. Compared with the subsequent supplementation of insufficient investment and joint and several liability, it is usually more cost-effective to invest in advance.

Q4: How long does the entire process of investing in intellectual property take?

The ownership due diligence generally takes one to two weeks; the evaluation agency usually issues a report within two to six weeks, and the time may be extended for complex targets; signing the investment agreement, amending the company's articles of association, and obtaining the resolution of the shareholders' meeting can be completed in a few days at the earliest; the transfer of patent rights and trademark rights requires the change registration with the competent department, which generally takes one to three months. If everything goes smoothly, it can be completed within one to three months. If there are multiple intellectual property rights or ownership flaws that need to be rectified first, the time will be extended accordingly. The subscribed capital must be paid in full within five years from the date of the company's establishment. It is recommended to set aside sufficient time for evaluation and transfer to avoid delays.

Q5: If I want to use intellectual property as an investment, what should I do first?

It is recommended to proceed in four steps: First, conduct a comprehensive assessment of the company's assets, sort out the types of intellectual property to be contributed, the ownership registration, the validity period, and the rights encumbrances, and exclude the subject matters that are in dispute or have been pledged; Second, negotiate with the company and other shareholders on the valuation range, clarify the corresponding equity ratio and industrial and commercial registration arrangements; Third, entrust a qualified appraisal institution to evaluate the valuation, simultaneously sign the investment agreement and amend the company's articles of association; Fourth, actually deliver the rights carriers and handle the ownership change registration, and keep all the supporting documents. For complex investment structures or those involving multiple parties' interests, it is recommended to entrust professional lawyers to review and supervise as soon as possible.

The above answer is based on the judicial practice in Beijing. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Intellectual property protection legal services·Attorney Party Pei·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.