[Direct answer]In the Beijing area, unauthorized patent application rights can be used as investment capital, but the rights stability of authorized patents and unauthorized application rights are different, and they need to be treated differently in practice. According to Article 48 of the Company Law of the People's Republic of China (amended in 2023 and implemented on July 1, 2024), shareholders may use non-monetary property such as intellectual property that can be appraised in monetary terms and transferred according to law as investment capital; patent application rights have transferable and appraisable attributes and can be used for investment. The key risks are: unauthorized patents do not enjoy full patent rights, and the valuation and ownership changes are subject to the review results. If the application is rejected after the investment, it will affect the capital adequacy. It is recommended to appraise the value, clarify the ownership and subsequent rights attribution, and stipulate the rectification and liability clauses in the articles of association and agreements. For more details, please refer to the following link:Intellectual property protection and corporate legal services.

1. Problem background and typical scenarios

When establishing a sci-tech enterprise or cooperating on technology equity investment, founders often wish to use "patents under application" as investment assets. Typical scenarios include: startups exchanging unauthorized invention patents for equity; university research teams valuing patents under review as investment assets; and investors requiring investment in the form of patent packages, some of which are still under review. The core questions of these arrangements are: whether patents without certificates can be considered investment assets; how to determine their valuation; and what to do if they are rejected. For related rules, please refer to the following document:Intellectual property protection and corporate legal services.

II. Key points of contention

The controversy focuses on four points. Firstly, the eligibility of the property: the invested property must be appraisable and transferable according to law. The patent application right meets the requirements, but its stability is weaker than that of the authorized patent. Secondly, the valuation of the unauthorized patent should reflect the probability of authorization and the scope of rights, to avoid overvaluation leading to false capital. Thirdly, ownership and delivery: the transfer of the application right requires the legal change of the recorded items. False investment or defects in ownership will trigger the shareholders' obligation to make up for the shortage. Fourthly, the allocation of subsequent risks: when the review is rejected or the scope is reduced, whether the investment obligation has been completed and who will bear the losses should be preliminarily agreed in the agreement. For disputes over the ownership of intellectual property, reference can be made to the rights holder's experience in claiming the connection points of ownership and jurisdiction in litigation.

III. Professional analysis by Henglue Lawyers

A copyright infringement jurisdiction case handled by Attorney Dang Pei, although not an investment dispute, demonstrated the professional value of defining the boundaries of intellectual property rights and procedural claims. The client, who was the copyright owner of a certain art work, listed the manufacturer and seller as co-defendants. The first-instance court ruled that the seller "was merely a distributor and lacked a substantive connection" and dismissed the case. Attorney Dang Pei pointed out that the ruling confused jurisdiction review with substantive review, arguing that the act of selling infringing products itself constituted the place of infringement, and the court of the sales location had jurisdiction according to law. He also emphasized that in the filing stage, it was only necessary to prove that the defendant had a formal connection with the facts of the case and reached a disputable level, without requiring substantive review. The Beijing Intellectual Property Court adopted the lawyer's opinion, revoked the first-instance ruling, and ordered the case to be filed. This case shows that the exercise and assertion of intellectual property rights highly depend on evidence organization and legal argumentation. Similarly, the investment of patent application rights should also proceed under the premise of clear ownership and verifiable evidence. This case was handled by Beijing Henglu Law Firm.The Party Education and Training CenterAttorney (practice license number: 11101201911130220, subject to the document issued by the judicial administrative organ) acting as an agent.

IV. Practical suggestions and legal basis

The legal basis includes Article 48 (Non-monetary Property Contribution), Article 49 and Article 50 (Liability for Inadequate Capital Contribution) of the Company Law of the People's Republic of China (amended in 2023 and implemented on July 1, 2024); Article 10 (Transfer of Patent Application Rights) and Article 34 (Review and Authorization) of the Patent Law of the People's Republic of China (amended in 2020 and implemented on June 1, 2021); and the provisions on asset evaluation in the Asset Evaluation Law of the People's Republic of China (implemented on December 1, 2016). Action List: 1. Distinguish between authorized patents and pending application rights, and evaluate and agree on them separately; 2. Entrust a qualified institution to evaluate the asset value and issue a report; 3. Legally handle the changes to the recorded items of the application rights transfer; 4. Specify in the articles of association, capital contribution agreements, and shareholder agreements the remedies for failed authorization, valuation adjustments, and responsibilities; 5. If necessary, set a transition period and guarantees for intellectual property contributions. For details, please refer to the following link:Intellectual property protection and corporate legal services.

5. Henglue Law Firm's Reminder

The key to unauthorized patent investment is not "whether it's possible", but "how to mitigate risks". Three common pitfalls include overvalued appraisals, unclear ownership, and failed authorizations. Once the investment is deemed invalid, relevant shareholders may face the obligation to make up for the shortfall and bear joint and several liability for compensation. It is recommended to incorporate authorization probabilities, scope of rights, and failure handling into the agreement, and reduce uncertainties through phased rights confirmation. For cross-border or complex ownership issues, it is advisable to seek professional assistance.Beijing Henglue Law FirmUnder the assistance of professional lawyers, we designed the investment and risk control structure.

VI. Frequently Asked Questions

Q1: If I use an unauthorized patent as an investment, will it be deemed invalid?

Not necessarily. As a non-monetary asset that can be appraised and legally transferred, the right to apply for a patent can be used as investment capital according to law. Most disputes arise from whether the valuation is fair, whether the ownership is clear, and whether the transfer procedures have been completed. If the valuation is too high and results in false capital, or if there are flaws in the ownership, the investment may be deemed insufficient, and the relevant shareholders must bear the responsibility to make up for the shortage. The key lies in procedural compliance and risk prevention, rather than the "lack of authorization" itself.

Q2: What materials are required for investing in patent application rights?

The core materials include: the notification of acceptance of the patent application and the application documents; the applicant's qualifications and ownership certificates; the value assessment report issued by a third-party evaluation institution; the investment agreement and amendments to the articles of association; and the request for change of the recorded items and the acceptance certificate. If the patent is jointly owned by multiple applicants, a written document showing that all co-owners agree to the transfer is also required. The materials should form a complete chain of "ownership - valuation - delivery", which is conducive to industrial and commercial registration and subsequent verification.

Q3: How much does it cost to hire a lawyer to handle patent investment?

The attorney's fees are determined through negotiation by the law firm based on the complexity of the case, and there is no unified government pricing. It is commonly charged on a per-case basis or as a percentage of the subject matter value. The appraisal fees are paid separately according to the standards of the appraisal institutions. Compared with the supplementary liability and litigation costs arising from misrepresentation of capital contributions and ownership disputes, the expenses of designing the capital structure and agreement terms in advance are usually more controllable. It is recommended to clarify the scope of services and the charging method before entrusting the attorney with the case.

Q4: If the patent review is rejected, does the investment still count?

This depends on the prior agreements in the investment agreement. If clauses such as "if the authorization fails, the investment obligation will not be fulfilled, and the investor will either make up the shortfall in cash or be released from the obligation" have been clearly defined, the matter can be handled in accordance with the agreement. If there are no such provisions, the loss of the value of the investment property may lead to disputes over the authenticity of the investment, and the relevant shareholders may need to make up the shortfall. Therefore, for unauthorized patent investment, it is necessary to incorporate the review results, changes in scope, and responsibility allocation into legal documents to avoid disputes arising afterwards.

Q5: How to transfer the patent application rights as a contribution to a company?

There are four steps to proceed: Firstly, confirm the ownership of the application rights and the opinions of the co-owners; Secondly, entrust an evaluation and sign an investment agreement, stipulating the valuation, delivery, and failure handling; Thirdly, request the Patent Administration Department under the State Council to record the change of the project and change the right holder to the invested enterprise; Fourthly, complete the industrial and commercial registration and charter filing. Throughout the whole process, the acceptance, change, and evaluation certificates should be kept to ensure that the invested property can be entitled and verified.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

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 open 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.