Issuing Body: Ministry of Science and Technology, National Development and Reform Commission and Ministry of Finance
Issuing Date: April 10, 2010

Three Chinese government agencies have issued a draft notice that, if enacted, will make it somewhat easier for foreign companies to achieve "national indigenous innovation" status for their products, and thus to sell those products to government agencies and other Chinese organizations that have procurement policies favoring indigenous products. The Ministry of Science and Technology (MOST), National Development and Reform Commission (NDRC), and the Ministry of Finance (MOF) together issued the Draft Notice Regarding the Launch of the National Indigenous Innovation Product Accreditation Work for 2010 (2010 Indigenous Innovation Draft) for public comment on April 10, 2010.

The draft notice is an update of the Notice Regarding the Launch of the National Indigenous Innovation Product Accreditation Work for 2009, which was released on October 30, 2009. It broadly outlines the requirements and procedures for the accreditation of so-called "national indigenous innovation products" that may enjoy government procurement preferences as stated under the Scientific and Technological Advancement Law of the People's Republic of China.

According to the draft notice, products eligible for National Indigenous Innovation Product accreditation include computing and application hardware, telecommunications hardware, modern office equipment, software, new-energy products, and highly efficient energy-reduction products.

Any manufacturing entity that enjoys legal person status in China (including foreign-invested enterprises) may voluntarily apply for this accreditation, which will be awarded upon satisfaction of the following requirements:

• The product must meet the requirements of PRC laws and regulations and comply with national industry and technology policies.
• The applicant must either own or be licensed to use the intellectual property rights associated with products resulting from R&D efforts, and there must be no disputes or controversies in relation to such rights.
• The applicant must possess an ownership right or use right for any trademark on the product for which national indigenous innovation status is being sought.
• The product's technology is advanced and has an obvious effect in conserving energy, reducing pollution, and/or raising energy efficiency, or it substantially improves on an original product's structure, quality, material, craftsmanship, or performance.
• The product's quality is reliable, and the applicant has obtained the required licenses, approvals, or certification by relevant authorities.
• The product has already entered the market for sale, or else it has potential economic benefits and bright market prospects.

Conclusion

When compared to the 2009 notice, the draft notice appears to relax some restrictions that will enable products to qualify for National Indigenous Innovation Product accreditation. For example, it no longer requires that products be developed and based solely on intellectual property developed and owned in China. Additionally, the draft notice no longer requires products' trademarks and brands to have been first registered in China.

Despite such changes that are favorable to foreign companies, questions and concerns still remain. For example, in the case of licensed intellectual property, it is unclear what the scope and terms of the license will need to be.

The draft notice has reportedly attracted quite a few critical comments from foreign governments and corporations, which may lead to changes before it is implemented.