Patent Licence Agreement (Hong Kong)

A Patent Licence Agreement in Hong Kong is a legal contract by which a patent owner (the licensor) grants another party (the licensee) permission to make, use, sell, or import a patented invention without transferring ownership of the patent, governed by the Patents Ordinance (Cap. 514) and the common law of contract as applied by the Court of First Instance and the Intellectual Property Department of Hong Kong.

Hong Kong’s patent system under Cap. 514 comprises two patent types, both of which may be licensed. Standard patents have a maximum term of 20 years from the filing date of the designated patent application. Until 19 December 2019, standard patents could only be obtained by re-registering a patent granted by one of three designated offices: the State Intellectual Property Office of China (CNIPA), the UK Intellectual Property Office (UKIPO), or the European Patent Office (EPO) designating the UK. Since that date, Hong Kong also accepts original grant patent (OGP) applications filed directly with the Intellectual Property Department, which undergo substantive examination in Hong Kong. Short-term patents have a maximum term of 8 years (an initial 4-year term, renewable for two further 2-year periods), are filed directly with the Intellectual Property Department, and undergo formality examination only — not substantive examination for novelty or inventive step.

The scope of the licence determines both the licensee’s rights and the licensor’s ability to exploit the patent independently. An exclusive licence grants only the licensee the right to exploit the patent within the agreed scope and territory, excluding even the patent owner. Under section 72 of Cap. 514, an exclusive licensee has the right to bring infringement proceedings in their own name, subject to giving the patent owner notice. A sole licence permits both the licensor and the licensee to exploit the patent, but prohibits the licensor from granting further licences. A non-exclusive licence allows the licensor to grant multiple licences to different parties simultaneously.

Section 49 of Cap. 514 makes patent licences registrable transactions. Failure to register within 6 months of the transaction date may prevent the licensee from claiming costs in infringement proceedings for the period prior to registration, and an unregistered licence may be ineffective against a subsequent acquirer of the patent who takes without notice. Registration is effected by filing the prescribed form and a copy of the licence with the Patents Registry of the Intellectual Property Department.

Hong Kong does not impose Goods and Services Tax (GST) or Value Added Tax (VAT) on royalty payments. All financial terms in a Hong Kong Patent Licence Agreement should be expressed in Hong Kong Dollars (HKD). Royalty income received by a Hong Kong-resident licensor from a Hong Kong source is subject to Profits Tax under the Inland Revenue Ordinance (Cap. 112) at the two-tier rate: 8.25% on the first HK$2,000,000 of assessable profits, and 16.5% on the remainder for corporations.

The Intellectual Property Department administers the Patents Registry and provides guidance on patent filing, registration, and licensing procedures. The Trade Marks Registry and Copyright Registry within the Intellectual Property Department cover the broader IP framework within which patent licences typically sit, as commercial licensing arrangements often involve multiple IP rights simultaneously.

A Patent Licence Agreement in Hong Kong is needed whenever a patent owner registered with the Intellectual Property Department (IPD) wishes to authorise another party to exploit a patented invention without transferring patent ownership, or when a business requires licensed access to patented technology to manufacture, sell, or import products in or through Hong Kong.

Commercialising a patented technology through a manufacturing partner requires a Patent Licence Agreement that defines the licensed products, the manufacturing territory, royalty structure, and quality control obligations. Section 49 of the Patents Ordinance (Cap. 514) requires the licence to be registered with the Patents Registry of the Intellectual Property Department within 6 months of the transaction date to preserve the licensee's right to claim costs in infringement proceedings before the Court of First Instance. Hong Kong's position as a gateway to mainland China manufacturing makes cross-border technology licensing particularly common, with licences often structured to cover both the Hong Kong SAR and specific provinces of the People's Republic of China as separate licensed territories under the respective jurisdictions of the Intellectual Property Department (Hong Kong) and the China National Intellectual Property Administration (CNIPA).

A university or research institution in Hong Kong — such as the University of Hong Kong, the Hong Kong University of Science and Technology (HKUST), the Chinese University of Hong Kong (CUHK), or Hong Kong Polytechnic University — that has developed a patented invention and wishes to grant a commercial licence to a private company for product development and commercialisation needs a Patent Licence Agreement addressing milestone payments, minimum royalties, sublicensing rights, and the university's right to revoke the licence under Section 72 of Cap. 514 if the company fails to meet commercialisation milestones. The Hong Kong Science and Technology Parks Corporation and the Cyberport management company both supports technology licensing between resident companies and commercialisation partners.

Cross-licensing arrangements — where two companies each hold patents the other needs — require Patent Licence Agreements governing each party's rights as both licensor and licensee. Cross-licences are common in technology, telecommunications, and pharmaceutical industries where patents frequently overlap. Section 80 of Cap. 514 sets out implied terms in patent licences that the parties may vary by express agreement.

A start-up or SME that has been granted a short-term patent by the Intellectual Property Department under Section 113 of Cap. 514 and wishes to generate revenue through licensing rather than direct manufacture needs a Patent Licence Agreement structured to maximise royalty income while protecting the patent against invalidity challenges under Section 128 of Cap. 514 and confirming that the licensee actively commercialises the technology. Any party entering a patent licence arrangement in Hong Kong should register the licence with the Patents Registry promptly, seek advice from a registered patent agent or solicitor enrolled with the Law Society of Hong Kong, and confirm the agreement addresses invalidity risk, infringement by third parties, and the licensor's insolvency — risks unique to intellectual property licensing.

A Patent Licence Agreement in Hong Kong compliant with the Patents Ordinance (Cap. 514) should include the following essential elements.

Parties: Full legal names, company registration numbers (for corporate parties registered with the Companies Registry), and addresses of the licensor (patent owner) and licensee. Confirmation of the licensor’s title to the patent — that the licensor is the registered proprietor at the Intellectual Property Department’s Patents Registry.

Licensed Patent: Identification by patent type (standard patent or short-term patent), patent number as registered with the Intellectual Property Department, patent title, filing date, and expiry date. For standard patents obtained through re-registration, the details of the designated patent (CNIPA, UKIPO, or EPO) should also be included.

Licence Scope: Whether the licence is exclusive, sole, or non-exclusive. The specific licensed acts — manufacture, use, sale, offer for sale, importation, and/or exportation of the patented product or process. Field-of-use restrictions (limiting the licence to a specific technology field or application). Sublicensing rights — whether the licensee may grant sub-licences and, if so, whether they require the licensor’s prior written consent.

Territory: The geographical scope of the licence — typically Hong Kong SAR, specified additional territories, or worldwide. For licences covering mainland China, the agreement should specify whether the licence relates to CNIPA-registered patents separately.

Royalty and Payment Terms: The royalty structure — running royalties (percentage of net sales, defined precisely), lump-sum payments, milestone payments, or a combination. Minimum annual royalties (MARs) that guarantee the licensor a minimum income regardless of the licensee’s sales volume. Currency (HKD). Payment frequency, reporting obligations, and audit rights. No GST or VAT applies in Hong Kong.

Quality Control: For trademark and patent licences that protect branded goods, minimum quality standards the licensee must maintain. The licensor’s right to inspect the licensee’s manufacturing processes and products.

Registration Obligation: Requirement for both parties to register the licence with the Patents Registry of the Intellectual Property Department under section 49 of Cap. 514 within 6 months of execution, to protect the licensee’s interest against third-party acquirers and to preserve the right to claim costs in infringement proceedings.

Infringement and Invalidity: Obligation to notify the other party of any third-party infringement. Right of the exclusive licensee to bring infringement proceedings under section 72 of Cap. 514. Consequences of patent revocation — whether royalty obligations terminate and whether previously paid royalties are recoverable.

Term and Termination: Duration of the licence (not to exceed the patent term). Termination for breach, insolvency of either party, patent revocation, or failure to meet minimum royalty obligations. Consequences of termination — cessation of licensed acts, disposal of existing stock, survival of royalty obligations for pre-termination sales.

Governing Law: Laws of the Hong Kong Special Administrative Region and the Patents Ordinance (Cap. 514). Disputes to be resolved by the Court of First Instance (which has specialist intellectual property jurisdiction) or by arbitration under Hong Kong International Arbitration Centre (HKIAC) rules.

Forms-legal.com provides this Patent Licence Agreement template for Hong Kong, covering all key Cap. 514 requirements and designed to protect the interests of both licensor and licensee in a wide range of patent licensing arrangements.

Warranties: The licensor's warranties that the licensed patent is valid and subsisting, that the licensor has the right to grant the licence, and that the licensor is not aware of any pending invalidity or revocation proceedings. The extent to which these warranties are qualified (e.g. to the licensor's knowledge) and the remedies available to the licensee for breach of warranty.

Compulsory Licences: Under Section 89 of Cap. 514, any person may apply to the Court of First Instance for a compulsory licence to work a patent on just terms if the patent is not being worked to the fullest extent reasonably practicable in Hong Kong, or if the working of the patent in Hong Kong is being prevented or hindered. The existence of a voluntary licence does not necessarily preclude a compulsory licence application.

Registered Patent Agents: In Hong Kong, patent agents practising before the Intellectual Property Department's Patents Registry must meet the qualifications prescribed under Cap. 514 and the Patents (General) Rules (Cap. 514C). Solicitors enrolled with the Law Society of Hong Kong may also advise on patent licensing. The Hong Kong Institute of Patent Practitioners (HKIPP) represents the patent profession in Hong Kong. For disputes about patent validity or infringement that arise during the licence term, the Court of First Instance (Intellectual Property Division) has jurisdiction, and the Hong Kong International Arbitration Centre (HKIAC) provides a confidential alternative for resolving licensing disputes without public court proceedings.