Licensing Technology from China: What US-Based Professionals Need to Know
- Jeff Chang
- 5 hours ago
- 7 min read
If you work in the US and have connections to Chinese companies with valuable technology, you may see an opportunity. A former colleague's company has a patented process. A contact from graduate school now runs a biotech firm in Shenzhen with promising IP. Someone approaches you about helping bring their technology to the American market.
Licensing arrangements between Chinese companies and US-based individuals or entities are possible. But they require careful structuring, and the regulatory environment has grown more complex in recent years. This article provides a general overview of the key considerations. It is not a substitute for legal advice on any specific transaction.
Export Controls on Licensing Technology from China
Most discussions of US-China technology transfer focus on American technology going to China. But export controls also affect technology coming into the United States.
The Bureau of Industry and Security (BIS) maintains the Entity List, which identifies foreign parties subject to specific license requirements. If the Chinese company you're working with appears on this list, or has affiliations with listed entities, importing their technology may require government approval or may not be permitted at all.
Certain categories of technology face heightened scrutiny regardless of specific company designations. These include items with potential military applications, dual-use technologies, and products in sectors the US government considers strategically sensitive. Advanced computing, artificial intelligence, biotechnology, and semiconductor-related technologies all receive particular attention.
Before pursuing any licensing arrangement, verify that the specific technology can legally enter the US and that the Chinese licensor is not subject to restrictions. This requires more than a cursory check. Company names vary between English and Chinese, ownership structures can be opaque, and affiliations with restricted entities are not always obvious.
Verify the IP Before You Commit
A licensing agreement is only as valuable as the underlying intellectual property. Before entering into any arrangement, confirm that the Chinese company actually owns what they claim to be licensing.
Chinese patent and trademark registrations can be verified through official databases, but registration alone does not guarantee clear title. The IP may be subject to disputes, encumbrances, or competing claims. In some cases, employees or former partners may have rights that limit what the company can license. State-owned enterprises or government-affiliated research institutions may have residual interests in technology developed with public funding.
Chinese companies sometimes register IP domestically without securing international protection. If the technology is not patented in the United States, your ability to prevent competitors from using it here may be limited. Conversely, the technology may infringe existing US patents held by third parties.
Due diligence on the IP itself is separate from due diligence on the company. Both are necessary before committing to a licensing arrangement.
Your Immigration Status Matters
If you are a US citizen or lawful permanent resident, your immigration status does not restrict your ability to start a business or enter into licensing arrangements.
If you hold an H-1B visa, the situation is more complicated. The H-1B is employer-specific, meaning you are authorized to work only for the company that sponsors your visa. Starting a business on the side raises questions about unauthorized employment.
The general rule has been that H-1B holders can own a business passively but cannot actively work for it unless that business sponsors them for a separate H-1B. In practice, this meant having US partners handle operations while you remained a passive investor, or having your company file a concurrent H-1B petition so you could work for both your sponsoring employer and your own business.
Regulations finalized in early 2025 clarified and somewhat relaxed the rules for H-1B holders who own the company that sponsors them. Under the current framework, you can hold a controlling interest in a company that sponsors your H-1B, provided you can demonstrate a genuine specialty occupation role and a legitimate employer-employee relationship. This typically requires a board of directors or similar governance structure with authority over your employment, documentation showing the position requires specialized knowledge, and evidence that you will spend the majority of your time on specialty occupation duties rather than general business management.
These arrangements receive close scrutiny from USCIS. The initial approval period may be limited to 18 months rather than the standard three years. If you are pursuing this path, work with immigration counsel to structure the business and document the employment relationship properly.
If you currently hold an H-1B sponsored by another employer, you cannot begin actively working for your own company until either a new H-1B petition is approved or you transition to a different status. You can take preparatory steps, form the entity, secure licensing rights, and arrange financing, but operational involvement must wait.
Structuring the US Entity
If you plan to commercialize licensed Chinese technology in the United States, you will typically need a US legal entity to hold the license, conduct business, and potentially sponsor your visa.
For H-1B founders, a C-Corporation is often the preferred structure because it creates clear separation between the company and its owners, facilitating the employer-employee relationship that USCIS requires. The corporation can have a board of directors with authority to hire, supervise, and terminate the founder-employee.
LLCs offer more flexibility for tax purposes and are simpler to maintain, but they can create complications for H-1B holders. Single-member LLCs in particular may be treated as disregarded entities, making it difficult to establish the separate employer-employee relationship. Multi-member LLCs with appropriate operating agreements may work, but require careful structuring.
Beyond visa considerations, entity choice affects liability protection, tax treatment, and future fundraising options. These decisions should be made with both legal and tax counsel.
The Environment Has Changed
Chinese-background professionals starting businesses in the United States face a different environment than they did a decade ago.
The Department of Justice's China Initiative, launched in 2018 and formally ended in 2022, focused investigative resources on researchers and businesspeople with Chinese connections. While the program was discontinued after concerns about discriminatory targeting, the underlying scrutiny has not disappeared. Proposals to revive similar programs have circulated in Congress, and law enforcement attention to technology transfer involving China remains elevated.
This does not mean you cannot pursue legitimate business opportunities. It does mean that documentation and transparency matter more than they once did. Maintain clear records of the commercial basis for any licensing arrangement. Ensure that any technology you bring into the US complies with export control requirements. Disclose foreign business relationships where required, such as on grant applications or in employment agreements that require such disclosure.
If you work in a sensitive field or maintain ongoing research relationships with Chinese institutions, consider how a licensing business might be perceived and whether additional disclosures or precautions are appropriate. The goal is not to avoid legitimate activity, but to ensure that legitimate activity is clearly documented as such.
When CFIUS May Apply
The Committee on Foreign Investment in the United States (CFIUS) reviews foreign investments in US businesses for national security concerns. A pure licensing arrangement, where a Chinese company licenses technology to an unrelated US entity in exchange for royalty payments, generally does not trigger CFIUS jurisdiction.
However, if the arrangement includes features beyond a standard license, CFIUS considerations may arise. Equity investments by the Chinese licensor in your US company, board seats or observer rights, access to your customer data or other sensitive information, or governance rights that give the Chinese party influence over business decisions can all bring a transaction within CFIUS review.
If you are structuring a deal that goes beyond arm's-length licensing, evaluate whether CFIUS notification is required or advisable. The rules in this area have tightened considerably for transactions involving Chinese parties.
Frequently Asked Questions
Can a Chinese company license its patents to a US company I form?
Yes, this is a standard commercial arrangement. The key requirements are that the technology itself can legally enter the US, the Chinese company has clear title to license, and the terms are properly documented. Export controls and entity restrictions must be evaluated for each specific transaction.
Do I need government approval to license technology from China?
It depends on the technology and the parties involved. Most commercial licensing does not require prior approval, but certain technologies and certain Chinese entities are subject to restrictions. Screening the transaction against export control regulations and restricted party lists is essential.
Can I do this while working on an H-1B visa?
You can own a business passively while on H-1B, but active involvement requires either a concurrent H-1B sponsored by your company or a change of status. The 2025 H-1B rules allow founders with controlling interests to be sponsored by their own companies under certain conditions, but these arrangements require careful structuring and documentation.
What if I have a green card?
Lawful permanent residents face no immigration-related restrictions on business ownership or employment. You can start and operate a company, enter into licensing arrangements, and work in whatever capacity you choose.
Will I face extra scrutiny because of my background?
Professionals with Chinese connections may encounter more questions about technology-related business activities than they would have a decade ago. This reflects the current regulatory environment, not any prohibition on legitimate business. Maintaining clear documentation, complying with disclosure requirements, and structuring transactions transparently helps address potential concerns.
Does CFIUS apply to licensing deals?
Pure licensing arrangements without equity, governance rights, or data access generally fall outside CFIUS jurisdiction. If the deal includes investment components or gives the Chinese party influence over your US business, CFIUS analysis becomes relevant.
How do I verify that a Chinese company owns the IP it wants to license?
Patent and trademark registrations can be checked through official databases such as CNIPA for Chinese IP and USPTO for any US filings. However, registration does not guarantee clear title. A thorough review may require examining assignment records, employment agreements, government funding sources, and potential competing claims.
What business structure should I use?
C-Corporations are often preferred for H-1B founders because they facilitate the employer-employee relationship USCIS requires. LLCs offer tax advantages but can create visa complications. The right structure depends on your immigration status, tax situation, and business plans.
Can I license technology in a sensitive field like biotech or AI?
Potentially, but these fields receive heightened attention. Verify that the specific technology is not subject to export restrictions, that the Chinese company is not on restricted party lists, and that any required licenses or approvals are obtained. The due diligence requirements are more extensive for sensitive technologies.
How Chang Law Group Can Help
We advise US-based professionals on structuring licensing arrangements with Chinese companies, navigating export control requirements, and forming US entities to commercialize foreign technology. If you are considering bringing Chinese technology to the US market, we can help you evaluate the regulatory landscape and structure the transaction appropriately.
Chang Law Group LLC: One Marina Park Drive, Suite 1410 Boston, MA 02210
Contact:
Phone: (617) 307-1238
Email: info@jchanglaw.com
WeChat: ChangLawGroupLLC
This article provides general information only and is not legal advice for your specific situation. Reading this post does not create an attorney-client relationship with Chang Law Group. This article may not reflect recent developments or apply to your particular circumstances. Consult Chang Law Group LLC to evaluate your specific situation and options.