August 2017
Anti-monopoly Guidelines of the Anti-monopoly Commission of the State Council on Abuse of Intellectual Property Rights (Solicitation for Opinions)(Mainland China)
James Cheng
On December 31, 2015, the Anti-monopoly Commission of the State Council promulgated a solicitation for comments concerning the Anti-monopoly Guidelines on Abuse of Intellectual Property Rights (hereinafter, the "Guidelines") from the public during January 1, 2016 through January 20, 2016. Although intellectual property rights can promote innovations and enhance technological developments, if the operator abuses the uniqueness of intellectual property rights to exclude and restrict competition, it would conflict with the original purpose of such rights. It has therefore always been a challenging issue facing an anti-monopoly enforcement agency as to how to strike a balance between maintaining innovations made possible by intellectual property rights and avoiding abuse of intellectual property rights. Therefore, the Guidelines are quite significant even though they have not been formally promulgated and come into force yet.
The Guidelines first set forth four basic enforcement principles. First, it is specifically indicated that that the framework is basically referencing the analytical thinking under the Anti-monopoly Law with considerations given to the uniqueness of intellectual property rights. Second, even if operators own intellectual property rights, they are not directly presumed to enjoy a dominant market position in the relevant markets. Third, analysis over use of intellectual property that may potentially exclude and restrict competition shall take into consideration of the industry in question in examining the active impact of the exercise of intellectual rights on competition and innovation. Finally, the facts, evidence and reasons proposed by operators concerning the justification of their exercise of intellectual property rights should be fully considered. Simply put, the analytical thinking embedded in the Guidelines follows the conventional anti-monopoly analytical framework. The relevant markets are first defined before whether the exercise of intellectual property rights has any effect of excluding or restricting competition is determined. However, in light of the uniqueness of intellectual property rights, there are additional considerations over whether the exercise of intellectual property rights has positive impact such as innovation or enhanced efficiency.
In addition, with respect to the analysis of the relevant markets, the Guidelines introduced defining the relevant technology markets to address the inadequacies in the definition of the relevant markets under the general framework. The so-called "relevant technology markets" are determined by the substitutability of the technologies involved in the exercise of intellectual property rights. In addition, provisions regarding substitutability factors are further made, including the attributes, use, and royalties of technologies, the term limitation on intellectual property rights, and the possibilities and costs of switching to other substitutive technologies by the demand side.
The Guidelines also contain provisions concerning intellectual property rights agreements that may exclude or restrict competition and potential types of abusing a dominant market position involving intellectual property rights. First, different types are stipulated based on whether competing operators have reached an agreement. In case where an intellectual property rights agreement between competitive operators pertains to joint research and development, patent alliance, cross-licensing, or standards setting, such agreement may be deemed to exclude or undermine competition. In case of an intellectual property rights agreement between operators with no competitive relationship, if such agreement contains clauses relating to price restriction, monopolistic concessions, no-challenge clause or other restrictive clauses, such agreement may also be deemed to potentially exclude or undermine competition. In addition, the Guidelines also contain exemption provisions on intellectual property rights agreements and stipulate the types for which market share may be used as a standard for presumed exemption.
As for acts engaged by an entity holding a dominant market position, such as licensing intellectual property rights under unequitably high royalties, refusing a license, tie-ins, attaching unreasonable commercial terms, discriminatory treatments, or injunctive relief, they are likely to be deemed abuse of a dominant market position. However, it is specifically indicated in the Guidelines that when considering whether the above types of acts have violated the Anti-monopoly Law, it is also necessary to consider the unique characteristics of intellectual property rights.
On December 31, 2015, the Anti-monopoly Commission of the State Council promulgated a solicitation for comments concerning the Anti-monopoly Guidelines on Abuse of Intellectual Property Rights (hereinafter, the "Guidelines") from the public during January 1, 2016 through January 20, 2016. Although intellectual property rights can promote innovations and enhance technological developments, if the operator abuses the uniqueness of intellectual property rights to exclude and restrict competition, it would conflict with the original purpose of such rights. It has therefore always been a challenging issue facing an anti-monopoly enforcement agency as to how to strike a balance between maintaining innovations made possible by intellectual property rights and avoiding abuse of intellectual property rights. Therefore, the Guidelines are quite significant even though they have not been formally promulgated and come into force yet.
The Guidelines first set forth four basic enforcement principles. First, it is specifically indicated that that the framework is basically referencing the analytical thinking under the Anti-monopoly Law with considerations given to the uniqueness of intellectual property rights. Second, even if operators own intellectual property rights, they are not directly presumed to enjoy a dominant market position in the relevant markets. Third, analysis over use of intellectual property that may potentially exclude and restrict competition shall take into consideration of the industry in question in examining the active impact of the exercise of intellectual rights on competition and innovation. Finally, the facts, evidence and reasons proposed by operators concerning the justification of their exercise of intellectual property rights should be fully considered. Simply put, the analytical thinking embedded in the Guidelines follows the conventional anti-monopoly analytical framework. The relevant markets are first defined before whether the exercise of intellectual property rights has any effect of excluding or restricting competition is determined. However, in light of the uniqueness of intellectual property rights, there are additional considerations over whether the exercise of intellectual property rights has positive impact such as innovation or enhanced efficiency.
In addition, with respect to the analysis of the relevant markets, the Guidelines introduced defining the relevant technology markets to address the inadequacies in the definition of the relevant markets under the general framework. The so-called "relevant technology markets" are determined by the substitutability of the technologies involved in the exercise of intellectual property rights. In addition, provisions regarding substitutability factors are further made, including the attributes, use, and royalties of technologies, the term limitation on intellectual property rights, and the possibilities and costs of switching to other substitutive technologies by the demand side.
The Guidelines also contain provisions concerning intellectual property rights agreements that may exclude or restrict competition and potential types of abusing a dominant market position involving intellectual property rights. First, different types are stipulated based on whether competing operators have reached an agreement. In case where an intellectual property rights agreement between competitive operators pertains to joint research and development, patent alliance, cross-licensing, or standards setting, such agreement may be deemed to exclude or undermine competition. In case of an intellectual property rights agreement between operators with no competitive relationship, if such agreement contains clauses relating to price restriction, monopolistic concessions, no-challenge clause or other restrictive clauses, such agreement may also be deemed to potentially exclude or undermine competition. In addition, the Guidelines also contain exemption provisions on intellectual property rights agreements and stipulate the types for which market share may be used as a standard for presumed exemption.
As for acts engaged by an entity holding a dominant market position, such as licensing intellectual property rights under unequitably high royalties, refusing a license, tie-ins, attaching unreasonable commercial terms, discriminatory treatments, or injunctive relief, they are likely to be deemed abuse of a dominant market position. However, it is specifically indicated in the Guidelines that when considering whether the above types of acts have violated the Anti-monopoly Law, it is also necessary to consider the unique characteristics of intellectual property rights.
