Qualcomm Subject of AML Investigation – Other Developments on the Way

China’s use of the Antimonopoly Law to deal with pricing for royalties may have taken another turn with recent launch of an Antimonopoly Law investigation by the National Development and Reform Commission against Qualcomm. Although the exact basis for the investigation is unknown, the press reports speculate that the investigation is related to the forthcoming launch of TD-LTE by China Mobile in early 2014 as well as negotiations on chip and licensing pricing between Qualcomm and China-based companies.

Qualcomm announced the case on Monday November 25. The investigation has been covered in several articles in Reuters as well as other press sources, including the Chinese press. An NDRC spokesperson was quoted in China’s official press on Sunday November 24 that China’s AML authorities would focus on six areas of technology and pharmaceuticals. Some observers have also tied the case to the impactful recent Huawei-Interdigital case(http://chinaipr.com/2013/10/29/huaweiinterdigital-appeal-affirms-shenzhen-lower-court-on-standards-essential-patent) adjudicated in Guangdong, which also involved standards and royalties.

In separate developments, at a conference sponsored by China’s Ministry of Industry and Information Technology that I attended in Beijing on November 13, it was announced that the State Administration for Industry and Commerce will be revising its rules on AML and Intellectual Property. Last August a draft revision to its IPR enforcement guidelines was floated selectively for public comment(http://chinaipr.com/2012/08/26/a-quick-read-of-the-aml-ipr-enforcement-guidelines-fifth-draft/). Additionally, at this November 13 conference, the Supreme People’s Court noted that it would be looking into revising its judicial interpretation on patent infringement regarding availability of injunctions, presumably to make injunctions less automatic (or presumably, denied) in the case of standards-essential patents.

There are some areas where there appear to be less momentum, at least for now. I am unaware of any public initiative to deny orders stopping infringement in the case of standards-essential patents and administrative patent enforcement. In addition, I am unaware of any public request to date for an administrative compulsory license of patents through the State Intellectual Property Office for an antitrust violation or a refusal to license. To judge by the recent MIIT conference, there is also no active discussion on patent “hold-out” for refusal of a licensee to take a license under a standards-essential patent, and what that would mean in the Chinese context, where damages are low in litigation, injunctions are almost always granted, the state plays an active role in standardization, the statute of limitations is short and China’s equities as a patent holder and manufacturer are in flux. Also, noticeably absent from the November 13 program was Ms. Dai Hong from the Standards Administration of China, who had been active on these issues for SAC – an agency which had been relatively active on these issues some years ago. Please send in your comments if you know of other developments.

Overall, China’s ramp-up on AML is not unlike its ramp up for other disruptive economic laws, such as the bankruptcy law. Frequently these laws are enacted for “trial implementation” or alternatively they are not actively enforced until after regulators and the public have had time to become familiar with the laws and their implications and/or the political timing is “ripe.” It will be very interesting to observe future developments.

2 thoughts on “Qualcomm Subject of AML Investigation – Other Developments on the Way

  1. chinaipr2 says:

    Here’s a timely report on standardization in emerging markets by Dieter Ernst at the East-West Center: http://www.eastwestcenter.org/sites/default/files/private/econwp134.pdf (Sept. 2013).

  2. […] Qualcomm Subject of AML Investigation – Other Developments on the Way (chinaipr.com) […]

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