Three Upcoming Programs

If you are near Portland, Oregon, Prof. Eric Priest of the University of Oregon, Chief Judge Rader (ret) and I will be talking at the University of Oregon about our joint efforts with the US Chamber on China IP related matters.  The program will be held form 12:00 to 1:30 on May 6th at the University of Oregon White Stag Building, 70 NW Couch Street, Portland, Oregon,  RSVP: teevee@uoregon.edu.  Oregon CLE is pending.

On June 2, 2016 in Beijing, IP Key will be cosponsoring a program on Infringement of Intellectual Property Rights Online.  Information is available here.

Another upcoming program on June 8 is in Alexandria, Virginia with the USPTO and George Mason University on licensing.  Although not strictly speaking a China-related program, I expect there to be  considerable discussion around China’s licensing environment.  Amongst the speakers will be Director Lee of the USPTO, Commerce Deputy Secretary Bruce Andrews, FTC Commissioner Ohlhausen, and former USPTO Director David Kappos.  I will also be speaking at this program.  The conference agenda and a link to registration are available here.

 

GAI’S Comments on NDRC’s IP Abuse Guidelines

 “[T]he code is more what you’d call “guidelines” than actual rules” (Barbossa, Pirates of the Carribean, The Curse of the Black Pearl).

Attached find the comments of the Global Antitrust Institute of George Mason University (GAI) on the recently released public comment draft of NDRC’s IP Abuse Guidelines.

GAI’s excellent comments suggest that NDRC adopt a more compliance-based approach to ensure predictability to commercial actors.  In its view, the Draft Guidelines do not explain the significance of each of four factors enumerated by NDRC or how they will be weighed in Anti-Monopoly Law (AML) agencies’ overall decision-making process.  This approach allows the AML agencies broad discretion in enforcement decision-making without providing the guidance stakeholders need to protect incentives to innovate and transfer technology that could be subject to AML jurisdiction.  GAI also recommends that the NDRC include throughout the Guidelines examples similar to those found in the U.S. antitrust agencies’ 1995 Antitrust Guidelines for the Licensing of Intellectual Property to illustrate how the AML agencies will apply the basic principles.  GAI also provided specific line-edit proposed edits on four provisions: general analysis, charging “unfairly high” royalties, discriminatory treatment, and injunctive relief.

Anyone keeping a list of all the legislative activity in this area is likely to be bewildered.  I have previously released other comments of the GAI, including their recent comments on SAIC’s draft of the IP Abuse Guidelines, and an earlier draft of the NDRC IP Abuse Guidelines.  I also commented on NDRC’s questionnaire regarding the guidelines, and published the ABA’s comment on the questionnaire.  Activity on IP Abuse guidelines now stretches back several years.  Indeed. there were already SAIC several drafts when I helped author a chapter on IP and China’s antimonopoly region in Antimonopoly Law and Practice in China  (2011).   Additionally, the AML itself is reportedly under consideration for revision by the NPC, and related legislation, a draft of the Anti-Unfair Competition Law, has reportedly recently been submitted to the State Council for its consideration (it was listed for preparatory work in the State Council’s 2015 legislation plan).

One saving grace: the final guidelines would likely need to be adopted by the Antimonopoly Commission which, according to the AML itself, is in charge of “organizing, coordinating, and guiding anti-monopoly work.” In the interim, the large number of drafts by different administrative agencies, lack of clear legislative or judicial guidance, the overhang of active enforcement activities and large damage/international administrative and judicial decisions (such as Qualcomm and Interdigital), the “exporting” of AML cases overseas (such as in Huawei vs. ZTE), SIPO’s effort to address standardization issues in the patent law revision, etc., all suggest that a situation where agencies could be using rulemaking to both address voids in legislation but also enhance their position in a multi-agency turf battle.

During my trip to China last week, I also repeatedly heard concerns expressed about current practice of Chinese agencies drafting legislation that may be used to enhance their administrative power or enhance their influence, with calls for greater direct legislation by the State Council or National People’s Congress (here’s one article on this topic involving educational legislative work).  Despite the heavy work load of the State Council, it seems to me that the IP Abuse Guidelines are increasingly becoming more ripe for the already planned consideration by the Antimonopoly Commission or the State Council Legislative Affairs Office itself.

(Updated Jan. 21, 2016)

GAI Comments on SAIC IP Abuse Guidelines, NDRC’s Up For Comment

Attached are the comments in English of the Global Antitrust Institute on SAIC’s draft IPR Abuse, as well as the Chinese Translation)  (received January 14 here at chinaipr.com)

NDRC’s comments are also up for comment, with a due date of January 20, 2016.

SIPO is also reportedly preparing its own draft, according to some media sources.

(updated January 17, 2016).

 

GMU Comments on Questionnaire of China University of Politics and Law on AML Revisions

roosevelt-and-the-trusts

Although the ink has not yet been fixed on guidelines for IP abuse in antitrust matters in China, the preparatory work on revisions to China’s Antimonopoly Law (AML) are always underway.   In that connection, the Global Antitrust Institute (GAI) at George Mason University School of Law submitted the attached response to the Questionnaire on AML Revisions  that had been prepared by the China University of Political Science and Law.

I have summarized below some of the key IP-related concerns:

  • Deleting References to Use of Non-Competition Factors in Competition Analysis. The GAI recommended that references to non-competition goals such as “promoting the healthy development of the socialist market economy” be deleted.  This request reflects similar efforts made by the US government in the Strategic and Economic Dialogue where an outcome was the mutual recognition that “the objective of competition policy is to promote consumer welfare and economic efficiency, rather than to promote individual competitors or industries, and . . . enforcement of its competition law should be fair, objective, transparent, and nondiscriminatory.”
  • Deleting Exemptions for State-Owned Enterprises (SOEs). The GAI recommended that SOEs be fully subject to the AML, including liability and fines.  I have often wondered what the effect of additional competition would be on content creators who rely on state-owned entities such as China Film Group (for imports) or China Mobile and China Unicom (for music ring tones). Possibly due to weak competition, a study cited by IFPI noted in that in 2012 in China the estimated total value of the digital music sector in China at RMB30 billion (US$4.9 billion), but the study estimated that a very small share of that revenue (less than 3 per cent) was being shared with the copyright holder.
  • Deleting the Prohibition on Charging “Unfairly High” or Purchasing at “Unfairly Low” Prices. The GAI recommended that this prohibition be deleted in its entirety or, at the very least, revised to explicitly provide an exception for matters involving intellectual property rights.  Among other things, the GAI explained that price regulation risks punishing vigorous competition and government imposed prices that are too high or too low encourage misallocation of resources, soften incentives to engage in efficient conduct, reduce incentives to innovate, and distort markets. These risks are especially acute for IPR’s, because “the very purpose for which nations create and protect IPRs is to induce investment in risky and costly research and development. To achieve a balance between innovation and the protection of competition, monopoly prices should only be unlawful if they are the result of conduct that is unlawful on other grounds.” The most recent 2015 JCCT also specifically requires that China should “take into account the pro-competitive effects of intellectual property,” which arguably also suggests some degree of caution should be exercised in looking solely at prices charged for licensing IP rights.
  • Limiting the Prohibition on Refusals to Deal to Conduct that Creates or Maintains a Monopoly. The GAI explained that, without such a limitation, the prohibition could be interpreted to impose an antitrust-based duty to deal on firms, to micromanage the terms of trade between firms, and to require courts and agencies to administer a burdensome remedy with substantial risk of causing more harm to competition and to consumers than benefits.  Apart from consistency of forced licensing with the Paris Convention, TRIPS and other agreements, through erosion of the right to exclude inherent in a patent, the competition law IP risks to licensors are also underscored by GAI: “potential inventors may be less likely to undertake the research and development that lead to an invention if the inventor’s reward for its efforts is reduced by having to share its technology or goods. Conversely, if businesses know they can easily gain access to the goods or technology of other firms, then they have less incentive to innovate and more incentive instead to free-ride on the risky and expensive research of others.”
  • Specifying that the Legitimate Use of Intellectual Property Rights Includes the Right to Exclude. The GAI has suggested revising Article 55 of the AML, which deals with abuse of IP as follows:

 This Law [the AML] is not applicable to undertakings who exercise their intellectual property rights in accordance with the laws and administrative regulations on intellectual property rights, which includes the right to exclude; however, the Law shall be applicable to undertakings who eliminate or restrict market competition by abusing their intellectual property rights. This Article does not create a standalone violation for the abuse of intellectual property rights. Conduct will only be found to violate this Law if it constitutes a violation of Articles 13 or 14.

As GAI notes “If the government is too willing to step in and appropriate the gains from innovation and dynamic competition, then potential innovators anticipating such interventions will have weak incentives to risk investment in new inventions. Likewise, if the laws governing abuse of IPRs is uncertain or unpredictable (which they would be if the prohibition of “unfairly high pricing” is applied to IPRs), potential innovators will also have weak incentives to innovate.” As I previously noted in addressing NDRC’s IP abuse drafting effort: “the starting point of that discussion … is the incentive afforded by the patent system to disclose technology in order to exclude others and ultimately contribute to the public domain of technology when the patent lapses.”

 A special thanks to Koren W. Wong-Ervin, Director, Global Antitrust Institute, George Mason University School of Law, for sharing these comments and her summary which I have adopted in light of my knowledge of some of the  IP issues in Chinese antitrust enforcement.