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).

 

“I’m Lovin’ it!” – A “Wrong Way” for McDonalds?

mcdonalds

My colleague at Fordham Law, Geoffrey Sant, has written an interesting  blog  on Salon “McDonald’s self-hating complex: Why its overseas P.R. campaign is the worst of all time” that addresses McDonald’s Chinese slogan which translates “I’m lovin’ it” to 我就喜欢  (wo jiu xihuan).

As Geoff explains:  “The second word in this sentence (jiu) is used to emphatically contradict what someone else has said.  The natural implication is that the speaker is responding to someone who has just insulted McDonald’s food.  While there is no perfect translation for the phrase, it has the same essential spirit as “I like it no matter what you say!”

Every student of Chinese in the West learns about the jiu particle early in their Chinese language career.   However, rather than rely on my study of Chinese grammar forty years ago,  I checked with Google translate, which suggests that the phrase  indeed connotes faint praise, and translates it as “I would like to.”

There are many other similar mistakes in both Chinese and English, including such notables as the “Rongwei” car, which sounded suspiciously like ‘wrong way”, and is now known in English as the Roewe.

Goeff suggests positive alternatives such as  “我很喜欢” (wo hen xihuan) or “我好喜欢” (wo hao xihuan), both of which mean “I really like it.”

Apparently the SAIC trademark database reflects a different market reality.  When I checked on March 15, 2015, I noticed that McDonald’s has six registrations in four classes (28, 29 , 30, 32 and 43) for 我就喜欢  (wo jiu xihuan).  There were an additional 21 registrations by other companies or individuals.

Perhaps McDonald’s has some squatters who are more interested in being paid off than grammatical niceties?

 

JCCT 2014 Winds Up – Joint Fact Sheets Now Released

JCCT2014

The 2014 JCCT was hosted by the US government in Chicago, Illinois this year. Here is a link to the updated English  fact sheet (released Dec. 29) (Chinese:第25届中美商贸联委会联合成果清单)  that is now a joint fact sheet.    Here is a summary of the IP accomplishments of this year’s JCCT according to the joint fact sheet:

One significant outcome involved “technology localization” which is the practice whereby China grants tax preferences based on where IP is owned or R&D is undertaken.  Here is what the fact sheet says about the outcome in this area:

The United States and China commit to ensure that both countries treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights.  ..Both China and the United States confirm that the government is entitled to take measures to encourage enterprises to engage in research and development and the creation and protection of intellectual property rights. 

In my personal estimation, the significance of this outcome is that China committed to not discriminating in awarding tax preferences based on where IP is owned.  To a degree this reflects footnote 3 of the TRIPS Agreement, which prohibits discrimination in “protection” of IP, which includes “matters affecting the use of intellectual property.”

Regarding service invention compensation, which has been important to readers of this blog, the JCCT commitment reflected the accomplishments of the 2014 Innovation Dialogue regarding freedom of contract:

The United States and China commit to protect the legal rights of inventors in respect of their inventions and creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws, commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between employers and inventors concerning inventor remuneration and awards.

Another JCCT outcome involved protection of trade secrets in government regulatory proceedings:

The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law…

The rather “hot” issue of geographical indications was also the subject of an “outcome” involving not extending GI’s to generic terms and establishing procedures to object to and cancel the registration of the GI.

There were also a number of cooperative commitments which will likely be a focus of various bilateral discussions and programs, including on technology licensing, bad faith trademark registrations, judicial best practices, data supplementation for pharmaceutical patents, IP in standards setting, sale of IP-intensive goods and services, and addressing on-line infringement.

The revised joint fact sheet also includes a joint commitment on abusive litigation:

Patent Protection and Bad Faith Litigations

  • The U.S. and China remain committed to promoting a robust intellectual property system that will incentivize future innovation and economic growth in both countries. Both parties are to strengthen cooperation to protect innovators from bad faith litigations, including to hold a joint seminar on IP licensing, so as to create positive conditions for innovation.

 

 

There were also outcomes that weren’t focused on IP but have significant IP implications.  One involved medical device and pharmaceutical market access, where China committed to accelerate approval procedures, which has long been hampered by inadequate resources at China’s Food and Drug Administration.  Another involved clarifying standards for antimonopoly law enforcement, including providing for greater due process and law firm access.  Still another commitment involved collaboration on law firm market access, which certainly affects foreign IP lawyers practicing in China.

In my personal experience, this 25th JCCT might equally be labeled JCCT v. 3.0.  The JCCT has changed to accommodate the growing complexity and importance of US-China trade.  In its first version (1983 to approximately 2001), the JCCT was as often a rather sleepy technical exchange mechanism.  I remember attending an early JCCT dealing with the enforcement of arbitration awards.  Another iteration (v 2.0) was under the leadership of Vice Premier Wu Yi after China’s WTO accession.  The JCCT then became a mechanism for negotiating trade issues with the Vice Premier chairing on the Chinese side and the Secretary of Commerce and US Trade Representative as formal co-chairs, but with an important added role for the Secretary of Agriculture.  Version 3.0 includes the same leadership structure, but with more involvement by industry and the host locality through various programs and symposia, joint fact sheets, and commitments to move negotiations changes in the negotiating calendar, including “a year of continuous work to address important issues facing our two nations.”

The above are my personal, non-official observations.

A Quick Report on the EIPC MIIT Conference Including SAIC’s IP Abuse Rules, Patent Law Amendments, EIPC MIIT Standardization Policies, Standards and IP Abuse…

EIPC MIIT’s Conference on Intellectual Property Standards and Anti-Monopoly Law convened on December 10 and 11 in Beijing.  The conference brought together about 150 international and Chinese experts, including lawyers, judges, academics, diplomats, and other professionals to the Wanshou Hotel in the Haidian District, Beijing.  There were over over 30 speakers. The initial speakers set the tone for the conference by concentrating on one theme:  China’s anti-monopoly regime had entered a new phase from theory to enforcement.  Further, this transition period is characterized by the need to balance anti-monopoly law and IP rights, regulation and innovation.

One example of the struggle for balance is the debate over the prevalence and importance of holdouts, or the practice of standards implementers engaging in conduct intended to drive royalties down royalties for Standards Essential Patent (SEP) holders to lower than F/RAND levels.  Dina Kallay, Director of Intellectual Property and Competition at Ericsson Ltd.  argued the problem of hold outs was real.  David Wang, Director of Standards and IPR Strategy, Intellectual Property Rights Department of Huawei Technologies Co., argued that that there is no evidence of real life hold outs.  His opinion comes in light of Huawei’s recent litigation with IDC, in which a court ruled that IDC should compensate Huawei for excessive pricing and tying practices.

Many speakers addressed current and future reforms.  Yang Jie, Director of the Anti-Monopoly and Anti-Unfair Competition Enforcement Bureau at SAIC, explained new revisions to its forthcoming rules on abuse of dominance and exclusionary relief (presumably, SAIC’s IP Abuse guidelines or rules). Since August, SAIC has modified seven articles. First, Yang Jie said that SAIC has maintained the “essential facilities” doctrine in the new version, however with some modifications. The doctrine will apply when an intellectual property right cannot be easily substituted in the relevant market, other players want to be part of the market, a refusal to deal would restrict competition or innovation in the relevant market, it harms the public interest, and the licensing of the patent would not negatively or unreasonably harm the interests of the patentee.

Yang Jie also explained that SAIC has adopted a narrow interpretation of refusal to deal for players in a dominant position.  It will only apply when the intellectual property right constitutes an essential element for production.  Moreover, a violation only occurs when the behavior limits competition. Additionally, in abuse of dominance, “abuse” must be considered parallel to other elements and the behavior must harm the public interest or consumer behavior.

Concerning guidelines for the standard setting process, Yang Jie explained that the rules do not include a special provision for horizontal agreements in the standard setting process, because this is covered under the provision for anti-monopoly agreements.  Furthermore, Yang Jie divided monopolistic behavior in the standard setting into standard setting procedures – for instance if a firm fails to say something in a patent application – and standard implementation, which would include violations of F/RAND commitments.  Yang Jie said that the standards clarify the “what should have been known” standard for the standard setting process.  For standard implementation, the guidelines add the requirement of restricting or limiting competition.  Additionally, the new guidelines will treat intellectual property rights the same as other property rights. In other words, SEP holders are not automatically deemed to have market dominant positions. Instead, a case specific analysis must show that a firm is “dominant” within the meaning of relevant provisions of the Anitmonopoly Law.

Lastly, the guidelines no longer include a specific provision targeting copyright collecting societies for abuse of dominance or restricting competition. Yang Jie explained that the provision was cut because there was no real evidence of copyright organizations abusing their position. That being said, enforcement agencies can still pursue copyright organizations as they are not otherwise exempt from the law.

Yang Jie also said that the official version has not yet been promulgated. The regulations have been submitted to relevant bodies within the State Council for review (note from Mark Cohen: it is unclear to me if this is registration with the State Council, or review by the Antimonpoly Enforcement Agencies, or another process.  If this document is an SAIC rule, then review by the State Council should be limited).

Zhang Yonghua, Deputy Director of No. 1 Division of the Legal Affairs Department of the State Intellectual Property Office of China (SIPO), provided details regarding the latest draft of the proposed patent law amendments.  The new draft empowers judicial and administrative bodies with the right of investigation and evidence collection. It also allows administrative agencies to effectively settle infringement issues by compensation.  Furthermore, the draft provides for punitive damages for severe infringements, a concept already employed in China’s trademark law. Additionally, protection for industrial design is extended to 15 years. The new draft also introduces a burden of proof shifting scheme in which the burden of proof shifts once the patentee has satisfied certain of its evidentiary burdens.

Zheng Wen, Deputy Director General of the Anti-Monopoly Bureau, focused on the need for improvement in the merger review process of MofCOM.  Zheng Wen said that MOFCOM had received over 1000 cases since August 2008 and had finished over 900, imposing sanctions in only 3% of the cases.  Zheng suggested that there was a need to impose more sanctions and to crack down on parties that illegally skipped merger review.  Since November, MOFCOM has been publishing notices of sanctions on parties that did not report their proposed merger but should have.  Zheng Wen also expressed the desire to set up a long term cooperation mechanism with the E.U. and U.S., especially for large scale transnational mergers.

Huang Yong, Vice Chair of the Expert Advisory Committee under the State Council Anti-Monopoly Commission, stated that allowing agencies the rights of investigation and suggestion would be a step in the right direction.

Concerning the new Specialized IP Courts, Jin Kesheng, Deputy Chief Judge of the IPR Tribunal and senior Judge of the Supreme Court said that we could look forward to a judicial interpretation regarding the role of the court’s “technology investigator” position.  Additionally, Zhang Xiaojin, Chief Judge of the Second Tribunal in the Beijing Intellectual Property Court, expressed serious concern over the new court’s ability to handle their large caseload. For instance, the Beijing specialized IP court has 100 staff in total, only 22 of whom are judges and the court is expected to receive 15,000 cases annually.  He expressed further concern over their ability to carry out judicial reform while so severely understaffed.

Finally, Shi Shaohua of EIPC MIIT spoke about feedback to EIPC MIIT’s own Template for IP Policies in Industry Standards Organizations, (which I previously wrote about here). Two criticisms were that the structure was too complicated and that courts do not have sufficient expertise to adjudicate F/RAND issues; injunctions and unwilling licensors;  and reference factors for unreasonable licensing, including factors such as the smallest component or device, the total aggregate royalties of all potential SEPs, the influence of standards on patents, and the extra value that standards bring to a patent.  EIPC MIIT also received comments concerning reciprocity requirements, for instance what standard should be employed and whether adding restrictions to SEP licensing will influence cross-licensing, market access, and reciprocity.

The conference also included presentations on Legal Issues of Competition in Internet Industry” and “Internet Based Information Security and Intellectual Property Protection” which unfortunately we were not able to cover.

Prepared by Marc Epstein of Fordham Law School with edits by Mark Cohen.   A special thanks to EIPC MIIT and Shi Shaohua for allowing a Fordham student to attend this important conference!  Please provide us with any corrections, additions or comments!  As always, these comments are the authors’ own.