ABA Section of International Law Comments on NDRC Questionnaire on IP Abuse Guidelines

The American Bar Association has once again made publicly available its response to the NDRC questionnaire on drafting IP abuse guidelines, attached here.  This is a useful and large bilingual download which contains useful background materials.

Some of my prior recent blogs on this questionnaire include a posting of George Mason University’s comments, and my comments on the questionnaire itself.

Thanks again to the ABA for the transparency of its efforts!

NDRC and Qualcomm Reach Resolution of Antimonopoly Law Complaint

Qualcomm announced yesterday, February 9, that it has reached a resolution with China’s National Development and Reform Commission (NDRC) regarding the NDRC’s investigation of Qualcomm under China’s Antimonopoly Law (AML). The NDRC has issued an Administrative Sanction Decision finding that Qualcomm has violated the AML. Qualcomm has stated that it will not pursue further legal proceedings contesting the NDRC’s findings and that it will implement a “rectification plan” that modifies certain of its business practices in China.  Qualcomm has also noted that while it is “pleased” with NDRC’s review and approval of this rectification plan, it is “disappointed” with the results of the investigation.  Key aspects of the rectification plan are:

Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents and it will provide patent lists during the negotiation process. If Qualcomm seeks a cross license from a Chinese licensee as part of such offer, it will provide fair consideration for such rights.

For licenses of Qualcomm’s 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm will charge royalties of 5% for 3G devices (including multimode 3G/4G devices) and 3.5% for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each case using a royalty base of 65% of the net selling price of the device.

• Qualcomm will give its existing licensees an opportunity to elect to take the new terms for sales of branded devices for use in China as of January 1, 2015.

Qualcomm will not condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement. However, this does not require Qualcomm to sell chips to any entity that is not a Qualcomm licensee, and does not apply to a chip customer that refuses to report its sales of licensed devices as required by its patent license agreement.

The NDRC imposed a fine on the Company of 6.088 billion RMB (approximately USD 975 million), which Qualcomm will not contest. Qualcomm will pay the fine on a timely basis as required by the NDRC.

The settlement appears to identify certain issues which likely were actively negotiated, including, the smallest “unit” based upon which royalties may be collected, compensation and negotiation for cross-licenses from Chinese licensees, dates of  application of newly imposed licensing terms, royalties and licensing practices for  essential and non-essential 3G and 4G patents, calculation of any different Chinese domestic market royalties,  sales of chips in conjunction with royalties and calculation of a fine.   It is unclear from this announcement how significant a difference the prospective licensing terms are from Qualcomm’s current licensing regime, and the impact, if any, on this new licensing scheme on Qualcomm’s global licensing practices.  It is also unclear  at this time how proportional this penalty and rectification program is compared to other NDRC investigations.

Zhang Xinzhu Dismissed from AMC Expert Committee

Xinhua reported on August 12 2014 that  the State Council Antimonopoly Commission today fired Chinese Academy of Social Sciences researcher Zhang Xinzhu 张昕竹as a member of its expert advisory panel.  The official reason given was violating AMC expert advisory committee discipline. Zhang claimed the real reason was that he was speaking for foreign firms. Subsequent press reports have identified the relevant conflict of interest rules that Zhang is alleged to have violated. The relevant ethical code (enacted September 2008) is said to be “In order to protect the reputation of the experts committee, members cannot participate and effectuate activities conflicting with the interests of the experts committee; without the consent of the experts committee, they cannot use their title as a member of the experts committee to engage in activities unrelated to the work of the work of the experts committee” 《国务院反垄断委员会专家咨询组工作规则》第三章工作纪律中,第十三条规定了专家咨询组成员工作守则,其中第(三)项明确规定:“维护专家咨询组的声誉,不得从事与履行专家咨询组职责利益冲突的活动;未经国务院反垄断委员会同意,不得以专家咨询组成员身份从事与履行专家咨询组职责无关的活动。The conflict of interest appears to be that Zhang is identified as the second listed author of an AML report “Concerning Economic Evidence of Qualcomm’s Licensing Prices” “关于高通许可定价的经济学证据.”

This issue also continues to play out in the Chinese media and the facts remain unclear. Fortunately thus far it appears to me to be unrelated to efforts to rectify the Chinese Academy of Social Sciences from foreign influence. In early August, the South China Morning Post, reported that Zhang Yingwei, head of the party’s discipline inspection office at CASS, said the academy had been “infiltrated by foreign forces” and “was conducting illegal collusion at politically sensitive times”. At the same time, no information has been provided about other ethical issues arising in AML investigations or whether this type of activity had otherwise been tolerated if, as Zhang might be suggesting, it had been conducted on behalf of a Chinese company despite any specific ethical rule.

 

Huawei/InterDigital Appeal Affirms Shenzhen Lower Court on Standards Essential Patent

One of the hot on-going disputes on IP in China and the world is the relationship between standardization and intellectual property, particularly the role of standards essential patents (SEP’s) when a licensor has undertaken an obligation to license its patents on a fair, reasonable and non-discriminatory (FRAND) basis.  Chinese courts have played an important part in this debate.  The most recent skirmish in this area is the case between Huawei and InterDigital Corporation (IDC), which was the subject of a decision of the Shenzhen Intermediate Court and has just now been decided on appeal by the Guangdong High Court.  Continue reading