US Security Commission Hearings on Foreign Investment in China …. And Licensing

The US- China Economic and Security Review Commission held hearing on January 28 on the Foreign Investment Climate in China: Present Challenges and Potential for Reform.  I participated in those hearings as a representative of the USPTO, to talk about the licensing environment for intellectual property.  Here is my hearing statement and an alternative link.   There was also some other excellent testimony, from the Federal Trade Commission, academics and practitioners.

In discussing IP abuse, I noted that “Inability to commercialize license or enforce patents or other IP rights is IP abuse in a more fundamental sense [than the Antimonopoly Law”.  I also discussed US data that shows a relatively low level of IP licensing by Chinese companies of US technology, and discuss what may be the reasons for this low licensing rate.  I also discus the role of the state in regulating the licensing of technology.

I welcome your comments.

 

FTC Chairwoman Ramirez on China’s Approach to Licensing Standards Essential Patents in China

Federal Trade Commission Chairwoman Ramirez recently delivered a speech on  “Standards-Essential Patents and Licensing: An Antitrust Enforcement Perspective at Georgetown University’s Global Antitrust Conference” (Sept. 10, 2014).    Here’s what she said about China:

“In contrast to the FTC’s and EC’s approach, media reports indicate that China’s antitrust authorities may be willing impose liability based solely on the royalty terms that a patent owner demands for a license to its FRAND-encumbered SEPs, as well royalty demands for licenses for other patents that may not be subject to a voluntary FRAND commitment.

I am seriously concerned by these reports, which suggest an enforcement policy focused on reducing royalty payments for local implementers as a matter of industrial policy, rather than protecting competition and long-run consumer welfare.

As I have stated previously, here and elsewhere, I am of the firm belief that consumers are best served when competition enforcement is based solely on sound economic analysis of competitive effects. A contrary approach risks damaging the investment incentives that are critical to continued growth in many of today’s global technology markets, in the ICT sector and beyond. We intend to continue to engage with our counterparts in China and around the world on these issues, in an effort to build consensus on policies that will benefit competition and consumers globally.”

Here is the link to the full text of the speech.

 

In an unrelated development, Deputy FTC Commissioner Marueen Olhausen was reported by the Chinese press as cooperating in a “joint siege” (共商围剿) on “Patent Troll” companies, with the Chinese, European and Korean enforcement agencies, at an antimonopoly law conference in Seoul, Korea on September 4 which focuses on Patent Assertion Entities.  At that conference, NDRC’s Xu Kunlin reportedly discussed  “problems arising from bringing enforcement actions against patent trolls companies” with foreign competition enforcement counterparts.   Xu also reportedly discussed enforcement actions against holders of SEP’s involving bundling of patents, including licensing of expired patents.

Of course, patent trolls have some history in China, as I have previously noted.  The Chinese press noted that Olhausen referred to the FTC’s on-going research into this area.

Xu Kunlin also took the opportunity to respond to criticisms of selective enforcement of China’s AML law against foreign companies. (update posted Sept. 14, 2014)

 

Obama’s New Laboratories for IP Enforcement Involving China

The President mentioned China four times in his State of the Union address on January 24, 2012.   Although it’s a bit unclear what his game plan is, it seems that he is looking closely at IP-related claims.  “It’s not right when another country lets our movies, music, and software be pirated,” Obama said:  “Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China. “

What will be the nature of this Trade Enforcement Unit? During the Bush administration, a “top to bottom” review at the U.S. Trade Representative’s office resulted in the creation of a China trade enforcement unit within USTR that took the lead on China trade cases at the WTO.  Claire Reade, the current Assistant USTR for China was the head of that unit.  Continue reading