NDRC IP Abuse Guideline Out For Public Comment

IPabuseguidelines

NDRC has released a draft for public comment of its Antitrust Guidelines for Abuse o IP知识产权滥用的反垄断指南(征求意见稿)(English language wordcloud above).   As with the NDRC questionnaire this appears to have been selectively released although some versions have also been made available on line by bloggers and the like.  Several organizations are commenting on it, and some bloggers have made its content publicly available.  The release of the guidelines has also been reported by the media based on NDRC presentations at public conferences.

Below is what I believe is the Chinese text regarding on abuse of dominance involving intellectual property rights.  Unfortunately I do not have an English text I can release.  I have added English captions so that non-Chinese readers can see some of the key areas discussed.

I did notice that the provisions on the availability of injunctive relief for infringement of standards essential patents thankfully address “whether the two negotiating parties in the process of negotiations have shown real willingness to negotiate”, which I believe is a significant problem in the Chinese environment.  Interestingly, in addressing the problem, the draft incorrectly identifies requests for injunctive relief as “the request of the patentee of a judicial body to issue an order to enjoin use of relevant patents.”  In fact, I believe the injunctive relief that is sought is typically to enjoin infringement, as there has been no authorized use of the patents in the absence of a license.

I am also wondering whether other agencies, notably MofCOM and SAIC are also preparing drafts of the abuse IP guidelines, particularly as SAIC only recently released its rules in this area.

———–

三、涉及知识产权的滥用市场支配地位行为

 (一)不公平的高价许可费 [unreasonably high royalties]

权利人有权就其知识产权获得合理的经济补偿,这是弥补其研发投入和激励创新的基本动力,权利人收取许可费的行为,通常不会受到《反垄断法》的规制。但是,如果权利人滥用其具有的市场支配地位,向被许可人收取不公平的高价许可费,会排除、限制竞争,损害消费者利益。

分析和认定知识产权权利人是否收取不公平的高价许可费,可考虑以下因素:

  1. 相关知识产权许可历史或者可比照的许可费标准;
  2. 权利人是否超过知识产权覆盖的范围收取许可费;
  3. 权利人是否迫使被许可人接受不合理的许可方式或者许可期限;
  4. 权利人进行一揽子许可时是否迫使被许可人接受过期或者无效的知识产权。拒绝许可是权利人行使知识产权的一种表现形式,一般情况下,权利人不承担与竞争对手或者交易相对人进行交易的义务。但是,具有市场支配地位的知识产权权利人无正当理由拒绝许可,同时符合下列条件的,可能排除、限制竞争:
  5. (二)拒绝许可 [refusals to license]
  1. 拒绝许可可能导致相关市场上的竞争或者创新受到不利影响,损害消费者利益或者公共利益;
  2. 许可该知识产权不会对权利人造成损害。(三)搭售 [tying]搭售可能对相关市场的竞争产生不利影响,主要表现为排除了被搭售品市场中其他供应商的交易机会,并损害了消费者的选择权。同时,搭售也可能对相关市场的竞争产生有利影响,主要表现为可以降低交易成本,促进产品功能的完善等。搭售的正当理由,需要在个案中进行具体分析。如果搭售是基于技术兼容、产品安全、产品性能、交易成本等方面的考虑而实施的,可能被认为具有正当理由。具有市场支配地位的权利人在交易中附加下列限制条件,可能排除、限制竞争:
  3. (四)附加不合理的交易条件 [Attaching unreasonable conditions of trade]
  4. 具有市场支配地位的经营者没有正当理由,违背交易惯例、消费习惯等或者无视不同知识产权或商品的性质及相互关系,将不同知识产权,或者知识产权与商品强制捆绑销售或者组合销售,并且使该经营者将其在搭售品市场的支配地位延伸到被搭售品市场,可能排除、限制竞争。
  5. 搭售是指权利人就一项知识产权以许可、转让等方式行使时,违背交易相对人的意愿要求其接受另一项知识产权的许可或转让,或者从权利人处或者权利人所指定的第三人处购买某种商品。
  6. 拒绝许可的正当理由,需要在个案中根据具体情况进行分析,通常考虑的因素包括:被拒绝的潜在被许可人缺乏必要的质量、技术保障或支付许可费的能力,能够确保技术的正当使用或者产品的安全和性能;被拒绝的潜在被许可人使用知识产权行为可能会对节约能源、保护环境等社会公共利益产生不利影响等。
  1. 要求交易相对人将其改进的技术进行独占性回授;
  2. 禁止交易相对人对其知识产权的有效性提出质疑,或者针对其提起知识产权侵权诉讼;
  3. 限制交易相对人利用竞争性的商品或者技术;
  4. 对过期或者无效的知识产权主张权利;
  5. 禁止交易相对人与第三方进行交易,或者对交易相对人与第三方的交易行为在对象选择、交易地域等交易条件方面进行限制。一般来说,知识产权权利人对不同的被许可人实施不同的许可条件,是权利人的自由。但是,具有市场支配地位的知识产权权利人对被许可人实施差别待遇,同时符合下列条件的,可能排除、限制竞争:
  6. (五)差别待遇 [Differential treatment/discriminatory treatment]
  1. 拒绝被许可人提出与其他被许可人实质相同的交易条件;[the party refused a license offers substantially similar conditions of trade of a prior licensee]
  2. 差别待遇对被许可人参与相关市场的公平竞争产生了显著不利影响。四、涉及标准必要专利的知识产权行使行为 [Concerning Implementation of Standards Essential Intellectual Property] 具有市场支配地位的标准必要专利权利人下列行使权利的行为,可能排除、限制竞争:标准必要专利权利人有权就其专利获得合理的激励性回报。但是,标准必要专利权利人所要求的许可费应当合理体现相关标准必要专利的经济价值。如果拥有市场支配地位的标准必要专利权利人向被许可人索取不公平的高价许可费,可能排除、限制竞争,损害消费者利益。
  3. 分析和认定标准必要专利权利人是否收取不公平的高价许可费,可以考虑以下因素:
  4. (一)收取不公平的高价许可费 [Receiving unfairly high license fees]
  5. 专利权人持有标准必要专利并不必然导致其具有市场支配地位。分析和认定标准必要专利权利人是否具有市场支配地位,可考虑以下因素: [the following may be considered](1)相关标准的市场价值与应用程度;[the value and use of the standard in the market](2)是否存在替代性标准;[are the substitutable standards](3)行业对相关标准的依赖程度及使用替代性标准的转换成本;…(4)不同代际相关标准的演进情况与兼容性;(5)标准必要专利许可双方的相互制衡能力等。
  6. 分析和认定是否构成差别待遇,在考虑被许可人的交易条件是否与其他交易对象实质相同时,[in analyzing and determining whether there is differential treatment, and considering whether the conditions of trade of a licensee are difference in substance, the primarily consideration should be from the the rightsholder perspectives regarding whether the intellectual property transaction costs are the same.]  主要从权利人的角度考量不同许可行为的交易成本是否相同。同时,还会综合考虑该知识产权的用途和使用该知识产权生产产品的属性、销售范围、销售量、销售额与利润率等因素。
  1. 被许可的标准必要专利的技术价值;
  2. 相关产业的技术特点;
  3. 符合相关标准的产品所承担的整体许可费情况;
  4. 相关标准必要专利所负担的许可承诺;
  5. 相关标准必要专利许可历史或者可比照的许可费标准;
  6. 相关产品市场上下游合理的利润空间。在标准必要专利许可中,下列交易条件可能排除、限制竞争:
  7. (二)附加不合理的交易条件 [Attaching unreasonable conditions of trade]
  1. 捆绑非标准必要专利;
  2. 强制要求免费交叉许可和回授;
  3. 强制要求被许可人给予许可人所指定的第三方免费专利许可;
  4. 就过期或者无效专利继续收费;
  5. 禁止被许可人质疑专利有效性或者针对许可人提起专利侵权诉讼。禁令救济是专利法赋予专利权人的救济手段,标准必要专利权利人有权依法申请禁令救济以维护其合法权益。但是,如果标准必要专利权利人利用禁令救济申请迫使被许可人接受其提出的不合理许可条件,可能排除、限制竞争。
  6. 分析和认定标准必要专利权利人申请禁令救济是否排除、限制竞争,可考虑以下因素:
  7. (三)滥用禁令救济 [abuse of injunctive relief]
  1. 谈判双方在谈判过程中所表现出来的真实谈判意愿;
  2. 相关标准必要专利所负担的有关禁令救济的承诺;
  3. 谈判双方在谈判过程中所提出的许可条件及许可条件的合理性;
  4. 申请禁令救济对双方谈判地位、相关市场及下游市场竞争和消费者福利的影响。

..consider the following factors:

  1. whether the two negotiating parties in the process of negotiations have shown real willingness to negotiate;
  2. whether the relevant standardsessentialpatentsare burdened by commitmentsrelating to injunctiverelief;
  3. the proposed licensing conditions and the reasonableness of the licensing conditions brought forth by the two negotiating parties during the negotiation process;
  4. the role of applications for injunctive relief in negotiations of the parties, competition in the relevantmarketand the downstream market, and the effectson consumer welfare.

本指南所称禁令救济,是指专利权人请求司法机构或者准司法机构颁发的限制使用相关专利的命令。

Injunctive relief as referred to in this guide, refers to the request of the patentee of a judicial body to issue an order to enjoin use of relevant patents.

Asking the “Better Questions”: Lessons for the AML … from a Nobel Physics Laureate

fitch_cronin_ting_yang_rabi_photo

Several people have reached out to me in the past few weeks about questionnaires that have been sent out by China’s National Development and Reform Commission, which brought the Qualcomm IP abuse cace, to academics, companies and experts regarding IP abuse in preparation for the drafting of the IP Abuse Guidelines. I understand that some of these responses were due at the end of August, while others may be due mid-September. The guidelines themselves are being prepared by the Antimonopoly Enforcement Agencies (NDRC, MofCOM and SAIC), with NDRC as the coordinator and the additional involvement of SIPO. Due to their interagency drafting process, they will be more authoritative than the IP abuse rules issued by SAIC in April which came into effect August 1.

Hopefully by soliciting information from the right groups, the relevant agencies will collect the information needed. Hopefully as well the group of respondents is broad enough to avoid any selection bias in responses. However good questions drive good policies as much as good answers. Although respondents are free to supplement their responses, I was nonetheless reminded of Nobel Laureate Isidore Rabi’s explanation of his own upbringing: ”My mother made me a scientist without ever intending it. Every other Jewish mother in Brooklyn would ask her child after school: ‘So? Did you learn anything today?’ But not my mother. She always asked me a different question. ‘Izzy,’ she would say, ‘did you ask a good question today?”’

There are several “good questions” being asked globally today about such issues as antitrust and standards, patent trolls, F/RAND obligations to license, “smallest saleable patent practicing unit” and the standards setting process.  China is certainly an important part of those debates and these questionnaires tend to focus on these concerns and their role in Chinese law.  However, I think some equally interesting questions involve issues specific to China’s stage of IP development.

In the spirit of Izzy Rabi, here are the questions I might ask:

How Much Should China Be Focusing on Harmonizing Its AML Regime with International Practices in Light of Its Current IP and Licensing Environment?

China has long sought to have a more aggressive global antitrust posture which has been at odds with traditional notions that focused on territoriality of patents and judicial sovereignty in dispute resolution.  With the Huawei/InterDigital case, Chinese courts recognized that initiation of a litigation on a standards essential patent in an overseas court (USITC) could constitute a per se abuse of China’s AML law, essentially showing no deference to foreign proceedings or notions of patent territoriality.  Moreover, the Court applied Chinese law, nothwithstanding that the relevant agreements were based on French law.  China-based global antitrust cases are occurring at a time when our legal systems are increasingly interacting, when Chinese judgments are being enforced in the US, when US courts are struggling with delays in obtaining evidence from China, and when Chinese courts are misunderstanding US decisions involving identical fact situations.  Moreover, China persists in aggressive use of pre-AML practices, such as pricing to determine of abuse of dominance, and invalidating of mandatory grant-backs without the benefit of economic analyses.  These are practice that are not typically found in jurisdictions such as the United States.  Despite these nationalistic views of IP and antitrust, China is also seeking to become a major IP and technology consumer and exporter and will increasingly need a more harmonized environment for its own intangible exports.  In short, Chinese regulators may wish to consider how much they wish to continue to create AML and enforcement disciplines that factor into global best practices.

How Much Should A Patent’s Pro-Innovation Effects Outweigh Alleged Anticompetitive Effects?

Chinese officials, like officials in many companies are asking about right “balance” between IP protection and antitrust enforcement.  The questions often assume that some of those balances have not already been established and that new doctrines need to be created.  In the United States our constitution clearly establishes that patents were established for a pro-competitive purpose, namely to “promote the progress of the … useful arts.” The basic notion is simple: this pro-competition process requires a disclosure of information that might otherwise be maintained as confidential, in order to secure a limited right to exclude others from practicing the invention.  Overly aggressive antitrust enforcement can result in a diminution of incentives to disclose and affect global innovation ecosystems.  In short, patent and antitrust doctrines are not necessarily in conflict, and, in fact, help foster competition together.  The starting point of that discussion however 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.  As the world’s largest high tech exporter of goods that China in large part did not invent and the country with the largest patent system, China has benefitted enormously from the stability afforded by that patent system.  Rather than seek to minimize IP rights through euphemisms such as “balance” perhaps a better approach would be how to optimize the patent system to foster long term innovation and competition and insure that the competition system supports and does not retard such development.

Is There Sufficient “Use” of IP Rights in China to Justify Aggressive Enforcement Against IP Abuse?

China has long had problems in protecting and enforcing IP, which the Chinese government itself has publicly acknowledged.  Considering the high incidences of infringement and the low rate of utilization of IP, how much an antitrust regulator must take into account the weak IP environment that creates incentives to infringe, in determining whether a patentee is abusing its rights.  In short, can a country strongly support doctrines of IP abuse(滥用) if there is inadequate IP use (用)? Overly aggressive enforcement against “abuse” might in fact delay development of markets for “use.”

Available data suggests that China is a remarkably under-licensed economy – accounting for a lion’s share of high tech production and exports with a limited share of licensing revenue.  China is also a major “exporter” of IP litigation, with many companies reluctant to bring suits in China against Chinese infringers but preferring to bring suits which they believe will afford a more effective process, such as the United States or Germany.  The Chinese government has complained that patents, in particular, are difficult to enforce, due to challenges such as damages being far too low, litigation too time consuming, difficulties in satisfying burdens of proof, etc.

The challenges to foreign licensors are especially acute.  As one commentator noted: ” anti-trust compliance is just one challenge faced by licensors in China; other challenges relate to restrictions on technology imports, under-reporting of royalties, difficulties with audits, dispute resolution and more.” A related questions to this issue is What circumstances exist to suggest that a prospective licensee is engaged in patent hold-out, i.e., refusing to license in good faith which might suspend the licensor’s F/RAND obligation, or when a prospective licensee is using the licensing negotiations to precipitate a Chinese antitrust case  – circumstances which the court appears to be facing in the Vringo/ZTE case.

Other related questions are How Much Should AML Damages Be Proportionate to IP Damages? China is imposing AML damages, as in the Qualcomm case, that are fifty times or more higher than typical patent damage awards (according to http://www.ciela.cn).  Still another question is whether reducing the availability of injunctive relief for SEP’s in China makes sense as in most cases damage awards do not create incentives to license patents, and  injunctive relief is the only meaningful relief for IP infringement due to these low damage standards

How Much Should China’s AML Practices in IP be Governed by the TRIPS Agreement?

I personally believe that a too-often ignored discipline on AML practices involving IP remains the TRIPS Agreement.  Articles 7, 8 and 40 of the TRIPS Agreement discuss abusive licensing practices.  If an AML investigation involves IP licensing practices, the national treatment and most favored nation treatment obligations of TRIPS should also apply.  I believe the enforcement provisions of the TRIPS Agreement also establish certain minimal due process standards, which are further enhanced by China’s commitments at WTO accession. For example,  WTO members bringing IP abuse cases are likely obligated under TRIPS to provide “fair and equitable proceedings” (Art. 41), written and reasoned decisions (Art. 41), decisions based on evidence (Art. 41), judicial review (Art. 41), the right to written notice (Art. 42), the right to independent legal counsel (Art. 42), the obligation to substantiate claims (Art. 42), the means to protect confidential information (Art. 42), and approximate conformity of administrative procedures to civil procedures (Art. 49), amongst others.

How Much Should China Rely on Economic Analysis in Making AML Decisions and/or Explicitly Reject Industrial Planning?

China desperately needs more qualified economists in assisting with policy decisions and actual disputes in both AML and IP matters.   China’s metrics-driven approach to IP and innovation based on criteria such as numbers of domestic service invention patents in key areas, licensing revenue and costs, numbers of global famous brands, plans to develop China’s own products in IP-intensive sectors, Chinese participation in global standards setting bodies, and the subsidies that are often provided for these efforts –  place additional burdens on regulators as antitrust policies could be bent in the direction of state industrial goals to increase licensing revenue, decrease licensing expenses, provide import substitutions, develop local champions, etc.  A hopeful sign in this area would be the additional employment of economic experts by both the enforcement agencies and the courts.

How Much Should China Be Concerned About NPE’s or How Much Should China Be Concerned About Patent Quality?

China’s research entities generally play a more active role in China’s patent environment than in the US. An undue emphasis on “non-practicing entities” as a source of “IP abuse” or litigation abuse could weaken the role of this important sector of the Chinese (and global) research environment. Rather than asking if non-practicing entities are a source of IP abuse, a “better question” might be “should the nature of the patent owner have any bearing of whether the owner is engaged in abusive conduct.” In general, I side with former Chief Judge Rader’s perspective on this issue: the question is not one of the nature of the owner, but the quality of the right. High quality patents should be enforced, no matter the nature of the owner of the right. This question is especially important to China due the higher incidence of research institution and non-service invention patenting.  Moreover, the relatively high damage awards and rate of injunctive relief for unexamined utility model and design patents, suggests that there may continue to be problems with assertions of low quality patents in China.

I hope that NDRC and its sister agencies publish their surveys and the results of the surveys for the public to better understand the nature of the debate and questions being asked. This is a laudable task and I hope the right questions, in addition to the right answers, are being given to Chinese agencies.

These are my personal observations. Please feel free to supplement or correct with information that you have, and feel free to share your thoughts and opinions.

Photo source: http://www.nobelprize.org/nobel_prizes/physics/laureates/1944/rabi-photo.html

Courtesy Brookhaven National Laboratory. 1980 Laureates Val L. Fitch and James W. Cronin, and 1976 Laureate Samuel C.C. Ting. Sitting (left to right): 1957 Laureate Chen Ning Yang and 1944 Laureate Isidor Isaac Rabi.

InterDigital Settles With NDRC

According to a May 22 press release (http://online.wsj.com/article/PR-CO-20140522-903952.html) , InterDigital has settled antimonopoly charges with the National Development and Reform Commission of China.

InterDigital’s commitments regarding licensing of its patent portfolio for wireless mobile standards to Chinese manufacturers of cellular terminal units (“Chinese Manufacturers”) are as follows:

1. Whenever InterDigital engages with a Chinese Manufacturer to license InterDigital’s patent portfolio for 2G, 3G and 4G wireless mobile standards, InterDigital will offer such Chinese Manufacturer the option of taking a worldwide portfolio license of only its standards-essential wireless patents, and comply with F/RAND principles when negotiating and entering into such licensing agreements with Chinese Manufacturers.

2. As part of its licensing offer, InterDigital will not require that a Chinese Manufacturer agree to a royalty-free, reciprocal cross-license of such Chinese Manufacturer’s similarly categorized standards-essential wireless patents.

3. Prior to commencing any action against a Chinese Manufacturer in which InterDigital may seek exclusionary or injunctive relief for the infringement of any of its wireless standards-essential patents, InterDigital will offer such Chinese Manufacturer the option to enter into expedited binding arbitration under fair and reasonable procedures to resolve the royalty rate and other terms of a worldwide license under InterDigital’s wireless standards-essential patents. If the Chinese Manufacturer accepts InterDigital’s binding arbitration offer or otherwise enters into an agreement with InterDigital on a binding arbitration mechanism, InterDigital will, in accordance with the terms of the arbitration agreement and patent license agreement, refrain from seeking exclusionary or injunctive relief against such company.

A quick read of these commitments suggests that item 1 is a re-commitment by InterDigital to F/RAND licensing of its SEP’s,  Item 2 reflects Chinese antipathy to mandatory grantbacks of technology in a technology transfer agreement, including imposing non-essential requirements on the technology transfer agreement under the Contract Law and related Judicial Interpretation and  Item 3 reflects the interest in many parties in seeking mandatory arbitration to resolve increasingly complex F/RAND SEP disputes, including questions concerning the availability of injunctive relief in light of F/RAND licensing commitments. 

My personal observation: the news release does not indicate under what circumstances a Chinese licensee would have lost the right to an arbitration by reason of a lack of good faith in negotiating licensing terms and thereby does little to incentivize licensors entering into negotiations at an early stage after a standard has been determined.  However, it does appear to offer the possibility of expedited arbitration for licensor and licensee in lieu of the licensor’s seeking injunctive relief, thereby potentially mitigating losses of a licensor due to unreasonable delay.