China’s NDRC singles out three areas for antitrust regulation in SEP licensing misconduct, official says

30 March 2015. By MLex Staff.

China’s antitrust regulator could step in and regulate anti-competitive conduct that emerges in negotiations over the licensing of standard essential patents, or SEPS, under certain conditions, an official from the National Development and Reform Commission said in Beijing recently.

“When patent holders offer unreasonable terms for patent licensing and meanwhile seek injunctions, this results in a change in the nature of patent licensing,” an official from the NDRC’s Price Supervision and Antimonopoly Bureau told a seminar on SEP licensing and antitrust regulation.

“Under such conditions, the regulator can step in,” the official said.

This represents one of three areas that the NDRC will focus on in its regulation of anti-competitive conduct in SEP licensing, according to the official.

The other two areas involve longstanding, but unreasonable licensing practices, such as in the case of US chipmaker Qualcomm, and the behavior of non practicing entities, or NEPs, the official said.

“Of course, we can regulate [anti-competitive conduct] related to certain patent licensing practices, as long as it is unreasonable, even if those practices have been in existence for a long period,” the official said.

Regarding NPEs, the official said they “don’t necessarily pose a problem, but they do carry higher risks without necessary market constraint.”

As MLex reported, the NDRC is currently investigating multiple US and European-based patent trolls for suspected anticompetitive conduct.

The official said abuse of SEPs could be found in monopolistic agreements, abuse of market dominance, and mergers and acquisitions, but added that abuse of market dominance is “particularly typical” for antitrust regulation of SEPs.
In determining whether certain licensing of essential patents constitutes abuse of market dominance, the regulator usually checks for the existence of four factors, the official said.

“The precondition is whether there exists market dominance,” the official said, adding that holding SEPs strengthens the status of the patent holder but doesn’t necessarily lead to market dominance.

The second factor is evidence of abuse of market dominance.
“There isn’t a problem to find evidence, because it can usually be found in contracts or practices, which is different from anti-competitive conduct related to anti-monopolistic agreements,” said the official.

The third factor is whether there is a reasonable cause for the licensing practice, and this is key to judging whether patent licensing of SEP constitutes abuse of market dominance, the official said.

In this context, the regulator should determine whether certain conduct is indispensable for the SEPs; whether the rights of patentees are impaired or limited; whether there have been fair negotiations that respect the patentee’s willingness; and whether certain conduct will benefit innovation in the long term.

The fourth factor is effect-analysis, which should focus on whether competition has been damaged.

The official said China should move actively to regulate abuse of intellectual property rights, because the country is a major manufacturing hub and there is great risk that IPR could be abused.

At the same time, the official said the regulator should approach the issue cautiously, so that antitrust enforcement won’t be used to give certain parties a competitive advantage.

– Analysis provided by Olivia Wang

	Eliot Gao