Measures of the State Administrations for Industry and Comme

Article 1. To protect fair competition, encourage innovation and prohibit the abuse of intellectual property rights (“IPRs”) with the purpose of eliminating or restricting competition, the Measures of the State Administrations for Industry and Commerce on the Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition (hereinafter “Measures”) are formulated pursuant to the Anti-Monopoly Law of the People’s Republic of China (hereinafter “AML”).

 

Article 2. The combating of anti-competitive conducts and the protection of IPRs share the same goals, i.e., promoting competition and innovation, enhancing economic efficiency and protecting the interests of the customers and the public.

 

The AML shall not be applicable to those business operators’ activities of exercising IPRs under IP-related laws and regulations; however, any business operators’ abuse of IPRs to eliminate orrestrict competition shall be subject to the AML.

 

Article 3. For the purpose of the Measures,“the abuse of IPRs for the purpose of eliminating or restricting competition”refers to implementation of monopoly agreements or abuse of market dominant position in violation of the AML, except price monopolistic behaviors;

 

“relevant market” refers to both relevant product market and geographic market and shall be defined in accordance with the AML and the Guideline of the Anti-Monopoly Committee of the State Council for the Definition of the Relevant Market, by taking

into account of the impact of factors such as IPRs and innovation. In the course of IP licensing related antimonopoly enforcement,the “relevant market” may refer to “technology market” or product market involving certain IPRs. “Relevant technology market” refers to the market that is developed out of competition between the technologies involved in exercising IPRs and those available substitutable technologies of the same kind.

 

Article 4. Business operators shall not reach those monopoly agreements that are prohibited by Article 13 and Article 14 of AML through the exercise of IPRs, unless the business operators are able to prove that the monopoly agreements fall into the exceptions as specified under Article 15 of AML.

 

Article 5. The exercise of IPRs which falls within any of the following conditions may not be determined as a monopoly agreement as prohibited by Article 13.1.6 and Article 14.3 of AML, unless otherwise there is evidence to the contrary proving the effect of eliminatingor restricting competition.

(1) The combined market share of the competing business operators in the relevant market does not exceed 20 percent;or, there exist at least four independently controlled substitutable technologies that are available at reasonable cost in the relevant market.

(2) The respective market share of each of the business operators and their transaction counterparties in the relevant market does not exceed 30 percent; or, there exist at least two independently controlled substitutable technologies that are available at reasonable cost in the relevant market.

 

Article 6. A business operator that has dominant market position shall not abuse dominant market position in the course of exercising IPRs to exclude and restrain the competition.

 

The dominant market position shall be determined and presumed pursuant to Article 18 and 19 of the AML. The possession of IPRs of a business operator may constitutes one of the factors determining market dominance, but abusiness operator shall not be directly presumed to have a dominant market position in the relevant market because of its possession of IPRs only.

 

Article 7. Without justifiable reasons, abusiness operator having a dominant market position shall be prohibited from refusing licensing other business operators to use its IP under reasonable conditions to eliminate or restrict competition, where the said IP serves as anessential facility in manufacturing or business operation.

 

The following factors shall be considered in determining the acts mentioned in the preceding paragraph:

(1) The said IP cannot be reasonably substituted in the relevant market, and it is essential for other business operators to compete in the relevant market;

(2) The refusal to license will impose adverse impact on competition or innovation in the relevant market and thereby harming consumers’ or public interests; and

(3)The licensing of the said IP will not cause unreasonable damage to the business operator.

 

Article 8. Without justifiable reasons, inthe course of exercising IPRs, business operators with dominant market positionare prohibited from carrying out the following activities in restrictingtransactions to eliminate or restrict competition:

(1) Restrict the counterparties to exclusively dealing with them;

(2) Restrict the counterparties to exclusively dealing with their assigned business operators.

 

Article 9. Without justifiable reasons, in the course of exercising IPRs, business operators that have dominant market positions shall be prohibited from engaging in tie-in activities, which meet all of the following criteria to eliminate or restrict competition:

(1) Carry out compulsory tie-in activities or combination sales of different products, which is out of line with trade practice or consumption habits or ignores the product function;

(2) The tie-in practice can enable the IPRs holder to extend its dominant position in the tying product market to the tied product market, eliminating or restricting competition in the second product market.

 

Article 10. Without justified reasons, in the course of excising IPRs, business operators that have dominant market positions shall be prohibited from imposing the following unreasonably restrictive conditions to eliminate or restrict competition:

(1) Require the counterparties to render exclusive grant-back for their improvements in the licensed technology;

(2) Prohibit the counterparties from challenging the validity of the IPRs;

(3)Restrict the counterparties, after the expiry of the license agreement, from utilizing competing products ortechnologies in absence of any IPR infringement;

(4) Continue exercising the expired IPRs orIPRs that have been declared invalid;

(5) Prohibit the counterparties fromdealing with third parties;

(6) Impose any other unreasonable restrictive conditions on the counterparties.

 

Article 11. Without justified reasons, in the course of excising IPRs, business operators that have dominant market positions are prohibited from imposing discriminatory treatment on the counterparties that are in the same conditions, to eliminate or restrict competition.

 

Article 12. Business operators shall be prohibited from eliminating or restricting competition through patent pooling arrangements.

 

Pooling arrangements members shall not use the pooling arrangements to exchange competitively sensitive information such as output and market share, and reach the monopoly agreements prohibited by Article 13 and Article 14 of the AML, unless the business operators are able to prove that such agreements are in compliance with Article 15 of the AML.

 

Without justified reasons, pooling arrangements management organizations that have dominant positions shall not use the pooling arrangements to carry out the following acts of abusing dominant market positions to eliminate or restrict competition:

(1) Restrict pooling arrangements membersfrom licensing their patents as independent licensors outside the patent pools;

(2) Restrict pooling arrangements membersor licensees from independently developing or collaborating with a third partyin developing competing technologies;

(3) Force the licensees to render exclusivegrant-back license of their improved or newly developed technologies to the pooling arrangements management organizations or its members ;

(4) Prohibit the licensees from challengingthe validity of the pooled IP;

(5) Impose discriminatory treatments amongpooling arrangements members that are of the same conditions or those licensees in the same relevant market;

(6) Other activities that shall be determined as abusing market dominance by the SAIC.

 

For the purpose of the Measures, “pooling arrangements” refer to the agreements between/among two or more patent holders aimed at joint licensing via a given organization. The said organization may be in the form of a joint venture specifically established for this sole purpose,or in the form of entrusting a pooling arrangements member, or an independent third-party entity.

 

Article 13. In the course of excising IPRs,business operators are prohibited from using the standard-setting and implementation of the standards (including the compulsory requirements of thosenational normative technical specifications, the same hereinafter) to eliminateor restrict competition.

 

Without justified reasons, business operators that have dominant market positions are prohibited from carrying out the following activities in the course of the standard-setting and standard implementation to eliminate or restrict competition:

(1) Intentionally refuse to disclose the information of their rights to the standard setting organization during the standard-setting process; or after explicitly waiving their rights, assert their patents rights against the standard implementers after the patents are included in a standard;

(2) After the patents are recognized asstandard essential patents (SEPs), carrry out such activities as refusal to licensing, tie-in, or imposition of other unreasonable conditions etc., inviolation of the fair, reasonable and non-discriminatory principles (“FRAND”).

 

For the purpose of the Measures, SEP refersto the patents that are necessary to the implementation of a standard.

 

Article 14. The Administrations for Industry and Commerce (“AIC Authorities”) shall investigate the abuse of IPRs that is aimed to eliminate or restrict competition, pursuant to the AML and the Provisions on the Procedures for the Administrations for Industry and Commerceto Investigate and Handle Cases of Monopoly Agreements and Abuse of Dominant Market Position.

 

Article 15. The following steps may be taken in analyzing whether a business operator has abused IPRs to eliminate or restrict competition:

(1) Determine the nature and form of the exercise of IPRs by the business operator;

(2) Determine the nature of the relationship between the business operators who exercise their IPRs;

(3) Define the relevant market involved in the exercise of IPRs;

(4) Determine the market position of the business operators that exercise the IPRs;

(5) Analyze the effects of the business operators’ exercise of IPRs on the competition in the relevant market.

 

The characteristic of the exercise of IPRs shall be taken into account when analyzing the nature of the relationship between the business operators. In the case of IPR licensing, the licensor and the licensee that are already in competing relationship are considered as in arelationship of business deals when they are parties to a license; the same parties also compete each other when viewed through the market of the goods that are manufactured by both parties through the licensed IP. However, if theparties are not in competition until after entering into the license, such alicense shall not be treated as an agreement between competitors, unless thereare material changes to the original agreement.

 

Article 16. To assess the competitive impact of the exercise of IPRs, the following actors shall be considered:

(1) Market positions of the business operators and trading counterparties;

(2) Degree of concentration of the relevant market;

(3) Degree of difficulties in entering the relevant market;

(4) Customary industry practices and industrial development stage;

(5) Time frame and scope of validity of the restrictions on output, geographic area and customers;

(6) Impact of exercising IPRs on innovation and technology promotion;

(7) Business operators’ capability of innovation and speed of technology changes;

(8) Other factors relevant to assessing the impact of exercising IPRs on competition.

 

Article 17. Where business operators abuse IPRs to eliminate or restrict competition in the form of monopoly agreements,the AIC authorities shall order them to cease violations, confiscate illegalgains, and impose a fine of 1 to 10 percent of sales revenue of the preceding calendar year; where the monopoly agreement has not been executed, the AIC authorities may impose a fine of less than CNY500, 000.

 

Where business operators abuse IPRs to eliminate or restrict competition in the form of abusive market dominance, the AIC authorities shall order them to cease violations, confiscate illegal gains,and impose a fine of 1 to 10 percent of the sales revenue of the preceding calendar year.

 

When assessing penalties, the AIC authorities shall consider the nature, circumstances, degree and duration of the infringement.

 

Article 18. The interpretations of the Measures are subject to the SAIC.

 

Article 19. The Measures shall become effective on August 1, 2015.