From August 1 this year, business operators shall not exclude or limit the behavior of competitors under the banner of "protecting Intellectual Property". Otherwise, once verified, the illegal gains will be confiscated, with a maximum fine of 10% of sales in the previous year; even if not implemented the monopoly agreements reached, it will also be liable to fine of less than 500,000 yuan.

It is learned from SAIC that, the Regulations on prohibiting the abuse of Intellectual Property to exclude and limit competitions (hereinafter referred to as the Regulations), which was issued for public comments since last June, has been formally announced after examination and approval by SAIC executive meeting, and will be implemented from August 1, 2015.

Patent abuseabuse may be priorities for antitrust enforcement

The Regulations specifies that, the abuse of Intellectual Property to eliminate or restrict competition alleged in the provisions means business operators' exercise of Intellectual Property in violation of antitrust law, implementation of monopolistic agreements, abuse of dominant market position and other monopolistic behaviors (except price monopoly behavior).

Antitrust in the field of Intellectual Property is an important part of anti-monopoly enforcement. In recent years, the abuse of Intellectual Property to eliminate or restrict competition is a growing concern of antitrust enforcement agencies.

According to media reports, after several rounds of vigorous law enforcement in automobile, liquor and other industries by Chinese antitrust agencies, the focus of the next stage is determined to be related to the field of Intellectual Property. In this regard, the official from National Development and Reform Commission said recently that, for anti-monopoly regulations on the abuse of Intellectual Property, there are different options for different countries at different periods of time. Currently China needs to emphasize the protection of Intellectual Property, while strengthening the antitrust enforcement of the abuse of Intellectual Property.

It is understood that, pharmaceuticals, automotive after-market, agricultural machinery and other industries are the hardest hit area of Intellectual Property monopoly. It is the trend in the future to implement more aggressive antitrust enforcement in these industries.

It is reported that, in fact, in patent abuse, recently some patented drug pricing issues have been reported to the law enforcement authorities, which are under investigation by relevant departments.

No abuse of dominant position through patent pools

SAIC’s introduction of the Regulations is based on its antitrust functions within the framework of Chinese anti-monopoly law, stipulating the non-price abuse of Intellectual Property to eliminate or restrict competition.

The Regulations specifies the rules for identification and presumption of market dominance involving abuse of Intellectual Property, and set prohibitions on several specific abuses in practice, such as refusal to license Intellectual Property, limited trading, tying sales, adding unreasonable restrictions and differential treatment.

The Regulations also specifies the exercise of Intellectual Property in the patent pool and standards which may constitute monopolistic behavior in specific circumstances. Among them, regarding the patent pool, the Regulations specifies that, patent pool members must not exchange output, market division and other sensitive information on competition through patent pool, to reach monopoly agreements prohibited by Article XIII, Article XIV of the AML.

The Regulations points out that, the patent pool management organization with dominant market position, shall not, without justification, use the patent pool to implement the following abuse of dominant market position to eliminate or restrict competition:

(a) Restricting patent pool members to license patents as independent licensor; (b) restricting patent pool members or licensees to independently or jointly conduct R & D of competing technologies with a third party; (c) compelling the licensee to feed back the improved or developed technology exclusively to the patent pool management organization or members; (d) prohibiting the licensee to question the validity of the joint patent; (e) discriminatory treatment on the trading conditions to members with same conditions or licensee in the same relevant market; (f) other abuse of market dominance identified by SAIC.

The Regulations makes clear of the concept of "patent pool", namely: it refers to the protocol that two or more patent owners jointly license their own patents to a third party. Its form may be a joint venture specifically set up for this purpose, which can also be entrusted to a member or an independent third-party for management.

Maximum fine can be 10% of the sales revenue in the previous year

The Regulations also specifies the punishment. In accordance with the Regulations, when business operators abuse Intellectual Property to eliminate or restrict competition, and constitute monopoly agreements, the industrial and commercial administrative authorities shall order them to stop illegal acts, confiscate the illegal income, and impose a fine of 1-10% of sales revenue in previous year; when no monopolistic agreement is reached, they shall be liable to a fine of less than 500,000 Yuan.

When business operators abuse Intellectual Property to eliminate or restrict competition and constitute abuse of market dominance, the industrial and commercial administrative authorities shall order to stop illegal acts, confiscate illegal income, and impose a fine of 1-10% of the sales revenue in the previous year.

SAIC official said, antitrust and Intellectual Property protection have a common goal, namely, to promote competition and innovation.