China’s top antitrust authority, the Anti-monopoly Commission (“AMC”) of the State Council is to issue the integrated IPR antitrust guidelines. AMC has entrusted three antitrust enforcement agencies, the National Development and Reform Commission (“NDRC”), the State Administration of Industry and Commerce (“SAIC”) and the Ministry of Commerce (“MOFCOM”), and the State Intellectual Property Office (“SIPO”) with the task of drafting antitrust guidelines on intellectual property rights (IPRs). It is reported that these agencies are finalizing their respective draft guidelines and will submit the drafts to AMC by the end of March 2016. Since AMC is responsible for coordinating antitrust policies in China, it will take the lead to consolidate the said four draft IP guidelines and issue an integrated one.
NDRC published its draft IPR guidelines (“NDRC Draft IPR Guidelines”) on December 31, 2015 for public comments, and SAIC published its seventh edition of draft IRP guidelines (“SAIC Draft IPR Guidelines”) on February 5, 2016 for public consultation (this version has been formulated and revised based on several rounds of consultation and research since early 2009). When comparing these two drafts, it appears that NDRC and SAIC have taken a similar approach in devising the overall structure of their respective guidelines, i.e. both drafts include guiding principles for enforcement, definitions of relevant market, types of IPR-related monopoly agreements, exemptions based on market shares, and abuses of dominant position. However, there exist some major differences between these two guidelines. For example, although these two guidelines both set out certain market share threshold for exempting monopoly agreements (i.e. “safe harbor”), NDRC Draft IPR Guidelines adopt lower market share thresholds and do not include the substitutable technology thresholds as provided in SAIC’s version. In addition, apart from the definitions of relevant product market and relevant technology market, which are also covered by NDRC Draft IPR Guidelines, SAIC Draft IPR Guidelines introduce relevant innovation market, which refers to the market where business operators compete on the research and development of new technology or product.
MOFCOM and SIPO have not published their draft guidelines for public consultations as of the date of this writing. It is reported that MOFCOM has finalized its draft of the merger review section of IPR guidelines (“MOFCOM Draft IPR Guidelines”), and this merger review section will address IPR-related competition issues arising from various merger scenarios, including transfer and acquisition of IPRs, joint research and development agreement and exclusive licensing. MOFCOM Draft IPR Guidelines will also introduce the definition of relevant markets, methodology for assessment and possible remedies in IPR-related mergers.
AMC invited SIPO to join this drafting process for its expertise and experience in IPR-related issues. It is reported that, instead of providing for a list of regulations, SIPO has incorporated a range of cases to illustrate relevant issues.
Article 55 of the Anti-Monopoly Law (“AML”) provides for the legal basis for interface between IPR protection and antitrust regulation. Given China’s IPR industry is still under development, it would be necessary to have more coordination between the protection of IPRs, and the antitrust rules to fight against the abuses of IPRs. It remains to be seen how AMC would consolidate the IPR guidelines and bring them to a successful conclusion. Except MOFCOM’s draft which is relating to merger, there will be quite some overlaps among the draft guidelines of NDRC, SAIC and SIPO. How to address the different approaches and criteria adopted in different drafts may reflect AMC’s attitude towards the specific issues.
It is worth noting that IPR is increasingly considered as an enforcement priority by China’s antitrust authorities. Multinational companies with strong IPR holdings should therefore be very cautious when reaching agreements involving an IPR provision. In addition, stepping up the compliance with China’s antitrust rules and reviewing the business models in a timely manner would help avoid any potential violations of Chinese laws.