[Source: State of Intellectual Property of the PRC website]

In order to counter the monopoly practice associated with the abuse of intellectual property rights (IPR) that would lead to exclusion and limitation of market competition, the State Administration for Industry and Commerce (SAIC) has enforced the Anti-Monopoly Law, and on April 7th 2015 promulgated the Rules of the Administration of Industry and Commerce on the Prohibition of Abuses of Intellectual Property Rights for the Purposes of Eliminating or Restricting (hereinafter Administrative Rules) that is to be enforced on August 1st 2015. The Administrative Rules address that the companies with a dominant market position are prohibited from engaging in unjustified tie-in/bundling sales involving their IP rights.

According to the SAIC, IPR abuse is a major aspect of Anti-Monopoly Law enforcement. The abuse of IPR will hinder innovation and have adverse impact on market competition, which not only will the sole purpose for the establishment of IPR be defeated, but monopoly will also arise.

Companies are not allowed to use their IP rights to establish monopolistic agreements among themselves, and companies with a dominant market position are prohibited from abusing IP rights to attain competition exclusion or elimination, discriminatory refusals to license, trading restrictions, unjustified tie-in sales, and attaching unreasonable trading conditions.

With regard to tie-in sales, companies with dominant market position, without justified reasons, are prohibited from going against trading practice, overlooking consuming habits, and ignoring function of the goods to abuse their IP rights and sale dissociated products in bundles. Any conduct that excludes or restricts others from participating and competing in tie-in market will be considered violation of the Administrative Rules. .

If the IP owners have abused their rights and reached monopolistic agreements through eliminating and restricting market competitions, then the SAIC will order cease of any act of violation and confiscate the profits, in addition to imposing a fine of between 1% and 10% of annual sales. If the monopolistic conducts have not yet been executed, then the violators will be fined no more than RMB$500,000. Any enterprises that abuse their dominant market position and restrict market competition will be subject to a penalty decided by the SAIC.