getting the deal through intellectual property & antitrust · 3 preface getting the deal...

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Intellectual Property & A

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IntellectualProperty& AntitrustContributing editorPeter J Levitas

2019© 2018 Law Business Research Ltd

Intellectual Property & Antitrust 2019

Contributing editorPeter J Levitas

Arnold & Porter Kaye Scholer LLP

PublisherTom [email protected]

SubscriptionsClaire [email protected]

Senior business development managers Adam [email protected]

Dan [email protected]

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CONTENTS

2 Getting the Deal Through – Intellectual Property & Antitrust 2019

Global overview 5Peter J Levitas and Matthew A TabasArnold & Porter Kaye Scholer LLP

China 7Zhan Hao, Song Ying and Stephanie (Yuanyuan) WuAnJie Law Firm

France 14Emmanuel SchulteBersay & Associés

Germany 22Philipp RastemborskiMeissner Bolte

India 28Hemant SinghInttl Advocare

Italy 36Veronica Pinotti and Martino SforzaWhite & Case

Japan 44Yusuke Nakano and Atsushi YamadaAnderson Mōri & Tomotsune

Korea 51Hui Jin Yang and Jung Hyun UhmLee & Ko

Mexico 57Israel Pérez Correa and Hugo H ZapataPérez Correa & Asociados

Switzerland 63Daniel Emch and Nicolas MosimannKellerhals Carrard

United Kingdom 70John Schmidt, Richard Dickinson, Zeno Frediani and Kathy HarfordArnold & Porter

United States 76Lisa Kimmel and Kate M WatkinsCrowell & Moring, LLP


www.gettingthedealthrough.com 3

PREFACE

Getting the Deal Through is delighted to publish the thirteenth edition of Intellectual Property & Antitrust, which is available in print, as an e-book, and online at www.gettingthedealthrough.com.

Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.

Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the jurisdictions featured.

Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough.com.

Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers.

Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to the contributing editors, Peter J Levitas of Arnold & Porter Kaye Scholer LLP, for his continued assistance with this volume.

LondonNovember 2018

PrefaceIntellectual Property & Antitrust 2019Thirteenth edition


AnJie Law Firm CHINA


ChinaZhan Hao, Song Ying and Stephanie (Yuanyuan) WuAnJie Law Firm

Intellectual property

1 Intellectual property law

Under what statutes, regulations or case law are intellectual property rights granted? Are there restrictions on how IP rights may be enforced, licensed or otherwise transferred? Do the rights exceed the minimum required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Statues granting intellectual property rightsIn the People’s Republic of China (China), intellectual property rights are granted pursuant to the following laws and regulations:• the Patent Law (adopted in 1984 and amended 1992, 2000 and

2008);• the Trademark Law (adopted in 1982 and amended 1993, 2001,

and 2013);• the Copyright Law (adopted in 1990 and amended 2001 and 2010);• the Regulations on the Protection of New Plant Varieties (adopted

in 1997);• the Regulations on the Protection of Computer Software (adopted

in 2001 and amended in 2013);• the Regulations on the Protection of Information Network

Transmission Rights (adopted in 2006 and amended in 2013);• the Regulations on the Protection of Layout Design of Integrated

Circuits (adopted in 2001); and• the Anti-Unfair Competition Law (adopted in 1993 and amended

in 2017).

Patents, as prescribed in the Patent Law of China, refer to inventions, utility models and designs. Trademarks approved for registration are registered trademarks that can be classified into trademarks for goods, service marks and collective marks, and certification marks. A collec-tive trademark is a sign registered in the name of a group, association, or other organisation for use by a member of the organisation in a com-mercial activity to indicate the user’s membership in the organisation. A certification mark is a mark of the origin, raw material, manufactur-ing method, quality or other particular quality of a commodity or ser-vice that is controlled by an organisation that has a supervisory capacity for a particular commodity or service, and that is used by an organisa-tion or person other than that organisation for its goods or services.

In terms of copyright, works such as literature, art, natural sci-ences, social sciences and engineering techniques, as created in the following forms, are protectable under the Copyright Law of China:• written works;• oral works;• music, drama, folk art, dance and acrobatic works;• fine arts and architectural works;• photographic works;• cinematographic works and works produced in ways similar to

films;• engineering design drawings, product design drawings, maps,

schematics and other graphic works and model works;• computer software; and• other works as prescribed by laws and administrative regulations.

Restrictions on how IP rights may be enforced, licensed or otherwise transferredFrom a competition law perspective, there are a number of restrictions on how IP rights may be enforced, licensed or transferred.

For instance, the State Administration of Industry and Commerce (SAIC) issued the Provisions on the Prohibition of Conducts Excluding and Restricting Competition by Abusing Intellectual Property Rights (Anti-Monopoly Provisions on IP; effective as of 1 August 2015) which contains a number of restrictions on the exercising of IP rights. For instance, it prohibits competing firms from entering into horizontal and vertical monopoly agreements by way of exercising IP rights unless the relevant conducts meet the ‘safe harbour’ requirements or can be exempted pursuant to article 15 of the Anti-Monopoly Law of China (AML). A firm that is ‘dominant’ in the relevant market faces more restrictions if it abuses its dominance by way of exercising IP rights. For instance, a dominant firm cannot, absent justifiable reasons, refuse to license IP rights which constitute ‘essential facilities’ to other firms that implement such IP rights on reasonable terms. A dominant firm is also prohibited from engaging in the following patent-pooling activi-ties absent justifiable reasons: restricting members of the patent pool from licensing their patents independently outside the patent pools; restricting members of the patent pool or licensees from developing competing technologies independently or jointly with third parties, requiring licensees to grant back improvements exclusively; and for-bidding licensees from challenging the validity of patents in the patent pool.

TRIPs requirementsThe aforementioned rights do not exceed the minimum required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

2 Responsible authorities

Which authorities are responsible for granting, administering or enforcing IP rights?

In March 2018, China launched a major institutional reform of admin-istrative organs under the state council which involves the restruc-turing of both the IP and AML authorities. As regards IP rights, trademarks, patents and geographic indications have been brought within the ambit of the new China National Intellectual Property Administration (CNIPA) under the State Administration for Market Regulation (SAMR). As a result of the reform, CNIPA and the compre-hensive enforcement task force under the SAMR will be responsible for the granting, administration and enforcement of patents, trademarks, integrated circuit layout design and geographical indications.

The National Copyright Administration of China (NCAC) remains the authority responsible for the granting, administration and enforce-ment of copyrights.


CHINA AnJie Law Firm


3 Proceedings to enforce IP rights

What types of legal or administrative proceedings are available for enforcing IP rights? To the extent your jurisdiction has both legal and administrative enforcement options for IP rights, briefly describe their interrelationship, if any.

In China, both administrative actions and court proceedings are avail-able for enforcing IP rights. Administrative authorities at the national and local levels (ie, CNIPA, NCAC and their local counterparts) are vested with broad investigative powers relating to IP right infringe-ments. Additionally, the customs house can exercise border protection of IP rights either ex officio or on application by IP right holders. If an administrative authority finds that a complaint of infringement is justi-fied, it has the power to order cessation of the infringing activity, con-fiscate the infringing materials, impose fines on the infringer and seize materials, tools and equipment used in the course of the infringement.

IP right holders also have rights to file lawsuits before courts against any infringement of IP rights. Only courts have the power to award compensation of damages, issue orders for preservation of evidence and issue injunctions. Since 2017, specialist IP courts and tribunals have been set up to perform judicial review of the granting, adminis-tration or enforcement of IP rights. Currently there are three IP courts (in Beijing, Shanghai and Guangzhou) and 15 specialised intellectual property tribunals with cross-regional jurisdiction located in the cit-ies of Nanjing, Suzhou, Wuhan, Chengdu, Hangzhou, Ningbo, Hefei, Fuzhou, Jinan, Qingdao, Shenzhen, Tianjin, Zhenzhou, Changsha and Xi’an.

4 Remedies

What remedies are available to a party whose IP rights have been infringed? Do these remedies vary depending on whether one utilises judicial or administrative review or enforcement?

Administrative and civil remedies are available to a party whose IP rights have been infringed.

Administrative remedies are measures such as orders to cease infringement, seizure, attachment, fines and confiscation of illegal gains.

The primary civil remedies are injunctions, damages and award of reasonable costs. Injunction measures include immediate cease of infringement, exclusion of disturbance and elimination of negative effects.

As regards damages, the amount of damages is determined by applying the following methods. In the case of a patent:• the actual loss the right holder sustained;• if the actual loss cannot be determined, the infringer’s illegal gains

will be adopted;• if the actual loss or the infringer’s illegal gains cannot be deter-

mined, a certain multiple of the royalty rate will be adopted; or• if the actual loss, infringer’s illegal gains and royalty rate cannot

be determined, between 10,000 renminbi and 1 million renminbi based on the type of patent rights, nature of the infringing act and other circumstances will be adopted.

In the case of a trademark:• the actual loss the right holder sustained;• if the actual loss cannot be determined, the infringer’s illegal gains

will be adopted;• if the actual loss or the infringer’s illegal gains cannot be deter-

mined, a certain multiple of the royalty rates will be adopted; however if the infringer acted in serious bad faith the court may determine the damages at between one and three times of the amount determined by applying the above-mentioned methods; or

• if the actual loss, infringer’s illegal profits and royalty rate cannot be determined, up to 3 million renminbi will be adopted, subject to circumstances.

In the case of copyright:• the actual loss the right holder sustained;• if the actual loss cannot be determined, the infringer’s illegal gains

will be adopted; or

• if the actual loss or the infringer’s illegal profits cannot be deter-mined, up to 500,000 renminbi will be adopted, subject to circumstances.

In addition, an infringing entity or individual may be criminally pun-ished if a criminal offence is found under the criminal law.

5 Nexus between competition and IP rights

Do any statutes, regulations or case law in your jurisdiction address the interplay between competition law and IP law?

The legislation that addresses the interplay between competition law and IP law is article 55 of the AML. In accordance with this article, the AML is not applicable to the exercise of IP rights by undertakings in accordance with laws and administrative regulations on IP rights; how-ever, the AML shall be applicable to the conduct of undertakings that exclude or restrict competition by abusing IP rights.

6 Patent cooperation treaties and other agreements

Does your jurisdiction participate in any patent cooperation treaties or other similar agreements?

China is a member of the following patent cooperation treaties.

WTO• the Agreement on Trade-Related Aspects of Intellectual Property

Rights (TRIPS) (acceded in 2001).

WIPO• the Convention Establishing the World Intellectual Property

Organization (member since 1981);• the Paris Convention for the Protection of Industrial Property

(member since 1985);• the Washington Treaty on Intellectual Property in Respect of

Integrated Circuits (signed in 1990);• the Treaty on Intellectual Property in Respect of Integrated

Circuits (acceded in 1994);• the Patent Cooperation Treaty (PCT) (acceded in 1995);• the Budapest Treaty on the International Recognition of the

Deposit of Microorganisms for the Purposes of Patent Procedure (acceded in 1995);

• the Locarno Agreement on Establishing an International Classification for Industrial Design (acceded in 1996); and

• the Strasbourg Agreement Concerning the International Patent Classification (acceded in 1996).

7 Remedies for deceptive practices

With respect to trademarks, do competition or consumer protection laws provide remedies for deceptive practices?

The Anti-Unfair Competition Law as amended in 2017 prohibits con-fusing conducts such as unauthorised use of marks which are the same as or similar to goods, packaging, decoration etc of others and which induces others to think there are certain connections between such marks and the trade names, packaging and decoration of others.

Administrative and civil remedies are available for these decep-tive practices. In terms of administrative remedies, the relevant law enforcement agency may order the cessation of the illegal conduct, confiscate the illicit goods, impose fines and, in severe circumstances, cancel the business registration of the infringer. In terms of civil rem-edies, courts can award reasonable costs and may grant damages cal-culated based on the following methods to parties incurring harm due to illicit confusing conduct:• the actual loss that the right holder sustained;• if the actual loss cannot be determined, the infringer’s illegal gains

will be adopted; or• if the actual loss and the infringer’s illegal gains cannot be deter-

mined, up to 3 million renminbi will be adopted, subject to circumstances.

Apart from the above, there are also provisions in the Anti-Unfair Competition Law, Consumer Rights Protection Law and Advertisement Law that provide for civil and administrative remedies for other




deceptive practices, such as false or misleading business promotions or advertisements.

8 Technological protection measures and digital rights management

With respect to copyright protection, is WIPO protection of technological protection measures and digital rights management enforced in your jurisdiction? Do statutes, regulation or case law limit the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played? Has TPM or DRM protection been challenged under the competition laws?

Yes. WIPO protection of TPMs and DRM is enforced in China.Article 24 of the Regulations on the Protection of Computer

Software specifies that unless otherwise provided for by law or adminis-trative regulation, absent permission of a software rights holder, an act of intentionally circumventing or destroying the technological meas-ures taken by such copyright holder to protect its software copyright or intentionally deleting or altering the software right management digi-tal information can be subject to civil liabilities, administrative penal-ties or even criminal punishments.

There is no legislation that limits the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played; however, any such limitation by manufactur-ers could be challenged under the AML if the exercise of TPM or DRM excludes or restricts competition. So far, there have been no reported AML civil disputes or administrative enforcement activities challeng-ing TPM or DRM protection.

9 Industry standards

What consideration has been given in statutes, regulation or case law to the impact of the adoption of proprietary technologies in industry standards?

Consideration has been given by the SAIC in its Anti-Monopoly Provisions on IP to the impact of the adoption of propriety technologies in industry standards. Article 13 of the Anti-Monopoly Provisions on IP provides that firms are prohibited from engaging in conducts which exclude or restrict competition by utilising the setting and implemen-tation of standards (including mandatory requirements for national technical specifications). Article 13 also prohibits dominant firms from implementing the following conducts that exclude or restrict competi-tion absent justifiable reasons:• intentionally not disclosing its proprietary information or explicitly

waiving its rights in the process of standard setting, but claiming its proprietary rights from users of such rights afterwards; and

• refusing to license, conducting tying practice or imposing unrea-sonable trading terms in contravention of the fair, reasonable and non-discriminatory (FRAND) principle to exclude or restrict com-petition after its patent has become a standard essential patent (SEP).

Further, the Supreme People’s Court (SPC) clarified that injunctive claims may be denied under limited circumstances in article 24 of the Interpretations II of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Disputes (SPC Interpretations II) effective as of 1 April 2016. This arti-cle provides that in an SEP licensing negotiation process, if the SEP holder deliberately avoids its FRAND obligations, causing failure to reach a licensing agreement, and the accused infringer has no appar-ent fault during the negotiation process, the court shall not uphold an injunction claim.

There have been several important cases concerning patent hold-up or reverse hold-up in the context of SEP. On 22 March 2017, the Beijing IP Court handed down a decision in Xi’an Iwncomm v Sony Mobile, which concerns an SEP of a national standard of wireless com-munication. In this case, the Beijing IP Court held that an injunction could be granted to prevent a reserve hold-up when the SEP holder had no fault and the accused infringer was acting in bad faith.

Competition

10 Competition legislation

What statutes set out competition law?

The Anti-Monopoly Law of the People’s Republic of China, promul-gated on 30 August 2007 and which came into force as of 1 August 2008 set out competition law in China. The AML and the relevant judicial interpretations, administrative regulations and non-legislative docu-ments (such as guidelines) form the regulatory framework of competi-tion law in China.

11 IP rights in competition legislation

Do the competition laws make specific mention of any IP rights?

As mentioned in question 5, article 55 AML makes a general reference to the interplay between competition law and IP rights and serves as the legal basis for competition law’s intervention in the exercise of IP rights in China.

Additionally, the Anti-Monopoly Provisions on IP lay down cir-cumstances under which IP rights abuse may constitute monopoly agreements and abuse of dominance, which merit competition law intervention. China also has published its Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights (Draft for Comment) (Draft Anti-Monopoly Guidelines on IP) in 2017; however, this has not been finalised and is not yet in force.

12 Review and investigation of competitive effects from exercise of IP rights

Which authorities may review or investigate the competitive effect of conduct related to exercise of IP rights?

Following the institutional restructuring announced in March 2018 which merged the three previous AML enforcement agency, namely the respective AML enforcement agencies under the National Development and Reform Commission (NDRC), the SAIC and the Ministry of Commerce (MOFCOM) into one AML enforcement agency – the Anti-Monopoly Bureau under the SAMR – the authority that may review or investigate the competitive effect of conduct related to the exercise of IP rights will be exclusively the Anti-Monopoly Bureau.

IP courts or IP tribunals in China have the jurisdiction to conduct judicial review of the competitive effect of conducts related to the licensing and transfer of IP rights.

13 Competition-related remedies for private parties

Can a private party recover for competition-related damages caused by the exercise, licensing or transfer of IP rights?

Yes, private parties may recover competition-related damages arising from the abuse of IP rights and apply to the courts for injunctions and compensation for losses. A plaintiff may also apply to the courts for awarding reasonable expenses incurred by it in connection with inves-tigating and putting an end to the anticompetitive conduct.

14 Competition guidelines

Have the competition authorities, or any other authority, issued guidelines or other statements regarding the overlap of competition law and IP?

The Anti-Monopoly Provisions on IP issued by the SAIC in 2015 remain the only regulation in force regarding the overlap of compe-tition law and IP up to this date. On 23 March 2017, the revised Draft Anti-Monopoly Guidelines on IP were published for public comment. However, it is still pending finalisation.

On the judicial front, SPC Interpretations II has devoted one provi-sion about injunction application in the context of SEP. A number of courts in China have also published their IP guidelines concerning SEP, but they are non-binding. For instance, on 20 April 2017, the Beijing High People’s Court issued the Guidelines for Patent Infringement Determination (2017). Articles 149–153 are SEP-related provisions. Among the five, articles 152–153 specifically set forth how injunction applications are assessed in ‘no fault’ and ‘at fault’ scenarios during SEP licensing negotiation. On 26 April 2018, the Guangdong High




People’s Court issued the Working Guidelines of Guangdong High People’s Court on the Trial of Standard Essential Patent Dispute Cases (for trial implementation). Articles 25–31 dealt with the trial of SEP-incumbent monopoly disputes.

15 Exemptions from competition law

Are there aspects or uses of IP rights that are specifically exempt from the application of competition law?

Generally speaking, any abuse of IP rights by firms that excludes or restricts competition can be subject to scrutiny under the AML. Abuse of IP rights may be exempted pursuant to article 15 AML, which is shaped after article 101(3) of the Treaty on the Functioning of the European Union (TFEU). Article 15 AML sets out seven circumstances under which an agreement can be exempted from articles 13 and 14 AML, which are shaped after article 101(1) of the TFEU, with the bur-den of proof on the firm being challenged:(i) it improves technologies, or engages in research and development

of new products;(ii) it improves product quality, reducing cost and enhancing effi-

ciency, unifying specifications and standards of products or imple-menting specialised division of production;

(iii) it increases the efficiency and competitiveness of small and medium-sized undertakings;

(iv) it serves the public interest in energy conservation, environmental protection and disaster relief;

(v) it mitigates sharp decreases in sales volumes or obvious overpro-duction caused by economic depression;

(vi) it safeguards legitimate interests in foreign trade and in economic cooperation with foreign counterparts; or

(vii) other circumstances as prescribed by law or the State Council.

If articles 15(i)–(v) are claimed, the undertaking claiming them should also prove that the agreement will not significantly restrict competition in the relevant market and will enable consumers to share the benefits generated therefrom.

Apart from this general exemption provision, the Anti-Monopoly Provisions on IP provides a ‘safe harbour’. Agreements meeting the requirements of the safe harbour may be presumed not to constitute monopoly agreements, unless there is evidence indicating the con-trary. The safe harbour is delineated by meeting either of the following conditions:• where the combined shares on the relevant market affected by the

conduct of undertakings in a competing relationship are no more than 20 per cent, or there are four or more independently con-trolled substitutive technologies on the relevant market that can be obtained at reasonable cost; or

• where the market share in the relevant market of each of the undertakings in a vertical relationship is no more than 30 per cent, or there are two or more independently controlled substitutive technologies on the relevant market that can be obtained at rea-sonable cost.

The owner’s unilateral exclusion of others from using the owner’s IP is not automatically exempt from review under the AML. Abuse of domi-nance claims relating to IP rights are likely to be dealt with on a case-by-case basis.

16 Copyright exhaustion

Does your jurisdiction have a doctrine of, or akin to, ‘copyright exhaustion’ (EU) or ‘first sale’ (US)? If so, how does that doctrine interact with competition laws?

There are no statutory provisions on copyright exhaustion or first sale under the Copyright Law of China. However, courts in China have exercised such doctrine. For instance, in Automobile Magazine v China Automobile Industrial Economic Technology Information Research Institute the Sichuan High People’s Court found that although the lay-out design is created by the designer, the designer loses the right to grant permission to another person after the publisher makes payment and applies the layout design to the publication.

17 Import control

To what extent can an IP rights holder prevent ‘grey-market’ or unauthorised importation or distribution of its products?

There is no explicit legislative provision allowing an IP rights holder to prevent grey-market or unauthorised importation or distribution of its products.

In a 2009 case before the Changsha Intermediate People’s Court, tyre maker Michelin was able to stop the sale of parallel imports by showing that the defendant that was selling its tyres had not properly obtained China health and safety certifications.

On the other hand, in past years, courts in Shanghai and Tianjin have respectively ruled against Victoria’s Secret and the French wine group Les Grands Chais de France in their efforts to stop the sale of parallel imports. In each case the defendant seller had purchased genu-ine products, distributed them through standard channels and sold the goods as is without suggesting any relationship between the seller and the plaintiff.

18 Jurisdictional interaction between competition laws and IP rights

Are there authorities with exclusive jurisdiction over IP-related or competition-related matters? For example, are there circumstances in which a competition claim might be transferred to an IP court to satisfy subject matter jurisdiction? Are there circumstances where the resolution of an IP dispute will be handled by a court of general jurisdiction?

As mentioned in questions 2 and 12, the administrative agency having jurisdiction over IP-related matters is the CNIPA under the SAMR, NCAC and the Customs House of China. The administrative agency having exclusive jurisdiction over competition-related matters is the Anti-Monopoly Bureau under the SAMR.

When it comes to judicial review, competition disputes are cat-egorised under IP disputes. As such, as with IP disputes, competition disputes are subject to centralised jurisdiction, which means that the IP tribunals or IP courts have jurisdiction over both competition disputes and IP disputes.

If a civil matter is not competition-related at the time the case is accepted by a court, if the defendant has raised a defence or counter-claims that are competition-related and supported by evidence, or if a civil matter shall be adjudged based on the AML, the court, having no jurisdiction over competition matters, shall transfer the dispute to a court that does have jurisdiction to hear competition matters.

Merger review

19 Powers of competition authority

Does the competition authority have the same authority with respect to reviewing mergers involving IP rights as it does with respect to any other merger?

Yes, the Anti-Monopoly Bureau under the SAMR has authority to review mergers, whether they involve IP rights or not. According to the recently released organisational arrangement within the Anti-Monopoly Bureau, there are three departments dealing with merger reviews, which most likely divide their responsibilities based on the different industry sec-tors that a merger falls under and not on whether IP rights are involved.

20 Analysis of the competitive impact of a merger involving IP rights

Does the competition authority’s analysis of the competitive impact of a merger involving IP rights differ from a traditional analysis in which IP rights are not involved? If so, how?

Yes, for mergers involving IP rights the analysis of the SAMR can be different in a number of aspects. First, the SAMR will assess whether the transfer or exclusive licensing of IP rights could constitute ‘con-centration of undertakings’ for the purpose of the AML. Second, it will assess the degree of importance of the arrangement involving IP rights to the proposed transaction (ie, are IP rights substantive components of the proposed transaction or significant to the realisation of the aim of the proposed transaction). Thirdly, it will assess what remedies are




adequate to address competition concerns, considering that IP rights their have own special features; for instance, should access be required, should FRAND terms be imposed or maintained, or should reasonable royalty rates be set?

21 Challenge of a merger

In what circumstances might the competition authority challenge a merger involving the transfer or concentration of IP rights? Does this differ from the circumstances in which the competition authority might challenge a merger in which IP rights were not a focus?

The substantive test of the review has been the same for mergers involving IP rights and mergers in which IP rights were not a focus (ie, whether the concentration will exclude or restrict competition in the relevant market). If the SAMR thinks its competition concerns over the concentration can be eliminated by attaching restrictive conditions to the parties to the concentration, the parties can submit proposed com-mitments to address these concerns. If the proposed commitments are accepted by the SAMR, it will clear the merger subject to conditions. If the proposed commitments run the risk of not being able to be imple-mented, the SAMR may ask the parties to the concentration to come forward with alternative proposals, which may include divestiture of core assets. On the contrary, if the proposed commitments cannot elim-inate competition concerns or the parties to the concentration do not submit proposed commitments within a specified time, the SAMR will prohibit the merger.

22 Remedies to address the competitive effects of mergers involving IP

What remedies are available to address competitive effects generated by a merger when those effects revolve around the transfer of IP rights?

When competitive concerns of the SAMR revolve around the transfer of IP rights, the parties to the concentration may submit commitments to address them. If the SAMR thinks the commitments can address competition concerns, it will clear the merger subject to conditions and make them binding upon the parties to the concentration. Remedies can be classified into structural or behavioural remedies, or a hybrid of both. IP-specific structural remedies can involve divestiture of IP rights. IP-specific behavioural remedies can involve mandatory licensing of IP rights, access to infrastructures such as network or platforms, hold-sep-arate obligations, terminating exclusive agreements, compliance with FRAND obligations and charging royalty rates at a reasonable level. It therefore follows that measures such as mandatory licences and access to infrastructure can be imposed as remedies in a merger.

Specific competition law violations

23 Conspiracy

Can the exercise, licensing or transfer of IP rights create price-fixing or conspiracy liability?

Conspiracy between competitors not to transfer or license IP rights could constitute an illegal cartel if the conspiracy is about fixing price, restricting output or sharing market. Additionally, under article 13(iv) of the AML, agreements that restrict the purchase of new technology and new equipment or the development of new technology and new prod-ucts could constitute monopoly agreements. They can be exempted if the conditions set forth in article 15 AML can be satisfied or they fall under the safe harbour as stipulated in the Anti-Monopoly Provisions on IP. However, so far there have been no reported challenges in courts or investigations against cartels involving the transfer or licensing of IP rights among competitors.

24 Reverse payment patent settlements

How have the competition laws been applied to reverse payment patent settlements in your jurisdiction?

From the perspective of the AML, there have been no reported chal-lenges in courts or investigations against reverse payment patent settle-ments in China. Reverse payment patent settlements can nonetheless

be scrutinised under the existing legal framework of monopoly agree-ments and abuse of dominance.

In the context of copyright collectives, on 8 August 2018, the China Audio-Video Copyright Association (CAVCA) prevailed in an abuse of dominance challenge against it in court brought by a karaoke chain. The karaoke chain accused CAVCA of tying and refusal to deal by set-ting unreasonable royalty rates and practising blanket licensing. The Kunming Intermediate People’s Court of Yunnan province held that the royalty rates charged by CAVCA was reasonable and compliant with the relevant regulation. On the blanket licensing practice, the court found that it could lower transaction costs and had efficiency-enhancing effects.

25 (Resale) price maintenance

Can the exercise, licensing or transfer of IP rights create liability under (resale) price maintenance statutes or case law?

The exercise, licensing or transfer of IP rights is not excluded from the scrutiny of resale price maintenance rules under the AML. There have been a few dozen court cases and administrative enforcement actions against resale price maintenance (RPM) in China altogether to this date. However, there have been no reported RPM disputes or cases focusing on IP rights.

It may be expected that the same standard of review will be applied to RPM involving IP rights and those not involving IP rights. Worth noting is the sharp contrast between the analytic approach to RPM by courts and the SAMR, as well as among different courts. The SAMR has been consistently applying a presumption of illegality to RPM. The courts, on the other hand, are divided over the legal analysis of RPM. For instance, courts in Shanghai, Beijing and Guangdong have applied an analysis akin to ‘rule of reason’ to RPM in a number of cases (ie, these courts held that for RPM practices to be held illegal anticompetitive effects must be proved and the burden of proof is on the plaintiff ). However, the Hainan High People’s Court in its decision in 2017 took the same stance as the SAMR and applied the presumption of illegality to RPM practices. Therefore, RPM challenges in China, whether or not involving IP rights, will continue to face a degree of uncertainty in terms of the outcome when brought before the courts.

26 Exclusive dealing, tying and leveraging

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to exclusive dealing, tying and leveraging?

Yes, the exercise, licensing or transfer of IP rights can create liability relating to exclusive dealing, tying and leveraging under monopoly agreements, abuse of dominance and concentration of undertakings pursuant to the AML.

27 Abuse of dominance

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to monopolisation or abuse of dominance?

Yes, a dominant firm can be held liable for abuse of dominance if its conduct with respect to IP rights constitutes abuse under the AML. The analytical framework applicable to the exercise of IP rights by a dominant firm is no different from that applicable to non-IP related conduct by a dominant firm, although the special features of IP rights will be considered in finding abuse. In 2015, the NDRC fined Qualcomm around US$975 million for having abused its dominance by charging an unfairly high price when licensing wireless SEPs as well as tying and imposing unreasonable trading conditions without justifiable reasons.

Update and trends

An increased awareness of the intersection between competition law and IP rights has been observed in China. SEPs remain a com-plex area at the intersection of competition law and IP. As China’s AML enforcement enters its third fifth year, it can be expected that a greater number and variety of AML cases and investigations involving IP rights will emerge.




28 Refusal to deal and essential facilities

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to refusal to deal and refusal to grant access to essential facilities?

Yes, the exercise, licensing or transfer of IP rights can create liability relating to refusal to deal and refusal to grant access to essential facili-ties. In particular, article 7 of the Anti-Monopoly Provisions on IP stipu-lates that, absent justifiable reasons, a dominant firm is prohibited from refusing to license its IP rights, which are considered essential facilities to licensees which use such IP rights subject to reasonable conditions. Mandatory licensing will be a possible remedy in the context of abuse of dominance and concentration of undertakings. In determining whether the relevant IP rights constitute essential facilities, the SAMR will look at the following factors:• is the IP right concerned reasonably interchangeable with another

IP right and is it essential for other firms to compete on the relevant market?;

• will the refusal to license have a negative impact on competition or innovation in the relevant market or cause damage to consumers’ interest or the public interest?; and

• will mandatory licensing cause unreasonable damage to the licensor?

Remedies

29 Remedies for violations of competition law involving IP

What sanctions or remedies can the competition authorities or courts impose for violations of competition law involving IP?

The same sanctions as applicable to AML violations not related to IP can be applied to AML violations involving IP.

Administrative sanctions include:• an order to cease the illegal conducts;• the confiscation of illicit gains; and• the imposition of fines of no higher than 500,000 renminbi if the

monopoly agreement is reached but not performed and fines of between 1 per cent and 10 per cent of the sales value of the infring-ing undertaking in the previous year in the case of performed monopoly agreement and abuse of dominance.

Upon application of the plaintiff, the courts can order the defendant to do the following:• stop the infringement;• compensate the plaintiff for losses; or• pay reasonable expenses incurred by the plaintiff relating to investi-

gating and putting an end to anticompetitive conduct.

When it comes to mergers, the SAMR can apply structural or behav-ioural remedies, or a hybrid of both, including divestitures of IP rights and compulsory licensing.

30 Competition law remedies specific to IP

Do special remedies exist under your competition laws that are specific to IP matters?

General remedies under the AML are also available to IP-related com-petition matters. However, certain remedies could be more relevant for IP-related competition matters, such as mandatory licensing, divesti-ture of IP rights, complying with FRAND obligations and setting rea-sonable royalty rates.

31 Scrutiny of settlement agreements

How would a settlement agreement terminating an IP infringement dispute be scrutinised from a competition perspective? What are the key factors informing such an analysis?

A settlement agreement terminating an IP infringement dispute can be subject to scrutiny under monopoly agreements and abuse of domi-nance pursuant to the AML. However, there have been no reported challenges in courts or investigations based on the AML against settle-ment agreements in the context of an IP infringement dispute.

Economics and application of competition law

32 Economics

What role has competition economics played in the application of competition law in cases involving IP rights?

In terms of administrative enforcement actions, there are no bind-ing provisions requiring the SAMR to employ economic analysis to AML cases, including cases involving IP rights. Therefore, the discre-tion about when and how to employ economic analysis in competition law cases rests solely with the SAMR. Economic analysis has not been reflected or heavily employed in most of the infringement decisions published so far. The infringement decision against Tetra Pak in 2016 remains the only infringement decision that embodies detailed eco-nomic analysis in competition administrative enforcement.

In the context of court proceedings, the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Civil Disputes Arising from Monopoly Conducts, issued by the SPC in May 2012, allows parties to the litigation to apply to the court for engag-ing professional agencies or professionals to produce a market study or economic analysis. The court may consider such professional opinions in its review.

Zhan Hao [email protected] Ying [email protected] (Yuanyuan) Wu [email protected]

19/F, Tower D1Liangmaqiao Diplomatic Office BuildingNo. 19 DongfangdongluChaoyang DistrictBeijing 100600China

Tel: +86 10 8567 5988Fax: +86 10 8567 5999www.anjielaw.com




Recent cases and sanctions

33 Recent cases

Have there been any recent high-profile cases dealing with the intersection of competition law and IP rights?

On 22 March 2017, the Beijing IP Court issued its decision in Xi’an Iwncomm v Sony Mobile over the latter’s infringement of Xi’an Iwncomm’s mandatory national WAPI standard. The court held that Xi’an Iwncomm had complied with FRAND obligations when negotiat-ing SEP licensing with Sony Mobile and granted an injunction in favour of Xi’an Iwncomm. On 28 March 2018, the Beijing High People’s Court affirmed that Xi’an Iwncomm was not at fault in the licensing negotia-tion and complied with FRAND obligations, and thereby upheld the Beijing IP Court’s decision.

On 11 January 2018, the IP tribunal at the Shenzhen Intermediate People’s Court published two decisions in Huawei v Samsung. The two actions were filed in 2016 by Huawei, asserting two SEPs against sev-eral affiliates of Samsung Electronics in China. On the issue of whether Huawei was entitled to an injunction against Samsung, the court found that Huawei had complied with its FRAND obligations; in particular, the royalty rates offered by Huawei were compliant with the FRAND principle while Samsung’s were not. Thereby an injunction was granted to Huawei prohibiting Samsung from commercialising its devices by using Huawei’s SEPs.

34 Remedies and sanctions

What competition remedies or sanctions have been imposed in the IP context?

Apart from the remedies granted by the courts in a number of cases mentioned above, remedies in the IP context have been applied by the SAMR (previously by the MOFCOM) on a number of occasions in its merger decisions.

MOFCOM required access to technology and platform in Microsoft/Nokia (2014) and Bayer/Monsanto (2018). In Google/Motorola (2012), MOFCOM required Google to comply with FRAND commitments incumbent on Motorola for Motorola’s SEPs. FRAND commitments were also required by MOFCOM in Microsoft/Nokia (2014), Merck/AZ Electronic (2014) and Nokia/Alcatel (2015).


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