Heavyweight! State Administration Order No. 79 Announces Patents | Intellectual Property | State Administration

In order to encourage innovation, maintain a fair competition market order in the field of intellectual property, assist in the construction of a unified national market and a strong intellectual property country, combined with the new situation, situation, and problem of anti-monopoly supervision and law enforcement in recent years, the State Administration for Market Regulation has revised and issued the "Provisions on Prohibiting the Abuse of Intellectual Property and Excluding and Restricting Competition", which will be officially implemented on August 1, 2023.

The Regulations on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition focus on balancing intellectual property protection and maintaining a fair competition order, focusing on key and difficult issues in the field of intellectual property anti-monopoly, strengthening rule guidance, and promoting fair competition and innovative development. Compared to the "Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition" formulated in 2015, the focus has been on the following areas for modification and improvement:

One is to expand the connotation of "abusing intellectual property rights to exclude and restrict competitive behavior". The adjustment scope includes three types of monopoly behaviors: reaching monopoly agreements through the exercise of intellectual property rights, abusing market dominance, and implementing concentration of operators that have or may have the effect of excluding or restricting competition.

The second is to improve the rules for identifying monopolistic behavior through the exercise of intellectual property rights. According to the revised Anti Monopoly Law in 2022, combined with the characteristics of intellectual property and regulatory practices, the relevant market definition, determination and presumption of market dominance, determination of monopolistic behavior, considerations for concentration review of operators, and specific types of additional restrictive conditions will be improved and refined to enhance the guidance and operability of the rules.

The third is to strengthen the regulation of typical and special monopolistic behaviors in the field of intellectual property. If relevant regulations on patent consortia are improved, it is prohibited for patent consortia entities and members of patent consortia to engage in monopolistic behavior through patent consortia; Strengthen the regulation of monopolistic behavior in the process of standard formulation and implementation, and prohibit operators with market dominance from using standard essential patents to carry out patent hijacking.

Next, the State Administration for Market Regulation will take the promulgation of the Regulations on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition as an opportunity to coordinate the protection of intellectual property rights, anti-monopoly and other work, promote the independent and orderly flow and efficient allocation of innovative factors, and effectively maintain a fair competition market order.

Provisions on Prohibiting the Abuse of Intellectual Property Rights and Excluding or Restricting Competition

Article 1 In order to prevent and stop the abuse of intellectual property rights to exclude and restrict competition, these regulations are formulated in accordance with the the People's Republic of China Anti-Monopoly Law.

Article 2 Anti-monopoly and the protection of intellectual property rights have the same objectives, that is, to promote competition and innovation, improve the efficiency of economic operation, and safeguard the interests of consumers and the public interests of society.

Operators shall exercise intellectual property rights in accordance with relevant laws and administrative regulations, but shall not abuse intellectual property rights, exclude or restrict competition.

Article 3 The term "abuse of intellectual property rights to exclude and restrict competition" as mentioned in these Provisions refers to the exercise of intellectual property rights by business operators in violation of the provisions of the Anti-Monopoly Law, the conclusion of monopoly agreements, the abuse of dominant market positions, and the implementation of monopolistic acts such as concentration of business operators that have or may have the effect of excluding or restricting competition.

Article 4 The State Administration for Market Regulation shall, in accordance with the provisions of the first paragraph of Article 13 of the Anti-Monopoly Law, be responsible for the unified anti-monopoly law enforcement of the abuse of intellectual property rights to exclude or restrict competition.

The State Administration for Market Regulation, in accordance with Article 13, Paragraph 2 of the Anti Monopoly Law, authorizes the market supervision and management departments of each province, autonomous region, and municipality directly under the Central Government to be responsible for the anti monopoly law enforcement work of abusing intellectual property rights, excluding and restricting competition behaviors, such as monopoly agreements and abusing market dominance within their respective administrative regions.

The anti-monopoly law enforcement agencies referred to in these regulations include the State Administration for Market Regulation and provincial market supervision departments.

Article 5 The relevant markets referred to in these Provisions, including relevant commodity markets and relevant geographical markets, shall be defined in accordance with the Anti-Monopoly Law and the Guidelines of the Anti-Monopoly Commission of the State Council on the Definition of Relevant Markets, taking into account the influence of intellectual property rights, innovation and other factors. In the anti-monopoly law enforcement work involving intellectual property licensing, the relevant commodity market can be the technology market or the product market containing specific intellectual property rights. The relevant technology market refers to the market formed by the competition between the technology involved in the exercise of intellectual property rights and the similar technology that can be substituted for each other.

Article 6 Operators shall not use the method of exercising intellectual property rights to reach a monopoly agreement prohibited by the first paragraph of Article 17 and Article 18 of the Anti-Monopoly Law.

Operators shall not use the exercise of intellectual property rights to organize other operators to reach monopoly agreements or provide substantial assistance for other operators to reach monopoly agreements.

If the operator can prove that the agreement reached falls under the circumstances stipulated in Article 20 of the Anti Monopoly Law, the provisions of the first and second paragraphs shall not apply.

Article 7 An operator uses the method of exercising intellectual property rights to reach an agreement with the counterparty of Article 18, Paragraph 1, Item 1 and Item 2 of Article 18 of the Anti-Monopoly Law. If the operator can prove that it does not have the effect of excluding or restricting competition, it shall not be prohibited.

If the operator uses the exercise of intellectual property rights to reach an agreement with the counterparty, and can prove that the market share of the operator participating in the agreement is lower than the standards set by the State Administration for Market Regulation and meets other conditions set by the State Administration for Market Regulation, it shall not be prohibited. The specific standards can refer to the relevant provisions of the Anti Monopoly Guidelines of the State Council Anti Monopoly Commission on the Field of Intellectual Property.

Article 8 A business operator with a dominant market position shall not abuse its dominant market position to exclude or restrict competition in the process of exercising intellectual property rights.

Market dominance is determined and presumed in accordance with the provisions of the Anti Monopoly Law and the Regulations on Prohibiting the Abuse of Market Dominance. The ownership of intellectual property by operators can be one of the factors that determine their market dominance, but it cannot be inferred solely based on the operator's ownership of intellectual property that they have a market dominance in the relevant market.

The determination of whether operators with intellectual property rights have a dominant position in the relevant market can also consider factors such as the possibility and transfer costs of trading counterparties turning to technology or products with substitution relationships in the relevant market, the degree of dependence of downstream markets on the goods provided by utilizing intellectual property rights, and the balancing ability of trading counterparties on operators.

Article 9 A business operator with a dominant market position shall not, in the course of exercising intellectual property rights, license intellectual property rights or sell products containing intellectual property rights at unfairly high prices to exclude or restrict competition.

The determination of the behavior mentioned in the preceding paragraph may take into account the following factors:

The research and development costs and recovery cycle of this intellectual property;

The calculation method and licensing conditions for the licensing fee of this intellectual property;

The intellectual property can be compared to historical licensing fees or licensing fee standards;

The commitment made by the operator regarding the intellectual property license;

Other relevant factors that need to be considered.

Article 10 A business operator with a dominant market position shall not, in the process of exercising an intellectual property right, refuse to permit other business operators to use the intellectual property right on reasonable terms, and exclude or restrict competition.

The determination of the behavior mentioned in the preceding paragraph shall simultaneously consider the following factors:

This intellectual property cannot be reasonably replaced in the relevant market and is necessary for other operators to participate in the competition in the relevant market;

Refusing to license the intellectual property will result in adverse effects on competition or innovation in the relevant market, damaging consumer interests or public interests;

Licensing the intellectual property will not cause unreasonable harm to the operator.

Article 11 A business operator with a dominant market position shall not engage in the following restricted transactions to exclude or restrict competition in the process of exercising intellectual property rights without justifiable reasons:

Restricted trading counterparties can only engage in transactions with them;

Restricted trading counterparties can only engage in transactions with their designated operators;

Restricted trading counterparties are not allowed to engage in transactions with specific operators.

Article 12 A business operator with a dominant market position shall not, in the process of exercising intellectual property rights, violate the trading practices and consumption habits of its industry or field or disregard the functions of commodities, engage in the following tying acts to exclude or restrict competition:

Forcing or indirectly forcing the licensee to purchase other unnecessary products when licensing intellectual property rights;

Forcing or indirectly forcing the licensee to accept a package license when licensing intellectual property.

Article 13 A business operator with a dominant market position may not, without justifiable reasons, impose the following unreasonable trading conditions in the process of exercising intellectual property rights to exclude or restrict competition:

Require the trading counterpart to grant exclusive or exclusive feedback on their improved technology, or require the trading counterpart to cross license in the same technical field when reasonable consideration is not provided;

Prohibit trading counterparties from questioning the validity of their intellectual property rights;

Restricting the counterparty from using competitive technology or products without infringing intellectual property rights after the expiration of the license agreement period;

Attach other unreasonable trading conditions to the counterparty.

Article 14 A business operator with a dominant market position shall not, without justifiable reasons, apply differential treatment to counterparties under the same conditions in the process of exercising intellectual property rights, and exclude or restrict competition.

Article 15 Where the concentration of business operators involving intellectual property rights meets the reporting standards prescribed by the State Council, the business operators shall report to the General Administration of Market Supervision in advance, and the concentration shall not be implemented before the declaration or approval is obtained after the declaration.

Article 16 The examination of concentration of undertakings involving intellectual property rights shall take into account the factors specified in Article 33 of the Anti-Monopoly Law and the characteristics of intellectual property rights.

According to the specific situation of centralized transactions involving intellectual property rights, additional restrictive conditions may include the following situations:

Divesting intellectual property or business related to intellectual property;

Maintain independent operation of intellectual property related businesses;

License intellectual property rights under reasonable conditions;

Other restrictive conditions.

Article 17 A business operator shall not, in the course of exercising intellectual property rights, engage in acts of excluding or restricting competition by means of patent association.

Members of patent consortia are not allowed to exchange sensitive information related to competition, such as price, output, and market division, and reach monopoly agreements prohibited by Article 17 and Article 18 (1) of the Anti Monopoly Law. However, unless the operator can prove that the agreement reached complies with the provisions of Article 18 (2), (3), and Article 20 of the Anti Monopoly Law.

Patent consortium entities or members of patent consortia with market dominance shall not use patent consortia to engage in the following behaviors of abusing market dominance:

License joint patents at unfairly high prices;

Without justifiable reasons, restrict the scope of patent use of joint venture members or licensees;

Without justifiable reasons, restricting joint venture members from licensing patents as independent licensors outside of the joint venture;

Without justifiable reasons, restrict joint venture members or licensees from independently or jointly developing technologies that compete with joint venture patents with third parties;

Without justifiable reasons, mandating the licensee to exclusively or exclusively grant the improved or developed technology back to the patent consortium entity or its members;

Without justifiable reasons, the licensee is prohibited from questioning the validity of the joint venture patent;

Without justifiable reasons, compulsory combination licensing of competitive patents, or compulsory combination licensing of non essential patents, terminated patents, and other patents;

Without justifiable reasons, differential treatment shall be applied to joint venture members with the same conditions or licensees in the same related market in terms of transaction conditions;

Other behaviors of abusing market dominance recognized by the State Administration for Market Regulation.

The patent consortium referred to in these regulations refers to two or more operators jointly licensing their respective patents to consortium members or third parties. Patent joint venture parties usually entrust joint venture members or independent third parties to manage the joint venture. The specific methods of joint venture include reaching agreements, establishing companies or other entities, etc.

Article 18 A business operator shall not, in the process of exercising intellectual property rights, make use of the formulation and implementation of standards to reach the following monopoly agreements without justifiable reasons:

Collaborate with competing operators to exclude specific operators from participating in standard formulation, or exclude relevant standard technical solutions of specific operators;

Collaborate with competing operators to exclude other specific operators from implementing relevant standards;

Agree with competing operators not to implement other competitive standards;

Other monopoly agreements recognized by the State Administration for Market Regulation.

Article 19 A business operator with a dominant market position shall not engage in the following acts in the process of formulating and implementing standards to exclude or restrict competition:

During the process of participating in standard formulation, if one fails to timely and fully disclose their rights information in accordance with the regulations of the standard formulation organization, or explicitly waives their rights, but claims the patent right to the standard implementer after the standard involves the patent;

After its patent becomes a standard essential patent, it violates the principles of fairness, reasonableness, and non discrimination by licensing at an unfair high price, refusing to license, tying up goods, attaching other unreasonable transaction conditions, and implementing differential treatment without justifiable reasons;

In the process of standard essential patent licensing, violating the principles of fairness, reasonableness, and non discrimination, without good faith negotiation, requesting the court or other relevant departments to make judgments, rulings, or decisions prohibiting the use of relevant intellectual property, forcing the licensee to accept unfair high prices or other unreasonable transaction conditions;

Other behaviors of abusing market dominance recognized by the State Administration for Market Regulation.

The standard essential patent referred to in these regulations refers to the patent essential for implementing the standard.

Article 20 The following factors may be taken into account in determining the "justifiable reasons" mentioned in Articles 10 to 14 and Articles 17 to 19 of these Provisions:

Beneficial for encouraging innovation and promoting fair market competition;

Necessary for the exercise or protection of intellectual property rights;

Necessary to meet product safety, technical effectiveness, product performance, etc;

To meet the actual needs of the counterparty and comply with legitimate industry practices and trading habits;

Other factors that can prove the legitimacy of the behavior.

Article 21 In the exercise of copyright and copyright-related rights, business operators shall not engage in monopolistic acts prohibited by the Anti-Monopoly Law and these Provisions.

Article 22 The following steps may be taken to analyze and determine that a business operator is suspected of abusing intellectual property rights to exclude or restrict competition:

Determine the nature and manifestation of the operator's exercise of intellectual property rights;

Determine the nature of the relationship between operators exercising intellectual property rights;

Define the relevant markets involved in exercising intellectual property rights;

Identify the market position of operators exercising intellectual property rights;

Analyze the impact of the exercise of intellectual property rights by operators on relevant market competition.

The determination of the nature of the relationship between operators requires consideration of the characteristics of the exercise of intellectual property rights. In the case of intellectual property licensing, the operators who originally had a competitive relationship in the licensing agreement have a transactional relationship, while in the market where both the licensor and the licensee use the intellectual property to produce products, it is a competitive relationship. However, if there is no competitive relationship between operators at the time of entering into the license agreement, and the competitive relationship only arises after the agreement is concluded, it is still not considered an agreement between competitors, unless there is a substantial change in the original agreement.

Article 23 The following factors shall be taken into account in the analysis and determination of the impact of the exercise of intellectual property rights by business operators on the relevant market competition:

The market position of operators and trading counterparties;

Market concentration of relevant markets;

The difficulty level of entering the relevant market;

Industry conventions and stages of industry development;

The time and scope of effectiveness of restrictions on production, region, consumer, and other aspects;

The impact on promoting innovation and technology promotion;

The innovation ability of operators and the speed of technological change;

Other factors related to the impact of recognizing the exercise of intellectual property rights on relevant market competition.

Article 24 When the anti-monopoly law enforcement agency investigates and penalizes the abuse of intellectual property rights to exclude or restrict competition, it shall comply with the Anti-Monopoly Law and the Provisions on the Prohibition of Monopoly Agreements, the Provisions on the Prohibition of Abuse of Dominant Market Position, and the Provisions on the Review of Concentration of Business Operators The procedures stipulated in the regulations shall be implemented.

Article 25 if a business operator reaches and implements a monopoly agreement in violation of the Anti-monopoly Law and these provisions, the anti-monopoly law enforcement agency shall order it to stop the illegal act, confiscate the illegal income, and impose a fine of not less than 1% but not more than 10% of the sales volume of the previous year. If there is no sales volume in the previous year, a fine of not more than 5 million yuan shall be imposed; if the monopoly agreement reached has not been implemented, a fine may be imposed. If the legal representative, the principal person in charge and the person directly responsible of the operator are personally responsible for reaching a monopoly agreement, a fine of less than one million yuan may be imposed.

If an operator organizes other operators to reach a monopoly agreement or provides substantial assistance for other operators to reach a monopoly agreement, the provisions of the preceding paragraph shall apply.

Article 26 If a business operator violates the Anti-Monopoly Law and these Provisions and abuses its dominant market position, the anti-monopoly law enforcement agency shall order it to stop the illegal act, confiscate the illegal income, and impose a fine of not less than 1% but not more than 10% of the previous year's sales.

Article 27: If a business operator illegally implements the concentration of intellectual property rights and has or may have the effect of eliminating or restricting competition, the State Administration of Market Supervision shall order it to stop the implementation of concentration, dispose of shares or assets within a time limit, transfer business within a time limit, and take other necessary measures. To restore to the state before the concentration, a fine of less than 10% of the previous year's sales shall be imposed; if it does not have the effect of excluding or restricting competition, a fine.

Article 28 When determining the specific amount of the fines specified in Articles 25, 26 and 27 of these Provisions, the Anti-monopoly Law Enforcement Agency shall take into account such factors as the nature, degree and duration of the illegal act and the circumstances of eliminating the consequences of the illegal act.

Article 29 In case of violation of the provisions of the Anti-monopoly Law, the circumstances are particularly serious, the impact is particularly bad, and the consequences are particularly serious, the State Administration of Market Supervision may determine the specific amount of fine not less than twice and not more than five times the amount of fine stipulated in Article 56, Article 57, Article 58 and Article 62 of the Anti-monopoly Law.

Article 30 Any staff member of an anti-monopoly law enforcement agency who abuses his power, neglects his duty, engages in malpractices for personal gain, or divulges trade secrets, personal privacy and personal information known in the course of law enforcement shall be dealt with in accordance with the relevant provisions.

Article 31 The clues found by the anti-monopoly law enforcement agency during the investigation of public officials suspected of duty violations or duty crimes shall be transferred to the discipline inspection and supervision agency in a timely manner.

Article 32 If these Provisions do not provide for the abuse of intellectual property rights to exclude or restrict competition, they shall be dealt with in accordance with the Anti-Monopoly Law and the Provisions on the Prohibition of Monopoly Agreements, the Provisions on the Prohibition of Abuse of Dominant Market Position, and the Provisions on the Review of Concentration of Business Operators.

Article 33 The present Provisions shall come into force as of August 1, 2023. The Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition, promulgated by Order No. 74 of the former State Administration for Industry and Commerce on April 7, 2015, shall be repealed simultaneously.