Regulations on the Prohibition of Conduct Eliminating or
Restricting Competition by Abusing Intellectual Property Rights
took effect on August 1, 2015. The regulations give the
Administration for Industry and Commerce (AIC) the power to use
Chinese anti-monopoly law to deal with IP issues.
The regulations clarify that a dominant market position should
be determined according to articles 18 and 19 of the anti-monopoly
law and further clarify that ownership of IP rights is one of the
factors in determining a dominant market position, but it should
not be presumed solely because of such ownership.
The regulations provide market share safe harbours.
Specifically, unless it can be proved to have the effect of
eliminating or restricting competition, agreements between business
operators will not be determined as monopolistic agreements,
The combined market share of the competing business operators
is less than 20%, or there are at least four other independently
controlled substitutable technologies that can be obtained at
reasonable cost; or
The market share of neither the business operator nor its
trading partner exceed 30%, or there are at least two other
independently controlled substitutable technologies that can be
obtained at reasonable cost.
Article 7 of the regulation prescribes that a business operator
in a dominant market position should not, without justified
reasons, refuse to license its IP under reasonable conditions to
eliminate or restrict competition, if its IP constitutes a facility
essential for production and business operations.
This article also specifies the conditions that must be met for
the application of this provision, namely:
The IP cannot be reasonably substituted and is indispensable
for other business operators to compete;
The refusal to license will have a negative impact on
competition or innovation and is detrimental to the welfare of
consumers or public interest; and
Licensing such IP will not cause unreasonable harm to the
The regulations also have detailed provisions regarding licence
clauses that prohibit a business operator in a dominant market
position from, without justified reasons:
Restricting trading partners to dealing exclusively with itself
or designated business operators;
Tying or bundling different goods for sale, which results in
the extension of its dominant position in the tying product market
into the tied product market;
Requiring trading partners to exclusively grant back their
Prohibiting trading partners from challenging the validity of
their IP rights;
Restricting trading partners from using competing goods or
technologies after the expiry of the licence;
Continuing to enforce its IP rights after the IP rights expired
or are invalidated;
Prohibiting trading partners from dealing with third
Imposing other unreasonable restrictions on trading partners;
Giving discriminatory treatment to equivalent trading
Article 12 prescribes that members of a patent pool should not
reach monopolistic agreements through exchange of information
regarding production volume, markets division, etc.
A patent pool organisation in a dominant market position should
not, without justified reason:
Restrict members from becoming independent licensors outside
Restrict members or licensees from independently, or in
conjunction with a third party, developing technology that competes
with the pooled patents;
Force licensees to exclusively grant back the technology they
improved or developed to the organisation or its members;
Prohibit licensees from challenging the validity of the pooled
Give discriminatory trading conditions to equivalent members or
Article 13 prescribes that in a standard setting or implementing
process, a business operator in a dominant market position should
not, without justified reasons:
Deliberately fail to disclose information regarding its IP
rights to the standard-setting organisation or give up its IP
rights but then enforce its patent against users of the standard
when the standard involves the patent; or
When its patent becomes essential to the standard, engage in
conduct in violation of the fair reasonable and non-discriminatory
principle, such as refusal to license, tying products or imposing
unreasonable trading conditions.
The regulations further prescribe that if a monopolistic
agreement or abuse of dominant market position is found, the AIC
may order a business operator to stop the relevant conduct,
confiscate illegal earnings and impose a fine of 1 to 10% of its
annual revenue, or a fine of no more than RMB500,000 ($80,000) when
the agreement has not been implemented.
Stephen Yang is a partner at Peksung Intellectual Property.
He can be contacted at:firstname.lastname@example.org
This article first appeared in World Intellectual Property
Review, published by Newton Media Ltd.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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