On 4 November 2024, the China State Administration for Market Regulation (SAMR) announced the finalized "Anti-monopoly guidelines for standard essential patents" (the guidelines) at the link below:
https://www.gov.cn/zhengce/zhengceku/202411/content_6985623.htm
You may recall that I posted about the draft of the guidelines in July 2023 (https://www.linkedin.com/pulse/cn-samr-anti-monopoly-guidelines-standard-essential-patents-toby-mak/?trackingId=MsHx2YHtR%2F%2BvxsX%2FwRsOWQ%3D%3D ).
The below are based on the original Chinese text, its machine English translation, and the Chinese comparison of the final version (Nov 2024) with the draft (July 2023).
Unless otherwise specified, concerns raised in my previous post in July 2023 still apply, i.e. these remain unchanged in the final November 2024 version.
In my view, while most other revisions are making the guidelines more readable and concise (like consolidating the term "SEP patentee" to also include SEP operator having the rights to license), below are some significant changes:
- In all evaluation of monopolistic behaviors (articles 13-17), good faith is the first point to consider.
- New article 5 is directed to "strengthen supervision before and during the dispute". This allows all parties including the SEP setting organizations, the SEP patentees and the implementers, in fact anybody, to the Chinese authorities to step in "If any risk of excluding or restricting competition is found". The Chinese authorities then have the right to "propose improvement measures to prevent and rectify relevant problems" "through reminders, urging, interviews and rectification, and so on", although it is stated in this article 5 that these preemptive measures "will not affect the investigation and handling of monopolistic behavior." [Toby: You choose what to believe my friends.]
- Article 8 regarding good faith negotiations from the SEP patentee, the following are added:
1) At the offer, the following are additionally required:
- a) Reasonable number of comparison tables of standard essential patents and standards. [Toby: I thought China is a number country. When playing the number game (dumping the implementer with numerous comparison tables) hurts, China now wants this to stop for its own benefit. It will be great if this way of thinking (not playing the number game) is also extended to other areas.]
- b) The use scope and geographical scope of the SEP.
- c) Calculation method and basis of the license fee rate.
2) Specifying that the implementer has the rights to challenge the essentiality and validity of the SEP even if the implementer expresses good faith interest to negotiate.
- Article 10 regarding setting up of SEP patent pool, the following are added in the consideration of whether the pool is monopolistic:
1) Whether competing patents are included in the pool.
2) Whether SEP patentee is restricted from licensing to other parties individually.
3) Whether SEP patentees are organized to reach monopoly agreements or providing substantial assistance to SEP owners to reach monopoly agreements. [Toby: While the above two additions make sense to me, I will be grateful for any education on this addition, which appears to be natural operation of any SEP patent pool?]
- Article 13 regarding evaluating whether the SEPs license fee is unfairly high, "apparently higher than the development costs" has been removed. [Toby: I am glad that my concern on this point in the draft was addressed.]
- Article 16 regarding other unreasonable conditions, the following are added:
1) Restricting the implementer from developing competing technologies.
2) Without proper reason, requiring the implementer to provide or disclose business and technical information that is irrelevant to the implementation of the standard and obviously irrelevant to the relevant standard essential patent license, and other unreasonable conditions.
- Article 17 regarding differential treatment, the following are added to the factors of considerations:
1) Whether the timing and market context of the licensing negotiations have changed significantly.
2) Whether the licensing conditions such as license quantity, region, term and scope of use are substantially the same.
- Article 20 regarding remedies against concentration of undertakings, the following are added:
1) Including but not limited to requiring relevant operators to divest relevant assets including standard essential patents, licensing in accordance with the FRAND principles, prohibiting tie-in sales and imposing necessary restrictions on the behavior of standard essential patent assignees, and so on.
Toby's thoughts
As mentioned many times, I am not an expert in SEP and anti-monopoly, and will be grateful for any thoughts and education from the expert peers. If I missed anything important, please also let me know.
As Chinese entities are mostly on the receiving side, these guidelines have many measures benefiting the implementers. These can be seen all over the guidelines, like articles 5, 8, and 16. While the intention is understandable, these guidelines could make SEP bodies less willing to operate in China – when it is going to kill you, earning money is no longer an issue. When one side in a relationship is too bullying, the other side could just turn its back and walk away.
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.
