New Provisions Prohibiting Abuse of Intellectual Property Rights to Exclude and Restrict Competition

In general, with the revision of the Anti-Monopoly Law of the People’s Republic of China in 2022 and the promulgation of various regulations related to anti-monopoly, e.g., the “Provisions on Prohibiting Monopoly Agreements”(2023), the “Provisions on Prohibiting Abuse of Dominant Market Positions”(2023), the“Anti-monopoly Guidelines on Platform Economy”(2021) etc., China's legislation in the field of anti-monopoly has been continuously improved.

The revision of the Provisions, with a view to strengthening anti-monopoly regulation and maintaining the order of market competition while protecting intellectual property and promoting innovation, not only reflects the legislative spirit of various newly issued laws and regulations, but also invents various new rules regarding anti-monopoly in the field of IPR. Enterprises should minimize the risks in the process of exercising IPR and better protect their legitimate rights and interests in the market competition according to the requirements of China’s Anti-Monopoly Law and the Provisions.

Compared with the previous Provisions in 2015, the revised Provisions also include “concentration of business operators” in the scope of regulation. Therefore, the three forms of monopoly stipulated in China’s Anti-Monopoly Law (monopoly agreements, abusing dominant market position, and concentration of business operators) have all been incorporated into the rules of the anti-monopoly system in the field of IPR.

In terms of monopoly agreements, Article 6(2) of the Provisions clarifies that “A business operator may not, by way of exercising intellectual property rights, organize other business operators to reach monopoly agreements or provide substantive assistance for other business operators to reach monopoly agreements.” This article, which is in line with Article 19 of the newly amended Anti-Monopoly Law of 2022, explicitly prohibits Hub-and-Spoke Conspiracy in the field of IPR.

Article 7(2) of the Provisions applies the “Safe Harbor” rule, i.e., when the business operator can prove that the market share of the business operators participating in the agreement in the relevant market is lower than the criteria prescribed by the SAMR, and other conditions prescribed by the SAMR can be satisfied, such agreement will not be prohibited. This article is in line with Article 18(3) of the Anti-Monopoly Law, which no longer prohibits vertical agreements below the threshold set by the SAMR.

Regarding the determination of “dominant market position”, Article 8 of the Provisions specifies that the following factors may be considered in determining or presuming that a business operator possessing intellectual property rights has a dominant position in the relevant market:

Article 15 of the Provision specifies the declaration system, meaning that if a concentration of business operators involving IPR reaches the threshold of declaration prescribed by the State Council, the business operators concerned shall make a declaration in advance to the SAMR, and may not implement the concentration without declaration or before the declaration is approved.

Article 16 lists additional restrictive conditions for the review of concentration of business operators, including the divestiture of intellectual property rights or business involving intellectual property rights, maintaining the independent operation of business relevant to intellectual property rights, and licensing intellectual property rights on reasonable terms.

Articles 17 to 21 of the Provisions provide for regulations regarding special monopolistic acts in the field of intellectual property.

The term “patent pool” refers to the joint licensing by two or more business operators of their respective patents to a member of the pool or a third party. A party to a patent pool usually entrusts a member of the pool or an independent third party to manage the pool. The specific forms of a pool include reaching agreements and establishing companies or other entities.

Article 18 of the Provisions prohibits business operators from jointly excluding certain business operators from participating in the formulation or implementation of standards without justifiable reasons, excluding certain business operators from proposing relevant standards and technical schemes, or agreeing with a competing business operator not to implement other competitive standards.

Article 21 of the Provisions specifies that the operator shall not engage in monopolistic acts prohibited by the Anti-Monopoly Law and these Provisions in the exercise of copyright and copyright-related rights.

Articles 24 to 31 of the Provisions clarify the legal liability for violation of the Anti-Monopoly Law and the Provisions. The revisions in this part are to better align with the revised Anti-Monopoly Law in 2022, including the upward adjustment of the upper limit of the amount of fines, imposing fines on persons with personal responsibility, and imposing legal liability on the staff of the anti-monopoly enforcement agencies.