China has recently released the Antitrust Guidelines for Standard Essential Patents (hereinafter referred to as the Guidelines), a detailed framework designed to regulate the competitive dynamics associated with standard essential patents (SEPs). The Guidelines, structured into six chapters comprising 22 articles, address critical antitrust concerns related to SEPs, including market competition, patent disclosure, licensing commitments, and the abuse of market dominance.

Key Highlights of the Guidelines:

  1. General Provisions (Articles 1–5)

This section establishes the foundation of the Guidelines, outlining their purpose, scope, and legal basis. It defines key concepts related to SEPs and introduces principles for analyzing potential anticompetitive behaviors. The provisions also provide a framework for defining relevant markets and identifying antitrust concerns in both preemptive and ongoing contexts.

  1. Disclosure, Licensing Commitments, and Good Faith Negotiations (Articles 6–8)

The Guidelines emphasize compliance with FRAND (Fair, Reasonable, and Non-Discriminatory) principles, requiring SEP holders to adhere to transparent licensing commitments and good-faith negotiation practices. These measures aim to promote fair market conditions and strengthen antitrust enforcement within the SEP domain.

  1. Anticompetitive Agreements (Articles 9–11)

This section addresses monopolistic agreements that could arise during the standardization process or the licensing of SEPs. It specifically highlights concerns related to patent pooling and other collaborative agreements that might distort market competition.

  1. Abuse of Market Dominance (Articles 12–18)

These articles detail the assessment of market dominance in the SEP context, including methodologies and key factors for evaluation. They define various forms of abusive conduct, such as unfair pricing practices. discriminatory licensing terms, refusal to license SEPs. The section also provides clear criteria for identifying and addressing such anticompetitive behaviors.

  1. Concentrations of Undertakings (Articles 19–20)

The Guidelines outline the procedures for reporting and reviewing mergers and acquisitions involving SEP holders. Key factors for consideration include the impact on market competition and potential antitrust risks posed by such concentrations.

  1. Miscellaneous Provisions (Articles 21–22)

The final chapter clarifies the scope, applicability, and interpretation of the Guidelines. It emphasizes their voluntary nature while encouraging stakeholders to adopt best practices in SEP-related activities.

Balancing Innovation and Competition

The drafters of the Guidelines highlight their dual objectives:

  • Protecting intellectual property rights to incentivize innovation.
  • Preventing monopolistic behaviors that could hinder market competition.

By promoting compliance with FRAND principles, the Guidelines aim to align China’s SEP regulatory framework with international best practices. Additionally, they encourage the lawful use of patents to foster technological advancements and ensure a transparent, equitable SEP market.

 

SESEC Briefing on the Guidelines

The Guidelines build on key legislative frameworks, including the Anti-Monopoly Law of the People’s Republic of China (Anti-Monopoly Law), the Antitrust Guidelines in the Field of Intellectual Property (IP Guidelines), and the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition (IP Provisions). They extend China’s legislative efforts to integrate intellectual property rights with antitrust principles, promoting fair competition and innovation while refining regulatory practices for the standard development and implementation process.

The Guidelines introduce both procedural innovations—such as mechanisms for “enhanced ex-ante and ongoing supervision”—and substantive provisions that balance the interests of SEP holders and implementers. By addressing key issues like monopoly agreements and abuses of market dominance, they provide clearer guidance on typical monopolistic behaviors and their determining factors.

This briefing highlights the key provisions and practical applications of the Guidelines, aiming to assist enterprises in understanding SEP-related antitrust compliance, mitigating risks in SEP licensing and disputes, and safeguarding their legitimate rights.

  1. Enhanced Ex-Ante and Ongoing Supervision Mechanisms

The Guidelines establish a tiered antitrust regulatory framework for SEPs, emphasizing proactive measures to identify and address antitrust risks at both the standard development and implementation stages.

  1. Promotion of “Good Practices” in SEP Management

The Guidelines encourage compliance with legislative and judicial precedents by emphasizing three key obligations for SEP holders and implementers:

  • Information Disclosure Obligations: Stakeholders must ensure transparent communication of relevant SEP-related information.
  • Licensing Commitment Obligations: Commitments under FRAND principles must be upheld to maintain fairness in the market.
  • Good-Faith Negotiation Obligations: Licensing negotiations should be conducted with transparency and mutual respect to avoid unnecessary disputes.

Chapter 2 elaborates on these obligations, providing practical guidance to promote equitable and efficient practices in the SEP lifecycle.

  1. Clearer Definitions of Monopoly Agreements in Standard Development

The Guidelines expand on the categories of monopoly agreements identified in the IP Provisions and IP Guidelines, offering more specific examples of behaviors to avoid during standard development and implementation:

  • Typical Risks of Monopoly Agreements: These include collusion and anticompetitive agreements formed during the standard-setting process.
  • Antitrust Risks in Patent Pools:
    • Avoiding sensitive information exchange and collusion.
    • Monitoring the substitutability of pooled patents.
    • Minimizing exclusive licensing to reduce barriers to market entry.
  1. Clarification of Market Dominance Abuses

The Guidelines identify specific practices that could constitute abuses of market dominance in SEP-related activities, including:

  • Unfairly High Licensing Fees: Charging excessive fees that exploit implementers.
  • “Harsh” Grant-Back Arrangements: Imposing onerous requirements for implementers to license back improvements.
  • Bundled Licensing: Requiring implementers to accept unrelated or unnecessary patents.
  • No-Challenge Clauses: Prohibiting implementers from questioning the validity of SEPs.
  1. Balanced Remedies for SEP-Related Abuses

Recognizing the complex stakeholder interests involved in SEPs, the Guidelines aim to balance the rights of SEP holders with those of implementers:

  • Support for SEP Holders: Protects their intellectual property rights and ensures reasonable returns from innovation.
  • Oversight of Monopolistic Behavior: Limits abuses of SEPs that hinder competition and innovation by implementers.
  • Alignment with FRAND Principles: Ensures that SEP-related practices promote fairness, reasonable pricing, and non-discriminatory access.

The Guidelines emphasize that intellectual property rights must be exercised within legal boundaries to stimulate innovation while maintaining market fairness.