Provisions for the Prohibition of Acts of Abusing Intellectual Property Rights to Eliminate or Restrict Competition

The AML does not apply to the exercise by business operators of their intellectual property rights pursuant to intellectual property laws and administrative statutes; however, the AML shall apply where business operators abuse their intellectual property rights to eliminate or restrict competition.

Article 3: For the purposes of these Provisions, the phrase “abuse intellectual property rights to eliminate or restrict competition” means that a business operator exercises its intellectual property rights in a manner violating the AML by carrying out monopolistic acts such as executing monopolistic agreements and abusing its dominant market position (other than price monopolistic acts).

For the purposes of these Provisions, the term “relevant market”, including the relevant product market and relevant geographic market, shall be defined pursuant to the AML and the Anti-monopoly Commission of the State Council, Guidelines on the Definition of Relevant Market while also considering the effect of factors such as intellectual property and innovation. In anti-monopoly law enforcement involving intellectual property licensing, etc., the relevant product market may be the technology market or the market for a product incorporating specific intellectual property. The term “relevant technology market” means the market constituted by the competition between the technology involved in the exercise of intellectual property rights and similar intersubstitutable technologies.

Article 4: Business operators may not, between themselves, use the method of exercising intellectual property rights to reach a monopolistic agreement as prohibited by Article 13 or 14 of the AML, unless they can prove that the agreement they have reached complies with Article 15 of the AML.

Article 5: If the exercise by a business operator of its intellectual property rights is characterised by any of the circumstances set forth below, it may be determined that the same does not constitute a monopolistic agreement as prohibited by Item (6) of the first paragraph of Article 13 or Item (3) of Article 14 of the AML, unless there is counter-evidence showing that the agreement has the effect of eliminating or restricting competition:

(1) in the relevant market affected by its act, the aggregate market share of the business operators having a competitive relationship does not exceed 20%, or, in the relevant market, there are at least four other independently controlled substitute technologies that can be obtained at reasonable costs; or

(2) none of the market shares of the business operator and its transaction counterparties in the relevant market exceeds 30%, or, in the relevant market, there are at least two other independently controlled substitute technologies that can be obtained at reasonable costs.

Article 6: A business operator with a dominant market position may not, in the course of exercising its intellectual property rights, abuse its dominant market position to eliminate or restrict competition.

Dominant market position shall be determined and deduced pursuant to Articles 18 and 19 of the AML. The ownership of intellectual property by a business operator may constitute one of the factors in determining that it has a dominant market position but a business operator may not be deduced to have a dominant market position in the relevant market solely based on its ownership of intellectual property.

Article 7: Where the intellectual property of a business operator that has a dominant market position constitutes facilities necessary for production and other business activities, the business operator may not refuse, without a valid reason, to license the intellectual property on reasonable terms to other business operators in order to eliminate or restrict competition.

In determining the act specified in the preceding paragraph, all of the following factors shall be considered:

(1) the intellectual property in question may not be reasonably substituted in the relevant market and it is necessary for other business operators to compete in the relevant market;

(2) refusing to license the intellectual property in question would have an adverse impact on competition or innovation in the relevant market and harm the interests of consumers or the public; and

(3) licensing the intellectual property in question will not cause unreasonable damage to the business operator in question.

Article 8: A business operator with a dominant market position may not, in the course of exercising its intellectual property rights, carry out either of the following acts of restricting a transaction, without a valid reason, in order to eliminate or restrict competition;

(1) restricting transaction counterparties to dealing with it exclusively; or

(2) restricting transaction counterparties to dealing exclusively with business operators designated by it.

Article 9: A business operator with a dominant market position may not, in the course of exercising its intellectual property rights, engage in tied sales satisfying both of the following conditions, without a valid reason, in order to eliminate or restrict competition:

(1) forced bundling or combination of different goods for sale in a manner that runs counter to trading practice or consumption habits, etc. or that ignores the functions of the goods; and

(2) carrying out of the tied sales causes the dominant position of the business operator in the market for its tying product to extend into the market for the tied product, thereby eliminating or restricting the competition of other business operators in the market for the tying product or tied product.

Article 10: A business operator with a dominant market position may not, in the course of exercising its intellectual property rights, impose, without a valid reason, the following unreasonable restrictive conditions in order to eliminate or restrict competition:

(1) demanding that transaction counterparties grant back any of their improved technologies on an exclusive basis;

(2) prohibiting transaction counterparties from questioning the validity of its intellectual property rights;

(3) after expiration of the licensing agreement, restricting transaction counterparties from using competing goods or technologies when the same does not infringe intellectual property rights;

(4) continuing to exercise rights in intellectual property whose term of protection has expired or that have been determined to be invalid;

(5) prohibiting transaction counterparties from dealing with third parties; or

(6) imposing other unreasonable restrictive conditions on transaction counterparties.

Article 11: A business operator with a dominant market position may not, in the course of exercising its intellectual property rights, treat counterparties of equal standing in a discriminatory manner, without a valid reason, in order to eliminate or restrict competition.

Article 12: A business operator may not, in the course of exercising its intellectual property rights, use a patent pool in order to engage in acts that eliminate or restrict competition.

The members of a patent pool may not use the patent pool to exchange sensitive competition-related information, such as that on production capacity and market segmentation to reach a monopolistic agreement as prohibited in Articles 13 and 14 of the AML, unless the business operators are able to show that the agreement so reached complies with Article 15 of the AML.

A patent pool management organisation that has a dominant market position may not, without a valid reason, carry out any of the following abuses of its dominant market position to eliminate or restrict competition:

(1) restricting pool members from licensing patents as independent licensors outside the pool;

(2) restricting pool members or licensees from, independently or jointly with third parties, researching and developing technologies that compete with patents in the pool;

(3) compelling licensees to grant back their improved or developed technologies on an exclusive basis to the patent pool management organisation or pool members;

(4) prohibiting licensees from questioning the validity of patents in the pool;

(5) treating pool members of equal standing or licensees in the same relevant market in a discriminatory manner in terms of transaction conditions; or

(6) committing another abuse of dominant market position recognised by the State Administration for Industry and Commerce.

For the purposes of these Provisions, the term “patent pool” means an arrangement by agreement between two or more patentees to jointly license their respective patents to third parties by way of a certain form. The form may be an equity joint venture established specifically for this purpose or, alternatively, may involve the appointment of a pool member or a certain independent third party to carry out the management.

Article 13: A business operator may not, in the course of exercising its intellectual property rights, use the formulation and implementation of standards (here and hereinafter including the mandatory requirements of state technical specifications) to engage in acts that eliminate or restrict competition.

A business operator with a dominant market position may not, without a valid reason, in the course of the formulation and implementation of standards, engage in the following acts that eliminate or restrict competition:

(1) in the course of participating in the formulation of standards, deliberately not disclosing information on its rights to the standards formulating organisation, or expressly waiving its rights, but, after a certain standard covers the patent in question, asserting its patent rights against a party that implements the standard in question; or

(2) after its patent becomes a standard essential patent, it breaches the principles of fairness, reasonableness and non-discrimination by engaging in acts that eliminate or restrict competition, such as refusal to license, tied-in sale of goods or, in the course of dealing, attaching other unreasonable transaction conditions.

For the purposes of these Provisions, the term “standard essential patent” means a patent that is indispensable to the implementation of the standard in question.

Article 14: If a business operator is suspected of abusing its intellectual property rights to eliminate or restrict competition, the administration for industry and commerce shall conduct an investigation in accordance with the AML and the Provisions on Procedures for Investigation and Handling of Cases of Monopolistic Agreements and Cases of Abuse of Dominant Market Position by Administrations for Industry and Commerce.

Article 15: When conducting an analysis to determine that a business operator is suspected of abusing its intellectual property rights to eliminate or restrict competition, the following steps may be taken:

(1) determining the nature of the exercise of intellectual property rights by the business operator and the manner in which the same is expressed;

(2) determining the nature of the relationship between the business operators exercising the intellectual property rights;

(3) defining the relevant market upon which the exercise of the intellectual property rights has a bearing;

(4) determining the market position of the business operator exercising its intellectual property rights; and

(5) analysing the impact on competition in the relevant market of the exercise by the business operator of its intellectual property rights.

When conducting an analysis to determine the nature of the relationship between business operators, it is necessary to consider the features of the exercise of the intellectual property rights itself. Where a licensing of intellectual property is involved, the relationship between business operators that are already competitors is a transaction relationship under a licensing contract, whereas additionally that in the market between a licensor and a licensee who both use the intellectual property in question to produce products is a competitive relationship. However, where parties are not competitors when they enter into a licensing agreement but a competitive relationship arises only after the conclusion of the agreement, it shall still not be deemed an agreement between competitors, unless a substantive change in the original agreement occurs.

Article 16: When conducting an analysis to determine the impact on competition of the exercise by a business operator of its intellectual property rights, consideration shall be given to the following factors:

(1) the market positions of the business operator and its transaction counterparties;

(2) the degree of market concentration in the relevant market;

(3) the degree of difficulty to enter the relevant market;

(4) industry practice and the development stage of the industry;

(5) the duration of the restriction in production capacity, territory, consumers, etc. and the scope of the effect thereof;

(6) the impact on the promotion of innovation and the spread of technology;

(7) the business operator's innovation capacity and the speed of technological change; and

(8) other factors relevant to determining the impact on competition of the exercise of the intellectual property rights.

Article 17: If the abuse of intellectual property rights by a business operator to eliminate or restrict competition constitutes a monopolistic agreement, the administration for industry and commerce shall order it to cease the illegal act, confiscate the illegal income and impose a fine of not less than 1% and not more than 10% of the preceding year's sales turnover. Where the monopolistic agreement that has been reached has not yet been implemented, a fine of up to Rmb500,000 may be imposed.

If the abuse of intellectual property rights by a business operator to eliminate or restrict competition constitutes abuse of its dominant market position, the administration for industry and commerce shall order it to cease the illegal act, confiscate the illegal income and impose a fine of not less than 1% and not more than 10% of the preceding year's sales turnover.

When determining the specific amount of the fine, the administration for industry and commerce shall consider factors such as the nature, circumstances, extent and duration of the illegal act.

Article 18: The State Administration for Industry and Commerce shall be in charge of interpreting these Provisions.

Article 19: These Provisions shall be effective as of August 1 2015.