In the News: SEP Antitrust Regulation; First Infringement Case on Search Prompt Algorithms; and China's First Energy Law

|

China Introduces Regulation on Standard Essential Patents

Chinese antitrust regulator has published guidelines to prevent the misuse of standard essential patents (SEPs) to restrict competition, Xinhua reports.

SEPs are patents that protect inventions that are necessary to implement a technological standard. The Anti-Monopoly Guidelines Concerning Standard Essential Patents (“Guidelines”) (标准必要专利反垄断指引), issued by China's State Administration for Market Regulation (SAMR), seeks to further regulate patent-holders' antitrust behavior. The guidelines “have defined SEP-related concepts, put forth analysis principles for monopolistic acts involving SEP and definition of the relevant market, among others,” the government's statement said. In particular, SEP holders are encouraged to “proactively disclose relevant information and negotiate in good faith to avoid market failures caused by information asymmetry," according to an article by Financial Law Worldview. The guidelines also imply that “future agreements or actions in the standardization process will be subject to strict scrutiny.” By introducing the guidelines, the government hopes it can “promote fair market competition and protect the driving forces of industrial innovation and development."

The Financial Law Worldview article stresses that regulation of SEPs is necessary because “patents essential to implementing standards can, to some extent, lead to market dominance.” In addition, “some SEP holders may adopt unfair terms in licensing and negotiations, such as excessively high licensing fees or imposing unreasonable conditions, aiming to use their market dominance to exclude or restrict competition.” Such acts would not only harm businesses relying on such patents but also stifle innovation.

However, the guidelines are somewhat controversial because the state’s interference with patent rights is “obviously inconsistent with the patent holders’ wish for as little interference as possible”, an article by the Enterprise Patent Observation notes.

Dongping Liu, antitrust counsel at Zhong Lun Law Firm, told China Law & Practice that the guidelines address "emerging issues such as the patent pool amid its growing controversy in the Chinese EV industry. It also clarifies the risks associated with SEP licensing practices regarding monopolistic agreements, abuse of dominance, and concentration between undertakings. For instance, it posits that seeking injunction relief may be deemed an abuse of dominance if the licensor or licensee fails to adhere to a bona fide negotiation framework. Overall, throughout its drafting and revision process, the guidelines have evolved from a licensee-favoring stance to a more nuanced approach, carefully balancing innovation protection with fair competition.”

More from CLP:
Patent Infringement Case: In the News: Austrian Starlinger Settled IP Case
IP Rights and Antitrust Case: A Vital Supreme People's Court Decision for IP Rights Holders in China

|

Court Clarifies Obligations of Platforms with Search Engines

The Beijing Internet Court has ruled that an online platform is not liable for its search engine algorithms that caused damage to the plaintiff. This was the first case regarding prompt words in a search engine.

On November 11, the first defendant, surnamed Xia, published articles and videos on a Beijing information service company’s (the second defendant) online platform. The plaintiff, a Shenzhen technology company, alleged that these articles infringed on its right of reputation. “The 'search' section at the bottom of the page where one of the articles is located contains search prompts such as 'scam.' " In addition, when the name of the plaintiff is entered in the search box of the platform, search prompts such as ‘scam’ and ‘defrauded’ will also appear,” according to the court's press release. The plaintiff accused the second defendant of knowingly and selectively adding such search prompt terms “to the infringing content of the first defendant.”

The court held that although the articles and videos harmed the plaintiff’s reputation, the second defendant should not be liable. It explained that the plaintiff, by leaving a message in the comment area of one of the articles rather than submitting a complaint using the platform’s reporting channel, failed to issue an effective notice to the platform. Thus, the second defendant was not aware of the first defendant’s infringement, and thus is not jointly and severally liable.

It also found that the “search prompts involved were automatically generated and updated by the second defendant using algorithms based on the search and browsing history records of unspecified users.” The second defendant only interferes when illegal or immoral content is shown. The court explains that “it is not technically feasible to require the second defendant to review the search prompt words in advance one by one to see if they are infringing within a reasonable cost,” and would be too onerous to require it to verify and review the content with the current level of technology. Given that the second defendant has “taken necessary measures within a reasonable period of time after receiving the relevant litigation materials and has fulfilled the post-event obligations of an internet service provider,” and properly explained its algorithm, there is no liability.

Casper Sek, a TMT partner at Jingtian & Gongcheng, told CLP ,“The court’s opinion in this ruling provides significant guidelines for similar cases.” He explains that the court will likely consider multiple factors, rather than a single factor, when “assessing the boundaries of liability for services based on new technologies.” These factors include “the technical principles involved, the degree of human intervention, the recognizability of the content, the platform’s technical capabilities, and whether the service itself is profit-driven.” Sek adds that the “court affirmed the responsibility of service providers to explain the algorithms used,” a duty fulfilled by “presenting evidence regarding the basic principles, generation mechanisms, operational rules, and technical feasibility of the algorithms in question.”

More from CLP:
Court case on consent: In the News: Personal Information Dispute
Cross-border data case: In the News: First Cross-Border Data Transfer Judgment in China

|

China Delivers on Climate Change Pledge

On November 8, China passed the PRC Energy Law (中华人民共和国能源法 ）, which promotes carbon neutrality. The law was adopted during China's latest session of the Standing Committee of the National People’s Congress, the top legislative body in China, according to ESG News. This is the first-ever energy law passed by China. 

The new legislation has nine comprehensive chapters that cover a range of critical energy issues as China strives to deliver on its climate change pledge to decarbonize its economy by 2060, according to ESG News and Phys Org News. 

The key provisions of the new legislation include energy structure optimization, dual control on carbon emissions, renewable energy utilization and consumption guarantee, green energy consumption promotion, and new power system construction, according to Energy Trend. The new energy law specifies that it will promote a reliable, orderly transition from fossil fuels to non-fossil alternatives, increase the proportion of non-fossil energy consumption, establish a framework to shift from controlling total and intensity of energy consumption to dual control of total and intensity of carbon emissions, and establish specific provisions for the development and utilization of renewable energy sources such as hydropower, wind, solar, and hydrogen energy.

The legislation also strengthens mechanisms to ensure the consumption of renewable electricity, establishes measures to implement a green electricity certification system, encourages consumers to use renewable and low-carbon energy, and encourages public institutions to prioritize the acquisition and use of renewable energy and energy-saving products and services. It also aims to increase the development of a new power system that will enhance the grid’s capacity to integrate, allocate, and regulate renewable energy.

Wang Peng, a professor from the North China Electric Power University, told  China Daily that this new energy law will set “clear goals for green energy development,” as well as specify “the responsibilities of entities involved.” This would help in the development and utilization of wind and solar energy, Peng said, noting that the legislation “requires a combination of centralized and distributed systems and lays a legal foundation for distributed power trading, microgrids, and other business models.”  

More from CLP:
China Simplifies Environmental Approval Procedures: China's Environmental Regulator Plans to Simplify Procedures to Help Private Sector
Chinese Green Tech Invests in EU: More Chinese Green Tech Being Produced in Europe