AIPLA Files Comments on China’s Draft Provisions Prohibiting Abuse of Intellectual Property Rights to Exclude or Restrict Competition

Arlington, VA. August 23, 2022 - The American Intellectual Property Law Association (AIPLA) filed comments on Draft Provisions Prohibiting Abuse of Intellectual Property Rights to Exclude or Restrict Competition issued by China’s State Administration for Market Regulation (Draft Provisions). 

The comments point out that AIPLA generally believes intellectual property rights (IPR) should not be enforced beyond their effective term limits, given the efficient market realities of portfolio licensing, but recommends the Draft Provisions explicitly permit parties to establish license agreements that license an entire portfolio of IPR, notwithstanding the fact that certain IPRs may expire or be found invalid during the term of an agreement.

The AIPLA Comments are concerned about the Draft Provisions’ prohibition of licensing at an “unfairly high price” without providing adequate guidance as to what constitutes an “unfairly high price” and recommends such guidance be added.

AIPLA finds the Draft Provisions treatment of differentiated pricing unclear, difficult to implement, and inconsistent with both commitments to license on fair reasonable and non-discriminatory (FRAND) terms and court decisions outside China. It therefore recommends adding text highlighting the analysis of differentiated pricing and clarifying the multiple factors and pricing mechanisms that should be considered before China’s competition authority intervene in such cases. 

With respect to FRAND licensing, AIPLA notes that breach of a contractual FRAND commitment is not, and should not be, sufficient alone to establish a competition issue. Hence, the Comments recommend that the Draft Provisions clarify that antitrust laws may be invoked only when the violation of a contractual FRAND promise inflicts anticompetitive harm that cannot be reasonably handled by parties in court because that harm is egregious, and demonstrably affects social order. 

Overall, the Comments recommend applying a case-by-case rule of reason analysis of the procompetitive and anticompetitive effects of the conduct addressed in the Draft Provisions.