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Principles and methods of antitrust
analysis of the abuse of intellectual
property rights
Lecturer: Professor Huang Yong
Law school of UIBE
March 12,2010
Ⅰ. The relationship between intellectual
property (IP) and Antitrust Law.
Ⅱ. Basic principles of applying Antitrust Law
to the abuse of intellectual property rights
Ⅲ. Specific regulations of the abuse of
intellectual property rights.
Ⅰ. The relationship between intellectual property and
Antitrust Law.
• IP can promote innovation by entitling the right holders an
exclusive right to their intellectual property during certain
period, thereby provide consumers with cheaper products and
service of higher quality.
• By maintaining competition, Antitrust Law ensures that
products and service be traded and circulated in competitive
circumstances, achieving a rational resource allocation,
enhancing economic efficiency, maintaining innovation
achievement, thereby benefits consumers to the utmost.
• IP and Antitrust Law are both committed to providing
consumers with new, better and cheaper technique, products
and service, their basic targets are the same: to increase
consumer welfare and promote innovation.
Article 55 of Antitrust Law
• Article 55 This law is not applicable to
undertakings who exercise their intellectual
property rights in accordance with the laws
and administrative regulations on intellectual
property rights; however, this law shall be
applicable to the undertakings who eliminate
or restrict market competition by abusing their
intellectual property rights.
Article 55 of Antitrust Law
• Whether the abuse of IPR restricted competition or
not, Antitrust Law should be the only judging
• If the exercise of IPR restricts relevant market
competition, it will be regulated by Antitrust Law, no
matter IPR be abused or not.
• Conversely, even IPR is abused, if there is no
negative influence on relevant market competition,
Antitrust Law is not applicable, it shall be regulated
by Intellectual Property Law or Civil Law.
The current status of IPR protection in
China and Chinese IPR policy
• Science and technology are the primary
productive forces. China is paying more
attention to technical innovation, focusing on
developing high-tech industry economy.
• As a whole, China is still an IP importing
country, while the developed countries are major
IP exporting countries.
IPR protection in China
• China has established a complete legal system for IPR protection,
and has acceded to many international conventions for the
protection of IPR:
 Domestic laws: Patent Law, Trademark Law, Copyright Law,
Regulation for the Protection of Computer Software, Regulations on
the Protection of Layout Designs of Integrated Circuits, Regulations
on the Collective Management of Copyright, Regulations on the
Management of Audio-Video Products, Regulations on the
Protection of New Varieties of Plants, etc.
 International treaties: Regulations on the Protection of Intellectual
Property Rights by the Customs, Paris Convention for the
Protection of Industrial Property, Patent Cooperation Treaty,
Madrid Agreement for International Registration of Trademarks,
Berne Convention for the Protection of Literary and Artistic Works,
Universal Copyright Convention, etc.
The relationship between IPR protection and
regulation of IPR abuse
• As Chinese government protects foreign IPR energetically,
domestic enterprises are crying out against the unfair treatment
of foreign IPR, for instance, DVD Patent Pool was on a charge
of overhigh license fee, refusal of license, and illegal tying.
• Antitrust Law is not the sole legal remedy regulating IPR
abuse. It maintains and promotes technological competition,
encourages technological innovation.
• Cracking down on IPR abuse shouldn’t be at the cost of
restraining innovation. Protecting IPR and promoting
technological innovation should still be China’s basic IPR
Ⅱ. Basic principles of applying
Antitrust Law
1. . When an IPR conduct is examined for whether it violates
Antitrust Law, it should be analyzed in the framework of
Antitrust Law, and IPR should be treated equally to other
property rights,and the same principles of Antitrust Law
should be applied.
Ⅱ. Basic principles of applying
Antitrust Law
2. IPR owners can’t be presumed to possess market control
required by Antitrust Law only because they own IPR.
• Market control refers to the capacity of making profit while
maintaining the price higher or the production lower than the
level of competition in a fairly long period. Although IPR
entitles a certain product ,method or the relevant work
exclusive rights, there are usually enough aforementioned
product, method or work or potential similar substitute that
impede market control.
Ⅱ. Basic principles of applying
Antitrust Law
3. The exercise of IPR can usually promote competition,
realize mutual complementarity of resources, increase
the efficiency of resource allocation. For that reason,
the Antitrust Law Enforcement Agency should apply
the rule of reason to analyze a conduct concerning
IPR, comparing its effect upon promoting
competition and restraining competition.
IPR and the abuse of market
dominant position
 Merely owning an IPR can’t make undertakings
possess market dominant position, the Antitrust Law
Enforcement Agency should judge whether the
undertakings possess market dominant position
through determining the relevant market and
economic analysis.
IPR and the abuse of market dominant
• Even though undertakings who own IPR possess
market dominant position, it isn’t against Antitrust
Law for undertakings to possess market dominant
position through IPR, as long as they don’t eliminate
competition by exercising IPR unreasonablly.
IPR and the abuse of market dominant
 To examine whether a conduct concerning IPR is the
abuse of market dominant position, the Antitrust Law
Enforcement Agency should analyze the constitutive
requirements of the abuse of market dominant
position in accordance with Article 17 of Antitrust
Law, by applying the rule of reason.
Ⅲ. Specific regulations of the abuse of
intellectual property rights.
Overhigh license fee
Refusal of license
Patent Pool
Technical Standard
(Ⅰ)Overhigh license fee
• License fee is the main way for IPR owners to get
income, especially the non-production R&D
institutions, license fee is their one and only source
of profit.
• License fee income is the motivation for IPR owners
to continue carrying on technical innovation.
• Overhigh license fee can stimulate competitors to
invest in R&D relevant technique, and to improve
production efficiency .
(Ⅰ)Overhigh license fee
• Conditions for overhigh license fee becoming
monopoly price: IPR owners who possess market
dominant position can get out of competition pressure,
and determine license fee without obeying market
discipline, and gain monopoly profit though fixing
monopoly price which is higher than competitive
• Antitrust Law should respect IPR owners’ right to
determine license fee, and let market itself adjust
overhigh license fee.
(Ⅱ)Refusal of license
• Patent law explicitly entitles patentees to exclusive
rights to exercise their patent, including refusal of
• According to traditional antitrust law principles,
monopolists have no obligation to aid their rivals,
sharing goes against the purpose of antitrust law, that
is, promoting competitors’ enthusiasm to invest by
means of competition.
(Ⅱ)Refusal of license
• Intervening refusal of license to much may lead to:
1. The law enforcement agency may become the director
or planner of market conduct.
2. Discouraging licensors’ enthusiasm for innovation.
3. Depriving market participants of their right to choose
freely with whom to deal.
4. Resource sharing may also lead to collusion.
• Compulsory license against refusal of license should be
taken rarely.
(Ⅱ)Refusal of license
• According to the rule of reason:
1. The enterprise has the power of market monopoly;
2. Carrying out unilateral refusal of license, especially conditional
refusal of license;
3. The aforesaid conduct has weakened market competition;
4. There is no just cause for the aforesaid conduct.
• Generally, if a patentee who has the power of market monopoly
exercise license previously, but conditionally refuse to continue
license for the sake of raising license conditions or increasing
license restrictions, and the aforesaid license is good for the
society’s welfare, this unilateral conditional refusal of license will
probably be determined as a violation of Antitrust Law.
• Plaintiff Company A developed a kind of software and lodged a copyright
application, defendant Company B is a rival of company A, plaintiff A
holds 90% in the after-sales service market, while defendant B holds only
about 3%. Initially, Company A took a loose policy that permit the third
party to use the diagnostic software. Company A changed this policy soon
afterwards, and restricted the scope of license to its technicians and device
owners that accept A’s service. Therefore, Company B couldn’t use the
software. To obtain the software, Company B get a copy from one of its
employees who was a former employee of Company A. Company A sued
Company B for infringement of copyright, while Company B
countercharged Company A with illegal monopoly because of its unilateral
refusal of license.
 Tying refers to the conduct of the undertakings who demand
consumers to buy another product (tied product) when selling a
certain product (tying product).
 The constitutive requirements of tying:
1. Two independent products (tying product and tied product);
2. The seller sells those two products by means of tie-in sales;
3. The seller has market dominant position in the tying product
4. Material effect upon the tied product market;
5. Whether there is just reason for tying.
• Special problems of tying involving IPR: If the
tying product is a patented product, the
Antitrust Law Enforcement Agency shall not
presume the patentee to have market dominant
position in the tying product market.
• Case 1: Sichuan Dexian Science and
Technology Co., Ltd vs. Sony
Example 2
• Company A is a manufacturer of equipment and components,
and its equipment and components are patented, Company A
supplies equipment maintenance service. Company B is a
third-party equipment maintenance service provider, and needs
to purchase components from Company A when it supplies
maintenance service. Hereafter, Company A takes a measure:
only sells components to the equipment buyers who accept
Company A’s maintenance service. Meanwhile, Company A
attempts to prevent Company B from buying components from
other channels. Company B therefore sued Company A for
illegally compelling equipment maintenance service (tied
product) to be subject to the sale of equipment and
components (tying product).
(Ⅳ)Patent Pool
• Patent pool is often established when a group of
patentees all decide to cross license their patents to
each other and also license to a third party.
• The form of patent pool is always because masses of
licensed technologies are used to produce one
standardized product.
• Patent pool is helpful to solve complicated ‘patent
thickets’, reduce transaction cost, and improve license
(Ⅳ)Patent Pool
• The integration of complimentary or mutually exclusive
patents by patent pool always promotes competition.
• We can’t presume that patent pool restricts competition
because of the fact that patent pool includes alternative patents,
the competitive effect should be measured according to
specific cases.
• The competitive effect of patent pool license requirements
shall be analyzed according to specific cases, including the
promotion of competition and the restraint of competition.
(Ⅳ)Patent Pool
The fields where patent pool may leads to anti-competitive include:
Whether the patents in the patent pool are core and valid patents;
Whether members of patent pool restrict the right to license a
Whether the grantback provision weakens innovation impetus;
Whether to restrict the use of competitive sensitive business
Whether refusing to license part of patent may lead to competition
When analyzing the aforesaid issues, the rule of reason should be
applied for specific efficiency analysis.
• Two leading manufacturers of a consumer electrical product
own the patent of the product including alternative circuit
design. These two manufacturers transfer their patents to an
independent company wholly owned by them (to establish
patent pool). The company licenses the patent of the circuit
design to other consumer product manufacturers, and fixes the
license fee.
• Case 1: The use of any patent in the independent company
won’t infringe the patent of the other party, or needn’t
combine with the other party’s patent (alternative patents);
• Case 2: The use of any patent in the independent company
may infringe the patent of the other party (mutually exclusive
(Ⅴ)Technical Standard
• The difference of the technical standard formulation system
between China and developed countries-- administrative
management and market autonomy.
• China’s standardization takes a management system which
combines centralized management with divided responsibility.
Authorized by the State Council, supervised by Administration
of Quality Supervision,Inspection and Quarantine (AQSIQ),
Standardization Administration of China (SAC) is in charge of
the standardization of China, that is, to formulate, carry out
and supervise national standards. The competent
administrative departments under the State Council and the
relevant trade associations are in charge of the standardization
of each department and trade individually, that is, to formulate,
carry out and supervise industry standards.
(Ⅴ)Technical Standard
• China’s standpoint on whether a patented technology
can be included in national standards is : Compulsory
national standards shouldn’t include patent,
recommended national standards don’t object patent
included in standard in general, but the patent should
be the technology that can’t be replaced in national
standard, and no other material reasons that refuse to
involve the patent shall exist.
(Ⅴ)Technical Standard
• In July, 2008, in the official letter about whether implementing
the patent in the standard infringes the patent right, Supreme
People’s Court indicated:
If the patentees participated the formulation of the standard or
the patent was brought into national, trade or local standard
with the consent of the patentees, the patentees are deemed to
license others to implement the patent when implementing the
standard, the conduct of implementing doesn’t pertain to the
conducts of infringement of patent right stipulated in Patent
Law article 11. The patentees are entitled to certain royalty
from the patent users, but the sum of royalty shall be
considerably lower than normal license fees; if the patentees
promise to waive license fees, do as their promise.
(Ⅴ)Technical Standard
• Problems:
1. What role shall Antitrust Law play under
the current system?
2. Does the current system intervene in the
exercise of IPR too much?
Enlightenment of the case Rambus
In the case Rambus, Columbia Circuit Court of Appeal
overruled FTC’s charge of antitrust based on Sherman Act
article 2.
Legal system for patent (fraud) disputes in technical
Contract Law
Patent Law (laches, estoppel and implied license)
Tort Law (General Principles of the Civil Law of the People's
Republic of China )
Law of the People’s Republic of China Against Unfair
Antitrust Law
• Q&A
• Contact information:
[email protected]