Anti-monopoly Regulation

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The duality of anti-trust law and Intellectual Property law is complicated and involves balancing competition and innovation. Exclusivity that is created by Intellectual Property in effect stimulates innovation, while anti-trust law secures the work by licensing and applying the new technology, product or service in a competitive environment. The two complement each other and encourage innovative competition.

Enterprises monopolising the production of a certain product based on a patent within the term of validity may be able to continue control of the production after the expiration of the patent. This may make a certain industry become that of high concentration; making it difficult for new competitors to enter. Microsoft, for example, holds a 95 percent market share in PC operating systems through core technology.

If there is no patent system, other people may freely adopt an invention; output of the product will therefore rapidly increase, and the price will decrease. However, excessive competition can result in social resource deprivation. Second, some enterprises would rather capture the market by publicity and promotion. And last but not least, there is often repetitive development, which wastes social resources.

Indentify/Analyze the Intellectual Property Abuse under the Framework of Anti-trust
Generally, if one is engaged in technology R&D and licenses that to another for use in manufacturing and operations, then the relationship between them is vertical. However, when the licensor and licensee are both using same, they become competitors, in which case the relationship becomes horizontal.

The Guidelines on Relevant Market Definition issued in 2009 by the Anti-monopoly Commission of the PRC State Council set out that in the course of anti-monopoly law enforcement activities involving Intellectual Property Rights (IPR), such as technology trade or licensing agreements, there may also be a need to define the relevant technology market, and that the influence of factors such as IPR and innovation be taken into account. Under certain circumstances, the exclusivity of Intellectual Property can turn into a monopoly, e.g. after one patented technology is adopted as a common standard, judgment on the restrictive practice in that area of Intellectual Property license will be influenced.

Main Forms of Intellectual Property Abuse under the Framework of Anti-trust
According to academic understanding and practical legal precident, Intellectual Property abuse regulated by anti-trust law typically takes the following forms:

Refusal to license. The Intellectual Property holder refuses to license its competitor to reasonably use the Intellectual Property, excluding competition and strengthening its own monopoly.

Tying arrangement. The Intellectual Property holder abuses its dominant position and bundles the commodity. A tying arrangement includes package licensing, that is, in the license agreement of one item or group, the licensor is compulsorarily licensing the licensee to use a number of other Intellectual Property objects.

Price discrimination. The IPR holder who has a market dominant position, applies discriminatory treatment on a transaction price without justifiable reason.

Overpricing. A business operator who has a market dominant position abuses IPR to gain a benefit that far exceeds the competitive price.

Go unchallenged. The licensee is required to directly or indirectly assume obligations, and cannot question the effectiveness of the Intellectual Property owned by the licensor.

Exclusive licensing. An IPR holder requires the licensee to exclusively license the licensor to use the improvement and inventive patent created by the licensee.

Cross license and pool arrangement. The IPR holders of two or more than two different types of Intellectual Property cross license their respective Intellectual Property to each other or jointly grant license to a third party.

Generally speaking, if the IPR holder exercises its right beyond the legal limit, the anti-trust law is supposed to prevail by protecting competition. The anti-trust law shall overrule and put a necessary limit on the Intellectual Property Right holder’s behaviour.

Disclaimer
This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable official sources, no guarantee is made with regard to its accuracy and completeness. For more information please visit dandreapartners.com or WeChat: dandreapartners.

 

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Legal columnist Carlo D’Andrea is Chair of the Legal & Competition Working group of the European Union Chamber of Commerce in China; Shanghai Chapter, Coordinator of the Nanjing Working Group of the Italian Chamber of Commerce in China and has taught Chinese law (commercial and contractual) at Rome 3 University. 法律作家代开乐担任中国欧盟商会上海分会法律与竞争工作组主席,中国意大利商会劳动集团的协调员与曾经在罗马三大担任企业咨询课程中中国商法、合同法的课程教授。

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