One June 30, 2023, China’s State Administration for Market Regulation (SAMR) released the Draft Anti-monopoly Guidelines in the Field of Standard Essential Patents for Comment (关于标准必要专利领域的反垄断指南(征求意见稿)).  Per Article 1, the Guidelines are formed to “prevent and stop undertakings from abusing standard essential patents to exclude or restrict competition, protect intellectual property rights, improve the efficiency of economic operation, and safeguard the interests of consumers and the public interest of society.” Excerpts follow. Comments are due July 29, 2023.

[Article 5] Information Disclosure of Standard Essential Patents

The patentee or patent applicant participating in the standard formulation and revision shall, in accordance with the regulations of the standard setting organization, fully disclose the patents it owns in a timely manner at any stage of the standard formulation and revision , and may disclose other patents it knows, and provide corresponding proof materials at the same time, and be responsible for the authenticity.

Patent owners or patent applicants who have not participated in the standard formulation and revision can disclose the patents they own and know at any stage of the standard formulation and revision in accordance with the regulations of the standard setting organization , and provide corresponding supporting materials and be responsible for the authenticity.

In a specific case, an important consideration in determining whether the specific behavior will exclude or restrict market competition in the relevant market is when the patentee fails to disclose the patent information in a timely manner in accordance with the regulations of the standard-setting organization, or explicitly waives the patent right, but asserts the patent right against the standard implementer after the standard is promulgated.

[Article 6] Licensing Commitments for Standard Essential Patents

The principle of fairness, reasonableness and non-discrimination is an important principle that standard-essential patent owners and standard implementers must follow when negotiating standard-essential patent licensing. It is recognized by international, foreign and domestic standard-setting organizations and widely adopted as an important content of intellectual property policies.

The patentee or patent applicant participating in the formulation and revision of the standard shall, in accordance with the regulations of the standard-setting organization, clearly make a patent implementation license commitment , that is, agree to license any operator, etc. to use its patent in the implementation of the standard for free or for a fee on the basis of the principles of fairness, reasonableness and non-discrimination .

Where a patent is covered by a commitment based on the principles of fairness, reasonableness and non-discrimination , when transferring the patent, the owner of the standard-essential patent shall inform the assignee of the content of the patent implementation license commitment in advance, and ensure that the assignee agrees to be bound by the patent implementation license commitment , that is, the standard-essential patent license commitment has the same effect on the assignee.

In a specific case, whether the owner of a standard-essential patent or its assignee has violated the commitment to fairness, reasonableness and non-discrimination this will be an important consideration in determining specific monopolistic behaviors such as licensing at unfairly high prices, refusing to license without justified reasons, tying goods, imposing other unreasonable transaction conditions, or implementing differential treatment.

[Article 7] Good Faith Negotiation of Standard Essential Patents

Good faith negotiation of SEPs is a concrete manifestation of fulfilling the commitment to fairness, reasonableness and non-discrimination. Standard-essential patent owners and standard implementers should carry out good-faith negotiations on licensing conditions such as the rate, quantity, and time limit of standard-essential patent licensing , so as to reach fair, reasonable and non-discriminatory licensing conditions. Good faith negotiations include but are not limited to the following procedures and requirements:

(1) The owner of the standard-essential patent should make a clear licensing offer for the standard implementer, including providing a list of standard-essential patents, a comparison table between standard-essential patents and standards, and a reasonable feedback period;

(2) The standard implementer shall express a good faith intention to obtain the license within a reasonable period, that is, there is no malicious delay, no legitimate reason to refuse the license negotiation, etc.;

(3) The owner of the standard-essential patent should propose licensing conditions that conform to the fair, reasonable and non-discriminatory commitments he has made, mainly including the calculation method of the license fee rate and reasonable grounds, the time limit for the protection of the standard-essential patent and the transfer situation, and other necessary information and actual conditions directly related to the license;

(4) The standard implementer should accept the licensing conditions within a reasonable period, and if it does not accept it, it should propose a fair, reasonable and non-discriminatory plan on licensing conditions such as licensing rates and grantbacks within a reasonable period.

In specific cases, it is necessary to conduct a comprehensive assessment of the process and content of the negotiation, and negotiating standard-essential patent licensing in bad faith will increase the risk of eliminating or restricting competition in the relevant market. Both the SEP owner and the standard implementer need to prove that there is no fault in the above-mentioned process, provide corresponding evidence, and be responsible for the authenticity of the evidence provided.

[Article 11] Determination methods and considerations of dominant market position

To determine whether the SEP patentee has a dominant position in the relevant market, the factors and circumstances for determining or presuming that the operator has a dominant position in the market should be analyzed in accordance with the Anti-Monopoly Law and the Anti -Monopoly Guidelines in the Field of Intellectual Property Rights. At the same time, the following factors can also be specifically considered in combination with the characteristics of standard- essential patents:

(1) The market share of the standard-essential patentee in the relevant market, and the competition status of the relevant market. Under normal circumstances, the SEP owner has 100% of the market share in the SEP licensing market held by it, and there is no market competition;

(2) The ability of the standard-essential patentee to control the relevant market. It mainly includes the ability of standard-essential patentees to determine licensing conditions such as licensing rates and methods, the ability to hinder and influence other operators to enter the relevant market, and the objective conditions and actual capabilities of standard implementers to restrict standard-essential patentees;

(3) The degree of dependence of the downstream market on SEPs. It mainly includes the evolution of corresponding standards, substitutability and conversion costs, etc.;

(4) The degree of difficulty for other patentees to enter the licensing market. It mainly includes the possibility of standard essential patent technology being replaced;

(5) Other factors related to the determination of market dominance, such as the financial resources and technical conditions of the standard-essential patentee.

[Article 12] Licensing standard essential patents at unfairly high prices

Under normal circumstances, standard essential patents have relatively high value, and a reasonable license fee can ensure that standard essential patent holders are rewarded for their R&D investment and technological innovation. However, the owner of a standard-essential patent may abuse its dominant market position to license standard-essential patents at unfairly high prices or sell products containing standard-essential patents, thereby excluding or restricting competition. The following factors may be considered in the specific analysis:

(1) Whether both parties to the license conduct licensing negotiations in good faith in accordance with Article 7 of these Guidelines;

(2) Whether the license fee is significantly higher than the R&D cost;

(3) Whether the license fee is significantly higher than the comparable historical license fee or license fee standard;

(4) Whether the license fee exceeds the geographical scope of the standard essential patent or the scope of covered goods;

(5) Whether to charge licensing fees for expired or invalid standard essential patents or non-standard essential patents;

(6) Whether the owner of the standard-essential patent reasonably adjusts the license fee according to the changes in the quantity and quality of the standard-essential patent;

(7) Whether the standard-essential patent owner duplicates royalties through non-patent implementing entities.

[Article 13] Refusal to license standard essential patents 

Under normal circumstances, after a standard-essential patent owner has made a fair, reasonable and non-discriminatory commitment, if there is no justified reason, he shall not reject any standard implementer who is willing to obtain a license, otherwise it may have an impact of exclusion and restriction on market competition. The following factors can be considered in a specific analysis:

(1) Whether both parties to the license conduct licensing negotiations in good faith in accordance with Article 7 of these Guidelines;

(2) Whether the infringement damages of standard essential patents can be compensated by licensing in compliance with the fair, reasonable and non-discriminatory commitment;

(3) Whether the standard implementer lacks the ability to pay a reasonable license fee, etc.;

(4) Whether the standard implementer has a bad credit record or has a deterioration in business conditions, which affects transaction security;

(5) Whether the standard essential patent cannot be licensed due to objective reasons such as force majeure;

(6) The impact and degree of refusal to license relevant SEPs on market competition and innovation by standard implementers;

(7) Whether the refusal to license the relevant standard-essential patents will harm the interests of consumers or the public interest.