/>iOn November 8, 2024, China’s State Administration for Market Regulation (SAMR) released the Anti-Monopoly Guidelines for Standard Essential Patents (SEPs) (标准必要专利反垄断指引). Per Article 1 of the Guidelines, the purpose of the Guidelines is to “prevent and stop the abuse of standard essential patents to exclude or restrict competition, protect fair competition in the market, encourage innovation, improve economic efficiency, and safeguard consumer interests and social public interests.” The Guidelines follow up on a draft for comment from SAMR issued on June 30, 2023 and are important for licensors of SEPs to avoid enforcement actions, such as the $975 million fine against Qualcomm in 2015. A translation follows:
Chapter I General Provisions
Article 1 Purpose and Basis of the Guidelines
These guidelines are formulated in accordance with the Anti-Monopoly Law of the People’s Republic of China (hereinafter referred to as the “Anti-Monopoly Law”), the Standardization Law of the People’s Republic of China, the Patent Law of the People’s Republic of China, the Provisions on Prohibition of Abuse of Intellectual Property Rights to Exclude or Restrict Competition, the Anti-Monopoly Guidelines of the Anti-Monopoly Commission of the State Council on the Field of Intellectual Property Rights, and other laws, regulations, rules and guidelines in order to prevent and stop the abuse of standard essential patents to exclude or restrict competition, protect fair competition in the market, encourage innovation, improve economic efficiency, and safeguard consumer interests and social public interests.
Article 2 Related Concepts
Standard essential patents refer to patents that are essential for the implementation of standards.
Standard essential patent owners and related rights holders refer to operators who enjoy standard essential patent rights or operators who have the right to license others to implement standard essential patents. They are collectively referred to as standard essential patent owners in this guideline.
Standard implementers refer to operators who implement the standards.
Article 3 Analysis Principles
The determination of abuse of standard essential patents to exclude or restrict competition is based on the Anti-Monopoly Law and follows the following basic principles:
(1) According to the provisions of the Anti-Monopoly Law, the same analytical approach as that for the abuse of intellectual property rights to exclude or restrict competition is adopted;
(2) Taking into account both the protection of intellectual property rights and the maintenance of fair competition in the market;
(3) balancing the interests of standard essential patent owners and standard implementers;
(4) Fully consider the information disclosure, licensing commitments and licensing negotiations related to standard essential patents during the process of standard formulation and implementation.
Article 4 Relevant Market
Generally speaking, defining the relevant commodity markets and relevant geographic markets involving standard essential patents requires following the general principles set forth in the Anti-Monopoly Law, the Guidelines of the Anti-Monopoly Committee of the State Council on the Definition of Relevant Markets, and the Provisions on Prohibition of Abuse of Intellectual Property Rights to Eliminate or Restrict Competition, while taking into account the characteristics of standard essential patents and conducting specific analysis in combination with individual cases.
(1)Relevant commodity markets
The method of substitution analysis is adopted to define the relevant commodity markets involving standard essential patents. In specific cases, the relevant commodity markets involving standard essential patents are mainly the technology market and the product and service markets involved in the implementation of standards. Among them, the technology market can conduct demand substitution analysis from the perspective of whether there is a close substitution relationship between different standards, between different standard essential patents, between standard essential patents and non-standard essential patents, and between standard essential patents and non-patented technologies. If necessary, supply substitution analysis can be conducted from the perspective of the supply of standards and standard essential patents.
(2) Relevant Geographic Market
The alternative analysis method is also used to define the relevant geographical market for standard essential patents. When the license for standard essential patents covers multiple countries and regions, the relevant geographical market should be defined in individual cases by comprehensively considering factors such as the regional characteristics of different countries and regions in terms of standard implementation and patent protection.
When investigating monopoly agreements involving standard essential patents, cases of abuse of market dominance, and conducting antitrust reviews of business concentration, it is usually necessary to define the relevant market. However, the actual needs for defining the relevant market vary for different types of monopoly cases, and should be emphasized based on the circumstances of each case.
Article 5 Strengthening supervision before and during the process
In the process of standard formulation and implementation, management or operation of patent pools, and licensing of standard essential patents, operators such as standard formulation organizations, management or operation entities of patent pools, standard essential patent holders, and standard implementers should strengthen antitrust compliance , guard against monopoly risks, and if they find that there may be risks of excluding or restricting competition, they may proactively report the relevant circumstances to antitrust law enforcement agencies and accept supervision and guidance.
For those that have the risk of excluding or restricting competition or are suspected of implementing monopolistic behavior, the antitrust enforcement agency can strengthen pre-event and in-event supervision by means of reminders, urging, and interviews for rectification, and require standard-setting organizations, management or operating entities of patent pools, standard essential patent holders, standard implementers and other operators to propose improvement measures and do a good job in preventing and rectifying related problems. The antitrust enforcement agency’s pre-event and in-event supervision measures will not affect the investigation and handling of monopolistic behavior.
Any unit or individual has the right to report to the anti-monopoly law enforcement agency any risk of excluding or restricting competition or suspected monopolistic behavior.
Chapter II Information Disclosure, Licensing Commitments and Good Faith Negotiations Regarding Standard Essential Patents
Antitrust enforcement agencies encourage standard essential patent owners to disclose standard essential patent information in a timely and full manner, make fair, reasonable and non-discriminatory licensing commitments, and conduct good-faith licensing negotiations with standard implementers. The above positive behaviors are conducive to improving the efficiency of standard formulation and implementation, maintaining a fair and competitive market order, and promoting technological innovation and industrial development. Failure to follow the above positive behaviors does not necessarily lead to a violation of the Antitrust Law, but may increase the risk of excluding or restricting competition.
Article 6 Disclosure of Information on Standard Essential Patents
In accordance with the regulations of the standard setting organization, operators involved in the formulation and revision of standards must promptly and fully disclose the necessary patents they own and are aware of at any stage of the formulation and revision of standards, and provide corresponding supporting materials.
Operators who do not participate in the formulation and revision of standards can disclose the necessary patents they own and are aware of at any stage of the formulation and revision of standards in accordance with the regulations of the standard-setting organization and provide corresponding supporting materials.
In specific cases, the failure of operators to disclose patent information in a timely and sufficient manner in accordance with the regulations of the standard-setting organization, or the situation in which they have clearly waived their patent rights but asserted their patent rights to the standard implementer, are important considerations in determining whether their behavior will have an exclusionary or restrictive impact on market competition in the relevant market.
Article 7 Licensing Commitments for Standard Essential Patents
The principles of fairness, reasonableness and non-discrimination are important principles that must be followed by standard essential patent owners and standard implementers in negotiating standard essential patent licensing. They are recognized and widely adopted by domestic and foreign standard-setting organizations, and have become an important part of intellectual property policy.
In accordance with the regulations of the standard setting organization, patent owners or patent applicants who participate in the formulation and revision of standards must clearly make a patent implementation license statement, agreeing to license other operators to use their patents when implementing the standard free of charge or for a fee on the basis of fairness, reasonableness and non-discrimination principles.
For patents that have made licensing commitments based on the principles of fairness, reasonableness and non-discrimination, when the standard essential patent owner transfers the patent, he or she must inform the transferee in advance of the content of the patent implementation license commitment and ensure that the transferee agrees to be bound by the patent implementation license commitment, that is, the standard essential patent licensing commitment has the same effect on the transferee.
In specific cases, whether the owner of a standard essential patent or its assignee violates the commitment to fairness, reasonableness and non-discrimination is an important consideration in determining whether it constitutes specific monopolistic behavior such as licensing at unfairly high prices, refusing to license without justifiable reasons, bundling, attaching other unreasonable transaction conditions, or practicing differential treatment.
Article 8 Good Faith Negotiations Regarding Standard Essential Patents
Good faith negotiations on standard essential patents are a concrete manifestation of the implementation of the principles of fairness, reasonableness and non-discrimination. Standard essential patent owners and standard implementers conduct good faith negotiations on licensing conditions such as the rate, quantity, time limit, scope of use and geographical scope of standard essential patent licenses 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 holder of a standard essential patent shall make a clear licensing negotiation offer to the standard implementer, which shall usually include a list of standard essential patents, a comparison table of a reasonable number of standard essential patents and standards, the calculation method and basis of the licensing fee rate, a reasonable feedback period, and other specific contents;
(2) The standard implementer expresses a good-faith intention to obtain a license within a reasonable period of time, that is, there is no delay or refusal to negotiate a license without justifiable reasons;
(3) The licensing conditions proposed by the SEP owner that are consistent with the fair, reasonable and non-discriminatory commitments made by the owner, mainly including the method for calculating the license fee rate and the rationale, the protection period of the SEP and the transfer status, and other necessary information and actual conditions directly related to the license;
(4) The standard implementer shall accept the licensing conditions within a reasonable period of time. If it does not accept the conditions, it shall propose a plan on the licensing conditions that complies with the principles of fairness, rationality and non-discrimination within a reasonable period of time.
In specific cases, the negotiation process and content should be fully evaluated. Both the essential patent holders and the standard implementers need to prove that they have fulfilled their good faith negotiation obligations. The standard implementer’s expression of good faith does not affect its right to raise objections to the necessity and validity of the patent during the negotiation process.
Chapter III Monopoly Agreements Involving Standard Essential Patents
In determining monopoly agreements involving standard essential patents, the Anti-Monopoly Law, the Provisions on Prohibition of Monopoly Agreements, the Provisions on Prohibition of Abuse of Intellectual Property Rights to Eliminate or Restrict Competition and other relevant regulations shall apply.
Article 9 Monopoly Agreements in the Process of Standard Formulation and Implementation
In the process of standard formulation and implementation, operators may reach a monopoly agreement to exclude or restrict competition. The following situations may be considered in specific analysis:
(1) Whether other specific operators are excluded from participating in the formulation of standards without justifiable reasons;
(2) Whether there are no legitimate reasons for excluding relevant plans of other specific operators;
(3) Whether there is no legitimate reason for agreeing not to implement other competitive standards;
(4) Whether, without justifiable reasons, specific standard implementers are restricted from carrying out standard-implementing activities such as testing and obtaining certification based on the standards;
(5) Other relevant circumstances that need to be considered.
Standard-setting organizations or other operators shall not organize standard essential patent holders to reach monopoly agreements or provide substantial assistance to standard essential patent holders in reaching monopoly agreements during the process of standard formulation and implementation.
Article 10 Monopoly Agreements Involving Standard Essential Patent Pools
Generally speaking, patent pooling can reduce transaction costs such as licensing and improve licensing efficiency. However, standard essential patent owners may use patent pooling to reach a monopoly agreement to exclude or restrict competition. The following situations can be considered in specific analysis:
(1) Whether the holders of standard essential patents use patent pools to exchange sensitive information on prices, output, market segmentation, etc. related to competition;
(2) Whether the management or operation entity of the patent pool has included competing patents in the patent pool;
(3) Whether the management or operation entities of the patent pool jointly restrict the holders of standard essential patents from licensing to other parties individually;
(i4) Whether the management or operation entity of the patent pool organizes the SEP holders to reach a monopoly agreement or provides substantial assistance to the SEP holders in reaching a monopoly agreement;
(5) Other relevant circumstances that need to be considered.
Article 11 Other Monopoly Agreements Involving Standard Essential Patents
In addition to the above agreements, standard essential patent owners may also abuse their patent rights to implement other types of monopoly agreements to exclude or restrict competition. The following situations may be considered in specific analysis:
(1) Whether the price, quantity, geographical scope or quality of products involving standard essential patents produced or sold by standard implementers are restricted;
(2) whether the standard implementers are restricted from developing competitive technologies;
(3) Other circumstances that may constitute a monopoly agreement.
Chapter 4 Abuse of Dominant Market Position Involving Standard Essential Patents
The determination of abuse of market dominance involving standard essential patents shall be subject to relevant provisions such as the Anti-Monopoly Law, the Provisions on Prohibiting Abuse of Market Dominance, and the Provisions on Prohibiting Abuse of Intellectual Property Rights to Eliminate or Restrict Competition. Generally, it is necessary to first define the relevant market, analyze whether the standard essential patent holders and other operators have a dominant market position in the relevant market, and then analyze whether it constitutes an abuse of market dominance based on the circumstances of each case.
Article 12 Methods and factors to be considered in determining market dominance
To determine whether the standard essential patent holders and other business operators have a dominant position in the relevant market, an analysis should be conducted in accordance with the Anti-Monopoly Law and the Anti-Monopoly Guidelines of the State Council Anti-Monopoly Commission on Intellectual Property Rights. To determine or presume that a business operator has a dominant market position, the characteristics of standard essential patents should be taken into consideration. Specifically, the following factors may be considered:
(1) The market share of the SEP holder in the relevant market and the competition situation in the relevant market. Generally, when there is no alternative standard to the standard itself, the SEP holder has the entire market share in the SEP licensing market it holds, unless there is sufficient evidence to overturn the claim;
(2) The ability of the standard essential patent holder to control the relevant market. This mainly includes the ability of the standard essential patent holder to determine licensing conditions such as licensing rates and licensing methods, the ability to hinder and influence other operators from entering the relevant market, and the objective conditions and actual ability of the standard implementer to restrict the standard essential patent holder;
(3) The degree of reliance of the downstream market on standard essential patents. This mainly includes the evolution of the corresponding standards, substitutability and conversion costs, etc.;
(4) The degree of difficulty for other patent holders to enter the licensing market. This mainly includes the possibility of standard essential patent technology being replaced, etc.;
(5) Other factors relevant to the determination of market dominance, such as the financial and technical conditions of the standard essential patent holder.
Article 13: Licensing of standard essential patents at unfairly high prices
Generally speaking, reasonable licensing fees can ensure that standard essential patent owners can obtain returns for their R&D investment and technological innovation. However, standard essential patent owners and other operators may abuse their dominant market position to license standard essential patents or sell products containing standard essential patents at unfairly high prices, thereby excluding or restricting competition. The following factors can be considered in specific analysis:
(a) The good practices of the licensing parties in accordance with Chapter 2 of these Guidelines;
(2) Whether the license fee is significantly higher than comparable historical license fees or the license fees of other operators;
(3) During the licensing negotiation process, whether the company advocates charging licensing fees for expired or invalid standard essential patents or non-standard essential patents;
(4) Whether standard essential patent owners and other business operators reasonably adjust licensing fees based on changes in the number, quality, and value of standard essential patents;
(5) Whether standard essential patent owners and other business operators charge duplicate fees through non-patent implementing entities, etc.
Article 14 Refusal to License Standard Essential Patents
Generally speaking, after the SEP holder makes a fair, reasonable and non-discriminatory commitment in accordance with the rules of the standard setting organization, the SEP holder and other operators shall not refuse any standard implementer willing to obtain a license without a legitimate reason, otherwise it may have an exclusionary or restrictive impact on market competition. The following factors may be considered in the specific analysis:
(1) The good practices of the licensing parties in accordance with Chapter 2 of these Guidelines;
(2) Whether the standard implementer has a bad credit record or has experienced deterioration in business conditions, which seriously affects transaction security;
(3) Whether the licensing of the standard essential patent is impossible due to objective reasons such as force majeure;
(4) the impact of refusing to license relevant standard essential patents on market competition and innovation;
(5) Whether the refusal to license the relevant standard essential patents will harm the interests of consumers or the public interest.
Article 15: Tying of Standard Essential Patents
Generally speaking, a package license for standard essential patents can reduce overall transaction costs and improve the efficiency of standard implementation. However, standard essential patent holders and other operators may abuse their dominant market position and force standard implementers to accept a package license, accept non-standard essential patent licenses or purchase other products without justifiable reasons, thereby excluding or restricting competition. The following factors can be considered in specific analysis:
(a1) The good practices of the licensing parties in accordance with Chapter 2 of these Guidelines;
(2) Whether it complies with legitimate industry practices and transaction habits;
(3) Whether it is technically reasonable and necessary;
(4) Whether it is feasible to split the package license and whether it will cause unreasonable standard implementation costs to the standard implementer;
(5) Whether the standard implementer can independently choose the licensing combination or the products to be purchased.
Article 16: Imposing other unreasonable transaction conditions on standard essential patents
Generally, the licensing conditions of standard essential patents are formed by the agreement between the standard essential patent holder and the standard implementer, reflecting the autonomy of the licensing parties. However, standard essential patent holders and other operators may abuse their dominant market position and attach unreasonable transaction conditions to standard essential patent licenses without justifiable reasons, thereby excluding or restricting competition. The following factors can be considered in specific analysis:
(1) The good practices of the licensing parties in accordance with Chapter 2 of these Guidelines;
(2) Whether free or unreasonable reverse licensing is used as a precondition for licensing standard essential patents;
(3) whether the standard implementers are required to engage in cross-licensing without providing reasonable consideration;
(4) Whether it prohibits or restricts standard implementers from raising objections to the necessity, validity, etc. of their standard essential patents;
(5) Whether it prohibits or restricts the standard implementer from choosing dispute resolution measures or regions;
(6) Whether it forces or prohibits the standard implementer from trading with a third party, or restricts the conditions under which the standard implementer can trade with a third party;
(7) Whether the standard implementers are restricted from developing competitive technologies;
(8) Whether there is a lack of reasonable grounds to require the standard implementer to provide or disclose business and technical information that is irrelevant to the implementation of the standard and that is obviously irrelevant to the relevant standard essential patent license, or other unreasonable conditions.
Article 17 Differential Treatment of Standard Essential Patents
Generally, the licensing conditions for standard essential patents will vary in terms of licensing fees, time, etc., depending on the actual situation of the standard implementer, the trading habits of the region, the level of economic development, etc. However, the holder of standard essential patents may abuse its dominant market position and treat standard implementers with the same conditions differently without justifiable reasons, thereby excluding or restricting competition. The following factors may be considered in specific analysis:
(1) The good practices of the licensing parties in accordance with Chapter 2 of these Guidelines;
(2) Whether the timing of licensing negotiations and the market context have changed significantly;
(3) Whether the conditions of the standard implementers are substantially the same;
(4) Whether the licensing conditions, such as the license quantity, region, term and scope of use, are substantially the same;
(5) Whether the differences in the licensing content of the standard essential patents are caused by other licensing conditions agreed upon by the licensing parties;
(6) Whether the differential treatment has a significant and unreasonable impact on the standard implementers’ participation in market competition.
Article 18: Abuse of remedies for standard essential patents
Under normal circumstances, the holder of a standard essential patent has the right to request the court or relevant department to make or issue a judgment, ruling or decision to stop infringement of the relevant patent rights in accordance with the law. However, operators such as the holder of a standard essential patent may violate the principles of fairness, reasonableness and non-discrimination, and abuse the above-mentioned relief measures to force the standard implementer to accept its unfair high prices or other unreasonable transaction conditions without good-faith negotiations, thereby excluding or restricting competition. When conducting specific analysis, it should be considered whether the licensing parties have conducted good-faith licensing negotiations in accordance with Article 8 of these Guidelines, and other factors stipulated in the Anti-Monopoly Guidelines of the State Council Anti-Monopoly Committee on Intellectual Property Rights may be considered.
Chapter 5 Concentration of Operators Involving Standard Essential Patents
When reviewing concentrations of operators involving standard essential patents, the Anti-Monopoly Law, the State Council’s Regulations on the Reporting Standards for Concentrations of Operators, and the Regulations on Prohibition of Abuse of Intellectual Property Rights to Eliminate or Restrict Competition and other regulations shall apply.
Article 19: Concentration filing of undertakings involving standard essential patents
Transactions between operators involving standard essential patents may constitute a concentration of operators. To determine whether a transaction involving standard essential patents constitutes a concentration, an analysis should be conducted in accordance with the Anti-Monopoly Law, the Anti-Monopoly Guidelines of the State Council Anti-Monopoly Committee on Intellectual Property Rights, and relevant anti-monopoly regulations. The following factors may also be considered:
(1) Whether the products or services covered by the standard essential patent constitute an independent business or generate independent and calculable turnover;
(2) The method and term of licensing of standard essential patents.
If a transaction involving standard essential patents constitutes a concentration of operators and meets the reporting standards stipulated in the “Regulations of the State Council on Reporting Standards for Concentration of Operators”, the operators shall report it to the anti-monopoly law enforcement agency of the State Council in advance. Concentration shall not be implemented without reporting.
According to the “State Council Provisions on the Reporting Standards for Concentration of Operators”, if the concentration of operators involving standard essential patents does not meet the reporting standards, but there is evidence that the concentration of operators has or may have the effect of eliminating or restricting competition, the State Council Anti-monopoly Law Enforcement Agency may require the operator to report. If the operator fails to report as required, the State Council Anti-monopoly Law Enforcement Agency shall conduct an investigation in accordance with the law. Operators may take the initiative to report to the State Council Anti-monopoly Law Enforcement Agency for operator concentrations that do not meet the reporting standards.
Article 20: Review of Concentration of Operators Involving Standard Essential Patents
If a transaction involving standard essential patents is a substantial component of an operator concentration or is of great significance to the realization of the transaction objectives, the factors stipulated in the Anti-Monopoly Law should be considered during the operator concentration review process, while also considering the characteristics of standard essential patents.
Restrictive conditions involving standard essential patents include structural conditions, behavioral conditions and comprehensive conditions. The additional restrictive conditions involving standard essential patents are usually determined based on the individual case, based on the exclusionary or restrictive competition effects that the concentration of operators has or may have, and after evaluating the restrictive conditions, including but not limited to requiring the relevant operators to divest relevant assets including standard essential patents, licensing in accordance with the principle of fairness, reasonableness and non-discrimination, prohibiting tie-in sales and other behaviors, and imposing necessary restrictions on the behaviors of the assignees of standard essential patents.
Chapter VI Supplementary Provisions
Article 21 Effect of Guidelines
This guideline only provides general guidance on competition behavior in the field of standard essential patents for reference by operators and antitrust enforcement agencies, and is not mandatory. For matters not specified in this guideline, please refer to the Anti-monopoly Guidelines of the State Council Anti-monopoly Committee on Intellectual Property Rights.
Article 22 Interpretation and implementation of the guidelines
These guidelines are interpreted by the State Administration for Market Regulation and will be implemented from the date of publication.
