China

• Pages: 447-493

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Chapter XV

CHINA

A. Introduction

China established its intellectual property regime during the 1980s

and early 1990s, and significantly revised its IP laws shortly before its

accession to the World Trade Organization in 2001 in order to conform

to the WTO standards set forth under the Agreement on Trade-Related

Aspects of Intellectual Property Rights (TRIPS).1 The Patent Law of

China was amended again by the National People’s Congress on

December 27, 20082 in response to China’s strategic goal of transforming

itself into an “innovative country.”3 Following more than two decades of

rapid development of its IP system, China has the largest trademark

office4, the second largest patent office5 and among the most IP litigation

in the world.6

1. Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr.

15, 1994, Marrakesh Agreement Establishing the World Trade

Organization, Annex 1C, Legal Instruments - Results of the Uruguay

Round, 319 I.L.M. 1125 (1994).

2. Zhonghua renmin go ngheguo zhuanli fa [Patent Law] (promulgated by

the Standing Comm. Nat’l People’s Cong., Dec. 27, 2008, effective Oct.

01, 2009), available in Chinese at http://www.npc.gov.cn/

wxzl/gongbao/2009-02/05/content_1505227.htm, English translation

available at http://english.sipo.gov.cn/laws/lawsregulations/201101/

t20110119_566244.html..

3. Interview with the Spokesman of the State Intellectual Property Office,

Jan. 29, 2008, available in Chinese at http://www.sipo.gov.cn/tfs/

dtxx/jndt/200901/t20090106_436883.html.

4. Id.

5. Interview with the Head of the State Intellectual Property Office,

Standing on the New Starting Point, May 13, 2011, available in Chinese

at http://www.sipo.gov.cn/yw/2011/201105/t20110513_604227.html

(China has the second largest patent office in the world with the number

of patent applications exceeding 390,000 in 2010).

6. Tian Lipu (head of the State Intellectual Property Office) Named as Top

50 Most Influential People in Global IP 5 Years in a Row, available in

Chinese at http://www.nipso.cn/onews.asp?id=10312.

448 Antitrust Issues in International IP Licensing Transactions

China joined the international antitrust community when its new

Anti-Monopoly Law (AML)7 came into effect on August 1, 2008. The

AML attracted great international attention during the drafting stage and

included inputs from other major experienced jurisdictions.8 China faces

many of the same challenges that the developed world faces in striking

the right balance between promoting competition and IP protection. The

AML itself provides only general statements with little clear guidance for

dealing with the interface between its antitrust rules and the licensing of

IP rights.9 However, curbing the perceived abuses of IP rights (IPRs)

appeared to be one of the key drivers for adoption of the AML.10

More specific rules will need to be fleshed out through issuance of

implementing regulations, actual enforcement practice, and court

decisions under the AML and other laws and regulations to provide more

7. Zhonghua renmin gongheguo fanlongduan fa [Anti-Monopoly Law],

(promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 30,

2007, effective Aug. 1, 2008), available in Chinese at

http://www.npc.gov.cn/wxzl/gongbao/2007-10/09/content_5374672.htm,

English translation available at http://www.npc.gov.cn/englishnpc/

Law/2009-02/20/content_1471587.htm.

8. See Dina Kallay, Counsel for Intellectual Property and International

Antitrust, Fed. Trade Comm’n, Reflections on China’s New Anti-

Monopoly Law, Remarks delivered at the IVA/SVK Conference,

“Europe and the Globalisation of Antitrust,” (June 30, 2008) available at

http://www.ftc.gov/oia/speeches/080630kallay-asianmarkets.pdf

(“Through informal, formal, bilateral, and multilateral contacts, the

Chinese agencies and legislature involved in the [AML] drafting process

obtained a wide variety of views on the Law’s proposed provisions from

the public and private sectors in China and abroad.”).

9. See AML, supra note 7, art. 55 (providing that the AML “is not

applicable to conduct of undertakings to exercise their intellectual

property rights in accordance with the intellectual property laws and

relevant administrative regulations;” however, the AML “is applicable to

conduct of undertakings that abuse their intellectual property rights to

eliminate or restrict market competition.”). See also Huang Yong, IP

Abuses in The Context of AML, CHINA INTELLECTUAL PROPERTY, Issue

No. 22, available in Chinese at

http://www.chinaipmagazine.com/journal-show.asp?id=277. (“The

principle established in article 55 of the AML need to be fleshed out in

detailed implementing regulations and specialized guidelines.”).

10. See, e.g., The AML Will Break “Patent Traps” by Multinational

Companies, Jun. 29, 2006, available in Chinese at

http://npc.people.com.cn/BIG5/28320/127243/7514310.html.

China 449

guidance and predictability. 11 Representatives of the State

Administration for Industry and Commerce (SAIC), the primary

enforcement agency for the Anti-Unfair Competition Law (AUCL), as

well as most nonmerger, nonprice aspects of the AML have announced

that SAIC is working on draft Guidelines on Implementation of the AML

in the Area of IP (draft SAIC AML-IP Guidelines).12 However, these

draft guidelines have not been officially published for comments, nor is a

specific timetable for promulgation available. 13 In the meantime, a

number of competition and licensing-related provisions in other, existing

Chinese laws are also relevant to licensing practices.

B. The Sources and Basics of China’s Competition Law

China adopted its new AML on August 30, 2007, and it took effect

on August 1, 2008.14 The first comprehensive antitrust law in China, it

comprises four substantive sections that: (1) prohibit certain types of

monopoly agreements unless they fall within specified exemptions;15 (2)

prohibit certain behavior classified as abuse of a dominant market

position;16 (3) establish a broad merger review scheme;17 and (4) prohibit

abuses of government administrative powers that restrain competition.18

The law also imposes penalties for noncompliance and includes

miscellaneous provisions, including one that prohibits undefined

“abuses” of intellectual property rights.19

Prior to the AML, competition-related provisions existed in other

Chinese laws and regulations, such as the AUCL, Price Law, and

11. Zhang Hui, Gao Guozheng, & Guo Bingna, The Influence of the

Issuance of the AML to IPRs: More Expectation?, available in Chinese

at http://news.xinhuanet.com/legal/2008-07/16/content_8555719.htm.

12. See Zhong Youping, Statement at the SAIC Meeting regarding

Competition Law Enforcement and Economic Inspection, May 26, 2010,

available in Chinese at http://www.byaic.cn/news/zx/697.aspx.

13. Since the Guidelines have not been finalized and an official copy of the

draft Guidelines has not been made publicly available, this chapter will

be limited to a general discussion of the expected contents.

14. See AML, supra note 7.

15. Id. Chapter II.

16. Id. Chapter III.

17. Id. Chapter IV.

18. Id. Chapter V.

19. See part B.4 of this chapter for further discussion.