Chinese Antitrust Enforcement Agency Issues Warning Letter to Patent Pool

Chinese Antitrust Enforcement Agency Issues Warning Letter to Patent Pool

Recent action by China's State Administration for Market Regulation ("SAMR") demonstrates renewed Chinese antitrust focus on standard essential patents ("SEPs").

In an official press release dated June 27, 2024, SAMR warned Avanci, a patent pool, of potential antitrust risks in its licensing of SEPs for automotive wireless communication. Although SAMR apparently has not yet launched a formal enforcement action or reached a binding penalty decision, the warning letter urged Avanci to review and strengthen its antitrust compliance and prevent or rectify antitrust issues relating to its licensing practices. 

SAMR's warning letter to Avanci is a reminder that patent licensing practices, especially for SEPs, remain a focus of Chinese antitrust enforcement. This is not the first time China's antitrust enforcers have turned their attention to SEPs; previous high-profile enforcement actions involving SEPs include InterDigital (2014) and Qualcomm (2015).  

Chinese courts also have shown a willingness to adjudicate disputes over fair, reasonable, and non-discriminatory, or FRAND, royalties for SEPs. In OPPO v. Sharp (2021) and OPPO v. InterDigital (2023), the Supreme People's Court ("SPC") affirmed that Chinese courts have jurisdiction over global licensing rates for SEPs. In a recent decision in December 2023, a Chongqing court decided global FRAND rates for certain SEPs owned by a multinational licensor in favor of a Chinese licensee.  

In contrast, Chinese courts may take a more restrained approach in cases involving less-critical industries or non-SEPs. For example, in another landmark decision in December 2023, the SPC reversed a lower court ruling to hold that the patents owned by Hitachi Metals were non-essential patent and that Hitachi Metals lacked a dominant position in the technology market for its patents to manufacture sintered neodymium iron boron. In its recent Judicial Interpretation on Several Issues Concerning the Application of Law in the Trial of Monopoly-related Civil Disputes (2024), the SPC outlined a multifactor approach to find dominance that takes into account not only substitute technologies but also downstream substitute products for end customers.  

Given recent developments, licensors should pay close attention to the potential impact of Chinese antitrust and IP laws when negotiating licenses covering SEPs, particularly in sectors considered critical in China.

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