The concern from foreign businesses about the provision in China's Anti-Monopoly Law (AML) that prevents and penalizes the "abuse of intellectual property rights" is understandable, as foreign businesses currently hold and develop more IPR than their Chinese peers. However, instead of being a "weapon" to be used against multinationals, the Anti-Monopoly Law will function as a rational legal base for market competition.
Professor Huang Yong, an expert involved in AML legislation and director of the Economic Law Department of the Beijing-based University of International Business and Economics, recently shared his perspective in an interview pertaining to the IPR issue within the law.
According to Article 55 of the AML, which goes into effect on August 1, 2008, undertakings which abuse their IPR to exclude and/or restrict market competition are in breach of the law for their monopolistic behavior.
However, several issues related to the law's implementation, such as the definition of the "abuse of IPR" in particular, have yet to be clarified. This uncertainty has aroused concern among foreign investors.
The abuse of IPR governed by the Anti-Monopoly Law
Prof. Huang stressed that not all abuses of IPR are governed by the AML. Some activities, although deemed as an abuse of IPR, are not relevant to the AML; but are relevant only to other laws governing intellectual property rights.
For example, the exclusive rights of a trademark extend to all products and its scope not designated under the trademark's registration. This is a typical case of IPR abuse. But it is trademark law – not the Anti-Monopoly Law – that applies in this case.
Only when the abuse of IPR is deemed as a monopolistic behavior will the Anti-monopoly Law be applied. As long as the activity is designed to exclude and/or restrict market competition; then it will be defined as a monopolistic behavior - regardless of whether the activity in question has resulted in the exclusion and/or restriction of competition.
Prof. Huang further explained that monopolistic behaviors targeted by the AML, and by any international competition laws and policies, take three forms: the abuse of a dominant market position, monopolistic agreements and the concentration of business. The abuse of IPR may occur in any of those three forms.
In any one particular case, verifying that a behavior is monopolistic comes only after very careful investigation and analysis into the case in question. The process is quite complicated.
Preparation for implementation
A guideline for the implementation of the Anti-monopoly Law will be formulated before the law goes into effect. The experience of legislation from other countries will be taken into account when drafting the guideline. Prof. Huang listed fundamental principles and systematic arrangements as references.
He firstly highlighted that the protection of IPR and the AML both aim to encourage innovation and protect consumer interests. It is in this sense that the two are complementary.
Secondly, when it comes to the Anti-Monopoly Law, the same principles which apply to any kind of property also apply to IPR as property; although particular IPR features differentiate it from other properties.
Thirdly, the acquisition of exclusive IP rights does not automatically lead to the acquisition of a market dominant position. And fourthly, IPR licensing contracts normally promote, rather than restrict, competition.
In addition, amendments and supplements will be made on laws governing IPR so that those laws work well with the AML. For example, guiding articles can be included in IPR laws to state clearly that the AML should be applied to the exertion of the IPR when the activity restricts or is designed to restrict competition within the relevant market.
Another very important pending issue is the law enforcement agency. The State Council will appoint an Anti-Monopoly Committee. Prof. Huang expects that the organization will fully perform its duty; and will include senior leaders of different departments and experts. Prof Huang suggested that a permanent institution be installed for the committee.
But it is still yet to be determined how the stated enforcement agency will be organized and function. Prof. Huang personally preferred a unified, relatively independent, professional and authoritative body to do the job.
Monopolistic behaviors, not monopolies, are targeted
Companies enjoying market dominance are more likely to be put under scrutiny of the Anti-Monopoly Law. That is another reason why multinationals are seriously concerned about the AML. This is also the case in any country which implements an anti-monopoly law –regardless of name.
However, it is also worth noting that holding one or more patents does not indicate market dominance as defined by the law. And even if the holder of the patents has market dominance as the result of those patents, the holder will not necessarily be put under anti-monopoly investigation according to the law, because dominating the market does not violate the law.
The Anti-Monopoly Law, which protects market competition, does not challenge the exclusive or monopolistic elements intrinsically embedded in intellectual property rights. But once the exertion of IPR is thought to have threatened market competition, the judgment on the legitimacy of the behavior will be based on the principles and standards of "abuse" as clarified by the Anti-Monopoly Law.
When it comes to the IPR issue in the Anti-Monopoly Law, undertakings will not face the risk of triggering an anti-monopoly investigation unless exertion of their IPR does damage the market competition to the extent that the market itself cannot protect competition and the AML is required to intervene.
By People's Daily Online
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