On November 4, 2024, the State Administration for Market Regulation (SAMR) issued the "Anti-Monopoly Guidelines for Standard Essential Patents" (the "New Guidelines"). This issuance follows a draft version released in June 2023 and coincides with recent actions by SAMR concerning the Avanci patent pool. Specifically, on June 27, 2024, SAMR issued a reminder to Avanci about potential monopoly risks associated with their licensing practices for automotive wireless communication SEPs. This action underscores SAMR’s ongoing efforts to enforce antitrust laws and ensure fair competition in the market.

The New Guidelines provide a clear framework for SEP licensing, emphasizing the importance of compliance with antitrust regulations. They aim to refine and improve China's antitrust regulatory framework for standard essential patents (SEPs), preventing the abuse of SEPs, promoting transparency, and ensuring that licensing practices are fair and reasonable. These measures address concerns similar to those raised in the Avanci case.

The new "Guidelines" mainly cover the following six aspects:

1. General provisions

The New Guidelines clarify the purpose, basis, relevant concepts, and analytical principles. This section sets the foundation for understanding and applying the Guidelines in various contexts related to SEPs.

2. Disclosure of information, licensing commitments, and good faith negotiations involving SEPs

SEP holders are encouraged to timely and fully disclose patent information, make fair, reasonable, and non-discriminatory (FRAND) licensing commitments, and engage in good faith licensing negotiations with standard implementers. This aims to enhance transparency and foster trust between SEP holders and implementers.

3. Monopoly agreements involving SEPs

This section details how to identify and handle monopoly agreements involving SEPs.

It includes specific situations where operators may reach monopoly agreements during the formulation and implementation of standards, such as:

• Excluding other specific operators from participating in standard formulation without justifiable reasons.

• Excluding other specific operators' relevant solutions without justifiable reasons.

• Agreeing not to implement other competitive standards without justifiable reasons.

• Restricting specific standard implementers from testing, obtaining certification, or other activities related to standard implementation without justifiable reasons.

• Other related situations.

It also covers specific situations where multiple patent holders may reach monopoly agreements during patent pooling, such as:

• SEP holders exchanging sensitive competitive information such as prices, quantities, and market division through patent pooling.

• The management or operation entity of the patent pool including competitive patents in the pool.

• The management or operation entity of the patent pool jointly restricting SEP holders from licensing independently.

• The management or operation entity of the patent pool organizing SEP holders to reach monopoly agreements or providing substantial assistance for SEP holders to reach monopoly agreements.

• Other related situations.

Additionally, it addresses situations where SEP holders may abuse patent rights to implement monopoly agreements, such as:

• Restricting the price, quantity, geographic scope, or quality of products involving SEPs produced or sold by standard implementers.

• Restricting standard implementers from developing competitive technologies.

• Other situations that may constitute monopoly agreements.

4. Abuse of Market Dominance Involving SEPs

This section clarifies five factors to consider when determining whether an operator has a dominant position in the relevant market. It then details several situations where operators may abuse their market dominance, including:

• Licensing SEPs at unfairly high prices;

• Refusing to license SEPs;

• Tying SEPs with other products or services;

• Imposing other unreasonable trading conditions involving SEPs;

• Discriminatory treatment involving SEPs;

• Abusing relief measures involving SEPs.

5. Concentration of Operators Involving SEPs

This part covers the declaration and review of operator concentration involving SEPs. It explains how to handle transactions involving SEPs to ensure that operator concentration does not lead to exclusion or restriction of competition, thereby protecting consumer interests and promoting technological innovation. Operator concentration refers to two or more operators:

• Merging;

• Acquiring control over other operators through shares or assets;

• Acquiring control over other operators or exerting decisive influence over them through contracts or other means.

When operator concentration reaches certain thresholds, operators must declare in advance to the State Council's anti-monopoly enforcement agency, and concentration cannot be implemented without declaration.

6. Supplementary Provisions

This part explains the effectiveness, interpretation, and implementation of the new "Guidelines."

These comprehensive measures are designed to create a fair and competitive market environment for the implementation and licensing of SEPs, fostering innovation and protecting consumer interests. By addressing potential monopoly risks and promoting transparency, the New Guidelines aim to prevent the abuse of SEPs and ensure that licensing practices are fair and reasonable. This proactive approach by Chinese government reflects its commitment to maintaining a balanced and competitive market landscape.

Policy sources:

• Notice of the SAMR on Issuing the "Anti-Monopoly Guidelines for Standard Essential Patents"

         https://www.gov.cn/zhengce/zhengceku/202411/content_6985623.htm

• SAMR Issues Reminder to Avanci Patent Pool on Monopoly Risks

        https://www.samr.gov.cn/xw/zj/art/2024/art_ec1c9ce3d71a4a5baf853d430a3b5667.html