China’s Draft IPR Guidelines Reach Final Consultation Stages

by Allen & Overy LLP

Allen & Overy LLP

Speed read

On 23 March 2017, the Antimonopoly Commission of China’s State Council (“AMC”) published the long-expected draft Guidelines on Prohibition of Abuses of Intellectual Property Rights (“draft IPR Guidelines”) for public comments.  The draft IPR Guidelines aim to provide guidance on the enforcement of China’s Anti-Monopoly Law (“AML”) by the Chinese competition agencies in relation to IPRs.  The consultation period ends on 21 April 2017.


The interplay between antitrust rules and IPRs has been identified as an area of concern from the very early days of implementation of the AML.  Issuing guidance in that respect has been on the agenda since 2009.  In 2015, the AMC authorized four agencies, namely the Ministry of Commerce (“MOFCOM”), the State Administration for Industry & Commerce (“SAIC”), the National Development & Reform Commission (“NDRC”), and the State Intellectual Property Office (“SIPO”), to prepare a unified set of guidelines on the application of the AML to the use of IPRs after the SAIC had published its own ones in April 20151.

Both the NDRC and the SAIC prepared multiple drafts throughout 2015 and 2016, some of which were already subject to public consultation, and held several meetings with local regulators, domestic and multinational companies and chambers of commerce, law firms, and scholars.  MOFCOM and SIPO also worked on drafts but these were not made public.  It is understood that final submissions were made to the AMC by the four agencies in late 2016. 

The AMC has established a special working group to consolidate – and to the extent possible reconcile – these drafts.  The public consultation launched on 23 March 2017 should lead to a final version possibly adopted by the end of the year.

Contents of the draft IPR Guidelines

The draft IPR Guidelines generally follow the structure of the draft initially proposed by the NDRC and contain sections explaining how IPRs should be taken into account in relation to general antitrust issues (including the definition of relevant markets), anticompetitive agreements, abuse of dominance and merger control. 

The input from other agencies was nonetheless significant.  For instance, the draft IPR Guidelines retain the position adopted in the draft issued by the SAIC with respect to the concept of essential facility (which the NDRC draft did not endorse) or the definition of safe harbours in the case of agreements2 .

A significant addition to the drafts previously published is the section IV prepared by MOFCOM and dealing with IPRs in relation to merger control proceedings.  Interestingly, the draft IPR Guidelines clarify that transferring or exclusively licensing an IPR may result in acquiring control or decisive influence and trigger a merger filing obligation (a position long adopted in other jurisdictions, e.g. the European Union).  Section IV also describes several types of remedies involving IPRs, including behavioural remedies that are typically not adopted in merger control agencies outside China.

Preliminary observations

The draft IPR Guidelines aim to strike a proper balance between the rights of IPR owners and other stakeholders.  As set forth in the 13th Five-Year Plan, the Chinese government considers innovation as a key economic priority.  As a result, the Chinese government is committed to protect IPRs in order to encourage innovation, yet facilitate the diffusion of technologies. 

For instance, on the one hand, the draft IPR Guidelines clearly state that a business operator shall not be presumed to hold a dominant position solely on the basis of its IPR ownership – a position favorable to IPR holders.  The safe harbour clauses retained in the draft IPR Guidelines should also be considered favorable to IPR holders.

On the other hand, the draft IPR Guidelines intend to provide adequate protection for actual and prospective licensees.  Importantly, the draft IPR Guidelines appear to have limited the possibility for a dominant IPR holder to justify a refusal to license to prospective licensees willing and able to pay reasonable fees.

The draft IPR Guidelines indeed continue to support a rather heavy-handed approach to the application of antitrust rules to the use of IPRs in a number of areas.  Some controversial provisions concerning licensing practice from the earlier drafts are retained.  For instance, the existence of expired or invalid patents in a portfolio license may be challenged as an abuse of excessive pricing.

The draft IPR Guidelines are expected to have a very significant influence on any business in China involving IPRs.  The public consultation period – ending on 21 April 2017 – provides a unique opportunity for all stakeholders to express their views and have a say on what the final version should contain. 

We are finalising an English version of the draft IPR Guidelines that we would be happy to share with you.  We would also be keen to assist you in getting your comments across to the AMC, either in your own name or through our submission.

 1.   See our alert “The-tension-between-competition-law-and-IP-rights-in-China-What-IP-rights-holders-should-know”.
 2.    The draft IPR Guidelines provide that agreements be exempted if the parties’ combined market share is less than 20% for agreements between competitors or less than 30% for agreements between non-competitors.  The thresholds proposed by the NDRC (15 and 25% respectively) were less accommodating for companies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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