How will China’s competition law affect IP rights?

It’s interesting to see early attempts by Chinese Authorities to draw a line between the legitimate exercise of IP rights, and misuse of market power.  Martyn Huckerby, a Mallesons partner in our Shanghai office, recently issued an alert discussing China’s publication of draft guidelines on IP-related Anti-Monopoly Law Enforcement.

By way of background, China enacted its Anti-Monopoly Law (AML) in August 2008.  The AML is the Chinese equivalent to Part IV of the Trade Practices Act 1974 (TPA) in Australia.  Article 55 is directed to those who abuse intellectual property rights to eliminate or restrict competition.

There was a concern that all IP transactions (no matter the size or effect on competition) would be subject to possible Article 55 scrutiny, but the guidelines go some way to alleviating this concern as it seems competition authorities have set a threshold below which they will not investigate.

The draft guidelines also provide for a possible compulsory scheme for IP holders. This suggestion is not anomalous.  In Australia, the Patents Act was amended in 2006 to include a specific “competition test” (if the patentee violates Part IV of the TPA) as an additional ground for the grant of compulsory licences.  See here for further details.

This is a timely reminder that IP-rights holders need to carefully consider competition law wherever they do business around the world, not just in Australia.  The boundaries of what is considered acceptable conduct to protect statutory monopolies may differ from country to country.

 

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