Abstract for Minutes of the Symposium
on Anti-Trust-Related Intellectual Property

On December 21, 2013, a symposium on Anti-Trust-Related Intellectual Property issues was held by the Center for Intellectual Property Study in School of Law, Fudan University. More than twenty specialists, including professors, judges, lawyers, etc., attended this symposium. Professor Zhang Naigen, director of the Center for Intellectual Property Study, Doctor Zhao Qishan from Institute of Law, Chinese Academy of Social Sciences, Professor Yuan Zhenfu from Intellectual Property Institute of Shanghai University, Professor Liu Xiaohai from IP Institute of Tongji University, Professor Zhang Xiaodong from School of Law, East China University of Science and Technology and Professor Du Tao from School of Law, Fudan University, delivered their presentations at the symposium. Judge Ding Wenlian from the High People’s Court of Shanghai, Judge Hu Zhenyuan from the First Intermediate People’s Court of Shanghai and some other professors and lawyers made comments on those presentations and motivated the discussion. All the presentations and discussions focused on legal issues of Standard Essential Patents (“SEP” or “SEPs”) and licenses of SEPs, mainly based on the domestic case of Huawei v. InterDigital Group and some latest relevant foreign cases. The symposium lasted for about 7 hours and achieved a great success.

Professor Zhang Naigen made the first presentation on “Legal Character and Relevant Issues of FRAND”. Professor Zhang introduced the meaning of “fair, reasonable and non-discriminatory” (“FRAND”) and the relevant provisions on Recommendations / Deliverables, royalties of SEPs and Licensing Declaration by three international organizations, i.e., ISO, IEC and ITU. The Standard-Setting Organizations (“SSO” or “SSOs”) take a neutral attitude towards the royalties which was the main issue in many disputes and the detailed arrangements arising from patents (licensing, royalties, etc.) are left to the parties concerned.

Next, Professor Zhang elaborated on the FRAND provided in the European Telecommunications Standards Institute (“ETSI”) Intellectual Property Rights Policy. He emphasized ETSI requests the patent owners to give an irrevocable undertaking in writing that it is prepared to grant irrevocable licenses on FRAND term and condition.

Then Professor Zhang analyzed four relevant cases in US to explain the legal character of FRAND. The four cases represented different schools of thoughts, respectively regarded FRAND as an obligation, as a contract and as a binding agreement.

In a conclusion, international organizations usually stand in a neutral positive and do not get involved in negotiations of the parties concerned. Provisions of various international organizations are similar but the specific practices vary from state to state.

Doctor Zhao Qishan delivered the next presentation. Her topic was “Research on Legal Character of RAND Licensing Declaration and Application of Law to Relevant Disputes”. Through an analysis of the basic contents of RAND, Doctor Zhao argued that RAND Licensing Declarations are between patent owners and SSOs, and SSOs do not interfere with the negotiations between patent owners and potential users of the patents. The critical issue is how the RAND Licensing Declarations produce a binding effect on the subsequent contracting behaviors of the patent owners.

Through a textual study of three SSOs, i.e., ITU, ETSI and IEEE, Doctor Zhao believed the RAND Licensing Declarations provided by different SSOs are not identical in details, so the legal character of RAND Licensing Declarations should be determined by the specific contents of the Declarations case by case. Meanwhile, addition attention should be paid to different phrases and expressions that might lead to different legal relations.

Doctor Zhao then examined through a research on the specific judicial practices in US, Germany and some other states various explanations, including implied patent licenses, third party beneficiary contracts in US, third party beneficiary pre-contracts in Germany, contracts under which obligations are performed to a third party in the Contract Law of PRC, offers by patent owners, etc., but she argued each of these explanations has its limits and obstacles. Whereas Contract Law, Patent Law and Anti-Unfair Competition Law are all faced with great application problems, the Intermediate People’s Court of Shenzhen thus had no choice but to use violation of Anti-Trust Law as the cause of action in the Huawei v. InterDigital Group case. However, it must be noted that the analysis and determination of the legal character of RAND Licensing Declarations constitute the basis of handling most of the RAND Licenses-related disputes and a case-by-case study of the text of specific RAND Licensing Declarations is essential.

After the presentation made by Doctor Zhao, some scholars actively discussed about the comparison among royalties of SEPs, pricing provisions in the Contract Law and negotiations of MFN Treatments under GATT, and the legal effects of intervention by public judicial powers with private negotiations, etc.

After a quick lunch and a short noon break, the symposium restarted at 1 pm.

Professor Yuan Zhenfu from Shanghai University delivered a presentation on “Implied Patent Licenses based on Technology Standards”. Professor Yuan started from three domestic cases concerning technology stands, through which he illustrated the definition of implied patent licenses and clarified the relationship between implied patent licenses and doctrine of exhaustion of rights. He pointed out that the establishment of technology standards does not impede findings of infringement upon patents of others. With respect to mandatory, recommendatory, national, industrial and local standards, it could be an option to apply the implied patent licenses, while with respect to factual standards of a single enterprise or an alliance of enterprises, the implied patent licenses may not be an ideal option and should be avoided or be applied in a cautious manner. In the industries of food and drugs, any implied behavior by patent owners in accordance with laws and regulations is likely to eliminate or impede the establishment of implied patent licenses. The current legislation has not established an explicit foundation for the implied patent licenses, but the deletion of the phrases “in writing” in article 12 of the latest revised Patent Law of PRC in 2008 could be inferred to actually provide a systematic support to the implied patent licenses.

Professor Liu Xiaohai from Tongji University made the next presentation. His topic was “Anti-Trust Issues and Compulsory Licenses of Intellectual Property Rights Issues: from the Aspect of the Judicial Practices within EU”. Professor Liu mainly focused on the defenses allowed in IP laws and anti-trust laws. He put forward the Orange Book case tried by the Federal Supreme Court of Germany (German: Bundesgerichthof, “BGH”) in 2009 and the doubt of the District Court of Düsseldorf in the Huawei v. Zhongxing case about the standards determined by BGH in the Orange Book case.

In the Orange Book case in 2009, the conditions of defense against patent licenses provided in cartel laws determined by BGH are: (1) unconditionally agree to sign an agreement----unable to challenge the validity of patents concerned and whether patents concerned are SEPs or not; (2) should draw a reasonable amount of royalties and the underlying reason is the principle of good faith (§242 BGB).

Professor Liu also mentioned some typical cases concerning cartel laws, such as the Magill case in 1995, etc., and pointed out that a refusal to license violates anti-trust laws. Then in the Apple v. Samsung (UMTS-Standard) case in 2012, the EC concluded that the requirement by BGH to sign an agreement unconditionally is against competition.

The conclusion of Professor Liu is that the Orange Book judgment by BGH violates the principle of efficiency. No matter whether the patents concerned are SEPs or not, whether the patents concerned are valid or invalid, the defending right granted by cartel laws shall remain. Patent uses can only apply for the use of patents after recognizing the patents concerned are completely effective. Another critical issues is the “reasonable” royalties, namely what royalties is reasonable.

In the following discussion, some attendants compared the US and German judicial systems concerning patent cases, commented on the nature of agreements under FRAND Declarations, and creatively put forward a procedural resolution to substantial issues, namely to establish a standard or to draw the royalties in advance. It was also clarified that licenses may only be granted in the form of a package of licenses in fact. Besides, some opinions on this topic were shared, for example, the maximum and minimum of a reasonable royalties actually has already been determined by the quoted prices of both parties and the final royalties cannot be higher than that before entering into the standard concerned, and courts can make a judgment limiting a rough scope of the final royalties.

Doctor Zhao Qishan gave her second presentation on “Study on Relationship between Injunction Remedies to Patent Infringement and RAND Licensing Declarations”. She firstly introduced the background of this study: this topic has been so hot a legal issue recently that many entities, including various SSOs, courts, anti-trust organs, US ITC and Congress, have paid much attention.

Doctor Zhao introduced two schools of thoughts, respectively arguing patent owners should be and should not be prohibited from applying for injunction remedies once they have made RAND Licensing Declarations, represented by Professor Mark A. Lemely and Professor J. Gregory Sidak. Doctor Zhao took a middle way and argued that both patent holdups and its reversed situation exist in practice.

Doctor Zhao then analyzed the various difficulties involved in the license negotiations and emphasized the extreme importance of injunction remedies in the negotiations. She illustrated several US cases for a better understanding of the injunction issue. In the Motorola v. Apple case, ITC listed four restrictive factors to be considered concerning ordering of an injunction. In the Apple v. Samsung case, the court ordered an import injunction which was then vetoed by the US president for the reason of public interests. Doctor Zhao also mentioned the four principles concerning permanent injunctions in general determined in the eBay case. However, whether these principles would be applied to SEPs remains uncertain, as commented by Professor Zhang Naigen.

Doctor Zhao summarized several conditions under which the court may refuse to order injunctions in China. She also put forward a procedural resolution for a detailed discussion about its feasibility, that is to grant the patent users a period of grace (for example 6 months) to finish the licensing negotiations before the injunctions take effect, but only upon the request of the patent users.

Doctor Zhao then analyzed the injunction issue from the aspect of anti-trust organs and SSOs. She concluded that (1) SSOs should make more detailed provisions in their patent policies, such as the conditions of application for injunctions; (2) anti-trust organs should provided flow-chart templates for RAND licensing negotiations; and (3) courts should control the thresholds of injunction remedies.

After that, Professor Zhang Xiaodong from East China University of Science and Technology delivered a presentation on “Identification of Misuse of Market Dominant Position in SEPs Licenses - Whether Injunction Remedies Constitute a Misuse of Market Dominant Position after the FRAND Commitments”. She first introduced the general information about SEPs. She emphasized the validity and irreplaceability of SEPs and various understandings about the FRAND principle.

Professor Zhang then talked about the availability of injunction remedies after the FRAND commitments. No SSO explicitly denies the availability while different courts hold different opinions. In the Huawei v. InterDigital case, the judgment is injunction remedies constitute a misuse of market dominant position after the FRAND commitments.

Professor Zhang also analyzed the potential influences of sole compensation without injunctions on both SSOs and patent owners. She concluded that this might impose an adverse impact on the promotion and competition of new technologies and might prejudice the interests of consumers.

The last speaker was Professor Du Tao from Fudan University. His topic was “Jurisdiction of the Huawei v. InterDigital Group Case and the Extra-Territorial Effects of Anti-Trust Law”. Professor Du mainly discussed about the nature of article 2 of Anti-Trust Law of PRC, which remains controversial. The court in this case avoided the application of article 2 and returned to the civil procedural law, as the legal basis of the jurisdiction of the case. The logic of the court was to deem the misuse of market dominant position as a civil tort and thus civil procedural laws could be applied. Professor Du expressed his worries and concluded from this case that article 2 of Anti-Trust Law is left useless.

Professor Du also made a comparison between the German and Chinese anti-trust laws and found the German one is the better one from which our legislature can borrow some experience.

Judge Ding Wenlian and some other scholars shared their opinions on this jurisdiction issue.

After several hours’ presentations and discussions, the symposium came to an end. It achieved a great success.