Antitrust Regulations On Standard-Essential Patent Licensing In The Communications Industry

Nowadays,communications industry around the world is undergoing rapid changes.With the advent of the 5G era,the competitive landscape in the communications industry is bound to be reshaped,resulting in huge business opportunities and employment opportunities,and at the same time bring extreme convenience and consumer experience to users.With the continuous progress of communication technology,the characteristics of interchangeability,compatibility and universality of products or services in the communications industry are also increasing.Standards play a more and more important role in the industry competition,and more and more standard-essential patents(SEPs)will be included in the standards.Around the SEP licensing,a series of disputes have arisen between the patent holders and the implementers,which has aroused the concern in theory and in practice.With the development of communication technology,the standards organization has played an important role in promoting technology development and technology standardization.The introduction of various communication standards makes technology more coordinated and optimized,facilitating the promotion and application of technology in the industry,which benefits the industry development and consumers.The world’s major standard setting organizations(SSO),such as the Third Generation Partnership Project(3GPP),the European Telecommunications Standardization Association(ETSI),and the China Communications Standards Association(CCSA),have issued relevant intellectual property policies,requiring that in the process of licensing,SEPs holders shall license the SEPs they hold based on "Fair,Reasonable and Non-Discriminatory"(FRAND)commitment in order to restrict the huge advantages that SEPs holders obtain due to the network effect and locking effect of SEPs.At the same time,these policies also ensure that SEPs holders can obtain reasonable returns for their R&D investment.However,in the process of SEP licensing in communications industry,due to the ambiguity of the FRAND principle and different interests of parties involved in licensing transactions,licensing parties often have difficulty agreeing on licensing conditions.After the dispute has occurred,it not only involves the direct interests of the parties to the licensing transaction,but also affects the promotion and implementation of communication standards as well as the overall market competition situation of the communication industry.Under such circumstances,antitrust law,as a law to adjust and regulate the market competition order,is necessary to intervene and regulate related monopoly behaviors,so as to balance the interests between the patent holders and implementers and to promote benign and healthy competition in the communications industry.The globalization of the economy and the development and promotion of international standards have led to the licensing of standard-essential patents on a global scale,resulting in patent and monopoly dispute cases that often involve multiple jurisdictions.Once a patent monopoly occurs,overlapping and conflicting national jurisdictions are likely to arise because the antitrust laws of the major jurisdictions can exercise extraterritorial jurisdiction based on the effects principle.In this case,it is necessary to rely on dialogue and full cooperation among countries,through coordination,legal reference,and the development and improvement of the principle of international comity,to include jurisdictional conflicts within the framework of multilateral or bilateral agreements or international organizations,in order to achieve a reasonable division of jurisdiction among countries and to achieve appropriate resolution of jurisdictional conflicts.In the practice of communication standard-essential patent licensing,the pricing activities of the patent license and the injunctions of the standard-essential patentee are often interrelated and intertwined,and are the focus of disputes between the two parties to the licensing transaction.How to determine FRAND licensing fees is the core of licensing activities,but it seems to be a problem that major standards organizations try to avoid answering,but tend to leave this problem to the licensing parties through negotiation.In practice,when parties cannot determine licensing fees through negotiation and have to resort to a third party organization(such as the court)for adjudication,the latter usually uses the hypothetical negotiation method,the top-down method,the comparable agreement comparison method and other methods to analyze and determine the licensing fee.In the analysis process,courts often invite technical experts and economists to comprehensively judge the evaluation conclusions of the value and strength of related patents,which leads to the extremely complicated and time-consuming calculation process of FRAND licensing fees,and the results are full of uncertainty.In this case,some SEPs holders are reluctant to be involved in lengthy litigation procedures,and instead choose to seek and implement an injunction,that is,to prohibit the implementers’ product sales as a threat to make them accept the licensing conditions and reach a licensing agreement as soon as possible,which constitutes a"patent hold-up" behavior and has a certain impact on market competition.Although the theory of patent hold-up is still controversial to this day,in recent years,major jurisdictions around the world have launched antitrust law enforcement against certain hold-up behaviors,and continue to promote theoretical exploration and innovation in this field.In addition to SEPs holders who may use the market power of SEPs to damage themarket competition,there may also be cases where SEPs implementers are unwilling to perform his obligations in good faith and fairly and violates FRAND commitments,constituting "patent hold-out".In 2018,"New Madison Approach" proposed by Delarhim,the Assistant Attorney General of the U.S.Department of Justice in charge of antitrust work,elaborated this issue in detail.He believed that "patent hold-out" even posed a more serious threat than "patent hold-up",and advocated that the standards organizations and antitrust law should be repositioned.Delarhim’s point of view has caused great controversy,but it has also attracted the attention of international antitrust law enforcement and judicial professions to the phenomenon of patent hold-out.It is expected that more practical cases will appear in this regard in the future.In the patent market in recent years,the non-patenting entity(also called Non-Practicing Entity,"NPE")has frequently attracted people’s attention and become the new hot debated issue.The NPE regards the patent itself as a commodity and directly realizes its value through market operations(rather than indirectly realizing its value by transforming patent into patented product).NPE,on the one hand,can establish a bridge between the owner and the patent implementer,and play an active role in the patent market;on the other hand,due to the high degree of monopoly and potential expansion of its patent aggregation activities,it is very easy to evolve into a tool for abuse of market dominance or monopoly agreement,so it should also be regulated by the antitrust law.China’s practice in antitrust regulation of SEP licensing can be said to be "law enforcement first,legislative follow-up".A series of important cases,such as Huawei v.IDC,Qualcomm antitrust investigation,antitrust review of maket concentration regarding Nokia’s acquisition of Alcatel-Lucent’s business,have caused huge social repercussions and promoted the formation of relevant rules,such as "Provisions on Prohibiting the Abuse of Intellectual Property Rights to Preclude or Restrict Competition" promulgated by the former State Administration for Industry and Commerce in August 2015,"Guidelines on the Trial of SEP Disputes(Trial)"promulgated by Guangdong Higher People’s Court in April 2018,"Several Opinions on Strengthening Intellectual Property Trial to Promote Innovation and Development"issued by Beijing Higher People’s Court in December 2018 and "Antitrust guidelines in the area of intellectual property" promulgated by the State Council Antimonopoly Commission in 2020.Although the above-mentioned legal documents are not highranked,they are also an important breakthrough in this specific field,laying a foundation for the improvement of the antitrust regulatory system of SEP licensing in China’s communication industry.In the future law enforcement work,it is suggested to actively learn from the experience and practice of mature foreign jurisdictions.At the same time,taking into account national conditions,the principles of combination of prevention and relief,matching of administrative punishment and long-term supervision,and reasonable analysis based on the case situation shall be adopted,with the full help of the third-party professional institutions,the order of competition in the SEP licensing market of communication industry could be maintained and the development of this industry will be promoted.