On the abuse of IPR in the Anti-Monopoly Law of China

The Anti-Monopoly Law of China (“AML”), as adopted by the Standing Committee of the National People’s Congress on August 30, 2007, will become effective on August 1，2008. It took more than 10 years for China to prepare for the AML which is described as the Economic Constitution. Upon promulgation, this milestone law has attracted wide attention, especially from foreign companies in China. “The European Chamber of Commerce welcomes the Anti-Monopoly Law of China and believes it is good for market competition,” said Joerg Wuttke, President of the European Chamber of Commerce in China, responding to a question raised by China IP. “Certainly we are still concerned about the enactment of the Implementing Regulations, particularly what is a ‘Monopoly.’ We will also pay attention to what companies will be excluded from the regulation of the AML or monopoly on account of national interest or security. In the experience of the Organization for Economic Cooperation and Development (OECD) countries, the United States and Europe, except such special fields as national security or military interest which is not deemed as monopoly, the other fields should open up as wide as possible to benefit more consumers.”

Article 55 of the AML which is relevant to the intellectual property rights (IPRs) states that “this law is not applicable to any activities of undertakings which use their intellectual property rights in accordance with the intellectual property laws or administrative regulations, but this law shall apply to the activities of undertakings which abuse their intellectual property rights and engage in activities that eliminate or contain competition.” For the first time abuse of IPR is included in a code in China. Unfortunately the provision is still a framework, awaiting the implementing regulations on such abuse and adjustments in the related laws and regulations. It is understandable that some multinationals are really worried by the framework. Moreover, the 17th day of September 2007 witnessed the conclusion of the antitrust case of Microsoft Corporation in Europe after three years of litigation. The European Court of First Instance turned down the company’s appeal and upheld most of the European Union’s March 2004 decision. Microsoft was fined, including an initial €497 million in 2004 and an additional €218 million in 2006 for not properly complying with the Commission’s ruling. The software giant was also required to disclose its proprietary program data and stop bundling Windows Media Player with the Windows operating system. It is still unknown whether the judicial decision in the Microsoft case will be used any where else outside Europe or whether such a decision will affect the future anti-monopoly litigation in China. As a matter of fact, at least 480 of the world’s Top 500 have invested in China and Microsoft, Intel, IBM or other multinationals are no longer a rare phenomenon. What they are concerned with now is probably the future tendency of the AML, particularly in the definition of abuse of IPR. Therefore, we have prepared for our readers this Special Report, wishing to interpret the AML with regards to the legislative purpose, the amending tendency and the experience of foreign countries in deciding an abuse of IPR, and discussing also some hot issues of the new law which concern us all.