In general foreign investors regard China's Anti-Monopoly Law as an important and progressive piece of legislation. Greater transparency and equal treatment for both foreign and domestic companies once the law comes into force on August 1st 2008 will reassure IPR holders, said the British Chamber of Commerce in China (BCCC).
Raymond Moroney, from the Beijing office of Rouse & Co. International, an Intellectual Property Specialist Consultancy and acting Vice Chairman of the IPR Working Group of the European Chamber of Commerce (EUCCC) in Beijing gave his remarks on behalf of the BCCC (for whom he is a frequent contributor on IPR related matters) in an interview in November in Beijing regarding the intellectual property (IP) related aspects in the context of China's Anti-Monopoly Law which was promulgated on Aug.30, 2007.
The main provision in the law focusing on IP is contained in Articles 55. While members of both the EUCCC and BCCC welcome its recognition of the principle that legitimate enforcement of IP rights will not breach the law, they expect further clarification on the implementation of the part of the Article which is designed to curb the "abuse" of the IPR which may result to the restriction of the market competition.
Mr. Moroney also suggested that European businesses study the new law and review their practices --- particularly their pricing policies --- to make sure that they are ready to comply with the law.
Striking a balance
It is felt that most of the concerns regarding Article 55 relate to a perception among foreign investors that the new provision could be implemented in such a way as to favor domestic companies over foreign ones. Mr. Moroney believes that legislators in the drafting of this provision have attempted to strike a delicate balance between the need to encourage domestic innovation while at the same time recognizing that foreign investment and technology are important factors in China's innovation drive.
While Mr. Moroney suggests that BCCC members will probably adopt a "wait and see approach" pending the issuing of the Implementing Regulations of the new law, he is optimistic that any such fears will subside over time.
He believes that it is in the long-term interest of Chinese companies to nurture and invest in their own R&D so as to reduce the possibility of damage to their brand as a result of potential IP disputes. On the other hand, it is equally important for China that new technologies being imported are not "abused" or monopolized to such a degree that they create industrial standards which are beyond the ability of Chinese companies to license, so they can benefit from those same technologies.
As long as foreign companies are encouraged to make significant R&D investment in China and to file their patents here first as well (but not penalized if they don't), this trend should facilitate the importation of more R&D and cutting edge technology into China. An environment where the IPR is respected is an important incentive for them to do so.
By way of background under the current Patent Law of the PRC, only Chinese domestic companies are required to file their patents in China first, where the relevant patent in question has been developed in China. However, under a proposed draft amendment to the Patent Law it is provided that both Chinese and foreign enterprises will be required to file their patents in China first as long as the R&D has been developed in China.
If China will adopt the best international practice with its own Anti-Monopoly Law that will ultimately lead to the creation of a more competitive environment for conducting business here, then foreign rights holders should have nothing to fear, said Mr. Moroney.
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) protocol, under the WTO, lays out a number of principles exclusively dealing with the protection and development of IPRS to be followed by WTO members. Under the TRIPS member countries are obliged to adopt legislation, which incorporates (with a certain degree of discretion being given to national governments as to its implementation) these guiding principles to facilitate better exchange of technology and trade among the WTO membership.
The main objective of legislators in Europe and the US in developing their respective Competition (or Anti Trust) laws has been to reduce the ability of large companies to use their dominating position in a particular market to create standards which limits competition within that particular market.
As a result, it is presumed that Chinese legislators have drafted Article 55 in such a way as to strike a balance between protecting individual IP rights while at the same time prevent as much as possible the adverse impact of the pooling of IP rights, on competition and free trade in the market.
Transparency
Many foreign companies recognize that laws in China are good and progressive; and that China has taken the unique step of seeking comments on its new draft laws from foreign stakeholders based in China, in order to avail of international best practice and benefit from the experience of other jurisdictions of the implementation of this type of law. In the context of IPR protection what foreign rights holders are most concerned about in China is not so much the quality of the laws but the enforcement of them.
When asked to comment BCCC members have expressed some concerns over how IPR can be adequately enforced and protected by the new law where Article 55 does not clearly define "IPR abuse" thereby leaving it open to interpretation. Does this mean that the act deemed to be an "abuse of an IPR" is itself a breach of the law, or must the abuse first be determined to be a monopolistic conduct as defined elsewhere in the law?
The EUCCC suggested that Article 55 state clearly that this law is applicable to the monopolistic conduct or abuse of a dominant market position of undertakings to eliminate or restrict market competition by abusing intellectual property rights.
Other matters yet to be clarified include the institutional arrangement. Who will be responsible for the enforcement of the law? Will there be several departments playing different roles, or one unified authority? The law currently states in Article 10 that the State Council will establish an anti-monopoly commission to organize, coordinate, and guide anti-monopoly affairs. However, it does not reveal who will be the anti-monopoly law enforcement agency designated by the State Council.
Mr. Moroney suggested that a unified enforcement organization would from a practical point of view be preferred (be it at local, city or provincial level) rather than companies having to deal with many different administrative agencies.
Mr. Moroney expects that the majority of these issues will be clarified in the forthcoming Implementing Regulations of this new law.
References
It is hoped that internationally accepted principles can be applied in China. For example, Mr. Moroney indicated that there appears to be no single definition in any particular law for what constitutes "IPR abuse", however a number of references can be found in both European and American laws.
It is probably worthy of note that in the past there was a slight divergence between the EU and the US on how their respective competition policies were implemented. However, this has changed with the practice in both countries becoming more harmonized in recent years.
Under the European law, for example, companies deemed to have had a "dominant position" in a particular market, are defined as a separate category of "undertaking", and are automatically barred from block exemptions under the legislation. The recent judgment of the European Court of Justice (ECJ) in the Microsoft complaint is a case in point.
Preparing for compliance
Of key importance to BCCC and its membership will center on whether the new law is transparent, the implementation of the enforcement process, and whether such process will allow for equal treatment under the law for both foreign and domestic undertakings.
Once the requisite amount of clarification can be provided in the Implementing Regulations, investors should be able to adapt to the prevailing market conditions –by assessing their position in the market (which will then determine what they can and cannot do in the context of anti competitive behavior) before the new law becomes effective.
Mr. Moroney also suggested that European businesses will need to carefully consider dedicating resources now to study the new law and its implications for them, by reviewing their existing policies to ensure compliance with the new legislation before it comes into effect next year. This applies in particular to the acquisition, development and exploitation of their IPR in China so that they can make any necessary adjustments subject to the imminent clarification of the law.
In practice, anti trust laws have sought to focus on anti competitive behavior in the market based on pricing strategy, which practice has now been singled out given that price fixing is considered to be the main form of anti-competitive behavior to be targeted by the new Anti-Monopoly Law.
By People's Daily Online
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