The Relationship Between Intellectual Property Rights Abuse and Monopoly Wang Xianlin, KoGuan Law School of Shanghai Jiao Tong University Dalian, June 10, 2010

Main Contents I. The complexity of enforcing antitrust law in the field of IPR II. Understanding IPR abuse III. IPR abuse and Monopoly IV. How to Determine if IPR abuse constitutes violation of anti-trust law

I. The complexity of enforcing antitrust law in the field of IPR The enforcement of antitrust law is itself a complex issue, and its is even more so and sensitive in the field of IPR. In China, the enforcement of antitrust law in the field of IPR is a brand new issue, which is full of challenges and involves how to perceive the complex relationship between antitrust law and IPR. The Chinese legal academia and legal practitioners have long held different views regarding the relationship between antitrust law and IPR, particularly on how antitrust law should deal with acts of exercising IPR.

The relationship between IPR protection and the Enforcement of antitrust law and IPR IPR protection which aims at encouraging innovation and the enforcement of antitrust law which is meant to protect competition both belong to the basic economic policy and legal system of modern countries Their basic functions and goals are consistent, namely they are just two means to the same end (Carrots and club, two sides of the same coin) They have apparent discrepancies in certain respects, which many even lead to conflicts: The owning and exercising of rights; the proper exercising and improper exercising of rights (abuse).

A Necessary check and balance mechanism On the whole, IPR protection and the enforcement of antitrust law (regulating acts of abusing IPR to eliminate or restrict competition) are essentially consistent. They complement each other for the same purpose. Regulation of IPR abuses by Antitrust law aims at establishing a necessary check and balance mechanism. Countries and regions at different development stages face different scenarios and have different concerns on this issue.

Article 55 of the Antitrust Law of China Article 55 This law is not applicable to undertakings who exercise their intellectual property rights in accordance with the laws and administrative regulations on intellectual property rights ； however, this law shall be applicable to the undertakings who eliminate or restrict market competition by abusing their intellectual property rights. This article lays out the fundamental principle of the enforcement of antitrust law in the field of IPR. But many questions on how to correctly understanding and application of this article needs to be solved How to perceive the relationship between the “abuse of the intellectual property rights” and the “elimination or restriction of the competition” prescribed in the Article 55 of the Antitrust Law of PRC is an important and controversial question. In essence, it is how to understand the relationship between the abuse of the intellectual property rights and monopoly.

II. Understanding IPR abuse The concept of IPR abuse has different definitions in various countries and regions, and different legal systems, it is even nonexistent in certain countries and regions In China, the concept of IPR abuse is not clearly defined by law, so understanding of it shall not be limited to the narrow scope of case laws in some other countries. Instead, it should be understood broadly, namely, it should be deemed as a concept against the proper use of IPR Thus, IPR abuse is understood as a manifestation of civil right abuse in the field of IPR

Definition of IPR Abuse Any act of the IPR owner in exercising the rights that exceeds the legal scope or justifiable limit, and thus results in the unjustifiable use of the rights and damage to the interest of others and the public society, shall be defined as the abuse of the intellectual property rights. of using licensing to expand unduly its IPR, or of using the advantages brought about by the IPR to eliminate or restrict competition for improper benefits.

III. IPR abuse and Monopoly Perceived this way, IPR abuse is a very broad concept, it involve issues of antitrust law, but it is not limited to, or at least not foremost an antitrust law issue. IPR abuse goes against the target of IPR Law to protect public interests of the society, and at the same time violates the basic principles of fairness, honesty and credit, forbidding the abuse of rights of the civil law. Even when the IPR violates the competition laws, it not only concerns antitrust law but also involves law against unfair competition, for instance, when the IPR owner sends warning letter improperly or abusing the right to action.

IPR Abuse Does Not Necessarily Constitute Monopolistic Behavior It is generally believed that the standard for judging if an abuse of the IPR abuse exists is whether the exercise of the right has violated the relevant public policies goal the IPR is supposed to achieve. Those policies includes not only competition policies, but also innovation policies, freedom of expression policies etc. Where the exercise of the IPR violates antitrust law, there must exist IPR, however, the opposite is not necessarily true, as some (even most) IPR acts do not violate antitrust law. There are many borderline acts in the zone between the lawful use of IPR and violation of antitrust law. They may not amount to violation of antitrust law, but may constitute IPR abuse.

Antitrust law is the major means to regulate IPR Abuse However, as antitrust law is part of the basic public policies of a country, and the monopoly nature of IPR determines that IPR abuse tends to violate the competition order protected by antitrust law. Therefore, constitution of violation of antitrust law by IPR abuse is usually more pronounced and draws more attention, making antitrust law the basic and most important legal mechanism to regulate IPR abuse.

IV. How to Determine if IPR abuse constitutes violation of anti-trust law Based on such a perception of the relationship between IPR abuse and the violation of antitrust law, determination of if an act of exercising IPR constitutes IPR abuse and whether it constitutes violation of antitrust law can be carried out separately. Neither is the prerequisite of the constitution of the other, but in cases where the use of the IPR in question violates antitrust law, it concurrently constitutes IPR abuse. But backward reasoning on this point does not hold

In understanding Article 55 of the Antitrust Law of China, it is not necessary to ascertain first the existence of an act of IPR abuse before reviewing whether it has eliminated or restricted competition. An act can be determined as having violated antitrust law when unjustifiable elimination of or restriction on competition happen as a result of the exercise of the IPR in question (as against the justifiable use of IPR which may also cause elimination of or restriction on the competition). Precondition or Result?

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