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China – Joint Fact Sheet Issued With U.S. Addressing China’s Enforcement Of The Anti-Monopoly Law And Intellectual Property Rights.

23 February, 2015

 


On Dec. 29, 2014, the U.S. Department of Commerce posted a fact sheet on the 25th U.S.-China Joint Commission on Commerce and Trade. Portions of the fact sheet—which was jointly issued by the U.S. and Chinese governments—address competition issues and intellectual property rights, following substantial criticism of what many considered to be uneven enforcement of China’s Anti-Monopoly Law (AML) against non-Chinese companies. The main complaint has been that China undertakes selective enforcement of the AML with the goal of promoting Chinese companies or industries, and does the same with enforcement proceedings relating to intellectual property rights. The fact sheet states the following with respect to competition:

 

  1. “In order to build on the recognition of the United States and China in the Sixth Meeting of the U.S.-China Strategic and Economic Dialogue that the objective of competition policy is to promote consumer welfare and economic efficiency, rather than promote individual competitors or industries, and that the enforcement of their respective competition laws should be fair, transparent, objective and non-discriminatory, and China’s commitment that its three Antimonopoly Enforcement Agencies (AMEAs) are to provide to any party under investigation information about the AMEA’s competition concerns with the conduct or transaction, as well as an effective opportunity for the party to present evidence in its defense:
    a) China clarifies that in enforcing the AML, all business operators shall be treated equally.
    b) Where AML violations are found, China clarifies that it is to impose enforcement measures that address the harm to competition, and not to impose enforcement measures designed to promote individual competitors or industries.
  2. China clarifies that its AMEAs will, 1) when undertaking administrative actions, strictly follow statutory limits on their authority, procedures, and requirements as laid out in China’s relevant laws, regulations and rules; and 2) before imposing penalties, notify the parties of the facts, reasons and basis according to which the administrative penalties are to be decided, notify the parties of the rights that they enjoy in accordance with the law, and provide the parties with the right to state their cases and to defend themselves.
  3. China clarifies that all administrative decisions that impose liability on a party under the AML will be provided in writing to the party and include the facts, reasons and evidence on which the decision is based. China clarifies that it will publish the final version of administrative decisions that impose liability on a party under the AML in a timely manner. Administrative decisions made public in accordance with law should not include contents involving what are legally commercial secrets.
  4. China will ensure that, upon request from a party involved, the three AMEAs are to allow Chinese practicing lawyers to attend and participate in meetings with any of the three AMEAs. China will ensure that, upon request from the party involved, and after obtaining approval from the AMEA, which shall be granted as normal practice, the following persons may attend the meetings with any of the three AMEAs: 1) representatives of foreign law firm representative offices established in China, who are permitted to attend and advise on international law and practice and provide information on the impact of the Chinese legal environment, but not permitted to conduct activities that encompass Chinese legal affairs, and 2) foreign legal counsel practicing in other legal jurisdictions, who are permitted to attend and provide information on the subject transaction or conduct and information on the laws or international practices of the legal jurisdiction where they practice.”

 

The joint fact sheet also addresses criticism that China has received with respect to the treatment of intellectual property rights, but with respect to standard essential patents it boils down to agreeing only to continue ongoing dialogue between the two countries. The fact sheet states the following with regard to IP rights and technology localization:

 

“The United States and China commit to ensure that both countries treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights. Enterprises are free to base technology transfer decisions on business and market considerations, and are free to independently negotiate and decide whether and under what circumstances to assign or license intellectual property rights to affiliated or unaffiliated enterprises. Both China and the United States confirm that the government is entitled to take measures to encourage enterprises to engage in research and development and the creation and protection of intellectual property rights.”

 

And with regard to the treatment of intellectual property in standards-setting:

 

“China and the United States recognize that standards setting can promote innovation, competition and consumer welfare.”

 

They also reaffirm that IPR protection and enforcement is critical to promote innovation, including when companies voluntarily agree to incorporate patents protecting technologies into a standard. Both sides recognize that specific concerns may exist relating to the licensing of standard essential patents that are subject to licensing agreements. China and the United States commit to continue engaging in discussion of these issues.

 

The full joint fact sheet, which addresses many other areas of commerce and trade between the United States and China, is available here.


Orrick

 

For further information, please contact:

 

David Goldstein, Partner, Orrick

dgoldstein@orrick.com

 

Douglas Lahnborg, Partner, Orrick

dlahnborg@orrick.com

 

Philippe Rincazaux, Partner, Orrick

princazaux@orrick.com

 

Howard M. Ullman, Orrick

hullman@orrick.com

 

Homegrown Competition & Antitrust Law Firms in China

 

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