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Sunday, April 10, 2016

Standard Essential Patents and Antitrust regulator in China

Now that Indian regulatory authority has got free hand to investigate abuse of monopoly position by SEP holder, Chinese success in this line needs to be highlighted.

The National Development and Reform Commission (NDRC) is the Chinese competition authority charged with investigating price-related conduct that is anticompetitive, such as cartels, “resale price maintenance” (RPM), and abuses of dominance. The NDRC investigated Qualcomm’s standard-essential patents (SEPs) for certain telecommunication standards and its licensing practices on the basis of complaints filed.  The NDRC formally started its investigation in November 2013 when several dozen NDRC officials raided Qualcomm’s offices in China.  There followed multiple rounds of submissions, intense hearings and negotiations between Qualcomm representatives, NDRC officials, as well as many other interested parties. Qualcomm was found to have abused its dominant position in three ways: excessive pricing, unfair terms, and bundling. The NDRC found that Qualcomm charged unreasonable royalties on Chinese mobile device manufacturers.  This finding is actually split into several claims.  First, Qualcomm refused to provide customers with a list of all patents included in its comprehensive licensing package, resulting in customers being charged for patents that had already expired.  Second, Qualcomm imposed unfair cross-licensing conditions: it forced customers to grant Qualcomm free licenses for their own patents whilst refusing to lower the royalties it imposed in consideration of the value of the patents licensed to it.  Third, the royalty rate was set at a high level and applied to the net wholesale price of the mobile devices concerned. The NDRC also found that Qualcomm forced customers to accept the licensing of Qualcomm’s non-essential patents (for which Qualcomm possibly holds no dominant position) in order to obtain a license for its SEPs. 
On 10 February 2015, China fined Qualcomm CNY6.08 billion (approx. USD975m or EUR870m) for abusive patent licensing practices and imposed several remedies on the company. 
The payoff to China continues. NowChip maker Qualcomm has agreed a licensing deal with Zhuhai Ewpe Information Technology in China related to 3G and 4G patents. Under the terms of the agreement, Qualcomm has granted Zhuhai a royalty-bearing licence to develop, manufacture and sell subscriber units covering 3G WCDMA and CDMA2000, and 4G LTE for use in China.
Qualcomm agreed to offer separate licences to certain patents, with licensees whose phones use 4G technology paying a 3.5% royalty rate and those whose handsets incorporate 3G paying 5%.

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