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On November 8, China’s top market regulator, the State Administration for Market Regulation (SAMR), issued the "Antitrust Guidelines for Standard Essential Patents" (hereinafter referred to as the "Guidelines").

The Guidelines, consisting of six chapters and 22 articles, addresses the pressing concerns over SEP misuse and systematically proposes an antitrust regulatory framework for SEP usage and licensing. This framework aims to foster technological advancement, promote healthy market development, and maintain fair competition. Below are the highlights:

Clarifying Information Disclosure Requirements

Information disclosure is crucial for ensuring fair competition in standard-setting. Article 6 of the Guidelines requires standard-setting organizations to mandate timely and sufficient disclosure of SEP information by participants. This measure aims to prevent potential patent abuse, ensuring fair and transparent access to relevant technical information for all parties, particularly standard implementers. Failure to disclose information or claiming rights after renouncing them will be considered as potentially excluding and restricting competition. In current industry practices, false disclosure, over-disclosure, or non-disclosure of SEP information is quite common. The issuance of the "Guidelines" is expected to play a positive role in regulating and correcting these behaviors.

Emphasizing FRAND Licensing Commitments

SEP licensing commitments must follow the FRAND principles, a widely-recognized norm followed by standard-setting organizations. Article 7 of the Guidelines specifies that SEP holders must commit to FRAND licensing terms during patent submission, allowing fair use of the patent by implementers. This requirement extends to new patent holders upon SEP transfer. The goal is to prevent SEP holders from abusing market dominance by imposing unfairly high prices or unreasonable conditions, thereby restricting competition and innovation. Non-compliance with FRAND commitments will be subject to antitrust scrutiny and potential monopolistic behavior findings. 

Outlining Good Faith Negotiation Procedures and Requirements

Good faith negotiations are essential for implementing FRAND commitments. Article 8 of the Guidelines details the procedures and requirements for SEP holders and implementers during licensing negotiations. SEP holders must present clear licensing offers, including detailed patent lists, SEP-standard mapping, and licensing fee calculations. Implementers must respond within a reasonable timeframe, avoiding unjustified delays or refusals. Negotiations should adhere to FRAND principles, and parties must act in good faith to agree on licensing terms. Unreasonable delays, refusals, or unjust terms during negotiations may be deemed abuses of market dominance.

Defining Market Dominance Determination for SEPs

Determining market dominance for SEPs requires detailed analysis under antitrust law. Article 12 of the Guidelines states that market dominance assessment should consider factors like the SEP holder's market share, control over relevant markets (licensing fees, methods), and the downstream market's dependency on the patent. If an SEP holder significantly influences market competition or innovation by controlling key technical standards, they may be deemed to have market dominance. Especially when no alternatives to the standard exist, SEP holders could control licensing terms and prices, thereby excluding and restricting competition.