Submitted By: Access Advance LLC
Recipient: China State Administration for Market Regulation

On August 2, 2022 Access Advance LLC filed comments with the State Administration for Market Regulation of China (SAMR) in response to SAMR’s invitation for comments on its draft revisions to the “Provisions on Prohibiting Abuse of Intellectual Property Rights to Exclude and Restrict Competition”.

SAMR released the draft Provisions on June 27, 2022 to implement the revised Anti-Monopoly Law (AML) in its application to Intellectual Property rights. Access Advance filed its comments, “A Proposed New Framework for Licensing of SEPs by Procompetitive Patent Pools”, in both English and Mandarin.

Summary of Access Advance’s Comments:

We would like to offer some suggestions for SAMR to consider in the context of adopting and administering the draft Provisions which we refer to the “Proposed New Framework for SEP Licensing by Procompetitive Patent Pools”.

I.  Proposed New Framework for Licensing of SEPs by Procompetitive Patent Pools

Our Proposed New Framework is summarized in the bullet points below and explained in the body of the paper.

• Not every joint licensing arrangement or patent joint venture is a patent pool in any modern sense of that term.
• Not every entity that calls itself a patent pool is a Procompetitive Patent Pool.
• Competition authorities and courts should recognize that a different approach on SEP licensing is appropriate for patent pools that (a) conform to the guidance of competition agencies and courts, and (b) are organized and operated in conformance with the best practices described in this paper (“Procompetitive Patent Pools”) and (c) alsohave been accepted in the market.
• The guidance of competition authorities and courts’provides that:
  • the patent pool portfolio should include only SEPs;
  • whether a patent is a SEP should be determioned by an independent expert;
  • the patent pool should be administered by an independent licensing administrator that makes the licensing decisions;
  • the administrator should safeguard the confidential and competitively-sensitive information of licensors and licensees;
  • pool licensors who practice the standard should be treated like any other licensees;
  • pool licensors are not prevented from licensing bilaterally;
  • licensees are not prohibited from challenging validity or infringement;
  • licensees and licensors are not prohibited from developing or using competing technology; and
• The formation of a Procompetitive Patent Pool guided by best practices results in rates and terms that minimize friction in licensing, maximizing the speed and scope of adoption of the standard.
  • Participants in formation therefore will include:
    • likely SEP holders whose business model is largely implementer driven; as well as
    • likely SEP holders whose business model is largely licensor driven.
  • This simulates market negotiation resulting in FRAND rates and terms.
• The operation of a Procompetitive Patent Pool guided by best practices includes:
  • a single pool license offered to all licensees including pool licensors;
  • licensing as consultative sales with the goal of a consensual license.
  • transparency, including at least the following on its website:
    • list of licensors and licensees;
    • key license terms including royalty rates;
    • list of patents evaluated as essential, showing provisions of the standard on which claims were found essential;
    • rights and obligations of licensors and licensees; and
    • exemplar license agreement available by download or email.
• A Procompetitive Patent Pool benefits licensees:
  • transparency in rates and terms; 
  • reducing transaction costs and increasing efficiency by offering broad coverage to a standard’s SEPs in a single transaction;
  • clearing blocking positions;
  • reducing licensees’ litigation risks;
  • licensing rates that generally are lower (often substantially lower) than bilateral license rates for equivalent patent coverage.
• These benefits make licensing fair, reasonable, and non-discriminatory—as well as more efficient—for all licensees and potential licensees, and may be particularly helpful to small and medium businesses, including those new to licensing SEPs such as licensees in IoT
• These benefits also help consumers by:
  • accelerating adoption of the standard;
  • encouraging more companies to offer products and services that comply with the standard; thereby creating a competitive downstream market of compliant products and services.
• The market’s acceptance of a patent pool’s license in consensual license transactions is the best evidence that its rates and terms are FRAND and not an abuse of dominance.
• To demonstrate “good faith” and/or “willingness” to take a FRAND license (to be seen as a “willing licensee”) an implementer should have these initial obligations:
  • to determine if there is a patent pool licensing SEPs for the standard and if there is to educate itself in detail about the information on the pool’s website; and
  • to initiate discussions with the pool (or each of the pool licensors) either before or shortly after it first makes or sells infringing products and/or services.  
• If an implementer fails in these initial obligations a Procompetitive Patent Pool that has met a threshold of reasonable acceptance should be entitled to a rebuttable presumption that the implementer is “unwilling” and/or not acting in good faith.
• Thereafter the implementer would have the burden of rebutting that presumption.
  • An implementer might be able to carry that burden by:
    • Producing clear evidence that it was unaware of the existence of the patent   pool and that it made reasonable good faith efforts to learn of the pool’s existence. OR,
    • Producing evidence of alternative good faith efforts to become licensed to the pool’s SEPs such as having initiated contact with each of the pool licensors.
• If an implementer fails to meet its burden to rebut the presumption of “unwillingness” the patent pool (and its SEP holders) should be entitled to seek, and courts should have the ability to grant, an injunction against further infringement.
• In licensing negotiations with the patent pool, an implementer must start from the position that the patent pool’s rates and terms are FRAND.
  • An implementer may try to establish that it is sufficiently different from every other patent pool licensee that the pool’s terms are not FRAND for it.
  • An implementer that begins negotiations as if starting from a blank slate or simply reserves to itself the right to determine what is FRAND should be subject to a rebuttable presumption that it is not a “willing” licensee and/or not acting in good faith.
• Fulfilling its obligations and responsibilities to educate itself about the pool and to open good faith negotiations are necessary but not sufficient for an implementer to be characterized as a “willing licensee.”
  • Thereafter an implementer must continue to work actively, and in good faith, in the same manner in which it would act in a commercial negotiation in which it sought to reach an agreement.
  • A course of conduct indicating a policy of delay or that is otherwise inconsistent with a good faith intent to conclude a license would lose its status as “willing” and be subject to a rebuttal presumption that it is “unwilling” and/or not acting in good faith.
• In any court proceeding between an implementer and the patent pool (or its SEP holders) the implementer would have the burden of producing evidence to rebut the presumption that it is “unwilling” and/or not acting in good faith, and the burden of convincing the tribunal.
• If the implementer fails to meet its burden, the patent pool (or its SEP holders) should be entitled to seek, and courts should have the ability to grant, an injunction against further infringement.

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