Three sections of the American Bar Association — antitrust, intellectual property, and international law — recently submitted joint comments on China’s draft “Guide on Anti-Monopoly Law Enforcement in the Field of Intellectual Property Rights.” Specifically, the ABA sections are trying to shape China’s proposed regulations governing anti-monopoly practices by intellectual property rights owners. The comments are interesting for several reasons, most notably, the inherent tension between antitrust law and intellectual property law, and the importance of China’s intellectual property and anti-trust laws on the US economy.

The three ABA sections argue against China’s proposed extension of the essential facilities doctrine to intellectual property rights. The essential facilities doctrine prohibits entities from using their control over an essential resource to inhibit competition. However, the doctrine generally is not applied in the context of intellectual property rights. The ABA sections argue that extension of this doctrine to intellectual property rights would be in tension with World Trade Organization obligations and international norms. The commenters note that the “essence” of an intellectual property right is the right to unilaterally exclude others from your IP. Thus, extending the essential facilities doctrine to intellectual property rights would undermine the IP owner’s core right to exclude, create a disincentive to develop competing IP, and create disincentives to innovation in general. If China chooses to extend the essential facilities doctrine to IP rights, the ABA sections advocate at least including a strong rebuttable presumption against an essential facilities claim involving IP rights. They also recommend including a requirement that the challenger demonstrate that they cannot practically or reasonably work around the IP, and that access to the IP would further the legitimate interests of consumers. These comments highlight the inherent tension between IP law, which centers on the idea that you are able to license your IP as you see fit, and anti-trust law, which focuses on protecting consumers and the marketplace from unreasonably high prices and incentivizing innovation and competition.

The ABA sections also commented on numerous other provisions in China’s draft guide. For example, they took aim at a provision that would prohibit exclusive grant back provisions in IP licenses (grant back provisions require that a licensee grant back to the licensor the rights to any improved technology developed through the use of the licensed IP). The ABA sections cautioned that a per se prohibition on exclusive grant backs could “unnecessarily chill innovation without a countervailing increase in consumer welfare.” The ABA sections also attacked a provision that would prevent licensing intellectual property rights at “unfairly high prices.” In the commenter’s view, such “high pricing” is an appropriate business decision and a legitimate benefit of having developed valuable IP; thus, high pricing should not be prohibited unless it results from other unlawful conduct.

At the core of all of the ABA sections’ comments is a theme that China should thoroughly consider the effect that its policies will have on competition and innovation before implementing regulations that restrict intellectual property rights. The commenters clearly recognize that due to today’s global economy and China’s key role in intellectual property disputes, the US should take a keen interest in shaping any Chinese laws that could restrict the rights of US IP owners or impact US consumers.

(By Sarah L. Bruno, Anthony V. Lupo and Amy E. Saomon of Arent Fox LLP)