FRAND: China vs. the West: In US and Europe, FRAND is based on principles of antitrust economics. In China, FRAND policy is perhaps based on what the Communist party wants FRAND to be, with economics merely being window dressing. Conflicting goals in Chinese antitrust policy.
"Institutional setting: 3 antitrust authorities: MOFCOM (mergers), SAIC (nonprice), NDRC (price). Unclear lines of division at the margins, unstable equilibrium. Other actors: other government ministries, courts, trade associations (quasi governmental in China)." There is a "lack of transparency, lack of substantive due process, economic analysis matters except when trumped by industrial policy."
With regard to standard setting, in China the state controls the standard setting in the context of the 5-year plan. Push to reduce China's dependent on foreign technology and to become an innovation nation by 2020. Vast majority of SEPs in China at present are owned by foreign patent holders. 5-year-plan requires that consideration be given to indigenous standards. Development policy versus long-run goal of innovation policy. Keeping FRAND rates low helps the first but not the second.
SAC draft regulations on patents and standard setting. First draft took patent-hostile approach. No patents in mandatory standards; include patents in voluntary standards only if irreplaceable, and patentee says will license on royalty-free or FRAND basis. Not implemented. Second draft moderated language a bit. Mandatory standards shall not in principle include standards. Patent holder may license on royalty-free or "FRAND" basis that would be significantly lower than normal fees. Also not implemented. Third draft dropped reference to "significantly lower," but doesn't say it can't be significantly lower.
SAIC antitrust-IP guidelines: said that in standard-setting process, fees should not be higher than prior to inclusion in standard. But wasn't clear on high that ceiling should be. Also, abuse of monopoly power could result from unfairly high prices, but not clear what this means.
FRAND in the courts: 2008 SPC Judicial Interpretation adopted the "significantly lower" standard, if patentee participated in standard-setting process. Followed in 2011 case.
More recent case: Huawei v. InterDigital, from February 2013. Decision not published, but judges wrote law review articles about its contents. Court awarded 0.019% royalty rate but no explanation of how that rate was chosen.
Big picture implications: bad for Chinese IP policy, bad for FRAND policy.
Rowe: Is there a TRIPs issue if Chinese courts treat foreigners differently? Or get around by saying it's antitrust policy, not IP? Zheng: license fees being granted not necessarily tied to nationality of patent owner. Probably not much conflict with TRIPs. My comment: At page 345 of my book, cite to three studies showing no evidence of discrimination against foreign patentees in China.
Page: what's to prevent the Chinese government from setting FRAND rates? Sokol: that's the possibility lurking in the shadows. Zheng: government could decide not use your technology as the standard. Page: but why aren't they doing this? Sokol: it's not explicit. Zheng: Chinese government reserves right to say this is our version of FRAND ("significantly lower").
Professor Keith Hylton: In a country where the outcome is known as advance, big question what antitrust law means. Standards are window-dressing. Zheng: good summary of our paper. But two constraints. One is that if government goes too far, foreign technology won't come in. Second, won't encourage domestic innovation.
Carlton: one advantage of having an antitrust authority is that there is an international presence that can exert some influence in China.
My comment: maybe having a weak patent policy is a good strategy. Maybe the patent incentive isn't all that important outside of pharmaceuticals, and maybe the Chinese market is so big that foreign investment will continue. So run a natural experiment. Zheng: maybe so, but still outside mainstream in terms of FRAND.