China dispatch: All eyes on patent pools
A recent supreme court ruling and an antitrust announcement come amidst growing interest in the country in joint licensing programmes
By Jake Schindler
China Dispatch is a new, regular Sisvel Insights feature that will leverage Sisvel’s strong presence in greater China to keep the IP market informed of important local currents in policy, law and technology, and explain their potential impact on the global SEP market.
By almost any metric, China has grown by leaps and bounds as a driving force of the world’s innovation economy in recent years. In raw patent generation, it is the clear leader. This has profound implications for the licensing market, whose unique norms and practices have been shaped over decades by a handful of US and European technology companies and courts.
This shift in the global dynamic will affect many parts of the market, including patent pools. This means understanding how Chinese industry and the country’s government view aggregation programmes and collective licensing matters more than ever.
In this context, two recent developments are highly noteworthy. First, on 26th June, news emerged that the Supreme People’s Court had confirmed lower courts’ jurisdiction to weigh in on the FRAND compliance of royalty rates charged by SEP pools – in this case the HEVC pool operated by Access Advance. The ruling came in a pair of cases involving TCL and Access Advance that had not previously surfaced publicly.
The next day, the State Administration for Market Regulation (SAMR), China’s competition watchdog, presented a “Reminder and Urgent Letter” to Avanci regarding its compliance with the Anti-Monopoly Law. Avanci welcomed the development, which it described as a positive communication stemming from its proactive engagement with regulators.
Both developments will be closely watched. If and when the courts/regulators have a further say, we will learn a lot more about how top decision-makers in China are thinking about pools.
To understand why patent pools are in the spotlight, it helps to step back and consider some of the broader context. At both the corporate and the government level, there appears to be growing interest in them as a way of increasing licensing efficiency.
One indicator is the growing number of local governments in China (most recently Shanghai) offering subsidies for the creation of homegrown pools. These nominal incentives do not seem to have spurred grassroots joint licensing activity. But they do serve as a signal to the market. The government no longer subsidises mere patent filing, and now wants local IP owners to explore value creation. The pool structure is evidently seen as a positive way to encourage this.
Indeed, patent pool participation is a great way for both new and experienced innovators to create IP value. Patent owners gain significant benefits from working with experienced partners in the pool space who can provide independent administration, extensive dealmaking resources, international legal expertise and a global platform.
To understand this, look no further than China’s tech giants, who are getting more involved with pool licensing at a global level. For example, two Chinese companies – Huawei and Oppo – are licensors in patent pools organised by both administrators mentioned above, the Access Advance HEVC pool and the Avanci 4G Vehicle programme. Huawei is also, of course, a member of the Sisvel Wi-Fi 6 and Cellular IoT pools.
In fact, the Sisvel Cellular IoT pool is one of the global licensing programmes with the strongest representation of Chinese patent owners. In addition to Huawei, its licensors include China Mobile, Datang Mobile, Shanghai Langbo, TCL and ZTE.
With all that in mind, it’s no surprise that policymakers in China are paying attention to pools as part of an overall strengthened focus on SEP matters. All major jurisdictions set out guidelines and guardrails to ensure that patent pool activity is pro-competitive, and China will be looking to ensure that its current approach is fit-for-purpose.
Any decision on FRAND rates or regulatory investigation certainly has the potential to create business and legal risks for parties. But to the extent that the resulting rulings and statements remove uncertainty rather than create it, they could also represent significant opportunity.
Quick hits
A Chinese university has built the world’s first 6G test network
WIPO report shows a big Chinese lead in Generative AI patenting
Patent cases at China’s national IP appeal court have increased at a 30% annual rate since 2019
There are over 4 million Chinese patents in-force according to the CNIPA
Huawei remains China’s top patent filer by a wide margin
Cumulative IP-backed finance issued in China has reached US$4.5 billion
RMB 640 million is the new record-high for damages in a Chinese IP case
A rare preliminary injunction for patent infringement was issued, but swiftly reversed
CNIPA continued to promote its open patent licence scheme
Qualcomm v Transsion legal battle to play out in China, India and Europe
Photo by we-o_rd35vfjgdnyzud3fw from Pixabay
