In April, ACT | The App Association was pleased to submit comments to the People’s Republic of China’s (PRC) State Council to provide feedback on its draft Guidelines for Anti-Monopoly Enforcement Against Abuse of Intellectual Property Rights (Draft Guidelines).
The App Association’s comments outline how the patent policies of Chinese standard development organizations (SDOs), influenced by key government agencies within the PRC, will directly impact how Chinese consumers work, live, and play for decades to come. Our members, including those who conduct business in China, care deeply about this issue, which is why the App Association launched the All Things FRAND initiative, and developed key consensus principles to drive its efforts and engagements.
While recognizing the breadth of IP policies addressed in the PRC’s Draft Guidelines, the App Association submitted comments specifically related to Standard Essential Patents (SEPs) and the commitments to license them on fair, reasonable, and non-discriminatory (FRAND) terms. Our members include innovators who are both SEP holders and standards implementers, and they are often victims of abusive licensing practices by other SEP holders. These small businesses, including many software companies doing business in China, do not have the resources to effectively challenge abusive SEP licensing practices. Ultimately, they may be forced to accept excessive royalty demands by SEP holders, or worse, if they cannot pay the excessive licensing fees, they may have to change their product design to remove the SEP or even abandon their business entirely. SEP licensing abuses pose a major threat to the competitiveness of industries that rely on standards in its innovation cycle in any market, including China.
The App Association has engaged with governments around the world to create an environment that will enable the internet of things (IoT) to bring new efficiencies to global consumers and enterprises. Through the issuance of guidance and enforcement actions, nearly every major competition regulator in the world has taken steps to ensure that FRAND promises, which SEP holders voluntarily make, are meaningful and enforceable. China should be no different, and we provided recommendations for numerous articles in the Draft Guidance highlighting ways in which the State Council can provide clear “rules of the road” to encourage competition and innovation without being overly-prescriptive. Without this clarity, China risks an unbalanced patent system and puts the viability of the IoT ecosystem in jeopardy. Small businesses face an additional challenge because they simply cannot afford years of litigation to fight SEP holders’ abuse of voluntary FRAND obligations.
We remain committed to promoting app developers’ innovation and accelerating the growth of technology markets through robust standards and a balanced intellectual property (IP) system. Our members rely on all forms of IP – patents, trademarks, copyrights, and trade secrets – to innovate and compete in the intertwined global app economy. As wireless internet connectivity revolutionizes new consumer and enterprise segments of the economy, it is increasingly imperative that governments develop strong patent systems to sustain and advance this extraordinary economic growth.
A single and straightforward policy regarding IP abuse would provide much-needed clarity and contribute to business continuity, and we support the State Council Draft Guidelines proposal to combine the agendas of the PRC’s National Development and Reform Commission of the State Council (NDRC); State Intellectual Property Office (SIPO); and State Administration for Industry and Commerce (SAIC) into a single harmonized IP policy.
The PRC must get these rules right to make China a FRANDlier place for small business innovators. The App Association is pleased to take the opportunity to share the insight and perspective of the app developer community with the State Council. We look forward to engaging with governments around the world to establish strong standards to support technology advancements and the social benefits they bring. We encourage you to read our comments to China’s State Council on its Draft Guidelines (in English and in Chinese), and share your thoughts, feedback, and questions with us!