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China’s approach to “standardization of the behavior of incorporating patents into standards”

posted by George Willingmyre on Thursday, June 24th, 2010 at 9:07 am

In June 2008, the China State Council officially promulgated the “Outline of National Intellectual Property Strategy.” The Outline identified “the development and improvement of the standard-related policies, standardization of the behavior of incorporating patents into standards” as a special task. In November 2009, the Standards Administration of China (SAC) issued for public comments the “Regulations on the Administration of the Formulation and Revision of Patent-Involving National Standards (Interim).” The China National Institute of Standardization (CNIS) followed shortly thereafter in early 2010 releasing for comment the draft “Disposal Rules for the Inclusion of Patents in National Standards” . Together these documents reveal the approach China is contemplating for meeting the mandate of the China State Council.

Regrettably, the SAC proposal departed significantly from patent policies of standards organizations widely accepted internationally. The most onerous element of the proposal would have prohibited the inclusion of any patented technology in a standard unless the patent holder agreed to grant licences with royalties at a price significantly lower than the normal royalties. A second troubling provision in the SAC Draft Regulations was compulsory licensing, or forced negotiations in the shadow of the threat of compulsory licensing, for essential patents in mandatory national standards. Numerous governments, companies, and private interest groups worldwide commented to SAC. Many echoed a common point of view: the SAC proposal undervalues the contribution and potential role of intellectual property rights holders in standard setting activities and threatens to inhibit the contribution of innovative solutions and technologies for use in national standards. (Elaborated here)

The Disposal Rules did not contain the two most troubling elements of the draft SAC Regulations above. Many commented to CNIS the improvements of the CNIS draft over that of SAC. There remain, however, several areas of the Disposal Rules that need to be refined to bring them into alignment with patent policies of standards organizations widely accepted internationally. These include: 1) distinguishing between essential patents and essential patent claims, and the obligations with respect to each; 2) clarifying that the declaration form is not a licence; and, 3) clarifying the disclosure obligations for participants and non-participants . (Elaborated here)

As of June 2010, neither SAC nor CNIS have issued new versions of their Regulations and Rules respectively. However CNIS replied positively to the comments of the American National Standards Institute and offered a dialog to discuss further their comments.

The Regulations and Rules SAC and CNIS are writing are intended to impact standards activity inside China. However in our global economy and with numerous standards processes having global impacts today, the proposed SAC Regulations and CNIS Rules will have strategic global impacts. Whether it is a China centric businesses expanding to the global market or a multinational businesses with China presence, the Regulations and Rules will impact decisions about research and investment in and use of intellectual property associated with standards setting.

It is China’s interests to look to the policies and procedures of standards organizations with long standing experience in this regard and build upon their patent policies which have met the test of time.

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George Willingmyre says:

I wanted also to mention that there is no “one size fits all” patent policy. What patent policy works well for a particular situation in China may not be the one for another particular situation in China and may not be the one for a situation internationally or in the US or in the EU.

See at http://www.gtwassociates.com/answers/IPRpolicies.html a chart linking to patent policies of 45 standards developmers none of whom are exactly the same. It is interesting that the IEEE has received one ex ante voluntary disclosure of royalties since implementation of its patent policy and VITA has receive six patent declarations with disclosres of fees and conditions.
George Willingmyre says:

Thank you for this comment. In my judgement here is not yet a “single” opinion on the correct patent policy for standards setting in China. For example just see the differences in the words of the SAC regulations in comparison to the words of the CNIS draft rules. From a broader context comtemplate the long range goals of China for its businesses to have and benefit from their own IP as reflected in the “The Outline of National Intellectual Property (IP) Strategy” http://www.chinaipr.gov.cn/news/government/664246.shtml
So here we have in country interests that should be wanting to protect investments of IP in standards setting. But we also have the anti monoply law and others who are concerned with anti competitive behavior. And now add international particiation in standards setting. The text of the SAC proposed Regulation “grant licences with royalties at a price significantly lower than the normal royalties” was text that if implemented would seriously harm innovation and standards setting in China.
Mattias Ganslandt says:

George, interesting points. The very fact that the PRC is willing to receive comments and to discuss policy proposals appears constructive and positive. Better to have a constructive dialogue than a trade conflict. But, is this openess reflecting a sincere willingness to reconsider the policy and to reach a point of multilateral understanding? PRC appears to consider standards as a potential means to reduce compensation to IPR holders (while respecting and enforcing IP rights?). I have a hard time seeing that this is compatible with China’s international obligations. /Mattias
George Willingmyre says:

I mentioned that ANSI had receved some feedback … Here is a for instance of sone of positive” aspects “As for the term “essential patent”, apart from the recommendations your organization made, we had heard a lot from different stakeholders about it, after the discussion, we basically got a conclusion that we would adopt the suggestion. Thanks a lot for your contribution and share. As for the clarification of the term “royalty free”, we do think that is a very good suggestion, because it will prevent misunderstanding of the term by people related, and we decide to adopt it.” However there are other elements of differences and the CNIS note ended with an offer to ANSI to “sit together to discuss”

China’s approach to “standardization of the behavior of incorporating patents into standards”

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