Through the Anti-Monopoly Lens: What Constitutes ‘Unfairly High Patent Pricing’ in China?

By Yuan Hao (Tsinghua University School of Law)

China is facing a pressing need to build its innovation-driven economy. With this backdrop, recent cases and controversies in judicial/administrative practice call our attention to the need of a more systematic understanding of the intersection between antitrust and IP. A critical thread in this intersection tapestry is the concept of “unfairly high patent pricing (专利高价)”. Different than its US counterpart, Chinese Anti-Monopoly Law pays substantial attention to a dominant market player’s unilateral “exploitative” conducts. Specifically, section 17(1) of the AML forbids a dominant undertaking from “abusing its market position” by selling at “unfairly high prices”. However, neither the Law nor later enacted Judicial Interpretation provides an administrable definition of what constitutes “unfairly high price” in an anti-monopoly sense. Correspondingly, courts and enforcement agencies have significant discretion in characterizing a patent pricing as “unfairly high”, thereby imposing penalty in practice. Despite a good intention, this ex post legal risk would seriously curtail business entities’ ex ante incentive to invest in innovation, which is often entailed with high risks. Lacking adequate legal and economic guidance, this discretion would also result in significant institutional positive error. Such error would be particularly severe in the context of patent-intensive industries. 

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