China’s legal framework at the intersection of IP and antitrust law

In China’s rapidly evolving business landscape, the intersection of intellectual property (IP) rights and antitrust regulation presents both challenges and opportunities for companies operating in or with Chinese entities.

While IP laws grant exclusive rights to encourage innovation, antitrust laws maintain market competition and prevent abuse of market power. Although these two legal domains may appear contradictory at first glance, they ultimately share the common objectives of fostering innovation, enhancing efficiency, and advancing societal welfare.

This article introduces China’s legal framework governing this intersection, analyses representative cases, and explores regulatory trends in this developing field.

China’s legal framework establishes a coordinated approach between IP protection and competition law. The Anti-Monopoly Law (2022) and the Patent Law (2020) affirm the same fundamental principle: the legitimate exercise of IP rights is protected, while the abuse of such rights to eliminate or restrict competition falls under antitrust regulation.

The Standardisation Law (2017) complements this general framework by addressing the specific area of standard-essential patents (SEPs). It prohibits using standards to exclude or restrict market competition and explicitly subjects such practices to antitrust scrutiny, reflecting the competition concerns that arise in standardisation contexts.

To specify regulatory standards and enforcement bases at the IP–antitrust intersection, the State Council’s Anti-Monopoly Commission issued the Anti-Monopoly Guidelines in the Field of Intellectual Property Rights in 2019. These guidelines provide analytical frameworks for assessing IP-related monopolistic agreements, abuse of a dominant market position, concentration of undertakings, and issues concerning SEPs.

In 2023, the State Administration for Market Regulation (SAMR) issued the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Eliminate or Restrict Competition, which prohibit monopolistic agreements arising from IP abuse, dominant position abuse, and business concentration. The provisions simultaneously address specific issues relating to patent pools, SEPs, and copyright-related monopoly matters, clarifying the analytical principles and frameworks for antitrust enforcement in the IP domain.

In November 2024, to address increasingly complex competition issues in the SEP field, the SAMR released the Anti-Monopoly Guidelines for Standard-Essential Patents. These guidelines establish normative requirements for information disclosure, licensing commitments, and good-faith negotiations in the SEP field.

Article 5 of the guidelines stipulates that operators may proactively report potential risks of eliminating or restricting competition to antitrust enforcement authorities for supervision and guidance. Enforcement authorities may strengthen ex ante and in-process regulation through reminders, interviews, and rectification. This mechanism represents a shift from singular ex post punishment to diversified regulatory approaches.

Chapter 2 of the guidelines stipulates good behaviours for SEPs, including information disclosure, licensing commitments, and good-faith negotiations, clarifying that while these are not mandatory obligations, non-compliance may increase antitrust risk.

Regarding information disclosure, Article 6 requires operators participating in standard-setting to disclose essential patents in a timely and thorough manner to prevent “patent ambush”. On licensing commitments, Article 7 emphasises fair, reasonable, and non-discriminatory (FRAND) principles and requires that commitments remain effective for assignees when patents are assigned. For good-faith negotiations, Article 8 details procedural requirements as reference standards for judging behavioural reasonableness.

Article 18 innovatively brings remedy measure abuse under antitrust regulation, stipulating that SEP holders with dominant market positions may be deemed abusive if they use injunctions to prevent standard implementation when implementers are willing to obtain licences under FRAND terms without justifiable reasons.

This provision draws on international experience, such as the EU Samsung case (AT.39939, Samsung Electronics – Enforcement of UMTS standard essential patents) and the US Department of Justice’s (DOJ’s) business review letters to the Institute of Electrical and Electronics Engineers (IEEE) (2015 and 2020). While Article 18 primarily addresses “patent holdup,” it simultaneously establishes safeguards against “patent holdout” or “reverse patent holdup” by requiring analysis of whether both licensing parties have engaged in good-faith negotiations as outlined in Chapter 2. This balanced approach aligns with the DOJ’s 2020 supplementary letter to the IEEE.

By creating this procedural framework that evaluates the conduct of both parties, the guidelines demonstrate a regulatory approach to SEP licensing that protects the legitimate interests of all stakeholders in the standardisation ecosystem.

Article 5 of the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Eliminate or Restrict Competition states that the relevant commodity market can be a technology market or a product market containing specific IP rights, reflecting the multidimensional nature of IP-related markets.

Defining technology markets requires consideration of substitutability between different technologies, which differs from traditional commodity market analysis. Technical substitutability often involves complex technical assessments and must consider multiple factors, including technical function, application fields, and implementation costs. For example, in the communications sector, whether different technical standards (such as 4G and 5G) constitute substitutes depends not only on technical performance but also on network effects and market acceptance.

For SEPs, market definition is particularly unique. Article 4 of the Anti-Monopoly Guidelines for Standard-Essential Patents states: “[T]he definition of relevant commodity markets involving SEPs adopts the method of substitutability analysis. In specific cases, the relevant commodity markets involving SEPs are mainly technology markets and product and service markets related to standard implementation.”

Since standardisation itself establishes certain technology as an industry standard while excluding other competing technologies, SEPs often have no substitute technologies once the standard is widely adopted, leading to a narrower relevant market definition.

Geographic market definition also has special characteristics. While IP protection is territorial, technology dissemination and use often cross national boundaries. The SEP guidelines specify that “when SEP licensing covers multiple countries and regions, the definition of relevant geographic markets must comprehensively consider the territorial characteristics of different countries and regions in standard implementation and patent protection”. This reflects the complexity of geographic market definition in IP cases.

In judicial practice, the Yangtze River Pharmaceutical API (active pharmaceutical ingredient) monopoly case, as will be elaborated below, illustrates the characteristics of market definition in the pharmaceutical patent field. The Supreme People’s Court of China supported the ‘one drug, one market’ approach, defining the relevant market as the single “desloratadine API market”, while emphasising the need to consider indirect competitive constraints from downstream markets.

Article 14 of the Anti-Monopoly Guidelines in the Field of Intellectual Property Rights states that determining a dominant market position requires an analysis of substitution possibilities and switching costs, downstream market dependency, and the countervailing power of trading counterparts.

For SEPs, Article 12 of the SEP guidelines provides a more specific analytical framework, including:

• Market share and competitive status;

• Market control capability;

• Downstream market dependency; and

• Market entry difficulty.

The article stipulates: “[U]nder normal circumstances, when the standard itself has no alternative standards, the SEP holder occupies the entire market share in the SEP licensing market, unless evidence can refute this”, while leaving room for contrary evidence.

China’s antitrust framework identifies various forms of monopolistic agreements involving IP. According to the IP antitrust guidelines, these include agreements restricting the scope of joint R&D and exclusive cross-licensing creating market entry barriers. The SEP guidelines elaborate by identifying several types of monopolistic agreements in standard-setting processes:

• Excluding specific operators from participating in standard-setting without justifiable reasons;

• Excluding alternative solutions without justifiable reasons;

• Agreeing not to implement competitive standards without justifiable reasons; and

• Restricting certain implementers’ standard implementation activities, such as testing and certification.

The guidelines also address monopolistic agreements related to patent pools, including:

• Using patent pools to exchange sensitive competitive information;

• Incorporating competitive patents into pools;

• Jointly restricting patent holders from licensing independently; and

• Organising or substantially assisting patent holders in reaching monopolistic agreements.

Additionally, the guidelines recognise other types of monopolistic agreements where SEP holders may abuse their patent rights, such as imposing restrictions on implementers regarding pricing, quantities, geographical scope or quality of SEP-related products, and limiting the development of competitive technologies.

The legal framework prohibits various abuses of dominant market position involving IP, including:

• Unfairly high licensing fees;

• Unjustified refusals to license;

• Tying and bundling;

• Imposing unreasonable trading conditions; and

• Applying differential treatment.

When applied to SEPs, these prohibitions are more stringent due to the market power conferred by standardisation.

The SEP guidelines detail various typical behaviours and analytical frameworks:

• Unfairly high licensing fees – Article 13 specifies considerations, including whether both parties have engaged in good behaviour, a comparison of licensing fees, whether expired patents are charged for, and whether fees are adjusted according to changes in patent value;

• Refusal to licence – Article 14 stipulates that after a patent holder makes a FRAND commitment, they cannot refuse willing licensees without justifiable reasons;

• Tying and bundling – Article 15 recognises the efficiency of package licensing but identifies abusive situations, such as forcing acceptance of non-essential patents or the purchase of other products; and

• Imposing unreasonable trading conditions and differential treatment – the former includes forced reverse licensing and the prohibition of challenges to patent validity; the latter involves applying different licensing conditions to implementers in similar situations.

The IP antitrust provisions and SEP guidelines also regulate concentrations of operators involving IP rights. Such concentrations must be notified to the antitrust enforcement authorities when they meet the notification thresholds. When analysing these transactions, authorities consider:

• Whether the IP rights constitute an independent business;

• Whether they generate independent and calculable revenue; and

• The mode and duration of IP licensing.

The Yangtze River Pharmaceutical API monopoly case (Supreme People’s Court Civil IP Final No. 1140, 2020) was the first patent and antitrust civil dispute in the API sector reviewed by China’s Supreme People’s Court, involving whether Hefei Medical Engineering abused its dominant market position in the desloratadine citrate disodium API market.

The case centred on Hefei Medical’s patent ZL02128998.0, which is essential for producing desloratadine API. The parties had a long-standing relationship – in 2006, they signed a technology transfer agreement whereby Hefei Medical would supply the API, while Yangtze River would manufacture the finished products. The dispute arose when Hefei Medical increased the API price from CNY19,900/kg to CNY48,000/kg, with threats to raise it further to CNY60,000/kg.

Regarding market definition, the Supreme People’s Court applied the ‘one drug, one market’ approach in line with the Anti-Monopoly Guidelines for the API Sector issued by the Anti-Monopoly Commission of the State Council, which state that “due to the special role of APIs in drug production, one API generally constitutes a separate relevant product market”.

In determining dominant market position, the Supreme People’s Court held that, as the patent holder and the sole holder of the API production approval, Hefei Medical controlled market access and had the ability to determine prices, regulate supply, and control transaction conditions. The court also emphasised the need to consider indirect competitive constraints from the downstream preparation market, particularly highlighting the market specificity of APIs as intermediate inputs.

Regarding the identification of monopolistic behaviour, the Supreme People’s Court established a ‘three-step’ method for analysing unfair high prices:

• An analysis of the relevant market competition status and innovation risks;

• An economic analysis of rates of return, profits, and price comparisons; and

• A verification of competitive effects and consumer welfare.

Applying this method, the Supreme People’s Court concluded that the price increase did not constitute unreasonable high pricing, considering Hefei Medical’s research investment, legitimate need to recover innovation costs, and the absence of clear evidence showing harm to competition or consumer welfare.

The Supreme People’s Court held: “[I]f a high price has neither produced obvious effects of excluding or restricting competition nor clearly harmed consumer welfare, it should not be simply identified as an abuse” and “when evaluating excessive pricing behaviour, greater emphasis should be placed on actual or potential anti-competitive effects, while avoiding any weakening of investment incentives for existing businesses and potential new entrants. Failure to do so may produce a ‘chilling effect’ that reduces innovation and ultimately harms consumer welfare”.

The court further emphasised: “[W]hen assessing market competition and innovation risks, the more intense the market competition, the more active the market entry, or the greater the investment required for market entry and the higher the innovation risk, the more cautious the analysis and evaluation of the alleged monopolistic behaviour should be. Focus must be placed on innovation factors and long-term consumer welfare factors.”

The Hitachi Metals Rare Earth antitrust litigation (Supreme Court Civil IP Final Nos. 1398, 1413, 1449, and 1482; 2021) was China’s first case involving a refusal to license SEPs. Four Ningbo companies accused Hitachi Metals of abusing its dominant position in the market for licensing essential patents for sintered neodymium–iron–boron magnets.

In defining the market, the first-instance court determined that the relevant market was “the patent licensing market for essential sintered neodymium–iron–boron patents owned by Hitachi Metals”, finding that Hitachi Metals held a dominant position and that the patents constituted an “essential facility”. However, the Supreme People’s Court found “insufficient evidence to prove that Hitachi Metals’ sintered neodymium–iron–boron patents are technically irreplaceable” and redefined the relevant commodity market as “the technology market for producing sintered neodymium–iron–boron materials”, including patented and non-patented technologies with close substitutability.

The Supreme People’s Court demonstrated the substitutability of Hitachi Metals’ patented technology from multiple dimensions:

• Basic patents had expired;

• Market share data showed that Hitachi Metals and its licensed enterprises held less than 20% of the Chinese market; and

• China’s neodymium–iron–boron production volume continued to increase significantly, indicating that Hitachi Metals’ patents lacked market control.

• Contradictions in the parties’ statements and technological updates also indicated substitution possibilities.

The first-instance court applied the ‘essential facilities’ theory, holding that refusing to implement patent licensing constituted an abuse of a dominant market position through “refusal to deal” when the plaintiff had clearly requested a licence and was willing to pay reasonable consideration. The Supreme People’s Court avoided a direct evaluation of this theory by denying the factual premise (the essentiality of the patents), clearly stating that Hitachi Metals did not hold a dominant position in the redefined market.

China’s IP–antitrust intersection demonstrates the following characteristics:

• A multi-level legal system has been formed, establishing basic boundaries between the legitimate exercise and abuse of IP rights;

• The SEP guidelines establish ex ante and in-process regulatory mechanisms, detail good behaviour norms, and innovate in regulating remedy measure abuse, reflecting China’s institutional innovation in this field;

• Relevant market definition, dominant market position determination, and monopolistic behaviour identification constitute the core analytical framework, with technology substitution, patent value, and innovation incentives as key considerations in the IP field; and

• Judicial practice has developed specialised analytical approaches through representative cases, such as the three-step method for analysing unfair high prices in the Yangtze River Pharmaceutical case and the multi-dimensional analysis of technical substitutability in the Hitachi Metals case.

As China’s innovation-driven development strategy deepens and global innovation competition intensifies, balancing IP protection with competition maintenance will become increasingly important. China’s legal practice in this field will continue to improve and contribute valuable insights to global IP governance.