Research on theory, legislations and practices about regulating non-practicing entities in China

• Author: MENG Yanbei
• Pages: 515-537

FRONTIERS OF LAW IN CHINA

VOL. 11 SEPTEMBER 2016 NO. 3

DOI 10.3868/s050-005-016-0030-2

ARTICLE

RESEARCH ON THEORY, LEGISLATIONS AND PRACTICES ABOUT REGULATING

NON-PRACTICING ENTITIES IN CHINA

MENG Yanbei∗

Abstract Non-Practicing Entities (NPE), as a subject, is a neutral concept, but the

derogatory sense of translation and understanding on this concept and the chaos of

understanding make the legal regulation of NPE encounter more difficulties and

challenges. In fact, NPE issues are concerned, discussed and researched in China within

quite a long period, however, it would not become an outstanding legal issue nowadays.

NPE as a market entity, its existence is legitimate per se, and what the law should focus

on is the unfair conduct that NPE might be engaged in rather than the subject of NPE

itself. It is not necessary to make specific articles and provisions on the subject of NPE

at present in the Patent Law of the People’s Republic of China (PRC) and the

Anti-Unfair Competition Law of the PRC which are revised in China, and a serial of

rules and guidelines for Anti-Monopoly Law of the PRC which are formulated in China.

It proved that the unfair conducts of NPE should be regulated according to Patent law,

Anti-Unfair Competition Law and Anti-Monopoly Law as well as, reconfirmed that the

conclusion that the regulation of NPE in China laws focus on conducts rather than

subject in a serial of cases such as the anti-monopoly investigation case against

INTERDIGITAL Corporation initiated by the National Development and Reform

Commission, the case that the Ministry of Commerce imposed restrictive conditions to

approve that Microsoft acquired Nokia equipment and service business, and the

commercial defamation case that Shenzhen Libang Precision Instrument Co., Ltd vs

Shenzhen Mairui Biological Medical Electronic Co., Ltd which was reviewed by the

Supreme People’s Court.

Keywords Non-Practicing Entities, improper conduct, Patent Law, Anti-Unfair

Competition Law, Anti-Monopoly Law

INTRODUCTION .................................................................................................................... 516

I. ACCURATE DEFINITION OF THE NPE CONCEPT IS THE CORNERSTONE OF LEGAL

REGULATION OF NPE IN CHINA............................................................................... 518

∗ (󳎖) Ph.D and Associate Professor, School of Law, Renmin University of China, Beijing 100872,

China. Contact: mengyb@ruc.edu.cn

This article is the result of research carried out as part of the 2012 Research Project 󰊂󲔡󰊂󰦪󳋃

󳕭󱓩󱝋 (Research on Issues of Enforcement of Anti-Monopoly Law in Monopolistic Industries) (Project

Approval No.: 12BFX097) in association with the National Social Science Fund.

516 FRONTIERS OF LAW IN CHINA [Vol. 11: 515

A. Legal Regulation Should Focus on Conduct rather than the NPE

Subject...........................................................................................................518

B. Only a Part of NPE Need Legal Regulation Because It Is Easy to Be Engaged in

Improper Conduct......................................................................................... 519

C. Legal Regulation Aims at Controlling the Negative Function of NPE .............521

II. NPE ISSUES WILL NOT BECOME AN OUTSTANDING LEGAL PROBLEM AFTER A LONG

PERIOD IN THE FUTURE IN CHINA........................................................................... 522

A. The Intellectual Property Service Industry with Lower Marketization Degree in

China............................................................................................................ 522

B. China’s Patent Policy and Legal System Are Unfavorable to the Appearance of a

Lot of NPE.................................................................................................... 522

C. The Relatively Effective Regulation of Patent Right Abuse in China ...............523

D. Necessary to Pay Attention to NPE Issues in China .......................................524

III. LEGISLATIVE REGULATION: REGULATION OF UNFAIR CONDUCT OF NPE BY

PATEN T LAW, ANTI-UNFAIR COMPETITION LAW AND ANTI-MONOPOLY LAW ...... 525

A. The Regulation of Unfair Conduct of NPE under the Patent Law..................525

B. The Regulation of Unfair Conduct of NPE under Anti-Unfair Competition

Law .............................................................................................................527

C. The Regulation of Unfair Conduct of NPE under the Anti-Monopoly Law..... 529

IV. LEGAL ACTION: THE PRACTICES THAT CHINA INTELLECTUAL PROPERTY

AUTHORITIES, ANTI-MONOPOLY ENFORCEMENT AUTHORITIES, AND THE COURT

REGULATE UNFAIR CONDUCT OF NPE ................................................................. 530

A. The Measures of Government Organs for Regulation of Unfair Conduct of

NPE .............................................................................................................530

B. The Practice that the National Development and Reform Commission

Regulates Unfair Conduct of NPE................................................................. 531

C. The Practice that the Ministry of Commerce Regulates Unfair Conduct of

NPE.............................................................................................................. 532

D. The Practice that the Court Regulates the Unfair Conduct of NPE................534

CONCLUSION........................................................................................................................ 536

INTRODUCTION

According to the statistics of Patent Freedom, the patent lawsuits brought by

Non-Practicing Entities (NPE) increasingly tend to rise. There were 588 cases in 2004,

increasing to 4,602 cases in 2011. Some large companies such as APPLE, HP, Samsung,

AT&T, DELL, SONY and HTC were the most frequent respondents in the attack of NPE

lawsuits, for instance, APPLE encountered 44 cases in 2012 alone.1 James Beson and

Michael Meurer, of the Boston University Law School, found in a research that 62% of

1 CHENG Yongshun & WU Lijuan,󱊳󱍙󱂅󰾋󲢙󲳅󱠫󱓩󱝋 (Comments on Current

Situation of “Patent Troll” in China and Research of Counter-Policy), 8 󱒺󲢛󰐘 (Intellectual Property

Right) 3, 4 (2013).