Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Saturday, September 12, 2009

Georgetown Law Global Antitrust Enforcement Symposium - 2009

Posted by D. Daniel Sokol

Georgetown Law Global Antitrust Enforcement Symposium, Tuesday 22 September 2009

Global Antitrust Enforcement Symposium

Cutting-edge issues in competition law and policy will be addressed in this forum for lawyers, policymakers, corporate executives and academics. Faculty will focus on the areas of greatest concern to multinational enterprises: new merger enforcement attitudes in a time of economic challenge; how economic thinking will affect single firm conduct enforcement; the latest developments in cartel investigations and prosecutions; and global agencies, convergence and recession.

Keynote speakers:

  • Philip Lowe, Director General, Directorate General for European Competition, European Commission, will give the keynote address at 9:00 am
  • Christine A. Varney, Assistant Attorney General, Antitrust Division, US Department of Justice, will give the luncheon address at 12:00 pm
  • Jon Leibowitz, Chairman, US Federal Trade Commission, will also give a special address

Other confirmed speakers to date include:

  • Melanie L. Aitken, Commissioner of Competition, Canada Competition Bureau
  • Philip Collins, Chairman, UK Office of Fair Trading
  • Joseph Farrell, Director, Bureau of Economics, US Federal Trade Commission
  • Richard Feinstein, Director, Bureau of Competition, US Federal Trade Commission
  • Scott Hammond, Deputy Assistant Attorney General, Antitrust Division, US Department of Justice
  • Ana Paula Martinez, Director, SDE, Brazilian Ministry of Justice
  • Carl Shapiro, Deputy Assistant Attorney General for Economic Analysis, US Department of Justice

September 12, 2009 | Permalink | Comments (1) | TrackBack (0)

Friday, September 11, 2009

Territory, Territoriality, and the Resolution of Jurisdictional Conflict

Posted by D. Daniel Sokol

Hannah L. Buxbaum, Indiana University School of Law-Bloomington has a new piece article on Territory, Territoriality, and the Resolution of Jurisdictional Conflict.

ABSTRACT: Ever-increasing gaps and overlaps in the national regulation of cross-border events challenge territorial sovereignty as the conceptual basis for rules on legislative jurisdiction. At the same time, the work of scholars in a range of disciplines, including international relations and critical geography, has complicated our understanding of the relationship between territory and power in the age of globalization. As a result, emerging models of jurisdictional theory are moving away from territory, and territorially based concepts of regulatory power, as the basis for defining legislative authority. What risks being overlooked in this shift is the critical step between re-thinking the construction of territory and rejecting the salience of territoriality to jurisdictional frameworks. While territorial contacts may function as simple factual inputs in jurisdictional analysis, 'territoriality' and 'extraterritoriality' are legal constructs - claims made by particular actors, and assessed by particular institutions, within particular legal systems. The meaning of such claims is therefore dependent upon the local practices and understandings of specific regimes. This article uses a case study of the role of territory in U.S. and German competition law to uncover differences in those systems that affect their respective constructions of territoriality. It argues that local legal and institutional frameworks remain relevant in the transition from traditional conflicts models to newer regulatory strategies, and that the process of integrating critical reconceptualizations of territory into jurisdictional theories must account for differences in those frameworks across regimes.

September 11, 2009 | Permalink | Comments (0) | TrackBack (0)

Penalty Clauses in Exclusive Contracts and Abuse of Dominant Position

Posted by D. Daniel Sokol

Ignacio Marin Garcia, Universitat Pompeu Fabra and Carlos Alberto Ruiz García, Universitat Pompeu Fabra - Department of Law describe Penalty Clauses in Exclusive Contracts and Abuse of Dominant Position.

ABSTRACT: This paper analyzes the Spanish National Competition Commission Decision of May 19, 2009, which fines 'Abertis' for abuse of dominant position. The abusive practice consisted in imposing excessive penalty clauses in contracts with national television channels. Penalty clauses in exclusive contracts may have effects on competition, either positive or negative. However, the National Competition Commission forgets the formers and therefore concludes that those clauses are anticompetitive.

September 11, 2009 | Permalink | Comments (0) | TrackBack (0)

GCR's 2009 Competition Law Review

Posted by D. Daniel Sokol

 

GCR's 2009 Competition Law Review

Recent developments in Competition Law and Policy

Monday 16 and Tuesday 17 November 2009, The Conrad Hotel, Brussels

Excellent speakers, excellent value!

Keynote speakers: Commissioner J. Thomas Rosch, Federal Trade Commission, Washington DC and Philip Lowe, Director General, DG Competition, European Commission, Brussels

Topics will include:

  • Competition snapshot - a year in review
  • Latest developments in cartel enforcement - review of recent cases, level of the fines, direct settlements
  • Information exchanges - challenges for antitrust in a recession
  • Vertical agreements - the revised regulation and guidelines
  • Recent developments in merger control - policy developments and trends in an economic downturn
  • Article 82 - application of Article 82 in innovative and high-tech sectors
  • The pharmaceutical sector inquiry - the Commission's final report
  • Damages actions for breach of the EC antitrust rules
  • 'Question time' - a roundtable discussion with senior competition representatives

Register here

Confirmed speakers include:

  • Peter Alexiadis, Partner, Gibson Dunn & Crutcher LLP, Brussels
  • Lars-Hendrik Röller, President ESMT, Berlin
  • Olivier Guersent, Director, DG Competition, European Commission
  • Bruno Lasserre, President, Autorité de la Concurrence
  • Christian Ewald, Chief Economist, Bundeskartellamt
  • Professor Frédéric Jenny, Director for International Relations ESSEC, Judge of the Supreme Court of France
  • Lars Kjølbye, Partner, Howrey, Brussels
  • Tony Reeves, Partner, Clifford Chance LLP, Brussels
  • Gerwin Van Gerven, Partner, Linklaters LLP, Brussels
  • Gary R. Spratling, Partner, Gibson Dunn & Crutcher, LLP, San Francisco
  • Jürgen Schwarze, Director, Institute of Public Law, Department of European and Public International Law, Freiburg
  • Wouter Wils, Legal Service, European Commission and Professor, King's College London
  • Robbert Snelders, Partner, Cleary Gottlieb Steen & Hamilton LLP, Brussels
  • Luc Peeperkorn, Senior Administrator, DG Competition, European Commission
  • Stephen Kinsella OBE, Partner, Sidley Austin LLP, Brussels
  • Melanie Thill Tayara, Partner, Salans, Paris
  • Nikos Vettas, Professor, Athens University of Economics and Business, CEPR, and EAGCP
  • Philippe Chappatte, Partner, Slaughter and May, London
  • Guillaume Loriot, Head of Unit, Antitrust and Merger Case Support DG, Competition, European Commission
  • Simon Priddis, Partner, Freshfields Bruckhaus Deringer LLP, Brussels
  • Matthias Pflanz, Vice President, CRA International, London
  • James R. Lowe, Partner, Wilmer Cutler Pickering Hale and Dorr LLP, Washington DC
  • Thomas Vinje, Partner, Clifford Chance LLP, Brussels
  • Nick Banasavic, Deputy Head of Unit, DG Competition, European Commission
  • James S. Venit, Partner, Skadden Arps Slate Meagher & Flom LLP, Brussels
  • Jorge Padilla, Managing Director, LECG, London and Brussels
  • Petri Kuoppamäki, Vice President Corporate Legal, Nokia Corporation, Helsinki
  • Philipp Gasparon, Deputy Head of Unit, DG Competition, European Commission
  • Stephen Kon, Partner, SJ Berwin LLP, London and Brussels
  • David H. Rosenberg, GlaxoSmithKline PLC, London
  • Daniele Calisti, Private Enforcement Unit, DG Competition, European Commission
  • Robert O'Donoghue, Brick Court Chambers, London
  • Gunnar Niels, Director, Oxera, Oxford
  • Tim Reher, Partner, CMS Hasche Sigle, Hamburg

Download the programme here

Register now to join delegates from organisations including:

Allen & Overy LLP • Autorità Garante della Concorrenza e del Mercato • Barcellos Tucunduva • Bugge, Arentz-Hansen & Rasmussen • CHEP International • CMS Adonnino Ascoli & Cavasola Scamoni • Copenhagen Economics • D&B David si Baias SCA • Danish Competition Authority • Frontier Economics • Gleiss Lutz • Gorrissen Federspiel • Hunton & Williams • LMR Attorneys Ltd • Morrison & Foerster LLP • The Netherlands Competition Authority • Ogilvy Renault LLP • Orange Home UK Limited • Peli Filip SCA • Roschier • Sidley Austin LLP • Swedish Competition Authority • Swedish Post and Telecom Agency • Telenor ASA • Wärtsilä Corporation • White & Case • Wolf Theiss

COST OF THE CONFERENCE

  • Standard registration: £950 (+ 21% TVA = £1149.50)
  • In-house Lawyer and Government Agencies: £850 (+ 21% TVA= £1028.50)

Register here

September 11, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, September 10, 2009

Chinese Anti-Monopoly Law Seminars

Posted by D. Daniel Sokol

CPI presents:

China Series: An Introduction to Anti-Monopoly Law
presented by Martyn Huckerby (Mallesons Stephen Jaques)
This seminar will provide a basic introduction to the Chinese legal framework and Chinese antitrust law.

This seminar will be offered on September 16, at 9:00 AM London time.

China Series: Concentration Issues
presented by Susan Ning (King & Wood)
This class will provide an in-depth introduction to the concentration requirements under China's Anti-Monopoly Law.
This seminar will be offered on October 14, at 9:00 AM London time.

China Series: Dominance Abuse
presented by Dr. John Yong Ren (T & D Associates)
This class will address China's regulation of dominant market position under its Anti-Monopoly Law.
This seminar will be offered on October 28, at 9:00 AM London time.
 

September 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk

Posted by D. Daniel Sokol

Oleksandr Perekhozhuk, Michael Grings, and Thomas Glauben have written on Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk.

ABSTRACT: Most of the studies based on the New Empirical Industrial Organization (NEIO) approach use the industry data to estimate the degree of market power at the national level. Yet, only a few empirical studies presented the results that measure the degree of market power at the regional level and found the existence of market power in the regional markets. While the fact is that there is an extensive evidence for the existence of potential oligopsony market power in the Ukrainian milk processing industry (price cartels and geographic market sharing among milk processing enterprises, interference of the state authorities, higher concentration on regional markets), the estimation results of the market structure model at the national level did not produce any evidence suggesting the exercise of oligopsony power (the estimated parameter of oligopsony power is close to zero and statistically insignificant). The objective of this s! tudy is to estimate the degree of oligopsony power in the regional market for raw milk. The estimation results of the market structure model at the regional level indicate the existence of oligopsony power in nine out of the twenty three regions of Ukraine.

September 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Mobile Termination and Mobile Penetration

Posted by D. Daniel Sokol

Sjaak Hurkens (Institute for Economic Analysis (CSIC)) and Doh-Shin Jeon (Universitat Pompeu Fabra) explain the dynamics of Mobile Termination and Mobile Penetration.

ABSTRACT: In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.

September 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Signaling the Strength of a Market Entrant

Posted by D. Daniel Sokol

Karel Janda (Charles University - Econ) provides us an understanding of Signaling the Strength of a Market Entrant.

ABSTRACT: This article belongs to the game theoretic and information economics literature dealing with the problem of signaling in the context of game theoretical models of entry into the industry. As opposed to the majority of literature we consider the situation of asymmetric information where the private information belongs to the entrant. We model the capacity decision of the entrant as a signal of his strength. We show that in the Stackelberg model of market entry for some values of underlying parameters the entrant fully utilizes his capacity while for other parameter values he builds excess capacity. The model may be empirically relevant for industrial organization analysis of the entry of a new supplier to the existing supply chain.

September 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 9, 2009

Screening and Merger Activity

Posted by D. Daniel Sokol

Albert Banal-Estanol (City University of London and Universitat Pompeu Fabra), Paul Heidhues (University of Bonn), Rainer Nitsche (European School of Management and Technology), and Jo Seldeslachts (University of Amsterdam and WZB) analyze Screening and Merger Activity.

ABSTRACT: In our paper targets, by setting a reserve price, screen acquirers on their (expected) ability to generate merger-specific synergies. Both empirical evidence and many common merger models suggest that the difference between high- and low-synergy mergers becomes smaller during booms. This implies that the target’s opportunity cost for sorting out relatively less fitting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during economic booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.

September 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Credit Market Competition and the Nature of Firms

Posted by D. Daniel Sokol

Nicola Cetorelli (Federal Reserve Bank of New York) has a working paper on Credit Market Competition and the Nature of Firms.

ABSTRACT: Empirical studies show that competition in the credit markets has important effects on the entry and growth of firms in nonfinancial industries. This paper explores the hypothesis that the availability of credit at the time of a firm’s founding has a profound effect on that firm’s nature. I conjecture that in times when financial capital is difficult to obtain, firms will need to be built as relatively solid organizations. However, in an environment of easily available financial capital, firms can be constituted with an intrinsically weaker structure. To test this conjecture, I use confidential data from the U.S. Census Bureau on the entire universe of business establishments in existence over a thirty-year period; I follow the life cycles of those same establishments through a period of regulatory reform during which U.S. states were allowed to remove barriers to entry in the banking industry, a development that resulted in significantly improved credit competition. The evidence confirms my conjecture. Firms constituted in post-reform years are intrinsically frailer than those founded in a more financially constrained environment, while firms of pre-reform vintage do not seem to adapt their nature to an easier credit environment. Credit market competition does lead to more entry and growth of firms, but also to complex dynamics experienced by the population of business organizations.

September 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Trends in Regional Industrial Concentration in the United States

Posted by D. Daniel Sokol

Joshua Drucker writes on Trends in Regional Industrial Concentration in the United States.

ABSTRACT: In a seminal article, Benjamin Chinitz (1961) raises the question of the effects that industry size, structure, and economic diversification may have on firm performance and regional economies. His line of inquiry suggests a related but conceptually distinct issue: how does the extent to which a industry is regionally dominated—concentrated locally in a single or small number of firms—impact the local performance of that industry? This question has received little attention, principally because accurately measuring industrial concentration at the regional scale requires firm-level information. This paper makes use of confidential plant- and firm-level manufacturing data to explore patterns of industrial concentration in the United States at the regional scale. Regional analogues of concentration ratios and other measures commonly used in the aspatial industrial organization literature indicate the extent to which man! ufacturing activity is concentrated in a small number of firms. Both the manufacturing sector as a whole and major manufacturing industry sectors are examined in order to determine the extent of industrial concentration in the continental United States, to explore changes over time in geographic patterns of concentration, and to investigate associations between industrial concentration and employment growth at the regional scale. Implications for understanding regional growth and for devising regional economic development policy are discussed.

September 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Economic Analysis Group Antitrust Division, US Department of Justice Fall 2009 Seminar Schedule

Posted by D. Daniel Sokol

Economic Analysis Group
Antitrust Division, US Department of Justice
Fall 2009 Seminar Schedule


September 15
(Tues 2–3:30pm)
Xavier Vives
Navarra
Strategic Supply Function Competition with Private Information

October 6
(Tues 2–3:30pm)
Leemore Dafny
Northwestern
Paying a Premium on Your Premium? Consolidation in the U.S. Health Insurance Industry (with Mark Duggan and Subramaniam Ramanarayanan)

October 13
(Tues 2-3:30pm)
Jake Gramlich
Georgetown
Gas Prices and Endogenous Product Selection in the U.S. Automobile Industry

October 20
(Tues 2-3:30pm)
Fiona Scott Morton
Yale
Differentiated to Death (with Judith Chevalier and David Harrington)

October 27
(Tues 2-3:30pm)
Nathan Miller
EAG
An Empirical Model of Spatial Competition with an
Application to Cement (with Matthew Osborne)
November 3

(Tues 2-3:30pm)
Chuck Romeo
EAG
Robust Inference in Mixed Logit Demand Systems for Aggregate Data
November 10

(Tues 2-3:30pm)
Joe Farrell
FTC and UC-Berkeley
Some Welfare Analytics of Aftermarkets

November 18
(Wed 2-3:30pm)
Louis Kaplow
Harvard Law
Why (Ever) Define Markets?
[Note this is a Wednesday.]

December 1
(Tues 2-3:30pm)
Tim Brennan
UMD-Baltimore County
Exclusion vs. Predation: Drawing Lines Between Easy and Hard Abuse Cases

December 8
(Tues 2-3:30pm)
Ron Goettler
Chicago
Competition and Innovation in the Microprocessor Industry: Does AMD Spur Intel to Innovate More? (with Brett Gordon)

Seminars take place in Room 9429 of the Liberty Square Building at 450 Fifth Street NW, Washington DC. For further information, contact Patrick Greenlee at (202) 307-3745 or patrick.greenlee@usdoj.gov. Schedule also available at http://www.usdoj.gov/atr/public/eag/seminars.htm

September 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Entry, Exit, and the Determinants of Market Structure

Posted by D. Daniel Sokol

Timothy Dunne (University of Oklahoma), Shawn Klimek (U.S. Bureau of the Census), Mark Roberts (Pennsylvania State), and Daniel Yi Xu (NYU) explain Entry, Exit, and the Determinants of Market Structure.

ABSTRACT: Market structure is determined by the entry and exit decisions of individual producers. These decisions are driven by expectations of future profits which, in turn, depend on the nature of competition within the market. In this paper we estimate a dynamic, structural model of entry and exit in an oligopolistic industry and use it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. We find that entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all important determinants of long run firm values and market structure. As the number of firms in the market increases, the value of continuing in the market and the value of entering the market both decline, the probability of exit rises, and the probability of entry declines. The magnitude of these effects differ ! substantially across markets due to differences in exogenous cost and demand factors and across the dentist and chiropractor industries. Simulations using the estimated model for the dentist industry show that pressure from both potential entrants and incumbent firms discipline long-run profits. We calculate that a seven percent reduction in the mean sunk entry cost would reduce a monopolist's long-run profits by the same amount as if the firm operated in a duopoly.

September 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 8, 2009

Government in Markets

Posted by D. Daniel Sokol

John Fingleton (OFT) has a great new speech on Government in Markets.

September 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Latin American Competition Law and Policy

Posted by D. Daniel Sokol

Eleanor Fox (NYU - Law) and D. Daniel Sokol (University of Florida - Law, me) are editors of Latin American Competition Law and Policy.  The book is an excellent collection of work from top academics and practitioners and covers many critical issues involving competition law and policy in the region.  You can download the table of contents here.  To order the book, please download the pdf form.  Download Competition Law and Policy in Latin America

BOOK ABSTRACT: This book offers an unparalleled analysis of the emerging law and economics of competition policy in Latin America. Nearly all Latin American countries now have competition laws and agencies to enforce them. Yet these laws and agencies are relatively young. The relative youth of Latin American competition agencies and the institutional and political environment in which they operate limit the ability of agencies to address anti-competitive conduct effectively. Competition policy is a tool to overcome anti-market traditions in Latin America. Effective competition policy is critical to assisting in the growth of Latin American economies and their global competitiveness, and to improving the welfare of domestic consumers. This book provides new region-specific insights into how better to achieve these aims.

September 8, 2009 | Permalink | Comments (1) | TrackBack (0)

IBA 13th Annual Competition Conference - Fiesole, Italy

Posted by D. Daniel Sokol

Details for the program are available here.

September 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Cross-shareholding in the Japanese Banking Sector, Tacit Collusion, and Market Power

Posted by D. Daniel Sokol

Umed Temurshoev, University of Groningen - Faculty of Economics and Business and Stanislav Stakhovych discuss Cross-shareholding in the Japanese Banking Sector, Tacit Collusion, and Market Power.

ABSTRACT:This paper modifies the well-known conjectural variation model of Clarke and Davis (1982) by taking into account partial cross ownership (PCO) links among firms. It is shown that, unlike in the no PCO case, the link between firms’ price-cost margins and the degree of tacit collusion is nonlinear in the presence of PCO. Thus, ignoring PCO in their presence would most likely lead to biased results due to model misspecification. The model is applied to the Japanese banking sector in 2003. We find that Japanese banks compete in a modest collusive environment, while neglecting PCO gives a different result indicating a Cournot oligopoly. It is further shown that banks with passive holdings in rivals exert a strictly larger market power than those without any PCO. In particular, city banks with many shareholdings are found to exercise a much larger market power than regional banks with none or few stockholdings.

September 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Judging’ Economists: Economic Expertise in Competition Law Litigation - A European View

Posted by D. Daniel Sokol

Ioannis Lianos of UCL Law has posted the very interesting Judging’ Economists: Economic Expertise in Competition Law Litigation - A European View.

ABSTRACT: The study focuses on the admissibility and assessment of economic expertise in EC competition law litigation. I start by exploring the broader issues raised by the integration of economic expertise in litigation: in particular the risk of moral hazard and adverse selection because of the epistemic asymmetry between judges and experts and the risk of expert bias. The analysis of these problems will bring me to the question of the conception of science and of the relations between science and law that underpins the concept of scientific expertise and, more specifically, economic expertise. I will then identify the extent of the problem of epistemic asymmetry and expert bias by looking to the degree and the locus of the intrusion of economic analysis in competition cases. I will examine the instruments, procedural and substantive, employed by the legal system, in order to mitigate the risks flowing from the epistemic asymmetry and the expert bias claims. First, I will highlight the different institutional and procedural frameworks that were adopted at the European Union level and in some selected member states in order to integrate economic expertise in litigation. My objective will be to understand how these institutional solutions may address each of the identified problems. Second, I will look to 'substantive' law approaches in the adjudication of expertise, such as the development of specific standards for the admissibility and the sufficiency of economic expertise in courts, as an alternative or as an additional option to deal with the challenges raised by economic expertise. The paper will conclude that the possible adverse effects of the epistemic asymmetry and expert bias between judges and experts raise important concerns that the legal systems should tackle. The current procedural/institutional and substantive legal framework governing economic expertise does not however take sufficiently into account important concerns that are specific to economics and other social sciences, such as the preservation of the scientific 'competition' in the supply of economic theory and consequently methodological or assumptions-related pluralism in economic thought. In particular, I will argue against adopting specific standards of admissibility of economic expertise in Europe. This is a US context-specific solution which does not necessarily fit with the specific characteristics of the European legal system. It is also an approach that represents an outdated and partial view of the scientific as well as of the judicial adjudication process.

September 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, September 7, 2009

Chinese Standard Setting

Posted by Paul Jones

One of the major areas of tension between China and the other countries has been, and will likely continue to be, intellectual property rights in standards. For example when China wants to develop its own national standards, there are concerns form foreign businesses that they will be disadvantaged in the Chinese market, such as in mobile telephones. On the other hand Chinese manufacturers feel that all of their profit margin disappears in the license fees for patented standards in  products such as DVD players. Often China played no role in the development of these standards.

So where is China headed on this issue?

On Friday in Beijing there was a Forum on the Interface Between Standardization and Intellectual Property Rights:

Agenda (in English): http://www.chinaiprlaw.cn/file/2009090115639.html

Pictures: http://www.chinaiprlaw.cn/file/2009090415657.html

Dr. Jiang Zhipei, the former head of the IP Section of the Supreme People’s Court, prepared a paper for the Forum which he has now posted online (in Chinese): http://www.chinaiprlaw.cn/file/2009090615659.html

His paper is a good overview of the development of standard setting policies in China, with reference to earlier cases decided by the Chinese courts and the current development of policies. I recommend it to those wishing to better understand the Chinese approach to standard setting.

First he points out that there are different types of standards; national standards, industry standards, local standards, and enterprise standards. These were set out in the Standardization Law adopted in 1988 (in Chinese:

http://www.chinawater.net.cn/guifan/bzhf.htm ) While in China national and industrial standards have tended to be considered as public property, he recognizes that in the U.S. sometimes industrial standards can be proprietary , and can capture the market for the owner.

In 2007 the Supreme People’s Court decided a case (http://www.chinacourt.org/html/article/200811/17/330980.shtml )  in which Jiang was one of the Judges. Article 6 of the Standardization Law requires that enterprise product standards must be submitted to local government agencies for the record. Did such a submission constitute a disclosure under the Patent Law so that the invention lost its novelty? The court said that enterprise standards are generally corporate trade secrets and the recording did not mean that they had been publicly disclosed. However the other three categories, namely the national, industry and local standards are to be considered differently.

When asked for advice in a patent case in 2008 the Supreme People’s Court wrote that as standards had not yet been established by standard setting bodies with respect to the disclosure of proprietary rights in standards, that if proprietary information is included in a standard with the consent of the owner, the use of the standard without a specific license from the owner does not constitute infringement. The owner may demand the payment of fees for such use, but at a significantly lower rate.

With the adoption of the amendments to the Patent Law in December of 2008 a draft Interpretation was issued by the SPC in June 2009 (最高人民法院关于审理侵犯专利权纠纷案件 – Several Provisions of the Supreme People’s Court on Issues Concerning Rules Applicable to the Trial of Patent Rights Infringement Disputes. Available online in Chinese at: http://www.chinacourt.org/wsdc/) . Article 20 of the draft Interpretation deals with standard setting and patent infringement.

It provides that where the proprietary information in  a patent has been incorporated into a national, industry or local standard the royalty owing to the patent holder should be set by the court based on the degree of innovation in the patent, among other things. Where the patent owner has not disclosed its rights or where the obligation to disclose is unclear, the parties can request the court to determine the fee and the license terms. Otherwise the laws on standardization shall prevail.

The consultation period for the draft Interpretation ended in July, and the final form of Article 20 is not yet known. But in China it is clear that standard setting is something in which the public and the state have an interest, except with respect to enterprise standards.

September 7, 2009 | Permalink | Comments (1) | TrackBack (0)

Welcome Guest Blogger Paul Jones

Posted by D. Daniel Sokol

Paul Jones, a Canadian antitrust lawyer who has particular expertise on Chinese issues will guest blog for us to describe some recent Chinese developments.

September 7, 2009 | Permalink | Comments (0) | TrackBack (0)