Antitrust Law Daily Antitrust agency heads stress importance of IP protections in China talks
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Thursday, February 1, 2018

Antitrust agency heads stress importance of IP protections in China talks

By Edward L. Puzzo, J.D.

A delegation of U.S. antitrust officials, including Makan Delrahim, Assistant Attorney General of the Department of Justice Antitrust Division, and Acting FTC Chairman Maureen Ohlhausen, have been engaged in a series of meetings this week in Beijing with Chinese competition officials to discuss antitrust enforcement and increased cooperation between the agencies. While in China, the antitrust chief also had the opportunity to deliver remarks on the importance of intellectual property rights.

The U.S. delegation’s visit to China is the fourth occasion for joint, high-level meetings between the agencies since the Justice Department and the FTC signed an antitrust memorandum of understanding (MOU) with the Chinese antitrust agencies in 2011. The MOU is designed to promote communication and cooperation between the U.S. and Chinese antitrust enforcement agencies and provides for periodic high-level consultations.

Delrahim and Ohlhausen participated in high-level bilateral meetings with officials responsible for China’s three anti-monopoly agencies: Vice Chairman Hu Zucai and Director General Zhang Handong of the National Development and Reform Commission (NDRC), Assistant Minister Li Chenggang and Director General Wu Zhenguo of the Ministry of Commerce (MOFCOM), and Vice Minister Wang Jiangping and Director General Yang Hongcan of the State Administration for Industry and Commerce (SAIC).

The meetings covered topics including enforcement and policy developments and priorities, the treatment of intellectual property, and future opportunities for cooperation. In addition, the agencies exchanged views on the role of sound and effective procedures in competition enforcement and the importance of competition advocacy in promoting innovation.

Antitrust chief’s remarks. In conjunction with the high-level bilateral meetings, Delrahim spoke at an event co-hosted by the China Intellectual Property Law Society, the Peking University Intellectual Property Alumni Association, and the U.S. Embassy in Beijing.

"Experience and economic research have taught us that intellectual property rights are the key to unlocking the innovation that drives our economy," Delrahim told the gathering. This requires the enforcement of intellectual property rules that protect the inventions that result from research and development which are essential to any pro-growth and competitive economic agenda. He stated that China's future efforts to promote its movie industry, advanced manufacturing, industrial capability, and increased innovation will be much more successful if they include a recognition and culture of protection and enforcement of intellectual property rights.

Intellectual property laws, which provide incentives for innovation and commercialization, are complemented by competition laws which prohibit certain actions that harm competition, Delrahim continued. He expressed his skepticism of rules which dilute a patent owner's exercise of patent rights because of the concerns of technology implementers or due to short term pricing concerns, but also acknowledged that there are circumstances where the exercise of patent rights deserves antitrust scrutiny.

Delrahim also advocated for effective judicial forums for patent disputes, noting that if patent owners whose patents are infringed have no effective recourse in the courts, that patent owner is bound eventually to question whether future investment in innovation will be worthwhile. He praised China's recent establishment of dedicated IP courts, most recently in Nanjing, Suzhou, Chengdu, and Wuhan, as examples of the accountability, accessibility, and competency which are necessary for engendering faith in the patent system as a whole. He praised additional measures which have been proposed to ensure that China’s courts are empowered to protect IP rights, including increasing access to evidence, and increasing statutory damages for patent infringement.

He noted that that these reforms have occurred at the same time that Chinese companies have transformed from net implementers of IP rights to important innovators and holders of IP rights. He noted that Huawei Technologies filed more patent applications in 2016 than any other company in the world, and that Chinese research and development spending has been increasing at the rate of 18 percent per year. For China and its consumers to enjoy the fruits of this staggering innovation long into the future, those who are investing and innovating—whether Chinese companies or foreign companies investing and doing business in China—must believe that their intellectual property rights will be respected, and that their legal rights and responsibilities will be evenly enforced in an adequate and effective manner, Delrahim stated. He opined that China's transformation to an innovation economy can be amplified through policies that promote and protect IP rights, including thoughtful competition law enforcement, and effective adjudication of IP-related disputes.

Delrahim concluded by expressing his hope that during his tenure, China and the United States will continue their cooperation in the areas of competition law enforcement in order to promote innovation and competition in their respective economies, with consumers and entrepreneurs in both China and the U.S. the beneficiaries of such mutual cooperation.

Ohlhausen’s comments. "Having closely followed the implementation of the Anti-Monopoly Law over the past decade, I was pleased to engage with our Chinese colleagues to discuss recent developments and issues of concern to our agencies," said Ohlhausen in a statement released by the FTC today. The acting chairman, who has visited China a number of times in recent years, also has delivered remarks on the topic of Chinese competition policy. In a 2016 speech, entitled "China’s Fair Competition Review: Insights from the U.S. Experience," Ohlhausen commented on the importance of IP rights in spurring innovation and enhancing competition.

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