Koren W. Wong-Ervin

Monetary Penalties in China and Japan

Recent solicitations for comments on monetary penalties in China and Japan highlight opportunities to improve the deterrent effect of antitrust law by more closely aligning penalties with economic theory and evidence. When monetary penalties are not based upon economic analysis and clearly linked to identified harms, they are likely to generate costly errors, either by overdetering welfare-enhancing behavior or underdetering anticompetitive behavior. On June 17, 2016, China’s Anti-Monopoly Commission of the State Council requested comments on Draft Guidelines issued by the National Development and Reform Commission (NDRC) for the calculation of illegal gains (disgorgement) and setting of fines issued. On July 13, 2016, the Japan Fair Trade Commission (JFTC) requested comments on introducing flexibility into their administrative surcharge system, developing a settlement program, and reforming due process in conjunction with surcharge reform. Both proposed monetary penalty systems would benefit from a deeper grounding in economics. The NDRC’s Draft Guidelines provided only for the optional use of economic analysis in calculating illegal gains and appear to create a presumption that disgorgement would apply in addition to fines in nearly all cases. The JFTC’s consultation acknowledged that the current inflexible surcharge system could give rise to “unreasonable or unfair�? surcharges, but did not require economic analysis to determine appropriate monetary penalties. In both countries, monetary penalties are applied broadly and are not based upon identified harms, although the JFTC’s consultation invited comments on whether differentiation by type of infringement was necessary.

Antitrust Analysis Involving Intellectual Property and Standards: Implications from Economics

There is a significant industrial organization (IO) economics literature on the economics of innovation and intellectual property (IP) protection. As some courts and antitrust agencies have recognized, the IO economics toolkit for business arrangements (e.g., vertical restraints, tying and bundling, etc.) involving IP rights is sufficiently flexible to be applied in high-technology areas involving antitrust and IP. In this Article, the authors explain the economics of innovation and IP protection, licensing, and compulsory licensing, with specific applications to standards development and to standard-essential patents. The authors then propose first-best approaches based on the implications of the economics that courts and agencies can apply at each stage of an antitrust inquiry, from market definition and market power to the assessment of particular business practices. The authors conclude by providing a summary of the approach applied in each major antitrust jurisdiction—China, the European Union, India, Japan, Korea, and the United States.

Portfolio Licensing to Makers of Downstream End-User Devices: Analyzing Refusals to License FRAND-Assured Standard-Essential Patents at the Component Level

Competition agencies around the globe are investigating whether a standard-essential patent (SEP) holder’s choice to license to the makers of downstream end-user devices, rather than to makers of the components of those devices, violates competition laws. Some authorities have already reached that conclusion. While much has been written about FRAND-assured SEPs, the literature to date focuses largely on the appropriateness of seeking and obtaining injunctive relief on such patents or on the meaning of “fair and reasonable,” and has largely ignored the “nondiscriminatory” prong of FRAND (fair, reasonable, and nondiscriminatory). This article analyzes what we observe to be the common industry practice of licensing on a portfolio basis at the end-user device level, and whether a patent holder’s refusal to license at only at the downstream end-user device level, and not at other levels of the production chain, may constitute an antitrust violation. We conclude that (1) whether the “nondiscriminatory” prong of the FRAND promise requires licensing at the component level is a fact-specific inquiry that depends upon the specific standard-development organization’s policy; (2) even if there is potential for a failure to comply with a FRAND assurance, that alone does not constitute an antitrust violation; and (3) the refusal to license at component level cannot be anticompetitive when the vertically integrated holder of one or more SEPs does not assert its patents against the makers of components but, instead, licenses its SEP portfolio to end-device manufacturers on FRAND terms.

Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Anti-Monopoly Commission of the State Council's Anti-Monopoly Guidelines against Abuse of Intellectual Property Rights

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University in response to the Anti-Monopoly Commission of the State Council of the Peoples Republic of China’s public consultation on its draft Anti-Monopoly Guidelines Against Abuse of Intellectual Property Rights. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving intellectual property rights.

Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Communication from the Commission on Standard Essential Patents for a European Digitalised Economy

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University in response to the Communication from the Commission on Standard Essential Patents for a European Digitalized Economy. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving intellectual property rights and standard-essential patents.

Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Japan Fair Trade Commission’s Draft Guidelines Concerning Distribution Systems and Business Practices Under the Antimonopoly Act

This comment is submitted by The Global Antitrust Institute (GAI) at Scalia Law School at George Mason University in response to the Japan Fair Trade Commission’s consultation on its Draft Guidelines Concerning Distribution Systems and Business Practices Under the Antimonopoly Act. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving multi-sided platforms and vertical restraints.

Comment of the Global Antitrust Institute, George Mason University School of Law, on the Japan Fair Trade Commission's Consultation on the Administrative Surcharge System

This comment is submitted in response to the Japan Fair Trade Commission’s request for comments on its Summary of Issues Concerning the Modality of the Administrative Surcharge System. The Global Antitrust Institutes Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy.

Comment of the Global Antitrust Institute, George Mason University School of Law, on the Proposed Revisions to the Guidelines of the Anti-Monopoly Commission of the State Council on Determining the Illegal Gains Generated from Monopoly Conduct and on Setting Fines

This comment is submitted in response to the National Development and Reform Commission of the People’s Republic of China’s public consultation on the Proposed Revisions to the Guidelines of the Anti-Monopoly Commission of the State Council on Determining the Illegal Gains Generated from Monopoly Conduct and on Setting Fines. The Global Antitrust Institutes Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy.

Comment of the Global Antitrust Institute, George Mason University School of Law, on the India Department of Industrial Policy and Promotion’s Discussion Paper on Standard Essential Patents

This comment is submitted in response to the India Department of Industrial Policy and Promotion’s Discussion Paper on Standard Essential Patents and Their Availability on FRAND Terms.

FRAND in India

Investigations and litigation involving standard-essential patents (SEPs) have been brought around the world. In the last several years, India has drawn attention to itself by raising several novel and controversial concerns regarding SEPs. For example, in 2013 and 2014, the Competition Commission of India (CCI) issued investigation orders against Ericsson, alleging that the company violated its commitments to license on fair, reasonable, and nondiscriminatory (FRAND) terms by imposing discriminatory and “excessive” royalty rates and using Non-Disclosure Agreements (NDAs). In its investigation order, the CCI stated that “forcing” a party to execute [an] NDA” and “imposing excessive and unfair royalty rates” constitutes “prima facie” abuse of dominance and violation of section 4 of the Indian Competition Act, as does “[i]mposing a jurisdiction clause debarring [licensees] from getting disputes adjudicated in the country where both parties were in business.” Most recently, India’s Department of Industrial Policy and Promotion issued a Discussion Paper on SEPs, which among other things, emphasizes concerns about holdup by patent holders, while omitting any concerns about holdup and holdout by implementers. This chapter analyzes that Discussion Paper, providing guidance based on the approach taken by the United States and Europe, and offers several policy recommendations, including on the availability of injunctive relief; the issuance of a one-size-fits all template for standard-development organizations (SDOs); the imposition of royalty caps or competition sanctions for “excessive pricing,” the use of NDAs and the “ND” prong of FRAND; balancing desires for transparency with needs for confidentiality in licensing; and the use of international arbitration on a portfolio basis as likely the most efficient and realistic means of resolving FRAND disputes.