On 10 February, 2015, the NDRC concluded a high-profile investigation of Qualcomm and announced a record fine. At issue was Qualcomm’s alleged abuse of its dominant position in several specific markets in violation of the Anti-monopoly Law of the People’s Republic of China 2007 (“Anti-Monopoly Law”). Specifically, s. 1 of art. 17 of the Anti-Monopoly Law prohibits the sale of commodities at an unfairly high price and s. 5 prescribes the unreasonable tie-in sale of commodities or the addition of other unreasonable trading conditions. The NDRC examined Qualcomm’s market share for licenses of various standard essential patents (“SEP”) using wireless communications technology and sales of CDMA, WCDMA and LTE baseband chips, and concluded that Qualcomm held a dominant position in each market. It further determined that Qualcomm abused its dominant position in these markets by charging unfairly high royalty fees, tying the sale of SEPs with the sale of non-SEPs, and imposing unreasonable conditions on the sale of baseband chips. In cases involving abuse of market dominance, the Anti-Monopoly Law permits fines of between one and 10 percent of the turnover for the preceding year. Qualcomm was fined less than 10 percent of its China-based turnover due to its willingness to cooperate in the investigation and agreement to a rectification plan. The decision may represent potential overreach by the NDRC as it combines price-related abuses of dominance, which are its mandate, with non-price-related abuses of dominance, which fall under the jurisdiction of the State Administration for Industry and Commerce (“SAIC”).

Identifying Risky Licenses

General Counsel for companies with patent-heavy portfolios should, if they have not done so already, assess their risk by examining the inventory of SEP that they license into China for sensitive terms such as those criticised in the Qualcomm decision. General Counsel without a background in interpreting the Anti-Monopoly Law in the technology sector may wish to seek specialist input due to the highly technical nature of the issues involved. Where problematic licences are identified and to the extent that it makes commercial sense to do so, General Counsel can consider discontinuing some terms on renewal or varying the contracts.