There are Risks in Participating in the Formation of Standards.
On July 8, 2008, when China’s Supreme Court addressed the question raised by the Liao Ning High People’s Court arising from a patent infringement dispute, it stated, “If a patentee participates in the formulation of the Standard or agrees to incorporate its patented technology into the National Standard, the Industrial Standard and/or the Local Standard, it shall be deemed as the patentee authorizing other parties to exploit the patent for the purpose of conforming to the standards. The exploitation by the said parties may not constitute patent infringement as specified under Article 11 of the Patent Law.”
How can this impact your patent in China?
The Chinese Supreme Court further clarifies, under such circumstances, that the Patentee is allowed to demand exploitation fees from the users, however, such fees are to be much lower than the licensing fees which could be obtained through normal commercial dealings.
It is worth mentioning that neither a patent disclosure system nor a patent exploitation system exists in China during the process of standard formulation. China’s Supreme Court, as the highest judicial authority having the authority to interpret laws and regulations in judicial practices, filled in rules where the law itself was silent. Though its opinion is made upon a specific case tried in Liaoning Court, this posturing will be a guide for inferior courts nation wide and will be binding on similar cases.
Patent holders in China would be wise to exercise caution when participating in the formulation of industry standards. Taking part in formulating standards could potentially result in the patentee forfeiting its chance to bring a claim for patent infringement and fees collected for exploitation will likely be significantly lower than those gained through market-based licensing agreements. Given the impact which this opinion could potentially have on protecting and profiting from one’s patent rights, we suggest that patent holders weigh the benefits of participation in industry forums with the risks inherent in the process.