The Anti-Monopoly Law Regulation On Patent Assertion Entities In Smartphone Industry

In recent years, the smartphone industry has become more and more competitive. Patents seem to be the most significant asset for each player in the industry and the control of core patents is vital for survival and getting a bigger share of the market. As a result, many smartphone manufacturers actively make patent applications and acquisitions. It is not rare to see "patent wars" among manufacturers. Patent litigations have been used as a weapon to force competitors to quit the market or pay massive amount of infringement damages. The so-called patents trolls in the smartphone industry have become a common phenomenon within the high-tech sector. In particular, in countries where the litigation cost is high, patent assertion entities(hereinafter referred to as "PAEs") are the new players whose novel business model can actively monetize their patent portfolios. The patent system is aim to facilitate patent commercialization and to encourage and protect innovation. However the PAEs whose business model takes advantage of the patent system have severely harmed the innovation.This paper discusses and analyzes the cause and business models of the patent assertion entities. By comparing the economic consequences of patent aggregation, ex ante licensing and ex post licensing, this paper finds that ex ante licensing is more efficient and facilitates market competition. By looking into the competition implications that PAEs have on the downstream technology market, this paper holds that it is necessary to find out possible anti-monopoly solutions to PAEs conducts. This is viable for manufactures to use anti-monopoly law to fend for themselves when facing patent infringement suits brought up by PAEs as this paper finds that certain PAEs' conducts may run afoul of the China's Anti-monopoly regulation on abuse of dominant market position.