Competition Law in Eyewear Lens Licensing in China

Introduction

Eyewear lens licensing in China can raise significant competition-law issues where a manufacturer or technology owner licenses lens technology, coatings, designs, manufacturing processes, trademarks, patents, optical technologies, or specialized lens platforms to lens manufacturers, wholesalers, opticians, or retailers.

The principal legislation is China's Anti-Monopoly Law (AML), as amended in 2022, together with the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Eliminate or Restrict Competition (2023) and the relevant intellectual-property antitrust guidelines. The basic principle is that intellectual-property rights are legitimate, but their exercise cannot be used to eliminate or restrict competition. (Practical Law)

This is particularly important in eyewear because a technologically or commercially powerful lens licensor may control an important input for opticians and retailers and may combine the lens licence with exclusive purchasing, trademark restrictions, minimum purchases, tying of coatings, restrictions on competing lenses, resale-price controls, or discriminatory licensing terms.

I. Legal Framework

1. Anti-Monopoly Law

China's AML addresses three broad categories:

Monopoly agreements;

Abuse of market dominance; and

Anti-competitive concentrations.

For lens licensing, the most important provisions concern:

agreements between competing licensors/licensees;

vertical licensing restrictions;

abuse of dominance;

unfairly high licensing fees;

refusal to license;

discriminatory licensing;

tying and bundling;

unreasonable trading conditions; and

restrictions imposed through IP rights.

The amended AML specifically preserves the distinction between legitimate exercise of IP rights and abusive exercise of IP rights.

II. What Constitutes Eyewear Lens Licensing?

An eyewear lens licence may concern:

prescription-lens manufacturing technology;

free-form/advanced digital surfacing technology;

anti-reflective coatings;

photochromic technology;

blue-light filtering technology;

progressive-lens designs;

high-index lens technology;

patented materials;

lens-processing software;

optical calculation algorithms;

trademarks and brand licences;

manufacturing know-how; and

patented coating or finishing processes.

A licence is not automatically anti-competitive merely because it restricts the licensee. The question is whether the restriction has the object or effect of eliminating or restricting competition.

III. Relevant Market

Market definition is particularly important.

Possible relevant markets include:

A. Lens product market

The authority may distinguish between:

prescription lenses;

contact lenses;

progressive lenses;

single-vision lenses;

photochromic lenses;

specialty lenses;

high-index lenses.

B. Technology market

A separate market may potentially exist for:

licensing of a particular patented lens technology.

However, Chinese jurisprudence demonstrates that authorities and courts should not automatically define the licensing market as narrowly as the patent portfolio itself.

C. Brand market

A powerful branded lens licence may give the licensor substantial bargaining power over opticians and retailers, particularly where consumers specifically demand the licensed brand.

The Essilor–Luxottica decision is especially important because SAMR expressly analysed China's markets for optical lenses, frames, sunglasses and retail eyewear. (SAMR)

IV. Potential Anti-Competitive Practices

1. Excessive Licensing Fees

A dominant lens technology owner may potentially violate the AML if it charges unfairly high royalties.

Factors may include:

economic value of the technology;

comparable licences;

development costs;

royalty rates for comparable technologies;

contribution of the technology to the final product;

duration of exclusivity;

alternatives available to licensees; and

bargaining power.

The Chinese courts' treatment of SEP licensing demonstrates that royalty rates can become a competition-law issue where the licensor possesses substantial market power.

V. Exclusive Lens Licensing

An agreement could require an optician or retailer to purchase all or substantially all of its lenses from one licensed manufacturer.

For example:

"The optician may sell the licensor's lenses only and may not stock competing lenses."

Such a provision can raise concerns where the licensor is dominant.

The analysis would consider:

market share;

duration of exclusivity;

coverage of competing outlets;

switching costs;

availability of substitute technologies;

consumer demand;

barriers to entry; and

whether the exclusivity forecloses rival lens manufacturers.

A short-term exclusive arrangement involving a genuinely innovative product is considerably less problematic than an arrangement covering most important retailers for many years.

VI. Tying Lens Licences to Other Products

This is one of the most important risks.

A dominant lens manufacturer could theoretically say:

"You may obtain our patented progressive-lens technology only if you also purchase our coating, frames and sunglasses."

This could amount to tying or bundling.

The Essilor–Luxottica merger provides an unusually direct eyewear-sector precedent. SAMR concluded that the combined entity could have incentives to bundle or tie optical lenses with frames and sunglasses and therefore imposed conditions requiring, among other things, separate supply and prohibiting unjustified tying. (SAMR)

VII. Refusal to License

A refusal to license is not automatically unlawful.

IP owners normally have the right to decide whether and to whom they license their technology.

However, a refusal becomes considerably more problematic when:

the licensor has a dominant position;

the technology is commercially indispensable;

there are no realistic substitutes;

access is objectively necessary for competition;

the refusal lacks legitimate justification; and

the refusal eliminates or substantially restricts downstream competition.

The Chinese Supreme People's Court's decision in Ningbo Ketian v. Hitachi Metals is particularly important on this issue.

VIII. Tying Essential and Non-Essential IP

A lens technology owner might possess:

essential patented technology;

optional improvements;

non-essential patents;

trademarks; and

know-how.

It could be problematic if a dominant licensor makes access to important technology conditional upon acceptance of unrelated IP.

For example:

A licensee wants patented progressive-lens technology but must also accept unrelated patents covering packaging or non-essential manufacturing equipment.

The Huawei v. InterDigital litigation demonstrates the Chinese courts' willingness to scrutinize tying of essential and non-essential patent rights.

IX. Discriminatory Licensing

A dominant lens licensor should be cautious about charging different licensees substantially different terms.

Differentiation is not automatically unlawful. Differences may be justified by:

volume;

technology contribution;

geographic scope;

R&D contribution;

distribution costs;

credit risk;

licence duration; or

different commercial obligations.

But unexplained discriminatory licensing may raise AML concerns.

For example:

Retailer A receives a 3% royalty while competing Retailer B is charged 10% for materially identical circumstances solely because the licensor wants to weaken Retailer B.

That may constitute discriminatory treatment if the statutory conditions are satisfied.

X. Minimum Purchase Requirements

A lens licence may contain:

minimum annual purchases;

minimum royalty payments;

minimum sales targets;

minimum inventory requirements.

Such conditions are not automatically illegal.

They become problematic where they operate as de facto exclusivity and substantially foreclose competing lens manufacturers.

The competitive assessment should examine:

duration × market coverage × market power × switching costs.

XI. Territorial Restrictions

A licence may limit a licensee to:

Mainland China;

particular provinces;

designated optical shops;

online sales;

offline sales;

hospitals/clinics; or

particular customer categories.

Territorial restrictions must be examined under the AML's rules governing vertical arrangements and IP licensing.

A narrow restriction protecting legitimate investment may be defensible. A broad restriction that partitions the Chinese market or prevents independent competition may create substantial risk.

XII. Resale Price Restrictions

Suppose a lens licensor tells optical retailers:

"Every licensed lens must be sold at RMB 1,000; retailers may not discount."

This can create resale-price-maintenance concerns.

The fact that the price restriction is contained in an IP licence does not immunize it from competition law.

The authority may examine:

market power;

duration;

market coverage;

actual effects;

competitive justification; and

whether the restriction facilitates coordination.

XIII. Online Sales Restrictions

Modern eyewear licensing increasingly involves online channels.

A licence might prohibit:

online sales entirely;

sales through third-party platforms;

price comparison;

digital advertising;

cross-platform sales;

direct-to-consumer distribution.

If a dominant lens supplier uses its IP rights to exclude online rivals, the conduct may receive heightened scrutiny because online distribution can be an important competitive constraint.

XIV. Trademark Licensing

Lens licensing may involve trademarks as well as patents.

For example:

"Only optical shops purchasing 100% of their lenses from the licensor may use the licensed brand."

The licensor may legitimately protect brand quality.

However, trademark control cannot automatically be used to eliminate competing products.

This is particularly relevant in China's eyewear sector because brand recognition can significantly affect retailer bargaining power.

XV. Six Important Case Laws

1. Essilor International–Luxottica Group Merger

Authority: SAMR, 2018

This is the most directly relevant Chinese eyewear competition-law precedent.

Essilor was a major optical-lens manufacturer, while Luxottica was strong in optical frames and sunglasses. SAMR identified overlapping and vertically related markets involving:

high-end optical lenses;

low-end optical lenses;

frames;

sunglasses; and

eyewear retail.

SAMR was concerned that the combined entity could use its market power to bundle or tie lenses, frames and sunglasses, and could strengthen control over retailers through licensing and distribution arrangements. (SAMR)

SAMR therefore imposed behavioural conditions including:

no unjustified tying;

separate supply of lenses, frames and sunglasses;

fair and non-discriminatory access;

restrictions on exclusivity;

continued ability of retailers to sell competing products; and

provision of necessary trademark authorizations on specified terms. (SAMR)

Principle

Eyewear-specific market power + licensing/distribution control + tying can produce significant competition concerns.

2. Haichang Contact Lens / Shanghai Hailien Optical Case

Authority: Shanghai competition authorities/SAMR, 2017–2019

The authorities investigated Haichang Contact Lens Shanghai Branch and Shanghai Hailien Optical for alleged monopolistic conduct.

The investigation was ultimately terminated after the undertakings fulfilled their corrective commitments. (SAMR)

Although this was not a classic patent-licensing case, it is highly relevant because it demonstrates that competition law is actively applied to the Chinese contact-lens/optical-products sector.

Principle

Eyewear companies cannot assume that industry-specific commercial arrangements escape AML scrutiny.

3. Huawei v. InterDigital

Shenzhen Intermediate People's Court, 2013; Guangdong High People's Court

Huawei challenged InterDigital's licensing practices concerning Chinese essential patents.

The court found problems involving:

excessive royalty demands;

tying essential and non-essential patents;

grant-back requirements; and

licensing negotiations combined with litigation conduct.

The court ordered cessation of certain conduct and awarded RMB 20 million in damages. The Guangdong High Court subsequently affirmed relevant rulings.

The litigation was later resolved and the earlier judgments were ultimately vacated at the parties' request, but the case remains highly influential in understanding Chinese competition-law analysis of IP licensing. (American Bar Association)

Principle

Dominant IP licensing cannot be used to impose excessive royalties or improperly tie essential and non-essential rights.

4. Qualcomm NDRC Antitrust Case

NDRC, 2015

Qualcomm's licensing practices were investigated by China's NDRC.

The rectification package required Qualcomm to:

separate licences for certain Chinese essential patents from other patents;

provide patent lists during negotiations;

negotiate cross-licensing in good faith;

modify royalty arrangements; and

refrain from conditioning chip sales on acceptance of unreasonable licensing terms. (Qualcomm Investor Relations)

Principle

This is highly relevant to eyewear technology licensing because it demonstrates that a dominant technology provider cannot necessarily use control over one commercially important product to force acceptance of broader licensing conditions.

For example, a dominant lens manufacturer should be cautious about conditioning supply of a necessary lens material upon acceptance of unrelated patent or trademark licences.

5. Ningbo Ketian Magnet v. Hitachi Metals

Supreme People's Court

This case concerned Hitachi Metals' patented technology for sintered NdFeB magnets.

The lower court initially considered Hitachi Metals dominant in an alleged licensing market and found that refusal to license and bundling of essential and non-essential patents could constitute abuse.

The Supreme People's Court reversed the result, holding that the relevant technology market had to be assessed more broadly and that Hitachi Metals did not possess the necessary dominant position. (American Bar Association)

Principle

This case is particularly important for lens licensing because:

Owning important patents does not automatically establish dominance.

The relevant technology and downstream markets must be properly defined.

6. Huawei v. Conversant

Nanjing Intermediate People's Court, 2019

The court considered royalty rates for Chinese standard-essential patents owned by Conversant.

The court adopted a methodology for calculating royalties attributable to the Chinese market and determined specific rates for different Huawei handset categories. The case demonstrates the Chinese courts' willingness to examine the economic reasonableness of technology licensing rates. (American Bar Association)

Principle

Where licensing technology is commercially essential, royalty methodology and the relationship between the value of the technology and the royalty demanded can become legally significant.

7. Huawei v. Samsung

Shenzhen Intermediate People's Court, 2018

The court examined FRAND licensing negotiations and found that Huawei had complied with its FRAND obligations while Samsung had not, issuing an injunction against Samsung.

The court also considered comparable licences in assessing an appropriate royalty. (American Bar Association)

Principle

Good-faith licensing negotiations, non-discrimination and objective royalty benchmarks are important where a licensor has substantial technology power.

8. Conversant v. Huawei — Chinese Anti-Suit Injunction

Supreme People's Court, 2020

The Supreme People's Court dealt with the conflict between Chinese and foreign SEP litigation and issued China's first IP-related anti-suit injunction.

The case illustrates the increasing importance of Chinese courts in disputes concerning international licensing rates and technology rights. (IPC Court)

Principle

International lens-technology licensing agreements involving Chinese patents may have substantial Chinese procedural and competition-law consequences even when the parties operate internationally.

XVI. Application to Eyewear Lens Licensing

Consider the following hypothetical:

LensTech China owns patented progressive-lens technology and licenses it to 2,000 Chinese optical stores.

The licence requires every retailer to:

purchase LensTech lenses exclusively;

purchase LensTech coatings;

purchase LensTech frames;

maintain a minimum annual purchase volume;

sell at prescribed prices;

refrain from selling competing progressive lenses;

use LensTech's trademark; and

pay a royalty calculated on all eyewear sales.

If LensTech has substantial market power, the arrangement could create several AML concerns.

The Essilor–Luxottica decision demonstrates why Chinese authorities would pay particular attention to combinations of lens, frame, sunglasses and retail-channel power. (SAMR)

XVII. Competition-Law Risk Matrix

Low Risk

non-exclusive licence;

reasonable royalty;

transparent technology scope;

voluntary trademark use;

quality-control requirements;

reasonable confidentiality obligations;

short-term commercial incentives.

Medium Risk

minimum purchases;

selective distribution;

territorial restrictions;

online-sales limitations;

preferred-supplier arrangements;

significant trademark conditions.

High Risk

mandatory exclusivity;

tying lenses to frames/coatings;

excessive royalties;

refusal to license essential technology without justification;

discriminatory licensing;

resale-price fixing;

using patent rights to exclude technically substitutable products;

requiring licensees to accept unrelated IP.

XVIII. Compliance Measures for Lens Licensors

A Chinese eyewear company should conduct an IP licensing antitrust review before signing major agreements.

1. Define the relevant market

Determine whether the relevant market is:

all optical lenses;

premium lenses;

progressive lenses;

a specific technology;

technology licensing; or

a broader eyewear market.

2. Measure market power

Review:

market share;

competitors;

switching costs;

patents;

brand recognition;

retailer dependence;

entry barriers.

3. Separate independent products

Where possible, licence:

lens technology;

coatings;

frames;

trademarks; and

software

on commercially separable terms rather than automatically tying them together.

4. Justify restrictions

Every significant restriction should have an identifiable legitimate justification, such as:

quality control;

protection of confidential technology;

prevention of counterfeiting;

protection of legitimate investment; or

technical compatibility.

5. Review royalty methodology

Maintain evidence demonstrating why the royalty is commercially reasonable.

XIX. Key Legal Test

For an eyewear lens licence, the central Chinese competition-law question can be expressed as:

Does the licence merely protect and commercialise legitimate IP, or does the licensor use IP rights and market power to eliminate or restrict competition?

The second situation creates AML exposure.

Importantly, IP ownership ≠ market dominance. The Hitachi Metals case illustrates this point particularly clearly. (American Bar Association)

Similarly, licensing restrictions ≠ automatically unlawful restrictions. Their legality depends on market structure, market power, the nature of the restriction, its competitive effects, and legitimate justification.

XX. Conclusion

Competition law in Chinese eyewear lens licensing sits at the intersection of IP protection, technology licensing, distribution law and antitrust regulation.

The greatest risks arise where a powerful lens licensor uses its patents, trademarks or technology to impose:

exclusive purchasing obligations;

unreasonable licensing fees;

tying of lenses with frames or coatings;

discriminatory licence terms;

unjustified refusal to license;

minimum-purchase obligations functioning as exclusivity;

resale-price restrictions; or

restrictions designed to foreclose competing lens manufacturers.

The Essilor–Luxottica merger is the most directly relevant eyewear precedent, while Huawei v. InterDigital, Qualcomm, Ningbo Ketian v. Hitachi Metals, Huawei v. Conversant and Huawei v. Samsung provide important principles for analysing the IP-licensing component. (SAMR)