#13670 - Competition Law And Intellectual Property - International Competition and Anti-Trust

• How might the patent holder’s actions cause competition law problems?

• A patent right itself might be thought to restrict trade and competition

• The response of EU law:

• Art 345 TFEU provides the Treaty shall in no way prejudice the rules in MSs governing the system of property ownership

• Which rights may cause problems:

• Patents are particularly likely to pose problems because of monopoly aspect

• Trade marks may if regularly re-registered (they will last for an indefinite amount of time)

• Copyright cannot last indefinitely but has the longest periods of guaranteed validity of any IP right

TTBER – guidelines paragraph 7 – relationship between IPR and Competition law

The fact that intellectual property laws grant exclusive rights of exploitation does not imply that intellectual property rights are immune from competition law intervention. Article 101 of the Treaty is in particular applicable to agreements whereby the holder licenses another undertaking to exploit its intellectual property rights . Nor does it imply that there is an inherent conflict between intellectual property rights and the Union competition rules. Indeed, both bodies of law share the same basic objective of promoting consumer welfare and an efficient allocation of resources. Innovation constitutes an essential and dynamic component of an open and competitive market economy. Intellectual property rights promote dynamic competition by encouraging undertakings to invest in developing new or improved products and processes. So does competition by putting pressure on undertakings to innovate. Therefore, both intellectual property rights and competition are necessary to promote innovation and ensure a competitive exploitation thereof

• The licence agreement could infringe if it might affect trade and competition within the internal market

• Bringing proceedings to stop infringement of an IPR may have Art 101 consequences if the proceedings affect trade within the internal market and are bought as a result of an agreement

• Technology Transfer Block Exemption:

• From Commission Regulation (TTBER)

• Certain types of technology transfer agreement, defined in Art 1 para 1(c) as patent licensing agreements, know how licensing agreements, software copyright licensing agreement or a combination of any of these, can improve economic efficiency

• Realisation that vertical agreements are in fact pro-competitive

• Competitors and non-competitors:

• Distinctions made between competitors and non-competitors, and reciprocal agreements and non-reciprocal agreements

• The structure of TTBER:

• Definitions in Art 1

• Exemption itself in Art 2

• Market share threshold in Art 3

• Art 4 contains the hard-core restrictions – inclusion of hard core restrictions will mean that the exemption provided in Art 2 will not apply to the entire agreement

  • Paragraph 1 deals with restrictions between competitors

  • Paragraph 2 deals with restrictions between non-competitors

    • 1a/2a. not allowed price restrictions, but are allowed to set maximum prices, and recommendations

    • 2b. not allowed to restrict passive selling

      • 2bi. Except into the exclusive territory of the licensor

• Art 5 outlines the excluded restrictions – exemption in Art 2 will not apply to a particular obligation listed in Art 5 but rest of agreement may still benefit from TTBER

Not allowed to place on obligation on the licensee to grant an exclusive licence/assign to the licensor severable improvements or new applications

Cannot restrict the right to challenge the validity of the IPR

• Art 6 allows the withdrawal of the exemption

• Art 7 allows the disapplication from entire markets

• Art 8 sets out detailed rules for the calculation of market share for purpose of Art 3

• Art 34 must be read subject to Art 36 – this permits derogation from Art 34 in certain circumstances, e.g. where the measure is necessary for ‘the protection of industrial or commercial property rights’ an expression which will cover IPR e.g. patents

• Under Art 36 the national measure (ie the national law on patents) may be justified if it protects something about the patent which needs protection

• There are limits on Art 36:

  • Cant be invoked to justify a measure which amounts to ‘arbitrary discrimination’ or a ‘disguised restriction on trade’

• Art 36 can be invoked by the holder of an IP right only if the infringement action is necessary to protect the ‘specific subject matter’ of the right

Specific subject matter

• Will vary according to the right concerned

• Subject matter of the patent is ‘the guarantee that the patentee, to reward the creative effort of the inventor, has the exclusive right to use an invention with a view to manufacturing industrial products and putting them into circulation for the first time, either directly or by the grant of licences to TP’s, as well as the right to oppose infringement’ (Centrafarm)

• For a TM SSM will be ‘the guarantee that the owner of the TM has the exclusive right to use that TM for the purpose of putting products protected by the mark into circulation for the first time, and is, therefore, intended to protect him against competitors wishing to take advantage of the status and reputation of the TM by selling products illegally bearing that TM’ (Centrafarm)

• The SSM of an IP right may therefore be seen as a limit on the use of the principles relating to free movement of goods

Exhaustion of rights

• ECJ has applied this doctrine to most IP rights

• When goods which are subject to an IP right are lawfully put on the market for the first time in the EEA (either by the right holder or with consent) this ‘exhausts’ the right holders opportunities to control what subsequently happens to the goods

• The right holder cannot use the right to prevent the goods being imported into another MS

• This only applies to attempts by the right holder to control the movement of goods around the EEA – it does NOT take away the holder’s rights to take action if the right has actually been infringed

• Consent cannot be inferred from silence, there would have to be some unequivocal demonstration from the circumstances that the TM owner had given up its right to control the import into and marketing of goods within the EEA

• It appears that there is now no need to state expressly in an agreement for goods which are to be sold outside the EEA that they must not be imported into and sol in the EEA

• Doctrine now applies to software downloads

• Art 101(1) TFEU prohibits “agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market”

• Agreements:

• Interpreted widely by the European courts and covers all types of commercial arrangements, written or oral

• Includes not legally binding arrangements (e.g. Quinine Cartel – gentleman’s agreement)

• Sufficient that the undertakings have expressed their joint intention

• Between Undertakings:

• Covers virtually all legal or natural persons carrying on economic or commercial activities

• Parent and subsidiary: must be between two or more separate undertakings, looks at whether they are separate economic entities, generally considered one and the same

• Agency agreements: pure agency agreements fall outside, where the financial or commercial risk is borne by the principal

• Decisions by associations of undertakings:

• Would include decisions taken by a trade association

• Concerted practices:

• Legislation extends to include conduct that impacts on competition but is made outside of an agreement or decision

• Problem of evidence and intent

• Affect trade between Member States:

• EU law: commission published ‘Guidelines on the effect on trade concept etc’, set out the NAAT rule (not capable of appreciably affecting trade), will not affect trade if the combines market shares are less than 5% on the relevant market, provided that the aggregate turnover in the EU is below 40million euros (horizontal), or the seller’s turnover in the EU is below 40million euros (vertical)

• UK Law: s2(1) CA 1998 applies to ‘agreements between undertakings, etc within the UK’, referred to as a Chapter I prohibition, Commission has no power to apply the CA 1998

• Object or effect the prevention, restriction or distortion of competition within the internal market:

• Object: includes the most serious types of behaviour, do not have to prove that there would have been an effect on competition, of vertical...