The task of the book to which this chapter belongs is to provide an annual practical overview of developments on the relationship between antitrust and intellectual property.
This chapter, which can be found here, describes the competition / IP law interface in Europe. It is structured as follows:
Section II is devoted to a review of developments that took place in 2017.
The section begins with a succinct description of the Google cases, before turning to a discussion on standard essential patents (SEPs). It also reviews the European Commission’s Communication on ‘Setting out the EU approach to Standard Essential Patents’.
The paper then briefly discusses e-commerce. It begins by mentioning the ECJ’s Coty decision and the Policy Brief prepared by the European Commission concerning this judgment. This Brief states that Coty provides more clarity and legal certainty to market participants by confirming previous case law and establishing a clear legal framework for online commerce. The paper also mentions the Commission’s e-commerce sector inquiry, which identifies contractual arrangements that might raise competition concerns such as resale pricing restrictions, online marketplaces selling restraints, and territorial restrictions and geo-blocking. The Commission has also found that the availability of licences from copyright holders is essential for digital content providers and a key determinant of competition. Certain licensing practices, including bundling, geo-blocking, long-lasting contractual arrangements and certain payment structures make it more difficult for new online business models and services to emerge. Such restrictive business practices may infringe EU competition rules.
Section III focuses on licensing and antitrust.
Licensing agreements are governed by a variety of EU regulations and EC guidelines, in addition to the TFEU itself. These include the Horizontal Cooperation Guidelines, the Technology Transfer Block Exemption Regulation and related Guidelines, the R&D Block Exemption Regulation, the Vertical Block Exemption Regulation and related Guidelines, and the European Commission’s Subcontracting Notice. Each of these instruments applies the principles contained in Article 101 TFEU to a particular type of agreement. While not attempting to provide an exhaustive overview of anticompetitive provisions in licence agreements, this section highlights a number of rules specific to such arrangements.
- First, this section discusses territorial restrictions in copyright licences. Some IP rights, such as copyright, are inherently national in scope. Right holders are, therefore, normally permitted to license their relevant rights on a national basis, and to prohibit licensees from marketing the licensed subject-matter outside the licensed territory. However, the CJEU has adopted a strict approach to any restraints that might go beyond limitations based purely on the geographical scope of the underlying IP right. A good example of this is the Premier League case, where the English Premier League had not only territorially limited the scope of its broadcasting licences, but had also prohibited its licensees from selling decoder cards – which could be used to access the licensee’s broadcasts from anywhere in the EEA – outside the licensed territory. This latter restriction was found to be anticompetitive. Furthermore, the court has recently extended the scope of the exhaustion doctrine to digital goods in Oracle/UsedSoft. The exhaustion doctrine holds that once a product incorporating the right holder’s IP right has been sold in the EEA with the right holder’s consent, the right holder may not prevent the subsequent resale of that product into another Member State.
- The author also pays attention to refusals to license. He begins by quickly reviewing the main cases on this controversial topic (Magill, Microsoft, Oscar Bronner). The chapter summarises the law as follows: refusals to license will be deemed lawful in most circumstances. However, a refusal to license may amount to an abuse of a dominant position in certain ‘exceptional’ circumstances – in particular where, without an objective justification, a dominant firm refuses a licence relating to an IP right that proves indispensable for rivals seeking to innovate or introduce new products into the market, such that the refusal risks eliminating effective competition in the same or in adjacent markets.
- This chapter then looks at unfair and discriminatory licensing practices. One limb of such practices concern excessive pricing, either self-standing (such as by copyright collecting societies in the old Lucazeau case and a more recent case on Lithuanian copyright collection society fees) and SEPs (which will be discussed in more detail below). A second limb concerns discriminatory practices, which provide the basis for claims in national courts.
- Lastly, the chapter discusses patent pooling. A patent pool is a combination of complementary patents from multiple right holders that are licensed together to third parties. Pooling patents, and particularly their availability under a single licence, can significantly reduce transaction costs. Patent pools are regulated by the Transfer Technology Block Exemption guidelines, which provide for an explicit safe harbour exempting certain patent pool arrangements from antitrust scrutiny irrespective of the parties’ market shares.
Section IV deals with standard essential patents (SEPs).
As by now I am sure everyone knows, a SEP is a patent that has been declared essential for implementing a technical standard adopted by a standard-setting organisation (SSO). SSOs generally require members to disclose patents that are or may be essential to the standard under development in good faith. To the extent that a member has disclosed ownership of a SEP, the SSO will generally request the patent holder to commit to license it on FRAND terms. FRAND commitments aim to offset potential anticompetitive effects of standardisation agreements, which are the result of a decision-making process among competitors to choose one technology over others.
While the European Commission decisions in Qualcomm and Rambus, and the CJEU ruling in Huawei v ZTE, have shed light on how the threat or enforcement of injunctions regarding SEPs can create competitive harms through ‘patent hold-up’, this body of case law by no means lays all questions to rest as to when exclusion on the basis of SEPs give rise to competition concerns. Nonetheless, a few conclusions can be inferred from these decisions.
First, while these are dominance cases where the dominant undertaking’s market power has to be established – as cautioned by the CJEU in Huawei v ZTE – the approach to market definition adopted by the European Commission is that each SEP will normally be a relevant market where the SEP holder will be dominant.
Secondly, when deciding whether seeking injunctions regarding FRAND-encumbered SEPs against an alleged patent infringer amounts to abusive behaviour, the CJEU in Huawei considered that a balance must be struck between ‘maintaining free competition’ and ‘protecting fundamental rights to property’. While seeking an injunction is inherent to IP rights, the exercise of exclusive IP rights may amount to abusive conduct in exceptional circumstances. The standard setting context, which renders SEPs indispensable, and the imposition of an irrevocable FRAND commitment as a preliminary condition for the patent holder’s patent being incorporated into the standard, qualify as exceptional circumstances – i.e. seeking an injunction regarding a SEP may be abusive. The CJEU went on to provide a procedural framework for SEP holders to follow in order to avoid infringing competition law. This framework was then further developed by the Commission in its Communication ‘Setting out the EU approach to Standard Essential Patents’, which provides additional guidance on the criteria used to determine whether a SEP holder is infringing competition law.
Thirdly, regarding patent ambushes – i.e. when a SEP holder deliberately hides the fact that it holds essential IP rights and starts asserting these rights only after the standard has been agreed upon – thus far there the European Commission has not adopted any infringement decision which conclusively found patent ambush to amount to an abuse of dominance. However, the commitment decision in Rambus suggests that such behaviour could constitute an abuse. To minimise the risk of patent ambush, the European SSOs – in collaboration with the European Commission – have all adopted IP rights’ policies that impose, inter alia, an obligation on SEP holders to disclose their SEPs.
A last matter concerns excessive prices in SEPs. A SEP holder may engage in abusive conduct by licensing its essential patents on supra-FRAND terms. Such excessive pricing amounts to a breach of the SEP holder’s FRAND commitment and may amount to an abuse of dominance under Article 102 TFEU. However, by closing its investigation in Qualcomm, the European Commission passed upon the only opportunity thus far to decide whether ‘mere’ supra-FRAND pricing of SEPs could constitute an abuse of dominance.
Section V addresses mergers and IP.
A first question in this regard concerns when the change of control of intellectual property assets, such as patents, know-how, trademarks and copyrights, may trigger or contribute to triggering EU merger control. Microsoft/Yahoo! Search Business made clear that a change of control over IP assets can amount to a notifiable merger transaction. In this case, it was found that Microsoft’s proposed acquisition of a 10-year exclusive licence over Yahoo’s core search technologies amounted, together with the transfer of employees and customers to Microsoft, to the acquisition of the whole or a part of a business to which market turnover can be attributed. The transfer of IPRs may also amount to a concentration in the case of the creation of a full-function joint venture that performs, on a lasting basis, all the functions of an autonomous economic entity.
A second question concerns the role that IP rights may play in merger remedies. There are two types of remedies that may involve intellectual property: (1) divestitures or exclusive licensing; and (2) granting third parties access to IP rights on a non-discriminatory basis. The paper provides various examples of cases where each type of remedy was adopted.
Section VI identifies other abuses. These abuses have taken place mainly in the pharmaceutical sector, to the point where they were identified in the European Commission’s 2009 Pharmaceutical Sector Inquiry.
One first such abuse is sham or vexatious litigation. In its 1998 ITT Promedia ruling – recently upheld in Protégé International – the General Court confirmed the exceptional nature of ‘predatory litigation’. It also established that bringing legal proceedings might be abusive if two cumulative conditions are met. First, the claim cannot reasonably be considered an attempt to assert rights of the undertaking concerned. In other words, the claim only serves to harass the other party. Second, the claim was adopted in the framework of a plan whose goal is to eliminate competition.
A second abuse is misuse of the patent process. The paradigmatic example of such conduct is AstraZeneca, which was found to have abused its dominance in two ways: (i) making false representations to patent authorities in various EEA Member States fraudulently to obtain or maintain IP rights; and (ii) submitting requests to deregister the original branded medicine thereby preventing generic competitors from relying on that marketing authorisation to enter the market.
A third type of abuse is the anticompetitive settlements of IP disputes (e.g. pay for delay settlements). These have been discussed at length elsewhere, so I will not discuss them here.
While the express aim of this chapter is to provide an overview of developments in 2018, it actually provides a very good overview of the interaction of competition and IP law in Europe since the turn of the century.
Given the vast number of anticompetitive practices it covers, it is unsurprising that one will not find detailed analysis or new insights in this chapter. However, it provides a very good introduction to the topic, and comprehensively describes the various ways in in which IP and competition law have interacted in Europe.