Microsoft powerpoint - ian forester ip competition in a globalised economy

Intellectual Property and Competition in a Globalised
Economy
Abuse of IP rights in the Light of Article 102 TFEU

National Graduate Institute for Policy Studies (GRIPS)
Ian S. Forrester, Q.C.
EU-Japan Centre for Industrial Cooperation
White & Case LLP
Tokyo, 22 February 2011
IP and Antitrust: General Principles
Undeniable tension between rewarding innovation with monopoly
(IP rights) and encouraging competition
Pursuit of Harmony:
IP rights are not immune from competition law
No “inherent conflict” between IPRs and EU competition rules:
 Same basic objective of promoting consumer welfare  “Both intellectual property rights and competition are necessary to promote innovation” (Technology Transfer Guidelines, ¶ 7) Intellectual Property and Competition in a Globalised Economy IP and Antitrust: EU Regulatory Framework
Competition rules: European competition rules highly developed
in substance and actively enforced
IP laws still substantially governed by the national laws at
Member State level
BUT: EU directives harmonise many aspects of national rules on IP
protection, including the enforcement of IP rights and some unitary
EU IP rights (trademark, design rights) have been created

EU competition law has constrained national law and exercise of
national IP rights in many areas
Each conflict involves anxious debate; usually competition has
prevailed
Intellectual Property and Competition in a Globalised Economy IP & Abuse of Dominance:
Compulsory Licensing

IP & Abuse of Dominance: Compulsory Licensing
When does Article 102 override the exclusive right conferred by
Volvo-Veng (1988): Generally not, but …
Magill (1991): Yes, exceptionally, if refusal blocks consumer access to
a specific new product
 The BBC would not deliver a multi-channel TV guide and used copyright to  IMS (2004): Yes, if four conditions are met:
 indispensable, absolute, not just desirable;  new product, consumer demand not met;  no objective justification;  elimination of all competition  Microsoft (2007): Yes, if it would help develop new products?
Intellectual Property and Competition in a Globalised Economy Microsoft Judgment of 2007 (1)
Nature of Sun’s request
Endowing Microsoft’s competitors with the capacity to participate perfectly in a
Windows server network as a full member of the family, not as an outsider
Microsoft had to undertake laborious and costly research to document the way
its software interacts and licence the results of this research (specifications) to
its competitors

When must a dominant company license its IP?
Ensure viable competition, not just weak competition
 Simply surviving in the market does not suffice: must ensure viability  Elimination of effective / viable competition in absence of license
 Substantial market share of competing products did not exclude Microsoft’s possible duty to  Foresight: applies even if elimination of competition may be some years ahead (damage to Intellectual Property and Competition in a Globalised Economy Microsoft Judgment of 2007 (2)
Absence of objective justification
Unclear what would suffice as justification, since secrecy and effort
are rejected
Licence may promote technical development (not the emergence
of a specific new product)
No guidance as to what would qualify as “technical development”
Aimed at a rival seeking a license to produce the same product as the
dominant player but simply adding an additional feature
Process rather than product approach: no specific new product needs
to be identified
Difficult to see the limiting principles
Intellectual Property and Competition in a Globalised Economy IP & Abuse of Dominance:
Pharmaceutical Sector

Pharmaceutical Sector Inquiry - Background
Launched on 15 January 2008
Numerous questionnaires sent
to stakeholders (originators,
generics, marketing
authorisation authorities,
parallel traders, wholesalers
and national competition
authorities): millions of items in
response

Preliminary report published
on 28 November 2008 and Final
Report published on 8 July
2009

Something 'rotten' in EU pharmaceutical sector… Intellectual Property and Competition in a Globalised Economy Pharmaceutical Sector Inquiry – Main Issues
Conduct of pharmaceutical companies
The European Commission believes that competition in the
pharmaceutical sector is imperfect
Delays in generic entry, including because of:
Patent litigation, notably when based on secondary patents
Patent settlement agreements
Decline in number of new medicines reaching market
“Defensive patenting”
Skepticism about the utility of patents
Intellectual Property and Competition in a Globalised Economy Pharmaceutical Sector Inquiry – Implications (1)
Both agreements and abuse of dominance are at stake
Patent settlement agreements will be the biggest issue going forward as
Article 101 TFEU applies to all companies
1st Monitoring Exercise (January 2010): companies had to provide the
Commission with all settlement agreements concluded between July 2008 and
December 2009

2nd Monitoring Exercise (January 2011): Commission asks for all settlements
concluded in 2010
Still unclear what the Commission’s position is…
Critique
Settling litigation is normally a positive step; judges are unpredictable
A situation where the generic enters market prior to patent expiry may be
viewed differently from a situation where the generic exits the market
US concerns about patent settlements do not easily translate to Europe given
regulatory differences (no Hatch-Waxman in EU)
Intellectual Property and Competition in a Globalised Economy Pharmaceutical Sector Inquiry – Implications (2)
When asked in the early 1970s by Henry Kissinger about the impact of
French Revolution, Zhou Enlai, then Premier of China, responded “it is
too soon to say.”

The same can be said about the impact of an inquiry on the European
pharmaceutical industry: so far there has been a large amount of stress
and debate, but not much new policy

Intellectual Property and Competition in a Globalised Economy Pharmaceutical Sector Inquiry – Implications (3)
Guidance might emerge in a number of pending cases:
Boehringer (COPD) – formal proceedings opened on 29 March 2007
Servier (perindopril) – formal proceedings opened on 8 July 2009
Investigation into generic practices in France – dawn raids conducted
on 6 October 2009
Lundbeck (citalopram) – formal proceedings opened on 7 January
Nexium (esomeprazole) – dawn raids in several Member States on 30
November 2010
Intellectual Property and Competition in a Globalised Economy AstraZeneca – Commission Decision (2005)
Commission’s theory: AstraZeneca abused dominant position by
blocking or delaying market access for generic versions and
preventing parallel imports of Losec (omeprazole)

Two abuses:
AstraZeneca provided misleading information to national patent
offices and courts; and
AstraZeneca misused regulatory procedures by selectively de-
registering marketing authorisations (MAs)
Intellectual Property and Competition in a Globalised Economy AstraZeneca – General Court (2010)
Commission Decision largely upheld
Lack of transparency:
AZ had to disclose all relevant facts and any underlying legal interpretation
Had AZ been transparent about its particular interpretation of SPC Regulation
and/or requested a rectification, its conduct may not have been abusive

Intent is not a necessary condition for abuse, nor sufficient to establish
an abuse

Abuse as objective concept
Legal standard: AZ “could not reasonably be unaware”
“Good faith” no objective justification unless pro-active transparency
Conduct still classified as anti-competitive even when such conduct is
remedied prior to having an effect (or effect occurs only after
dominance)

Intellectual Property and Competition in a Globalised Economy IP & Abuse of dominance:
Standards

Standard setting agreements – Rambus controversy
Inventors of the asynchronous DRAM
Discussion in JEDEC among manufacturers of DRAMs whether to incorporate this
new technology in industry standard for the DRAM
Was there a duty to disclose status of patent applications?
“Patent ambush”.
Complainants asserted that Rambus had in 1991 to 1994 intentionally concealed that it had
patents and patent applications which were relevant to technology used in the JEDEC
standard, and subsequently claimed royalties for those patents; Rambus claimed that its
technology had been hijacked by JEDEC members

When industry members negotiate standards, each is likely to seek its own
advantages rather than “higher” industry benefits
Desire for clarity to disclose as to what is obligatory
Settled in 2009, following Rambus' commitment to offer licences with maximum royalty rates
for certain memory types and memory controllers in the future
Intellectual Property and Competition in a Globalised Economy Standard setting agreements
Horizontal Guidelines (1)
Criteria under which the Commission will not take issue with a
standard-setting agreement (“safe harbour”):

unrestricted participation for all competitors in the markets affected by the
standard setting;

transparency of the standard-setting procedures;
effective access to the standard on fair, reasonable and non-discriminatory
(“FRAND”) terms; and

a clear and balanced intellectual property rights (“IPR”) policy.
Individual assessment of agreements outside the safe-harbour
(“effects-based” features):

Freedom to develop alternative standards and products
Access to the standard
Market shares of the goods and services based on the standard
Discrimination against any participating or potential members
Sufficiently transparent disclosure of IPRs
Intellectual Property and Competition in a Globalised Economy Standard setting agreements
Horizontal Guidelines (2)
Standardisation agreements may only be caught under Article
101(1) TFEU if the parties involved have market power
The Guidelines are an improvement on the position taken by the
Commission in early stages of the Rambus case
The Guidelines are still very prescriptive and not practical in
every specific instance
Many arrangements not covered by the Guidelines can
nonetheless be justified as procompetitive
Intellectual Property and Competition in a Globalised Economy entities compliant with regulations regarding the practice of law in the countries and jurisdictions in which we have offices.

Source: http://www.eu-japan.eu/sites/eu-japan.eu/files/Anti-competitive%20abuse%20the%20EU%20Approach_%20Ian%20FORRESTER.pdf

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