The European Antitrust Review 2014 Section 1: EU substantive areas

IP and Antitrust

Squaring the Circle: The EU’s Quest for Balance between Antitrust and Intellectual Property

Antitrust limits on intellectual property rights

Intellectual property rights (IPRs) generally give the creator an exclusive right over the use of his or her creation during a certain period of time, allowing the owner to prevent unauthorised use of its IP and to exploit it by, inter alia, licensing it to third parties. The importance of the protection and enforcement of these rights has long been recognised by EU law and policy. The Treaty on the Functioning of the European Union (TFEU) and the Charter of Fundamental Rights of the European Union specifically acknowledge the importance of IP protection.1 Numerous policy statements from the European Commission (Commission) and other European institutions recognise the crucial importance of protecting and enforcing intellectual property to ‘the EU’s ability to stimulate innovation and to compete in the global economy’.2

However, when enforcement of IPRs appears to cross the line of undermining or infringing other rights and laws, the challenge for the Commission and the EU Courts has been how to strike the right balance between adequate IPR protection and those other rights and laws, including antitrust law. What is clear is that IPRs are not absolute rights. As far back as the 1960s, the European Court of Justice (ECJ), in facing this balancing exercise, drew a distinction between the ‘grant’ or existence of IPRs and the ‘exercise’ of those rights, and found that an IP owner could be prevented from exercising its IPRs to the extent necessary to give effect to the Treaty prohibition on anti-competitive agreements.3 While this balancing exercise is not unique to the interface between IP and antitrust law,4 it is in the area of antitrust enforcement that we have seen more of the tensions in how far IP owners can be legitimately limited in using their IPRs. Recent enforcement by the Commission in the fields of pharmaceuticals and smartphones reflect a bold approach and raises new questions on the limits antitrust rules can place on IPRs. Recent statements from the Commission seem to point to a growing scepticism of IP owners’ legitimate exercise of their rights: ‘[...] I think that companies should spend their time innovating and competing on the merits of the products they offer – not misusing their intellectual property rights to hold up competitors to the detriment of innovation and consumer choice [...]’.5

Against this background, this article focuses on two of these areas of tension: when do antitrust rules force an IP owner to grant a licence to a third party, and what limits do antitrust rules place on litigation by IP owners and on the related area of settlements?

Unilateral conduct of IP owner and article 102 TFEU

The circumstances under which an IP owner may be compelled to license its technology or refrain from litigation to enforce its IPRs are generally governed by the antitrust rules regulating unilateral conduct, namely article 102 TFEU. Article 102 TFEU prohibits abuses of a dominant position. A company will infringe article 102 TFEU if:

  • it is found to be dominant in the relevant market;
  • it engages in a conduct that constitutes an abuse of that dominant position; and
  • there is no objective justification for the alleged abusive behaviour.6

In looking at these questions, therefore, it is necessary to assess whether ownership of an IPR, in and of itself, is sufficient to render a company dominant or whether there are other factors that play in this assessment.

In assessing market power and therefore dominance, the Commission will examine:

  • the constraints imposed by other companies and the market structure;
  • the constraints imposed by the credible threat of future expansion by actual competitors or entry by potential competitors; and
  • the countervailing buyer power.7

These criteria are equally applicable when it comes to analysing the position of an IP holder in the market.

As a result, the mere ownership of an IPR does not make an IP holder dominant.8 It will depend, among other things, on whether there are substitutable technologies available in the market and on whether it is envisaged that actual or potential competitors would launch substitutable technologies that could substitute the protected technologies. Where a technology has become an indispensable input for competitors, a refusal to grant access to that technology, by refusing to license IPRs, may be potentially abusive;9 however, this does not equate ownership of IPRs to dominance. This approach has also been followed in the United States, where the Supreme Court has acknowledged that IPRs do not necessarily confer market power.10

However, the dominance assessment under EU law becomes more complex in cases where the market at issue is governed by a technical standard. Usually, licences for many patents are necessary to manufacture a product that complies with a standard and the ownership of those patents is not generally concentrated in the same IP holder. This means that an IP holder who only owns one or several of the multiple patents that read upon the standard may impede the manufacturing of products by refusing to license its standard essential patent (SEP) on fair reasonable and non-discriminatory (FRAND) terms or by holding up the patent until its patented technology has been incorporated in the standard with the view to charge excessive or discriminatory royalties.

Standardisation creates a specific context at the intersection of IP and antitrust law, and the ownership of a SEP may result, under specific circumstances, in market power. However, similar to non-SEPs, equating ownership of a SEP with dominance would constitute an over-simplistic approach. At present, there are no clear Commission guidelines or case law authority that clarifies which steps are to be followed when assessing the market power of a SEP owner. In its Horizontal Guidelines, the Commission acknowledges that, despite the fact that a SEP holder could control the product or service market to which the standard relates and thus could behave in anti-competitive ways, ‘there is no presumption that holding or exercising IPR essential to a standard equates to the possession or exercise of market power. The question of market power can only be assessed on a case-by-case basis’.11 However, in assessing the acquisition by Google of Motorola Mobility Inc, the Commission stated that ‘each SEP can be considered as a separate relevant market in itself as it is necessary to comply with a standard and thus cannot be designed around, ie, there is by definition no alternative or substitute for each such patent’.12 Although this assessment is made in a merger context and not in applying articles 101 or 102 TFEU, it would appear to suggest that a SEP owner holds 100 per cent of a relevant market – namely the market for its SEP – and is most likely dominant. The Commission has indicated that a comparison between the royalties charged for the same patent ex-ante (prior to the incorporation of the IP in the standard) and ex-post (once the IP is incorporated in the standard), in addition to being relevant to assessing whether licensing is on FRAND terms, offers a benchmark to evaluate market power in that it may reveal the SEP owner’s ability to charge higher royalties as a result of the standard. It remains to be seen whether some of the current investigations pending in the smartphone sector will result in Commission decisions providing guidance on this and other critical elements of the assessment of potential abuse of dominance in the context of SEPs.

Finally, even if an IP owner was deemed to be dominant, it is important to remember that being in a dominant position is not, in itself, illegal.13On the contrary, while dominant companies have a special responsibility not to impair competition in the EU,14 dominant companies are entitled, and encouraged, to compete on the merits. Antitrust law only punishes abuse of a dominant position.

Compulsory licensing

Compulsory licensing occurs when the owner of an IPR is compelled to grant a licence to a third party under article 102 TFEU. As a general rule, the owner of an IPR is entitled to determine whether it will license its IPRs and, if so, how and to whom. A mere refusal to license does not per se amount to an infringement of article 102 TFEU. Following a series of high-profile article 102 cases over the years, starting back in the late 1980s with Magill and followed by IMS and Microsoft I,15 it has been established that an IP holder may be compelled to license its technology to a third party under ‘exceptional circumstances’. In practice, the ‘exceptional circumstances’ test has proven to be difficult to apply. The ‘exceptional circumstances’ have not been exhaustively defined by either the Commission or the EU Courts and thus a case-by-case analysis is required.

Compulsory licensing and EU case law

Magill

Magill is the landmark case in which the ECJ upheld a duty to license an IPR. Each of the BBC, RTE and ITV – broadcasters in the UK and Ireland – published weekly television guides containing detailed information of their TV programmes. Magill TV Guide Ltd wanted to publish the three TV broadcasters’ listings in a single weekly publication. At the time there was no such publication, but there was an obvious demand for it. However, the TV broadcasters refused Magill’s request for a licence to use the information. The case was eventually heard by the ECJ, who upheld the General Court’s (GC) judgment that the broadcasters were under an obligation to provide Magill with the listings.

The ECJ concluded that the refusal to license an IPR was not, in itself, an abuse of a dominant position, but it could be regarded as such in ‘exceptional circumstances’.16 According to the ECJ, the dispute concerned exceptional circumstances given that:

  • the TV broadcasters were the only source of the indispensable ‘raw material’ (ie, basic information on programme scheduling);
  • Magill wanted to put together a weekly listing magazine which sought to introduce a new product on the market where there was an increasing unsatisfied demand for such a product;
  • there was no justification for the refusal based on copyright protection; and
  • by denying access to the information, the TV broadcasters were reserving the downstream market of TV guides for themselves excluding all potential competitors.17

Shortly after Magill, the ECJ reiterated the ‘exceptional circumstances’ test in Oscar Bronner,18 although the object of the refusal was not an IP protected product or service. In that case, the alleged dominant service provider was not considered to have abused its dominant position by refusing to supply the requested service, inter alia, because the Court considered that the requested service was not indispensable to the complainant’s business.

The test was again applied in Ladbroke,19 although the IP owner in that case, Paris Mutual International, was not required to license its copyright to its betting shop competitor Ladbroke. The GC pointed out that, whereas in Magill the refusal to license prevented Magill from entering the market, in this case, Ladbroke was not only already active in the market but had the higher market share; and whereas in Magill the licence of IP was essential and indispensable in order to access and compete in the market for TV guides, in Ladbroke the IPRs were not indispensable for betting shop operators to be active in the market.20 Moreover, the Court found that the refusal to license IPRs in Ladbroke did not impede the bringing to the market of a new product.

IMS Health

IMS was another major case on compulsory licensing that added further colour on how the tests initially elaborated in Magill would be applied. The ECJ confirmed its long-established principle that a mere refusal to license an IPR does not constitute an abuse of dominant position in and of itself. However, in ‘exceptional circumstances’ where the actions of the IP holder go beyond the natural protection of the IPR, there might be an abuse of dominance in the form of refusing to license.21 The ECJ confirmed, again, the ‘exceptional circumstances’ test established in Magill and clarified certain of its elements, in particular:

  • regarding the likelihood of excluding all competition on a secondary market, the ECJ held that it is sufficient if a ‘potential’ or ‘hypothetical’ separate market could be identified;
  • regarding the absence of objective justification, the ECJ highlighted that this assessment needs to be conducted on a case-by-case basis; and
  • regarding the requirement of bringing a new product to the market, the ECJ emphasised that it would not be sufficient if the potential licensee intended to merely duplicate a product or service that a potential licensor already sold in the secondary market.

Microsoft I

The 2007 GC’s decision in Microsoft I went a step further in elaborating the obligation to license under article 102 TFEU and broadened the scope for compulsory licensing beyond what the Court had envisaged in Magill. In 2004, the Commission fined Microsoft €497 million for abusing its dominant position in the PC operating system market. The Commission concluded that Microsoft had abused its dominant position by refusing to supply competitors with interoperability information impeding them from developing and distributing products competing with Microsoft in the work group server operating system market.22 The GC upheld the Commission’s decision.

With respect to the indispensability and the elimination of competition in a secondary market, the GC, in line with IMS, agreed with the Commission that Microsoft was able to impose a de facto standard for work group computing and thus non-Microsoft work group server operating systems had to be capable of inter-operating with Windows PC and server operating systems on a non-discriminatory basis in order to be able to compete on the market.23 As a consequence, where a standard has been established in a market or industry (either de facto or de jure) the indispensability requirement is very likely to be met.

Microsoft I, apart from confirming the obligation to license,24 is of particular relevance because of the approach the GC took in relation to the ‘new product’ requirement. Indeed, the Court did not find that it was necessary to show that a specific new product (such as the TV guide in Magill) would have been introduced into the market if the interoperability information had been shared. The Court explained that the new product criterion should be interpreted as including any restriction on technical development.25 Accordingly, Microsoft’s refusal to share information prevented competitors from effectively competing in the work group server OS market. This interpretation significantly widened the strict approach originally adopted in Magill.

Compulsory licensing in the Commission’s Guidance on Article 102

The Commission confirmed its approach to refusal to license IPRs in its Guidance on Article 102.26The Commission will intervene if:

  • the refusal relates to a product or service that is objectively necessary to compete effectively on a downstream market;
  • the refusal is likely to lead to the elimination of effective competition on the downstream market;
  • the refusal is likely to lead to consumer harm; and
  • there is no objective justification for such refusal.27

The Commission refers to Microsoft I, Magill and Oscar Bronner in its Guidance on Article 102 when explaining how ‘product or service that is objectively necessary’ should be interpreted. It also explains that when deciding whether a refusal leads to consumer harm, it will analyse whether the refusal would prevent the introduction of an ‘innovative product’ to the market or whether it would stifle follow-on innovation.28

Conclusion

The EU Courts’ case law and the Commission’s Guidance on Article 102 set out the general parameters for assessing when compulsory licensing is required. While it is true that the precise legal standard may be difficult to apply in practice and continues to give rise to a number of questions, it is clear that in ‘specific circumstances’ EU antitrust law requires dominant companies to license their IPRs and, as a result, a case-by-case analysis is required. Future cases should shed additional light on the scope and application of compulsory licensing. However, given the Commission’s current preference for commitment decisions instead of prohibition decisions,29 it may take some time before we obtain any such guidance.30

Vexatious (patent) litigation and patent settlements

A refusal to license IPRs to third parties has for a long time been the main focus of enforcement and debate in terms of how far antitrust rules can legitimately limit an IP owner’s exercise of his or her rights. However, the current Commission investigations in the pharmaceutical and smartphone industries, and the Commission’s recent decision in Lundbeck31 have shifted the focus somewhat to potential abuse of litigation and patent settlements by IP owners.

Abuse of dominance through litigation or threatened litigation

There is very little precedent in the area of abusive litigation and the few available cases set the bar very high in terms of what the Commission would need to show in order to successfully establish that by litigating or threatening to litigate against an alleged infringer the IP owner is abusing a dominant position.

In ITT Promedia, both the Commission and the GC stated that entering into litigation, which is ultimately the expression of the fundamental right of access to justice, could not be considered an abuse of dominant position in itself.32 However, initiating litigation would be abusive if the dominant firm brings an action which is ‘manifestly unfounded’ (ie, only to harass the opposite party); and the claim is brought with the aim of eliminating competition. The GC has specified that these two criteria should be interpreted and applied restrictively as they constitute an exception to the fundamental right of access to courts.

In Protégé International Ltd, the GC upheld this two-step test.33 Protégé alleged that Pernod Ricard had abused its dominant position in the Irish whisky market by filing legal proceedings against Protégé in relation to the latter’s application for registration of the ‘Wild Geese’ trademark. The GC rejected Protégé’s claim that initiating litigation was abusive. The Court emphasised that access to justice is a fundamental right and therefore it is only in wholly exceptional circumstances that the bringing of litigation could amount to an abuse of a dominant position. The Court stated that the cumulative conditions set in ITT Promedia were not met in this case given that Pernord Ricard’s trademark ‘Wild Turkey’ contained the word ‘wild’ and that there thus existed a potential risk of confusion between the two brands. As a result, the Court found that initiating proceedings against the registration of Protégé’s trademark could be justified.

In practice, the successful application by the Commission of the above-mentioned criteria in establishing an abuse of dominance will be very challenging, particularly in relation to the ‘manifestly unfounded’ criterion. However, the Commission may try to invoke the ITT Promedia standard in one of its many ongoing investigations into the use of injunctions in the smartphone sector and, if so, the test may well be revisited in any appeal of a Commission decision in this area.

Application of antitrust rules to settlement agreements

Another important development is the Commission’s interest in patent settlements. The antitrust principles being developed in this area will be of general application, but given the apparent prevalence of settlement agreements in the pharmaceutical industry the Commission has been focused on this sector. In contrast with compulsory licensing and vexatious litigation, which are generally based on unilateral conduct and therefore enforcement is based on article 102 TFEU, settlements are generally subject to article 101 TFEU as they involve agreements between the IP owner and the alleged infringing party.

The Commission’s inquiry into the pharmaceutical sector, which was launched in 2008 and which was the subject of a report in 2009,34 revealed a number of practices that could lead to anti-competitive effects in the EU market, including patent settlement agreements between originator companies and generic companies.35 The Commission’s main concern relates to so-called ‘pay-for-delay patent settlements’ whereby an originator company eliminates or delays entry of cheaper competing generics through significant payments or benefits to the generic company who agrees not to enter or to postpone entry.36 Although the Commission recognises that settlements can be a legitimate mechanism in the hands of companies to end patent-related disputes,37 the Commission appears increasingly sceptical that any settlement agreement that involves the transfer of value from an originating company to a generic company in return for delaying generic entry could comply with antitrust rules.38 Arguably the Commission’s concerns in this area should relate only to those agreements that may potentially infringe competition rules by including restrictions outside the scope of the patent; for example, where entry is delayed beyond the expiry of IP protection or extends to products or processes not covered by IP protection. In its recent consultation on changes to the Technology Transfer Block Exemption,39 the Commission clarifies that settlement agreements involving a licence may run counter to article 101 TFEU, in particular where a licensee agrees, against a value transfer from the licensor, to more restrictive terms than the licensee would have accepted solely on the strength of the licensor’s technology.

However, this involves the Commission ultimately assessing the strength of the licensor’s technology, which may be better determined by a national court. In the end, these views still have to be tested in the EU Courts, but in the meantime the Commission has reached a decision in one pharmaceutical case40 while several other investigations are ongoing.41

On 19 June 2013, the Commission issued its first decision in a pay-for-delay case. The Commission imposed a fine of €93.8 million on Lundbeck and fines amounting to €52.2 million on several generic companies.42 The Commission concluded that the agreements between Lundbeck and its generic competitors infringed article 101 TFEU.43 It is important to note that the Commission considered this case different from other cases involving settlements of patent disputes where ‘generic companies are not simply paid off to stay out of the market’. Commission Vice President Almunia explained in his statement that: ‘Lundbeck did not prevent market entry by successfully enforcing its patent rights; rather, it simply paid other companies so that they would not compete [...] they shared the monopoly rents among themselves’. While there are elements to this case that may well distinguish it from other patent settlement cases under investigation, it remains to be seen whether all of the Commission’s findings – including the level of the fine – will be upheld on appeal and what position the Commission will take in the other patent settlements cases it is currently investigating.

Antitrust, IP, SEPs and smartphones

With multiple ongoing Commission investigations against IP owners in the smartphone sector,44 it may be expected that any Commission and potentially EU Court decisions will shed further light on the practical application of the legal standards on abuse of dominance in licensing and litigation. There is a tendency on the part of the Commission to view the area of SEPs as fundamentally different to other areas where the Commission has tackled compulsory licensing and abusive litigation, mainly because in the context of a standard setting body, the IP owner will generally have given a commitment up front to license any technology incorporated in a standard on FRAND terms. Nonetheless, in the context of the current investigations, it would seem that the principles established by the case law of the EU Courts in these areas cannot be disregarded.

So far, the main focus of the Commission’s investigation in the smartphone sector has focused on the use of injunctions.45 While recourse to injunctions is a legitimate remedy for patent infringements, the Commission claims that such conduct may be abusive in the context of SEPs where the potential licensee is willing to negotiate on FRAND terms.46 Since injunctions generally seek to prohibit the sale of the competing product allegedly infringing the patent, seeking (or threatening to seek) injunctions against potential licensees willing to negotiate on FRAND terms may exclude potential competitors as well as lead to other harmful effects (eg, higher royalties than would otherwise be charged).

SEP owners claim in their defence that their IPRs have been infringed and, in accordance with IP law, that they are entitled to challenge such violations, particularly if the infringing company is not willing to enter a licence. They also claim that the Commission should not restrict their fundamental right to access the courts. EU national judges are prepared to assess whether an injunction should be granted (if it is justified on the merits) or not.47 For its part, the Commission emphasises that the seeking of injunctions by a SEP owner may be considered abusive only in very limited circumstances, namely, where the IP owner has committed to license on FRAND terms; and the licensee can prove that it was willing to negotiate on FRAND terms.48 Conversely, if the licensee was not willing to accept FRAND terms, the seeking of an injunction by the licensor may be in accordance with antitrust law.49

However, the willingness of a potential licensee to negotiate on FRAND terms remains difficult to prove and ultimately involves an assessment of what constitutes a fair and reasonable royalty. According to the Commission, in the absence of an agreement between licensor and licensee with respect to royalties, the acceptance by the potential licensee to be bound by a third-party determination of the FRAND royalty shows a clear willingness to negotiate on FRAND terms.50 The Commission does not appear to take a clear position with respect to what should be considered a FRAND royalty. In fact, it states that national courts and arbitrators are better placed to carry out this exercise.51 It is suggested that a comparison between the royalties charged for the patent before being included in the standard and after such inclusion may serve as a proxy.52 However, this method does not provide sufficient certainty and appears to be unrealistic – in many instances there is no ex ante royalty as the investment has specifically been made after the selection of the standard.

If the Commission ultimately adopts a prohibition decision (rather than adopting a commitment decision) in any of these ongoing or future investigations on the use of injunctions by SEP owners, it will be interesting to see whether and how established principles on vexatious litigation and or compulsory licensing are dealt with. The ITT Promedia standard of ‘manifestly unfounded’ appears particularly difficult to apply in this context where determining whether there was a willing licensee turns on a determination of what constitutes a FRAND commitment or FRAND royalty. Similarly, the lack of objective justification for a refusal to license, following the principles developed in Magill, IMS and Microsoft I, in this context will likely hinge on a determination of what constitutes a fair and reasonable royalty. Whether the Commission relies on these principles or on a more novel legal theory, whether in the context of smartphones or elsewhere, the approach appears to be full of uncertainties.53

Notes

  1. See article 345 of the TFEU where it is stated that: ‘The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership’. Article 36 of the TFEU acknowledges that derogations to the Treaty enshrined principles of free movement of goods between EU member states may be justified on grounds of ‘the protection of industrial and commercial property’. Article 17 of the Charter of Fundamental Rights of the European Union provides that ‘Intellectual Property shall be protected’.
  2. See, for example, European Commission Directorate General for Trade Website, Intellectual Property.
  3. Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements, OJ 2004C 101/2, paragraph 7. See also, for example, Joined Cases 56/64 and 58/64, Consten and Grundig [1966] ECR 429.
  4. In its decision in C-70/10 Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM) [2011] (not yet published at time of writing) the Court acknowledged the need to ‘strike a fair balance between, on the one hand, the right to intellectual property, and, on the other, the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information’.
  5. Joaquin Almunia, European Commission press release, Commission sends Statement of Objections to Motorola Mobility on potential misuse of mobile phone standard-essential patents, 6 May 2013.
  6. Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009 C45/7 (‘Guidance on Article 102’), paragraph 12.
  7. See Guidance on Article 102, paragraph 12.
  8. Guidelines on the applicability of article 101 TFEU to horizontal co-operation agreements, OJ 2011 C11/1 (‘Horizontal Guidelines’), paragraph 269. See also Illinois Tool Works Inc v Independent Ink, Inc, 547 U.S. 28 (2006). Interestingly, this approach was advocated years before in Jefferson Parish Hospital District No. 2 v Hyde, 466 U.S. 2 (1984) by four concurring Justices. These Justices supported the idea that it is a ‘common misconception’ to presume that ‘a patent or copyright, a high market share, or a unique product’ by itself demonstrates market power. As Justice O’Connor explained then, ‘[w]hile each of these three factors might help to give market power to a seller, it is also possible that a seller in these situations will have no market power: for example, a patent holder has no market power in any relevant sense if there are close substitutes for the patented product’ (cited in Ariel Katz, Making Sense of Nonsense: Intellectual Property, Antitrust, and Market Power, Arizona Law Review, Vol. 49:837, p.849).
  9. See, for example, COMP/M.6381 – Google/Motorola Mobility (2012), paragraph 59.
  10. See Illinois Tool Works Inc v Independent Ink, Inc, 547 U.S. 28 (2006). The Antitrust Guidelines for the Licensing of Intellectual Property issued by the US antitrust authorities in 1995 also take this approach.
  11. Horizontal Guidelines, paragraph 269.
  12. COMP/M.6381 – Google/ Motorola Mobility (2012), paragraph 61.
  13. See Guidance on Article 102. See also Case 322/81 Nederlansche Banden-Industrie-Michelin v Commission [1983] ECR 3461, paragraph 57 and Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports and others v Commission [2000] ECR I-365, paragraph 37.
  14. As underlined in Case C-322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, paragraph 57. See also, for example, C-280/08 P Deutsche Telekom AG v Commission [2010] ECR I-9555.
  15. Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43, confirmed on appeal in Case CT-69/89, Radio Telefis Eireann (RTE) v Commission [1991] ECRII-485, Case T-70/89, British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission [1991] ECR-II535, and Case T-76/89, Independent Television Publications Ltd (ITP) v Commission [1991] ECR II-575, and further confirmed in Joined Cases C-241/91 P and C-242/91 P, Radio Radio Telefis Eireann and Independent Television Television Publications Ltd (RTE & ITP) v Commission [1995] ECR I-743 (hereinafter ‘Magill’); Case C-418/01, IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I – 539 (IMS Health); Case T-201/04, Microsoft Corp v Commission [2007] ECR II-3601 (Microsoft I).
  16. See Magill, paragraphs 49-50 citing Case C-238/87, AB Volvo v Erik Veng (UK) Ltd [1988] ECR 6211 (Volvo), paragraphs 8-9.
  17. See Magill, paragraphs 53-56.
  18. Case C-7/97, Oscar Bronner [1998] ECR I-7791 (Oscar Bronner), paragraph 40.
  19. Case T-504/93, Tierce Ladbroke SA v Commission [1997] ECR II-923 (Ladbroke).
  20. See Ladbroke, paragraphs 130-131.
  21. See IMS Health, paragraphs 34-35 citing Magill, paragraphs 49-50 and Volvo, paragraphs 8-9.
  22. According to the Commission and the GC, Microsoft also abused its dominant position by tying its PC operating system to its Windows Media Player.
  23. Competition Policy Newsletter, Number 3-2007, Thomas Kramler, Carl-Christian Buhr and Devi Wyns.
  24. The Court noted that ‘the following circumstances, in particular, must be considered to be exceptional: in the first place, the refusal related to a product or service indispensable to the exercise of a particular activity on a neighbouring market; in the second place, the refusal is of such a kind as to exclude any effective competition on that neighbouring market; in the third place, the refusal prevents the appearance of a new product for which there is potential consumer demand’, paragraph 332 of the judgment
  25. See Microsoft I, paragraph 643.
  26. Guidance on Article 102, paragraphs 75-90.
  27. Guidance on Article 102, paragraphs 28-31.
  28. Guidance on Article 102, paragraph 87.
  29. Regulation 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1 (‘Regulation 1/2003’), articles 7 and 9.
  30. Since Microsoft I, the Commission has only adopted six prohibition decisions based on article 102 TFEU (COMP/38.096 – PO/Clearstream (2 June 2004); COMP/37.507 – Generics/Astra Zeneca (15 June 2005); COMP/38.113 – Prokent/Tomra (29 March 2006); COMP/38.784 – Telefonica SA (broadband) (4 July 2007); COMP/37.990 – Intel (13 May 2009); COMP/39.525 – Telekomunikacja Polska (22 June 2011)). Of these six decisions, two concerned anti-competitive ‘refusals to supply’ (COMP/38.096 – PO/Clearstream (2004) and COMP/39.525 – Telekomunikacja Polska (2011); COMP/38.784 – Telefonica S. (broadband) concerned margin squeeze) but neither concerned a refusal to license IPRs. By contrast, the Commission has adopted 27 commitment decisions since Microsoft I (COMP/37.214 – German Bundesliga (2005); COMP/39.116 – Coca-Cola (2005); COMP/38.381 – De Beers (2006); COMP/38.173 – The Football Association Premier League Limited (2006); COMP/38.348 – Repsol (2006); COMP/38.681 – Cannes Agreements (2006); COMP/37.966 – Distrigaz (2007); COMP/39.388 – E.ON/GermanElectricity Wholesale Market (2008); COMP/39.389 – E.ON/German Electricity Balancing Market (2008); COMP/39.402 – RWE (2009); COMP/39.416 – Ship Classification (2009); COMP/39.316 – GDF Foreclosure (2009); COMP/38.636 – Rambus (2009); COMP/39.530 – Microsoft (tying) (2009); COMP/39.386 – EDF/Long Term Electricity Contracts in France (2010); COMP/39.351 – Swedish Interconnectors (2010); COMP/39.317 – E.ON Gas Foreclosure (2010); COMP/39.596 – British Airlines/American Airlines/Iberia (2010); COMP/39.315 – ENI (2010); COMP/39.398 – Visa MIF (2010); COMP/39.592 – Standard & Poors’ (2011); COMP/39.692 – IBM Maintenance Services (2011); COMP/39.736 – Siemens-Areva (2012); COMP/39.847 – Ebooks (2012); COMP/39.230 – Rio Tinto Alcan (2012); COMP/39.654 – Reuters Instrument Codes (2012); COMP/39.595 – Continental/United/Lufthansa/Air Canada (2013)). Of these 27, 17 concerned abusive practices under article 102 TFEU including 5 dealing with refusal to supply (COMP/39.402 – RWE (2009); COMP/39.316 – GDF Gas Foreclosure (2009); COMP/39.317 – E.ON Gas Foreclosure (2010); COMP/39.315 – ENI (2010); COMP/39.692 – IBM Maintenance Services (2011)).
  31. See http://europa.eu/rapid/press-release_IP-13-563_en.htm.
  32. Case T-111/96, ITT Promedia v Commission [1998], ECR II-2937, paragraph 30.
  33. Case T-119/09, Protégé International Ltd v Commission [2012] (not yet published at time of writing).
  34. See http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/.
  35. See http://europa.eu/rapid/press-release_IP-09-1098_en.htm; http://europa.eu/rapid/press-release_MEMO-09-321_en.htm.
  36. Such agreements are continuously monitored by the Commission since the closing of its sector inquiry and a yearly report is published on the outcome of this monitoring.
  37. See 3rd Report on the Monitoring of Patent Settlements (January-December 2011), published on 25 July 2012, paragraph 3. The Report also notes that the Commission’s focus on such settlements did not impose a general decrease in unproblematic agreements but had the positive effect of restraining competitively harming settlements.
  38. Joaquin Almunia, ‘Paying competitors to stay out of the market at the expense of European citizens has nothing to do with the legitimate protection of intellectual property: it is an illegal practice and the Commission will fight against it’. See http://europa.eu/rapid/press-release_IP-13-563_en.htm.
  39. Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of article 81(3) of the Treaty to categories of technology transfer agreements, OJ L 123, p.11-17.
  40. See http://europa.eu/rapid/press-release_IP-13-563_en.htm
  41. The Commission sent a statement of objections (SO) to Laboratoires Servier and several of its generic competitors for potentially delaying the entry in the market of Perindopril (see http://europa.eu/rapid/press-release_IP-12-835_en.htm). In 2013, the Commission sent another SO to Johnson & Johnson and Novartis for potentially agreeing to delay the market entry of Fentanyl in the Netherlands (see http://europa.eu/rapid/press-release_IP-13-81_en.htm). Finally, in 2011 the Commission opened an ex oficio investigation in relation to an agreement between Cephalon, Inc and Teva Pharmaceutical Industries Ltd that may have delayed the entry of Modafinil generics in the market (see http://europa.eu/rapid/press-release_IP-11-511_en.htm).
  42. See http://europa.eu/rapid/press-release_IP-13-563_en.htm.
  43. ‘Lundbeck paid significant lump sums, purchased generics’ stock for the sole purpose of destroying it, and offered guaranteed profits in a distribution agreement.’ See http://europa.eu/rapid/press-release_IP-13-563_en.htm.
  44. On 21 December 2012, the Commission sent a SO to Samsung for presumably abusing its dominant position by seeking injunctions against Apple in several member states on the basis of certain SEPs (see http://europa.eu/rapid/press-release_IP-12-1448_en.htm). On 6 May 2013, the Commission sent a SO to Google-Motorola Mobility for abusing its dominant position by seeking an injunction against Apple in Germany on the basis of its SEPs (see http://europa.eu/rapid/press-release_IP-13-406_en.htm). In May 2012, Huawei lodged a complaint before the Commission regarding the SEP licensing practices of Interdigital (a non-practising entity (NPE)). Huawei alleges that Interdigital has abused its dominant position by seeking an injunction with the aim of obtaining non-FRAND licensing terms form Huawei (see www.huawei.com/en/about-huawei/newsroom/press-release/hw-134791-anti-trustcomplainteuropeancommissioninterdigitalp.htm).
  45. The Commission is also looking at a complaint regarding the transfer of SEPs to so-called NPEs. In 2012, Google filed a complaint with the Commission alleging that Microsoft and Nokia were ‘colluding to raise the costs of mobile devices for consumers, creating patent trolls that sidestep promises both companies have made.’ Google claims that Microsoft and Nokia transferred hundreds of SEPs into two separate NPEs, Mosaid and Sisvel (the so-called ‘patent trolls’). Google alleges that Microsoft and Nokia entered into an agreement with Mosaid in order to discourage device manufactures from using Google mobile OS (Android). It is alleged that, as Mosaid owns many SEPs, companies that choose to build Android devices instead of Windows devices run the risk of being sued by Mosaid. To date, there is no official statement from the Commission in relation to this investigation. See, for example, www.bloomberg.com/news/2012-05-31/google-files-complaint-in-europe-against-microsoft-correct-.html; www.guardian.co.uk/technology/2012/jun/01/microsoft-nokia-google-patent-troll.
  46. See http://europa.eu/rapid/press-release_MEMO-13-403_en.htm; see also COMP/M.6381 – Google/Motorola Mobility (2012), paragraph 126.
  47. Note also that article 47 of the Charter of Fundamental Rights of the European Union embodies the right to an effective remedy and to a fair trial: ‘Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article. Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law’.
  48. See http://europa.eu/rapid/press-release_MEMO-13-403_en.htm.
  49. See COMP/M.6381 – Google/Motorola Mobility (2012), paragraph 126.
  50. See COMP/M.6381 – Google/Motorola Mobility (2012), paragraph 141. See also http://europa.eu/rapid/press-release_MEMO-13-403_en.htm where the Commission states that ‘By contrast, a potential licensee which remains passive to a request to enter into licensing negotiations or is found to employ clear delaying tactics cannot be generally considered as ‘willing’.
  51. See Horizontal Guidelines, paragraph 291.
  52. See Horizontal Guidelines, paragraph 289.
  53. It remains to be seen what impact, if any, the preliminary request made to the ECJ by the Regional Court of Düsseldorf in the SEP-based litigation Huawei-ZTE will have on the currently pending cases in this area.

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