Intellectual Property Rights

OUTLINE OF RESEARCH

Intellectual property rights are those exclusive rights granted to the owners there in to behave in a particular manner with a view to economically exploiting the result of their intellectual labour. They include patents, designs, registered as well as unregistered, copy rights, including computer software, trademarks, secret and substantial know how and other analogous rights. Competition law, in common parlance, seeks to take away monopolistic rights with a view to protect competition and maximise consumer welfare. It is therefore no surprise that historically, these two areas of law have regarded each other with mutual suspicion and there has existed tacit unrest.

However, the development of case law and policy over the decades shows that this view is overly naive and probably wrong. It becomes important to understand that even though intellectual property rights confer exclusive use, it is not the same as an economic monopoly. It is merely a film of immunity from competing undertakings. The real issue for consideration is whether intellectual property and competition law are fundamentally contradictory to one another or whether, in practice, they are just different means to achieve the same goals? In the 20th century, the courts seemed to hold the opinion that intellectual property sought to take away what competition law strived to achieve, in that they were mutually incompatible.

Today, it is an accepted school of thought that intellectual property and competition law strive to achieve common goals – promoting interests of the consumers, effective allocation of resources and most importantly, promoting innovation. In my analysis of the trend in the relationship between intellectual property and competition law, I will also draw reference to various Department of Justice (DOJ) and Federal Trade Commission (FTC) documents which showcase a clear shift in attitude from a time when intellectual property was perceived by competition lawyers to impede competition to now, when intellectual property agreements are expected to boost economic efficiency and in fact are considered pro-competitive.

A holder of an intellectual property may either exploit the property himself, or he may grant licences to another to enable him to do so. There may be many reasons as to why he chooses to do so. While licensing his property, the owner may also impose various other restrictions such as quality of goods produced, quantity of goods produced or the price at which they are sold, geographical area, etc.  This leads me to consider the relationship between intellectual property licensing agreements and article 81 of the EC treaty. It can be seen that the commission's policy on intellectual property licensing agreements has evolved and developed significantly over the last few decades.

Initially, in the 1960s, a very permissive approach was adopted. This is illustrated by the 1962 Notice on Patent Licensing Agreements [24 Dec. 1962 JO 2922/62] where even exclusive patent licensing was not considered to infringe Article 81(1) as long as the restrictions were within the scope of the patent. As time passed, the stand of the commission hardened and assumed a more formalistic and interventionist approach, moving towards the position that all exclusive licences, unless de minimus, infringed Article 81. The position was essentially that any intellectual property licence which went beyond simply exploiting the property against payment of royalty was a violation of art 81(1).

Momentous to this change was the decision of the ECJ in Consten & Grundig (Consten & Grundig v. Commission [1966] ECR 229) where the court drew an almost unnatural distinction between the 'existence' and 'exercise' of an intellectual property right. This distinction between grant of and exercise of the right can be further seen in Deutsche Grammophon (Deutsche Grammophon Gesellschaft v. Metro-SB_Grobmarkte GmbH [1971] ECR 487). Even though, in the real world, non-exclusive licences were commercially non viable, throughout the 1970s the commission ruled in a string of decisions that exclusive licenses were restrictive of competition and were caught by the provisions of Article 81(1). Although in Nungesser v. Commission (Case 258/78 [1982] ECR 2015) (also referred to as maize seeds case) the ECJ held that exclusive licence did not ipso facto infringe Article 81(1),  in that it drew a difference between an 'open exclusive agreement' and an exclusive licence conferring absolute territorial protection. In the years following the judgement, the ECJ adopted a very narrow approach as to it's application.

The reluctance on the part of the commission to apply the maize seed doctrine can be seen in various later judgements of Velcro/Aplix(OJ [1985] L 233/22); Tetra Pack I (OJ [1988] L 272/27); Delta Chemie/DDD Ltd (OJ [1988] L 309/34). The introduction of the new Technology Transfer Block Exemption, Regulation 772/2004 accompanied by the Technology Transfer Guidelines has signalled a more practical and economic approach to these types of agreements.

The law of intellectual property confers exclusive rights. Article 82, simply put, prohibits the abuse of a dominant position by any dominant undertaking.  The question therefore remains whether Article 82 can be used to limit the exclusive rights granted by the intellectual property in the case of a dominant undertaking. The ECJ, through various judgements, has made it quite clear that it is not the ownership of the intellectual property but it's improper exercise which can be questioned under Article 82.

Much debated over the years is the question as to what extent the owner of an intellectual property can be compelled into licensing it to a third party. In the Renault case (1988 ECR 6039) and Volvo v. Erik Veng (1988 ECR 6211), the courts took a rather orthodox view on the matter. However, in the Magill case (OJ 1989 L 78/43), Oscar Bronner (Case C – 7/97 1998 ECR I - 7791) and IMS Health (Case C 418/01 2004 ECR I - 5039), the court assumed a much less orthodox stand. I will discuss the meaning and consequence of these decisions in detail in the course of my research essay.

 My research essay will therefore attempt to establish a trend in the way in which the Community Courts and the Commission have regarded the relationship between Intellectual Property Rights and Competition Law under two broad headings,

(a) Intellectual Property Rights and Article 81 (b) Intellectual Property Rights and Article 82.

ANNOTATED BIBLIOGRAPHY

Richard Whish, Competition Law (6th edn., Oxford  University Press), chapter 19

This leading practitioner text book is a comprehensive guide for EC Competition Law and useful as a source of reference for the two main issues raised in my outline. It is up-to-date and excellently written with complicated concepts put forward in an easily understandable way.

Alison Jones and Brenda Sufrin, Text, Cases, and Materials: EC Competition Law (3rd edn., Oxford University Press) Chapter 10

This is an accomplished text that provides invaluable insight into the subject of European Competition law. It is a useful source of reference for the issues covered in my research essay. It contains a judicious balance of analysis, cases and materials. The cases are excellent with the right mix of facts, judgement and comments.

Kirsty Middleton, Blackstone's UK & EC Competition Documents (5th edn., Oxford University Press)

This statute book covers all the relevant Notices and Guidelines I will be referring to in my research essay. It offers unparralled coverage with primary and secondary legislation and up-to-date material.

FUTHER SOURCES

BOOKS

S. D. Anderman and J. Kallaugher Technology Transfer and the New EU Competition Rules: Intellectual Property Licensing after the Modernisation (Oxford University Press, 2006)

S. Anderson, EC Competition Law and Intellectual Property Rights (Clarendon Press, 1998)

C. Bernard, The Substantive Law of the EU (Oxford University Press, 2004)

L.Bently and B. Sherman, Intellectual Property Law 2nd edition (Oxford University Press, 2004)

Korah, V., Intellectual Property Rights and the EC Competition Rules, (Hart Publishing, 2006)

Govaere, I., The Use and Abuse of Intellectual Property Rights in the EC Law (Sweet & Maxwell, 1996)

ARTICLES

Dolmans, M.,and, Pilola, A., 'The New Technology Transfer Block Exemption, A Welcome Reform After All' [2004] 27(3) World Competition 351

L.Peeperkorn, 'IP Licences and Competition Rules: Striking the Right Balance' (2003) 26 World Competition 527, 527-28

Venit, J., 'In the Wake of Windsurfing: Patent Licensing in the Common Market' [1986] Fordham Corp L Inst 517

Cotter, T.F., 'Intellectual Property and the Essential Facilities Doctrine' [1999] Antitrust Bull 211

Knoll/Hille-Form XIIIth Report on Competition Policy (1983)