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Published: Fri, 02 Feb 2018

European Communities | Free European Law Essay

The European Communities were established with the aim of providing peace and economic stability within Europe. This essay will consider how the European Union has sought to establish:

  • a)

    a single market;

  • b)

    diminish and

    ultimately abolish barriers to trade;

  • c)

    encourage

    competition;

  • d)

    encourage

    international trade;

  • e)

    approximate laws of

    the Member States;

  • f)

    promote research and

    technological development and respect property rights.

a)

A single market

Article

2 of the EC Treaty explicitly sets out the primary goal of the Community of

creating a common market.

Article

3 provides a list of activities that must be put into effect by the Community

to ensure that these aims are achieved.

Article 3(c ) provides that all

obstacles to the free movement of goods, persons, services and capital are

abolished.

b) diminish and ultimately

abolish barriers to trade

i) Free

movement of goods

Article

3a sets out the principle for the free movement of goods. Article 14 provides

that the internal market will comprise an area without frontiers in which free

movement is ensured. Free movement of goods will be restricted by quantitative

measures, such as customs quotas. Customs quotas would for example, provide

that only so many widgets may be imported from a specified state each year.

This

is dealt with within Article 28, which provides quantitative restrictions on

imports and all measures having equivalent effect shall be prohibited between

Member States. Article 29 makes similar provisions for quantitative

restrictions on experts.

The

right of a patent or trade mark holder to restrain importers, which effectively

means that no products may be imported without the right holder’s consent, may

be perceived as having equivalent effect to a nil quota.

Article

30 assists by providing exceptions for measures that are justified on specified

grounds. These include the protection of industrial and commercial property’.

It however is also provided that the provisions of Articles 28 and 29 shall

not preclude prohibitions or restrictions on imports, exports or goods in

transit justified on grounds ofthe protection of industrial and commercial

property. Such prohibition or restrictions shall not, however, constitute a

means of arbitary discrimination or disguised restriction on trade between

Member States.

Therefore,

it is submitted that intellectual property rights may be of equivalent effect

to quantitative restrictions.

ii)

Exhaustion of

intellectual property rights

In

the 1970’s, the Court developed the doctrine of exhaustion of rights, in an

attempt to prevent limited national intellectual property rights dividing the

common market.

The

Treaty provides a closed list of grounds under which Member States may claim

derogation from the provisions of articles 28 and 29. Ground 11 provides that

there will be no justification to an obstacle to the free movement of patented

goods where the product has been put onto the market in a lawful manner, by

the patentee himself or with his consent, in the Member State from which it has

been imported, in particular in the case of a proprietor of parallel patents.

The courts have subsequently applied this ground literally, and treated a

patent as exhausted by any sale in another Member state by or with the consent

of the holder, whether or not a monopoly profit could be earned in the country

of export. The holders consent is however required if the doctrine of

exhaustion is to apply – as confirmed in Keurkoop v Nancy Kean Gifts.

Hugh

Hansen

has argued that the principle of free movement does not require international

exhaustion between Member States. He explains that exhaustion of rights

expands the number of peiole selling products that are already on the market in

Member States. It does not however increase the amount of different products

moving across Europe. On the contrary, it acts as a barrier to entry as

parallel trading will be expected to prevent the recover of the costs of

introducing the new product on to the market.

c)

encourage

competition;

Articles

81 and 82 prohibit undertakings from entering into anti-competitive agreements,

or from abusing a dominant market position. The aim of these provisions is to

prohibit distortion of free competition resulting from collusion or other

conduct between two or more undertakings, or the abuse of predominant market

power by an undertaking.

Article

81 provides that an anti-competitive agreement that may have a restrictive

effect on inter-community trade will be declared void, unless there is a

sufficiently valid reason to allow an exception. To invoke Article 18, there

must be an ‘actual’ effect – rather than mere potential for such an outcome.

It does not however matter whether such effect is detrimental or not.

Exceptions

include block or individual exemptions. A system of comfort letters has also

been developed.

Article

82 seems to prevent undertakings from becoming involved in anti-competitive

behaviour by prohibiting abuse by one or more undertaking of a dominant market

position. Such abuse will be prohibited as incompatible with the common

market in so far as it may affect trade between member states. Before abuse

can be shown, it must be established that the relevant undertaking is in a

dominant potition. It was held in Michelin v Commission

that a firm in a dominant position has a special responsibility not to allow

its conduct to impair competition. Abuse is considered objectively and it is

not necessary to show that the undertaking intended harm. No exemptions apply

to Article 82.

d)

Encourage international trade

Barriers

to trade fall into two categories – pecuniary, and non-pecuniary. Pecuniary

barriers include the imposition of for example a customs duty for goods

entering and leaving each state.

Article

23 creates a customs union, with all customs duties and charges on goods of

equivalent effect being removed. Article 24 provides that once non-domestic

goods have been subject to a commons customs tariff (raised by the EC – not

member states), they are in free circulation, and are to be treated the same as

domestic goods.

Article

25 provides that Member States shall refrain from introducing between

themselves any new customs duties or changes having equivalent effect. This

applies to both imports and exports. Goods include products which can be

valued in money and which are capable of forming the subject of a commercial

transaction.

This will clearly include intellectual property.

The

court has also taken care to encourage international trade through the

harmonisation of the laws of member states – as detailed below. Without

harmonisation, inter-state trade would be impeded wherever a right holder in

the country of import had no rights in the country of export, and the protected

product was put on the market by a third party without consent.

e)

approximate laws of member states.

National

limitations on intellectual property right are contrary to the concept of a

common market.

In

Jones & Survin EC Competition Law

it is noted that despite the introduction of some community-wide rights,

intellectual property rights are still typically granted by national laws and

enforced on a national basis, conferring protection within national

territories. This inevitably leads to a conflict with the community provisions

governing the free movement of goods and services.

A

particular example of the difficulty is seen with patents. For example, a UK

patent extends only through the UK. Similarly, a French patent extends only

through France.

Consten

and Grundig v Commission

was an early case looking to prevent the division of the common market along

frontiers through intellectual property rights. Grundig was permitted Grundig

to allow its exclusive distributors to register its trade mark ‘Gint. Its

French distributor, Consten, was then able to sue a parallel importer under

French law for trade mark infringement, in addition to unfair competition. The

ECJ distinguished the ownership of trade mark rights under national law

(protected under Article 295) from their exercise, subject to the Treaty

provisions. This avoided the conclusion that Grundig was acting in abuse of

trade mark law.

Harmonisation

of intellectual property rights is essential to prevent free riders from

selling into countries where there are weaker intellectual property rights,

which would lead to the creation of piracy havens.

Prior

to the Harmonisation Directive

copyright protection lasted for different periods in different Member States,

which led to divisions within the Common Market. The Directive has led to

copyright being extended throughout the Community from the life of the author

plus 50 years (as applied in most member states) to the German period of the

life of the author plus 70 years.

There

has been further harmonisation through the Software Directive

which introduced the requirement of all Member States to protect software by

copyright. This Directive provides that each member states must incorporate

into national law the rights of third parties to decompile programmes

sufficiently to permit one programme to work with another.

The

Database Directive

was intended to harmonise database law. The implementation of the directive

through national states has however been varied, and has therefore not

completely harmonised the position.

The

Trade Mark Directive

was adopted in 1993. The Community trade mark office

began accepting filings in 1996. National marks still exist, and there will

continue to be divisions within the market since honest and concurrent users of

independent marks will continue to cause difficulties. However, Community

marks will be effective throughout the EEA unless they are challenged within a

county on the basis of confusion with a local mark.

f) promote research and technological development

and respect property rights.

Exclusive intellectual property rights are by their very

nature anti-competitive. They restrain third parties from taking advantage of

the property right. By their nature, they constitute a barrier to entry.

However,

without encouragement of investment in intellectual property, it would not be

beneficial for creators to spend time creating new patented goods, artwork,

music, literature etc. Investors of intellectual property would not gain

return on their investment, which would cause a massive reduction in the

production of new and innovative designs and works.

Erosion

of intellectual property rights would allow inventions, designs and other

intellectual property to be copied, without the expense of the investment of

development time. This is of particular relevance to pharmaceutical products,

which are extremely costly to develop as a result of the necessary clinical

trials. They can however be cheaply copied. This would have dyer consequences

for the advancement of medicine throughout the world, since investment in

pharmaceutical products would vanish in such circumstances.

Trade

marks similarly are essential in order to increase consumer choice, and make

the economy more competitive.

Thus,

the EC must endeavour to strike the correct balance.

In

its judgments since the 1970’s, and in particular cases such as Keurkoop v

Nancy Kean Gifts

considering exhaustion of rights, the Courts have stressed the importance not

to undermine the importance of intellectual property rights. The court is

clearly conscious of the importance of rewards and incentives.

Bibliography:

Legislation/Directives

  • EC

    Treaty, 25th March 1957 as amended OJ 2002 C325/1

  • Commission

    Regulation (EC) No 772/2004

  • Council Dir 93/98/EEC of 29

    October 1993, Harmonising the term of protection of copyright and certain

    related rights OJ 1993, L290/9

  • Council Dir 91/250, OJ 1991,

    L122/42, Software Directive

  • Council

    Dir 96/9 OJ 1996, L77/20, The Database directive

  • Council Dir 89/104 to approximate

    the laws of the Member States relating to trade marks, OJ 1989, L40/1

Cases

  • Centrafarm

    bv and de Peijper v Sterling Drug Inc (15/74) ECR 1147 31 Oct 1974

  • Consten

    and Grundig v Commission (56 & 58/64) [1966] ECR 299

  • Keurkoop

    v Nancy Kean Gifts (144/81) [1982] ECR 2853

  • Michelin

    v Commission 322/81

Books

  • Davies,

    K – Understanding European Union, 2nd Edition 2003, Cavendish

    Publishing

  • Jones

    & Surfin EC Competition Law: Test Cases and Materials (2001)

  • Korah,

    V – An Introductory guide to competition law and practice, 8th Edition 2004, Hart Publishing

Articles

  • Hansen, H international

    exhaustion: an economic and non-economic policy analysis’ -Intellectual

    Property Law and Policy – vol 6 (New Jersey, Juris Publishing (2001)

Websites

  • www.competition_commission.org.uk
  • Centrafarm bv and de Peijper v Sterling

    Drug Inc (15/74) ECR 1147 31 October 1974


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