Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Almunia addresses competition policy and intellectual property rights in IP Summit speech, (Dec 10, 2013)

By Linda O’Brien, J.D., LL.M.

Joaquin Almunia, European Commission (EC) Vice President of the European Commission for Competition Policy, discussed the role of competition enforcement policy in the intellectual property protection system in his opening address before the 2013 Pan European Intellectual Property Summit on Patents and Trademarks on December 9 in Paris.

Almunia began his remarks, entitled “Intellectual property and competition policy,” by stating that competition policy enforcement and the protection of intellectual property rights share common goals and can help create the right framework to promote innovation. He noted that the EC intervenes only when IP rights have been abused or used as a cover-up for anti-competitive practices, which clearly are the exceptions and not the rule.

Such abuse could take the form of a refusal to license a patent or other IP rights that can lead to negative impacts on competition, Almunia noted. In all cases, the European courts have upheld EC decisions establishing that a dominant company’s refusal to license intellectual property rights may constitute an abuse of a dominant position.

Another problem area is the use of patents in standard-setting processes. The EC has provided guidance, “Horizontal Guidelines,” on standardization processes and included rules on disclosure and fair, reasonable, and non-discriminatory (FRAND) commitments. More guidance will be provided in antitrust rules on licensing agreements for the transfer of technology that will be designed to give incentives to innovation but also prevent the misuse of these agreements to partition markets or foreclose new technologies.

Almunia next addressed enforcement actions involving intellectual property rights and mobile devices. Standardization can bring the enormous benefits of allowing companies to focus on innovation and know that their products will work together. However, there is an inherent competition risk when a group of companies, many of them competitors, agree to use a common technology to the exclusion of other technologies, Almunia observed. To address the risk, standard-setting organizations generally ask members to commit to license on FRAND terms the patents that are essential to the standard. This requirement has caused the EC some concern as it is the EC’s position that patent holders should not seek injunctions based on standard essential patents ( SEPs) against companies that are willing to enter a license on FRAND terms.

SEP issues in mergers. The EC has also encountered SEP-related issues in two merger cases that were recently cleared: Google’s acquisition of Motorola and Microsoft’s acquisition of the mobile phone unit of Nokia. In the Google case, the EC concluded that its acquisition of Motorola’s large portfolio of SEPs for mobile devices would not lead the merged entity to foreclose other suppliers due to existing FRAND commitments. In the Microsoft case, since Nokia retained its patents, there was concern that the sale of the unit would give Nokia an incentive to extract higher returns from its portfolio. Almunia noted that such concern was outside the scope of the EC’s review. When the EC assesses a merger, it looks into the possible anti-competitive impact of the company resulting from the merger and does not consider what the seller may do.

In the Microsoft case, the EC dismissed claims that Nokia would be tempted to behave like a patent assertion entity (PAE). He acknowledged that a growing number of patent lawsuits in the U.S. are initiated by PAEs and the FTC is looking into the issue to better understand the impact these entities have on innovation and competition. Almunia asserted that this is an area that the EC will be watching closely and intends to hold PAEs to the same standards as any other patent holder.

Patent settlements in the pharmaceutical sector. In the pharmaceutical sector, the EC is concerned that the settlement of a patent dispute can be used as a cover-up for agreements that delay the sale of a generic medicine in return for a payment by the originating brand name company to the generic drug producer, called a pay-for-delay agreement. Specifically, the agreements may allow the generic drug producers to share the monopoly rent of the originator company. The EC has monitored the industry every year and found that potentially problematic settlements have stabilized at around 10 percent of the total number of cases. In Almunia’s view, EC scrutiny has not forced companies to litigate every patent dispute, as suggested by the industry. On the contrary, companies often have resolved their disputes in a manner that stays on the right side of European Union (EU) competition law.

Looking ahead, the role of intellectual property in world economies has grown significantly over the last decade and the trend will likely continue in the future, Almunia stated. Intellectual property is among the most valuable assets in many commercial transactions and is viewed as crucial to gain an edge over competitors. As a result, for EU competition enforcement and policy, cases involving intellectual property will continue to be monitored. Although the intersection of competition and intellectual property can be a challenging area, EC policy is sufficiently flexible to take into account a range of different market characteristics. Overall, the EC’s enforcement of intellectual property cases is rare and the Commission treads carefully. However, the EC’s record shows that intellectual property is not immune from competition law scrutiny and the Commission will intervene when necessary, Almunia concluded.

News: Antitrust