Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC Commissioner Vestager discusses link between competition enforcement and intellectual property, (Sep 11, 2015)

By Linda O’Brien, J.D., LL.M.

Intellectual property law has become an important tool to promote innovation; however, sometimes intellectual property rights can be used to restrict competition, Margrethe Vestager, European Commission (EC) Commissioner in charge of competition policy, stated in an address today before the International Bar Association (IBA) 19th Annual Competition Conference in Florence, Italy.

Vestager began her remarks entitled “Intellectual property and competition,” by noting that the European Patent Office grants about 65,000 patents a year. In today’s knowledge economy, innovation is a leading factor to ensure competitiveness, economic growth, and job creation. Protecting inventions and creative works is mainly the task of intellectual property law.

In Vestager’s view, competition law can complement intellectual property law in situations where the way that intellectual property law is exercised may fall short of promoting consumer welfare. Without effective competition rules, there would be higher risks that today's innovators might stifle those of tomorrow, or that consumers might not benefit from fair access to those innovations. The task is to find the right balance between the interests of distributors, artists, inventors and creators and the interests of consumers. In competition enforcement, resources should be focused on the most serious competition issues and priority given to cases that can set useful precedents for future practice, as well as for national competition authorities and courts.

Standard essential patents. In general, standards are good for consumers and the economy because of the ‘interoperability’ they provide, the Commissioner noted. To set a standard, competing firms must come together and choose one technology to the exclusion of others. If a member of a standard setting organization owns a patent for a technology that will be included in the standard, that member must commit in advance to license it to all third parties on fair, reasonable and non-discriminatory terms. The term “FRAND” serves two main purposes: it guarantees that standards are open to all; and it makes sure that patent holders receive a fair reward for their inventions.

According to Vestager, a frequent issue before the courts is when a patent holder that pledged to license its standard essential technology on FRAND terms claims a patent infringement and asks a court to ban the sale of competitors’ products that use the technology. The main point is whether patent holders can seek injunctions in these situations. In 2014 the EC adopted two decisions in this context. The Motorola and Samsung decisions outlined that there should be some limits to this right precisely because of the competition context in which the standardization process takes place. If not, injunctions of this type could be used to extract conditions that would otherwise not be achievable, and which may hamper the standardization process, restrict competition, and ultimately harm both consumers and innovation across the industry.

Cross-border online trade. Vestager noted that there are a series of barriers – linguistic, regulatory and contractual – that keep the online world fragmented along national boundaries in Europe. Online markets are far from integrated in Europe. However, the Commission does not have a full picture of the restrictions in Europe that lead to such fragmentation, and whether they are company-erected or regulatory. Competition policy – like all public policy – works best when it is based on facts. With the facts right, the interests of consumers and law-abiding firms can be protected and make Europe’s digital markets a better place for doing business.

Intellectual property protection provides incentives for investment as does competition. There is always sensitivity around property rights as well as cultural diversity. At the same time, property rights never give carte blanche for exemption from regulatory obligations. And competition law is no exception. Competition policy and intellectual property policy must work hand in glove in order to promote economic growth while ensuring consumers gain access to a wide range of innovative and creative goods and services at reasonable prices, Vestager concluded.

News: Antitrust