IP rights and competition law: Friends or foes? Etienne Wéry Attorney at the bars of Paris and Brussels Lecturer at Robert Schuman University (Strasbourg) Ulys Law Firm EUROJURIS PRACTICE GROUPS’ DAYS 1 st - 4 th May, 2008 Krakow, Poland

General introduction to IP right and competition law

Competition law To ensure economic efficiency  Public interest IP rights To protect moral and patrimonial rights of the owner  Private interest General introduction

Is there any common objective? YES - Both IP rights and competition law promote innovation and consumer welfare General introduction

BUT… The objectives pursued by competition law are broader and encompass those of IP law IP rights’ exercise must comply with competition law  The use of an IP right which leads to an anti- competitive conduct always damage innovation and consumer welfare General introduction

Example: The Microsoft case (2004)  Microsoft refused to supply other companies with information necessary to achieve interoperability between its PC operating system Windows and work group servers  Microsoft tied its separate multimedia player (Windows Media Player) with its PC operating system General introduction

Example: The Microsoft case (2004) Consequences:  Harm competition  Brake on innovation  Less choice and higher prices for consumers General introduction

Example: The Magill case (95)  TV stations, relying on national copyright, refused to provide basic information to a new entrant company for publishing a comprehensive guide to the television programmes  Such conduct prevented the appearance of a new product, which was not offered by the TV stations and for which there was potential consumer demand  Harm consumer welfare General introduction

Therefore:  Competition rules set out by the EC Treaty and national laws fully apply to IP law: (i) literary and artistic property and (ii) industrial property  IP rights are limited by the prohibition of anti- competitive practices such as abuses of a dominant position and cartels General introduction

Is there any exception to the application of competition law to IP rights? NO - The use of any IP right (patent, trademark, copyright, design, model, etc.) may give rise to an anti- competitive conduct. Article 295 EC, which provides that “This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership”, does not prevent articles 81 EC and 82 EC from applying to IP rights. General introduction

Never forget that:  The simple use of an IP right can never be a prohibited anti-competitive practice  Only conducts that go beyond what IP rights generally allow may lead to a violation of competition law  Criteria used in competition law to assess whether a practice is or is not prohibited apply when IP rights are involved General introduction

Is there any specific difficulty when competition law applies to IP rights? YES - Competition law infringements in the field of IP rights are particularly difficult to detect because these practices are not prohibited per se. The frontier between the free use of an exclusive IP right and a use which turns out to be prohibited Under competition law may be very tight General introduction

When does the exercise of an IP right become an anti- competitive conduct? General introduction

First element to be considered: the relevant market  Defining the relevant market means determining the scope of the competition rules  Combinaison of the product market and the geographic market General introduction

Relevant market: Relevant product market: all products and/or services which are regarded as interchangeable or substitutable by reason of the products' characteristics, their prices and their intended use; Relevant geographic market: the area in which the firms concerned are involved in the supply of products or services and in which the conditions of competition are sufficiently homogeneous. General introduction

Example: The Microsoft case « By reason of its specific characteristics and the lack of realistic substitutes, the market for operating systems for client PCs constitutes a relevant product market for the purposes of this Decision » « A second relevant market identified by the Commission is that for work group server operating systems. »

Two main anti-competitive behaviors:  Anti-competitive agreements (art. 81 EC)  Abuse of a dominant position (art. 82 EC) General introduction

Art. 81 EC: “All agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market”. General introduction

Art. 82 EC: “Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.” General introduction

Technology licensing agreements  Agreements between companies relating to technology licensing. Licensing agreements that restrict competition are normally prohibited except when they have positive effects: they may be exempted under EC Regulation of 27 April 2004 relating to technology transfer agreements General introduction Example:

Refusal to supply goods  A dominant company refuses to give access to some products or services which are indispensable to enter a connected market. Ex: Commercial Solvents (74), Télémarketing (85) General introduction Example:

Refusal to licence IP rights  A dominant company refuses to licence an IP right which is indispensable for entering a connected market. Ex: Volvo (88), Magill (95), Microsoft (2004) General introduction Example:

Conclusion

Etienne Wéry Attorney at the bars of Paris and Brussels Lecturer at Robert Schuman University (Strasbourg) Ulys Law Firm Q uestions & A nswers