ABA China Inside and Out September , Beijing The interface between competition law and intellectual property Nicholas Banasevic, DG Competition, European Commission (speaking in a personal capacity - the views expressed are not necessarily those of the European Commission)

IP and competition law have the same goals ■ No inherent conflict between IP and competition law (para. 7, TTBER Guidelines) ■ Both share the same objective ■ Consumer welfare and efficient resource allocation ■ Both necessary to promote innovation ■ IP rights promote dynamic competition by encouraging undertakings to invest in developing new or improved products and processese

IP and competition law ■ No antitrust immunity for IPRs ■ "That is no more correct than the proposition that use of one's personal property, such as a baseball bat, cannot give rise to tort liability“ (US Court of Appeals in Microsoft) ■ EU: refusal by a dominant undertaking to license an IPR not itself an abuse unless there are exceptional circumstances ■ EU CFI in Microsoft: once exceptional circumstances are established IPRs as such are no objective justification

But some perspective is important ■ 3 cases of refusal to license IP in 55 years ■ Exceptional circumstances are (rightly) demanding ■ Indispensability of IP to viably compete in adjacent market ■ Elimination of effective competition in the adjacent market ■ Prevents emergence of new products in the adjacent market ■ Dominant company can also invoke objective justification ■ e.g. incentives to innovate (fact-specific)

5 Interoperability ■ "What we are permitting is more innovation around our products, more interoperability, maybe also more potential for third parties to cannibalize what could have been Microsoft business … But it is a path we have committed ourselves to because we think it is good for customers and is consistent with our legal obligations" (Steve Ballmer, 2008) ■ Microsoft now shares interoperability information with Samba, the file server software that enables Linux servers to share files with Windows PCs

6 Standards, IP and competition ■ Group of companies decide on commonly agreed specifications (generally in a standards body) ■ Can be a choice of one technology over another ■ Technologies often covered by patents ■ Different to how competition occurs ‘traditionally’ ■ One-off choice between different technologies ■ The technology that is chosen is the standard

7 Benefits of open standards ■ Agreements between competitors ■ But clear benefits of standardisation  Specification is accessible  Interoperability  Follow-on innovation  Standard enables competing implementations by multiple vendors

8 Standards and market power ■ Standards can confer market power  Depends on importance of standard in market  Depends on lock-in (sunk costs, network effects) ■ Standards can confer incremental market power  Depends on ex ante alternatives  Relevance of «but for» scenario  What would have happened ex ante is a good benchmark

9 Horizontal Guidelines ■ Benefits of standardisation recognised ■ But subject to certain "safe harbour" conditions  Openness and transparency of process  No restrictions that are not indispensable  Available to all who wish to work the standard  Standard must be non-binding  Access to the standard on FRAND terms  FRAND commitments of essential patent holders

10 Injunctions ■ Proceedings opened in 3 cases in 2012  Samsung (Statement of Objections: Dec 2012)  Motorola (Statement of Objections: May 2012)  Motorola/Microsoft ■ Commission examining whether the seeking and enforcing injunctions on the basis of SEPs is potentially abusive in light of FRAND commitments

11 Conclusion ■ Competition policy and IP policy are complementary policies serving the same goals ■ Targeted antitrust intervention may be necessary in specific circumstances ■ Carefully balances the interests of consumers with incentives to innovate