1. Peter Hoeltzenbein, General Policy Division, Bundeskartellamt
The Relation of Competition Policy and Intellectual Property in the European Union – An Introduction
EU-China Workshop on
Application of Anti-monopoly Law in Intellectual Property Area
Changsha, 11. – 12. March 2010
Peter Hoeltzenbein, General Policy Division, Bundeskartellamt

2. Overview The European Union European Competition Policy
Intellectual Property Rights (IPRs)
Relation of Competition Policy and IPRs

3. The European Union

4. The European Union (1) 27 countries 500 million people
23 official languages
A unique economic and political partnership between 27 democratic European countries.

5. The European Union (2)
1952
1973
1981
1986
1990
1995
2004
2007
The EU was set up in the aftermath of World War Two to bring peace, stability and prosperity to Europe.

6. The European Union (3) Share of world trade in goods (2007)
Share of world trade in services (2007) EU
17% EU
28.5%
Others
40.6%
Others
53.2%
United States
14.5%
Japan
5.8%
United States
18.2%
China
9.5%
China
5.9%
Japan
6.8%

7. The European Union (4) Not a federal state
Member States remain independent sovereign nations
However, Member States delegate some of their powers so that decisions on specific matters can be made democratically at European level
The European Union (EU) is not a federation like the United States. Nor is it simply an organisation for co-operation between governments, like the United Nations. It is, in fact, unique. The countries that make up the EU (its ‘member states’) remain independent sovereign nations but they pool their sovereignty in order to gain a strength and world influence none of them could have on their own.
Pooling sovereignty means, in practice, that the member states delegate some of their decision-making powers to shared institutions they have created, so that decisions on specific matters of joint interest can be made democratically at European level.

8. The European Institutions
European Parliament
represents the European people
European Council
represents the 27 Member States
European Commission
27 Commissioner, one from each state
proposes new legislation
main executive body
The Council of the European Union, which represents the member states, is the EU’s main decision-taking body. When it meets at Heads of State or Government level, it becomes the European Council whose role is to provide the EU with political impetus on key issues.
The European Parliament, which represents the people, shares legislative and budgetary power with the Council of the European Union.
The European Commission, which represents the common interest of the EU, is the main executive body. It has the right to propose legislation and ensures that EU policies are properly implemented.

9. Law making at European level
Citizens, interest groups, experts: discuss, consult
European Commission: makes formal proposal
Parliament and Council: decide jointly
National or local authorities: implement
Commission and Court of Justice: monitor implementation

10. The Single Market
One of the European Union’s greatest achievements is the single market
Restrictions on trade and on free competition have gradually been eliminated
The single market is supported by a strong competition policy ensuring that free competition is not distorted
The single market is one of the European Union’s greatest achievements. Restrictions between member countries on trade and free competition have gradually been eliminated, with the result that standards of living have increased.
The single market has not yet become a single economic area. Some sectors of the economy (public services) are still subject to national laws.
The individual EU countries still largely have the responsibility for taxation and social welfare.
The single market is supported by a number of related policies put in place by the EU over the years. They help ensure that market liberalisation benefits as many businesses and consumers as possible.

11. European COmpetition Policy

12. European Competition Policy (1)
Prohibition of illegal state aid
national government interventions must not distort competition and trade inside the EU
Merger Control
concentrations must not impede effective competition
Antitrust
Prohibition of anti-competitive agreements
Prohibition of abuse of dominance

13. European Competition Policy (2)
The European Antitrust rules may be enforced
by the European Commission
by all 27 National Competition Authorities
Interpretation of the Antitrust rules
The European Commission issues detailed (non-binding) guidance on various topics
Ultimately, the European Court of Justice interprets and develops the law on appeal

14. European Competition Policy (3)
Cooperation of European competition authorities within the European Competition Network (ECN)
Case allocation
to the authority best placed to take action
Exchange of information
Mutual assistance
Power of the European Commission to claim competence over a certain case (which rarely happens)

15. European Competition Policy (4)
European Antitrust rules only apply where trade between Member States is affected
they do not apply to cases with regional or local impact
All the Member States have national antitrust laws which resemble the European regime
and which are only enforced by the respective national competition authority

16. Intellectual Property Rights

17. IPRs (1)
IPRs are rights to exclude others from exploiting intangible assets such as
inventions = patents
creative works = copyright
signs & names = trade marks
shapes & forms = design rights
plant varieties = plant breeders rights

18. IPRs (2) The owner of an IPR is entitled to
prevent unauthorised use of his IP
exploit it
by using the IP itself and/or
by licensing it to third parties
Once a product incorporating IP has been put on the market within the EU the IPR is exhausted

19. IPRs (3) IPRs are usually limited in time patents = 20 years
copyright = 70 years after the author’s death
trade marks = renewable every 10 years (if used)
designs = up to 25 years
plant breeders = up to 25 years rights

20. Market definition IPRs usually pertain to two relevant markets
(using a patented technology as example)
Technology markets
on which the technology for a certain product or a certain production process is (or could be) licensed
Product markets
on which the products incorporating the technology are (or could be) offered
A technology is either integrated into a product or used in the production process.

21. IPRs and market power IPRs are legal monopolies
They may (but must not) lead to market power and sometimes even to an economic monopoly
This always depends on the number of (potential) substitutes for the IP
If you can choose between a number of different equally suitable technologies (some of which might even be in the public domain) then there is most likely no market power

22. Relation of Competition Policy and IPRs

23. Competition and Innovation (1)
Competition is said to induce companies to offer the best products at the lowest price
Innovation is said to cause markets to change
improved products and production processes are introduced
consumer satisfaction increases and production costs decrease
Innovation is said to be the main source of increases in economic welfare!

24. Competition and Innovation (2)
Competition has mixed effects on innovation
competition is said to spur innovation - in principle
however, competition may also be detrimental to innovation
copying and free riding may undermine the incentive to innovate
there is also little incentive to disseminate knowledge and know how if it is used to free ride
Inventions and know how will be kept a secret and not be shared in order to prevent free riding on innovation efforts
these effects are highly debated in academia

25. Patents and Innovation (1)
Patents are supposed to incentivise innovation efforts and the dissemination of knowledge
without the prospect of an exclusive right, few firms would spend large sums on research and development
patent applications are published and, even before the patent expires, the protected invention can be used for research and development
patents facilitate the negotiation of licences and the dissemination of the technology
This holds true for instance in the pharmaceutical sector where one medicine is often covered by but one patent
without the prospect of an exclusive right, few firms would spend large sums on research and development. Secondly, patent applications and claims are published by national authorities and, even before the patent expires, the protected invention can be used for research and development, although not for commercial manufacture or sale. Consequently, the exclusive right can be perceived as the price of publication. Thirdly, patents facilitate the negotiation of licences. The licensee is unlikely to agree to pay a licence fee or accept other restrictions on its conduct unless it has been able to test the technology, but that would be difficult to arrange if the licensee were then free to exploit the invention without infringing the law.

26. Patents and Innovation (2)
However, in other sectors (e.g. semiconductor) one product may be covered by hundreds of patents
Patents are increasingly used for defensive purposes
the big companies build up large and highly costly patent portfolios
to block products of competitors
as a bargaining chip in cross-licensing negotiations
to prevent or defend against infringement suits
Does the current patent system strike the right balance for all industry sectors?
Does it grant to much protection?

27. Patents and competition policy (1)
Both IPRs and competition policy ultimately aim at increasing economic and social welfare
Competition is the driving force for efficient and dynamic markets
Patents (try to) strike a balance between over- and underprotecting innovator’s efforts
At the highest level of analysis IPRs and competition complement each other

28. Patents and competition policy (2)
Antitrust issues
Potentially anti-competitive agreements
licensing agreements
settlement agreements
agreements on standard setting and on the pooling of patents
the application of competition law is less controversial
Potentially abusive unilateral conduct
Misuse of the IPR system
Patent ambush
Refusal to deal
the application of competition law Is more controversial

29. Questions?

30. Thank you for your attention!