IP and competition law - 'We have been up to the challenge so far', says the EU Commission

It has been a busy week for Joaquin Almunia, Vice President of the EU Commission, and the DG Competition. At the IP Summit 2013, held in Paris from 9 to 11 December, Almunia (speech available here) examined the crossroads between IP and competition law and the Commission's policy on the matter, both from a general perspective and in light of some recent cases. The Commissioner highlighted the growing importance of IP for the economies of the EU member states, noting that it plays a fundamental role in ensuring that companies compete on the merits and invest in research and innovation. In this perspective, he concluded that the EU Commission has been up to the task of preventing abuses of the IP system, in the exceptional cases in which it conflicts with competition law:

[C]ases involving IP are also likely to remain on our radar. Although the intersection of competition and IP can be a very challenging spot, I believe that we have been up to the challenge so far. Our laws have proved to be sufficiently flexible to take into account a range of different market characteristics. Overall, our enforcement record shows that IP cases are rare and that we tread very carefully. However, our record also shows that IP is not immune from competition law scrutiny and that we will continue to intervene if necessary.

In his speech, Commissioner Almunia made it clear that antitrust authorities should normally refrain from interfering with IP rights, intervening 'only when the IP rights are abused or used as a cover-up for anti-competitive practices - which is clearly the exception, not the rule'. Among the cases warranting this exceptional intervention, Almunia first mentioned the refusal of a dominant undertaking to license its intellectual property rights, which constitutes an anti-competitive behavior when it prevents a third party from entering the relevant market and eliminates effective competition in the market, as taught in Magill, IMS Health and Microsoft. Similar anti-competitive effects may derive, according to the Commissioner, from patent ambushes in the standard-setting context (Rambus), as well as from the use of injunctions during the negotiations leading to the licensing of standard essential patents on F/RAND terms (Samsung, see PatLit post here). Examining the latter issue, he stated that injunctions should not be awarded against a willing licensee, adding that standard-setting organizations are expected to implement appropriate rules to this aim. If this is not going to happen, however, Almunia clarified that the Commission is 'willing to provide clarity to the market through competition enforcement'.

Assessing competition law issues arising in mergers, the speech briefly mentioned the cases of Google's acquisition of Motorola (here) and Microsoft's acquisition of the mobile-phone division of Nokia (here). Both cases, however, did not give rise to significant anti-competitive concerns, as Motorola's essential patents remained subject to their original F/RAND commitments, while Nokia retained its patent portfolio and the licensing commitments already made to the standard-setting bodies (although he was quick to add that '[i]f Nokia were to take illegal advantage of its patents in the future, we will open an antitrust case - but I sincerely hope we will not have to').

Almunia also referred to the new draft Technology Transfer Block Exemption Regulation, which contains rules aimed at encouraging the creation of patent pools, seen as a viable antidote to patent thickets and as a pro-competitive mechanism for the licensing of SEPs. The Commissioner promised to keep an eye on the rise of patent assertion entities, although 'they have been less active in Europe than in the US'. Mentioning the competition law issues encountered in the investigation on Google's scrapping practices, he noted generally that 'it is important to realise that competition-law tools have their limits [as they] cannot be a panacea for issues that relate solely to the nature of IP protection'.

Surveying the potential anti-competitive effects of patent settlements in the pharmaceutical sector, Almunia recalled the recent case of Lundbeck and the on-going investigations against Servier, Cephalon and Teva. Further, he observed that unlawful pay-for-delay agreements may also be concluded through commercial agreements, rather than through patent settlements, as shown by the very recent case of Johnson & Johnson and Novartis, commented yesterday on PatLit. The Commissioner concluded, however, that the number of potentially problematic settlements has been on a downward trend since 2008-2009:

These cases follow an inquiry in the pharmaceutical sector the Commission conducted in 2008-2009. The study found that over 20% of all patent settlements concluded between 2000 and 2008 were potentially problematic. We have since monitored the industry every year and the potentially problematic settlements have stabilised to around 10% of the total. The latest monitoring report, covering the settlements concluded in 2012, is published today. Its findings confirm the trend. Although the total number of settlements has increased, around 7% of these are potentially problematic. These results show that our scrutiny is not forcing companies to "litigate each patent dispute to death" –as is sometimes suggested by the industry. On the contrary, companies can often solve their disputes in a manner that stays on the right side of EU competition law.

Finally, Almunia favorably commented the UPC Agreement, clarifying that, from the perspective of competition law, 'there is no doubt that the introduction of a unitary patent and the creation of a Unified Patent Court will cut costs for innovative firms and reinforce the internal market'. He reassured, or threatened, that the paths of the new Court and EU competition authorities will frequently meet.