Deciphering Huawei vs. ZTE: A Paper

The intervention of Nicolas Petit at the Training course for technical judges atthe UPC organized by the CEIPI had been discussed here some time ago. Nicolas has now published his observations on the decision Huawei vs. ZTE, which are available for download here and are interesting to read.

Among other points, Nicolas observes that upstream licensing entities are immune against the antitrust defence because he concern of the CJEU lies in the exclusion of competitors, not in the exploitation. This means that the problems of hold-up, reverse hold-up and of FRAND setting are addressed only in terms of procedural courtesy obligations among parties competing on same market and that the question of substantial pricing is left open or left to the national courts.

Supreme Court To Hear Challenge To Brulotte Rule

On December 12, 2014, the U.S. Supreme Court granted certiorari in the third patent case to be heard this term, this one presenting an issue at the intersection of patent law and antitrust law. In Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court ruled that a patent license requiring the licensee to pay royalties after the licensed patent expires is a per se violation of the antitrust laws. In addition, the same conduct constitutes patent misuse, and may render a patent unenforceable in a subsequent infringement action. Now, 50 years later, the petitioner in Kimble v. Marvel Enterprises, Inc., No. 13-720, asks the Court to overturn that per se rule. 

Kimble is the inventor of a "Spiderman" toy that allows children (and perhaps some adults) to shoot foam webs from their wrists. He licensed the patent to Marvel. The license included a royalty based on sales of the toy, but did not provide for the royalties to end when the patent expired. Marvel relied on Brulotte to stop paying post-expiration royalties.

The Brulotte Rule has been widely criticized as outdated. For example, Scheiber v. Dolby Labs., Inc., 293 F.3d 1014 (7th Cir. 2002), Judge Richard Posner criticized the rule as being wrong, lamenting that the Seventh Circuit had “no authority to overrule a Supreme Court decision no matter how dubious its reasoning strikes us, or even how out of touch with the Supreme Court’s current thinking the decision seems.” The U.S. Department of Justice and Federal Trade Commission also have criticized the rule in recent guidelines analyzing anticompetitive provisions in intellectual property license agreements. In recent years, the Supreme Court has modernized its analysis of antitrust concerns relating to intellectual property. See, e.g., Illinois Tool Works, Inc. v. Independent. Ink, Inc., 547 U.S. 28 (2006) (overruling its prior decisions that, in an antitrust tying claim, a patent does not necessarily confer market power upon a patentee). The Kimble case may be a vehicle for it to dispense with the Burlotte rule as well. Oral arguments have not been scheduled.

FRAND - Commission opens proceedings against Samsung

The European Commussion has announced to have opened a formal investigation against Samsung in the question whether Samsung's strategy seeking injunctive relief based on standard-relevant patents amounts to an abuse of a dominant position which may affect trade and prevent or restrict competition given that Samsung had given its irrevocable commitment  to license any standard essential patents relating to European mobile telephony standards on fair, reasonable and non-discriminatory (FRAND) terms.

PatLit had reported on a selection of the litigations in question e.g. here and here.

Meanwhile, Florian Müller reports on FOSS that Judge VOSS at the Mannheim District court has announced his decision reject Samsung's requests for injunctive relief in both pending cases despite of the suspicious attitude towards the FRAND defence used by Apple discussed in a previous post. However, the reasons for the decision are not yet available.

Be careful what you use your patents for

Last month we made reference to the investigation started by the Italian Antitrust Authority to verify possible abuse of dominant position by Pfizer using patent system, artificially extendeding the patent protection of an active principle in order to prevent new generic drugs entering the market (here).


Now is the turn of the European Commission to continue investigating violation of EU antitrust rules to delay generics entering the market.

At the beginning of December some websites (i.e. Businessweek, Reuters) made reference to several raids at the premises of AstraZeneca and Nycomed in the course of an investigation regarding suspected anticompetitive practices. The European Commission published a quite short Press Release (here), informing that:

“The European Commission can confirm that on 30 November 2010 Commission officials carried out unannounced inspections at the premises of a limited number of companies active in the pharmaceutical sector in several Member States. The Commission has reason to believe that the companies concerned may have acted individually or jointly, notably to delay generic entry for a particular medicine. If confirmed, this could be a potential violation of EU antitrust rules that prohibit restrictive business practices and/or the abuse of a dominant market position (Articles 101 and 102 of the EU Treaty)”.

There may be a link between this raids and the Executive Summary of the Pharmaceutical Sector Inquiry Report by the EU Commission we have talked about in this Blog (here). As we said, we are living strange times, being patent system used to prevent competition.

This would not be the first time AstraZeneca is investigated by EC for this reason. On 15 June 2005, the EC fined that company €60 million for misusing patent system to delay market entry of competing generic drugs (text of the decision (text of the decision here). A short summary of the decision was provided by the EC (here):

From 1993 to 2000 AstraZeneca infringed EC and EEA competition rules by blocking or delaying market access for generic versions of Losec and preventing parallel imports of Losec. AstraZeneca did this by:
• giving misleading information to several national patent offices in the EEA resulting in AstraZeneca gaining extended patent protection for Losec through so-called supplementary protection certificates (SPCs). In this specific case, the patent offices essentially relied on information supplied by AZ and they were not obliged – as in normal patent assessments – to consider whether the products were innovative. AZ’s misleading conduct amounted to an abuse in Belgium, Denmark, Germany, the Netherlands, Norway and the United Kingdom.
• misusing rules and procedures applied by the national medicines agencies which issue market authorisations for medicines by selectively deregistering the market authorisations for Losec capsules in Denmark, Norway and Sweden with the intent of blocking or delaying entry by generic firms and parallel traders. At the time, generic products could only be marketed and parallel importers only obtain import licenses if there was an existing reference market authorisation for the original corresponding product (Losec). The purpose of a market authorisation is the right to sell a medicine and not to exclude competitors. Unlike patents, SPCs and data exclusivity, market authorisations are not intended to reward innovation and the finding of an abuse cannot therefore affect incentives to innovate. Subsequent changes in the applicable EU legislation have made it impossible to repeat this specific conduct.
Losec pioneered a new generation of medicines to treat stomach ulcers and other acid-related diseases – so-called proton pump inhibitors. Losec initially received patent protection in Europe in 1979. During part of this period, Losec was the world’s best-selling prescription medicine.
The Commission’s decision does not prohibit AstraZeneca’s dominant position on the proton pump inhibitor market but the company’s abuse of that position. The fine takes into account that some features of the abuses can be considered as novel.

On 1 July 2010 The General Court essentially upholded the decision of the Commission, reducing the fine to €52,5 million, since “the Commission failed to prove that the deregistrations of the marketing authorisations were capable of preventing parallel imports of Losec in Denmark and Norway, and, a fortiori, that the cessation or the sharp decline of parallel imports of Losec in those two countries was caused by AstraZeneca’s conduct” (Press release of the GC here and the Ruling here). This Ruling has been recently appealed by AstraZeneca (here).