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From car parts to computer chips, compulsory licensing of intellectual property rights in the European Union J. Anthony Chavez April 3, 2003.

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Presentation on theme: "From car parts to computer chips, compulsory licensing of intellectual property rights in the European Union J. Anthony Chavez April 3, 2003."— Presentation transcript:

1 From car parts to computer chips, compulsory licensing of intellectual property rights in the European Union J. Anthony Chavez April 3, 2003

2 2 Overview F Application of the law in the EU is as clear and as unambiguous as it is in the US. F Few cases. F Ongoing dispute over what constitutes exceptional circumstances to require compulsory access to intellectual property rights. –NDC/IMS –Intel v. Via u Most relevant to the hypothetical. u the ingredients of computer technology, patent infringement and Articles 81 and 82 EC Treaty make a somewhat indigestible dish

3 3 Competition Law / Intellectual Property Interface F Key decisions balance the broad scope of Article 82 with Article 295 of the EC Treaty. F Article 295 of the EC Treaty provides that the Treaty "shall in no way prejudice the rules in Member States governing the system of property ownership."

4 4 Broad Scope of Article 82 F Any abuse by one or more undertakings of a dominant position... shall be prohibited as incompatible with the common market... F Such abuse may, in particular, consist in: –(a)... imposing... unfair trading conditions; –(b) limiting production, markets or technical development...; –(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; –(d) making... contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

5 5 Common aspects F Complaint lodged to the European Commission. F Parallel proceedings in the national courts of the Member States. F Appeal to the Court of First Instance (created in 1989). –15 members, 3 member panels F Appeal to European Court of Justice –15 members, 3 member panels F Under Article 234, a national court can request a preliminary ruling from the ECJ to guide its judgement. F Often the process is long and drawn-out.

6 6 Volvo v. Veng, Case 238/87 [1988] ECR I-6211 F Concerned a registered design for body parts of a car. F Veng imported licensed auto parts into the UK. F Volvo sought to enjoin importation and marketing. F Veng contended that Volvos refusal to license was an abuse of a dominant position. F The English Court sought a preliminary ruling from the ECJ.

7 7 Volvo v. Veng F ECJ reasoned that –"the right... to prevent third parties from manufacturing and selling or importing... products incorporating the design constitutes the very subject-matter of his exclusive right. –an obligation to license third parties would deprive the owner from the substance of this right, and held – a refusal to grant such a licence cannot in itself constitute an abuse of a dominant position."

8 8 Volvo v. Veng F ECJ also noted: –the exercise of an exclusive right... may be prohibited... if it involves... certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model...

9 9 Magil RTE and ITP v. Commission, Cases C /91P [1995] ECR I-743 F TV broadcasters refused to license copyrights in program listings to Magil TV Guide Ltd. F Each broadcasters published weekly guides for its programs. F Magil published a comprehensive weekly guide in F Copyright infringement lawsuits in Ireland and England. –copyrights upheld F Magil lodged complaint with the Commission alleging that refusal to license constituted an abuse of a dominant position and in 1988 Commission compelled a license. F Broadcasters sought to annul the Commissions decision.

10 10 Magil F Decision upheld by CFI (1991) and ECJ (1995). F ECJ held that "...the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct. F ECJ found that the refusal to license had prevented the appearance of a new product, a comprehensive weekly guide to television programs, and that there was no justification in either market.

11 11 Tierce Ladbroke v. Commission, Case T-504/93 [1997] ECR II-923 F Belgium betting establishment sought access to broadcasts of French horse races. F Relief rejected by Commission and CFI. F CFI held that the refusal to supply must concern a product or service which was either essential for the exercise of the activity in question..., or was a new product whose introduction might be prevented...

12 12 Bronner v. Mediaprint, Case C-7/97 [1998] ECR I-7791 F Publisher of Der Standard, a daily newspaper, sought to compel Mediaprint to distribute Der Standard to homes in Austria. F ECJ found no basis for compelling distribution and noted that abuse of a dominant position required that: –the refusal eliminate all competition on the part of the person requesting the service, –such refusal be incapable of being objectively justified, and –the service be indispensable to that person's business. F Decision did not involve intellectual property.

13 13 NDC Health Corp. v. IMS Health Inc., Case C P(R)1 [2002] ECR 3193 F In Germany, pharmaceutical sales information is aggregated and provided to pharmaceutical companies. F IMS provides a regional sales-data service based on a brick structure known as the 1,860 brick structure. F October 12, 2000 judgement in Frankfurt District Court that IMS enjoyed copyright protection under German copyright law. F October 26, 2000, NDC requested a license from IMS, which was refused. F October 27, 2000 preliminary injunction issued by Frankfurt District Court. (subsequently suspended pending preliminary ruling from ECJ on Article 82).

14 14 NDC v. IMS F Dec. 18, 2000, NDC lodged a complaint with the Commission alleging that IMS's refusal to license constituted an abuse of a dominant position. F July 3, 2001 Commission decision imposed interim protective measures requiring IMS to license its competitors. F Decision found exceptional circumstances –the brick structure had become a defacto industry standard, –refusal to license is likely to eliminate all competition in the relevant market. –use of the structure is indispensable to carrying on business in the relevant market, –refusal to grant licenses was not objectively justified, –refusal constituted an abuse of the dominant position.

15 15 NDC v. IMS F Commission found that likelihood of irreparable harm to the public and balance of hardships justified interim measures. –Damage which could no longer be remedied by the decision to be adopted upon the conclusion of the administrative procedure. F President of the CFI suspended the Commissions interim measures. –serious dispute on the correctness of the fundamental legal conclusion underpinning the Commissions decision and balance of interests favored suspending the execution of the decision before the main action. F President of the ECJ rejected an appeal. F Frankfurt District Court requested a preliminary ruling from ECJ. F ECJ hearings held on March 6, 2003.

16 16 Intel v. Via F Sept two patent infringement actions against Via relating to x86 CPUs and compatible chipsets. F The decision notes that between Intel had 80% of the sales of x86 CPUs and 75% of the chipsets. F Prior licenses and litigation between the parties. F Via alleged that Intel offered a new license that was limited to chipsets compatible to Pentium IV CPUs and required Via to grant Intel broad patent rights. F Via disputed the validity of the patents, infringement and raised defenses under Articles 81 and 82 and UK Competition Act.

17 17 Intel v. Via F Via contended that refusal to license was abusive: –part of plan to withdraw from marketing certain products and force consumers to adopt a new more expensive technology, –Intels patent rights relate to an industry standard, –competitors cannot otherwise access the x86 processor market, and –the exercise of those rights unjustifiably prevents the marketing by Via of a unique product.

18 18 Intel v. Via F Trial Court granted summary judgement for Intel rejecting the defenses. F After noting the ingredients of computer technology, patent infringement and Articles 81 and 82 EC Treaty make a somewhat indigestible dish, the English Court of Appeal reversed. F Court of Appeals rejected contention that Magil and IMS state the only circumstances of what constitutes exceptional circumstances under Article 82 and noted that it was arguable that the ECJ will assimilate its jurisprudence...more closely with that of the essential facilities doctrine applied in the United States.

19 19 Intel v. Via F Court of Appeals held that Via had real prospects of success on two separate grounds –Intel's refusal to grant a patent license was an abuse of its dominant position under Article 82; –Intel's infringement claim was an unlawful attempt to compel Via to enter into a cross-license contrary to Article 81(1). F Reference to ECJ cannot be made until determination of whether patents are valid and infringed. F Intel did not appeal to the House of Lords.

20 20 Intel v. Via F Whether (and if so, when) the owner of an intellectual property right who is in a dominant position for the purposes of Article 82 is obliged not to exercise that right so as to exclude others from the market or a substantial part of the market. F Whether the owner of an intellectual property right (whether dominant or not) may lawfully exercise his right to license it on terms which either distort competition or are wider than necessary to define the extent to which his exclusive right has been surrendered. Whether it is a defense to an action for infringement of a patent that its enforcement would enable the owner of the patent to act in breach of Articles 81 or 82.

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