1 EC competition law vs. Copyright ownership The relationship between © and competition law: recent developments on compulsory licensing under article 82 Evelyn Heffermehl

2 Introduction: Competition law v. Copyright Article 81 (1) v. copyright licences Article 82 v. copyright ownership Compulsory licencing Case-law : Volvo, Magill, IMS, Oscar Bronner (essential facility) Latest developments: Apple France, Microsoft EC Competition law vs. Copyright ownership 2

3 EC Competition law vs. Copyright ownership: introduction EC competition law Eliminate distortions of competition in view of establishing an Internal Market: article 3 (g) Treaty Article 81 & 82 EC Treaty Copyright law © Intellectual Proprety = literary and artistic proprety to ensure the protection of the moreale and economic rights of their holders Phil Collins case

4 EC Competition law vs. Copyright ownership: introduction Competition law strives to keep markets open Copyright ownership (IPR) reward/incentive rationale exclusivity territoriality market power possible abuse Striking a balance between protection of copyright holders and free competition, single market: what is the extent to which the scope of IPR might be limited in order to ensure competition? 4

5 EC Competition law vs. Copyright ownership: article 81 (1) Competition law: article 81 (1) Basics 2+ undertakings agreement Object/effect Affecting trade Example of IPR agreement Licences: explotation by another person against royalty Patents Trade marks Copyright

6 EC Competition law vs. Copyright ownership: article 81(1) Article 81 (1): patent licences ECJ, Nungesser v Commission Open exclusive licence: licensor agrees not to license anyone else in licensees territory + not to compete there itself may violate article 81 Exclusive licence: ATP (no parallel imports) always violates article 81 Article 81 (1): Copyright licences ECJ, Coditel Cine Vog Films ATP not contrary to article 81 (1) in the special circumstances of a performance copyright: licensee may need ATP from re- transmissions of films from neighbouring Member States.

7 EC Competition law vs. Copyright ownership: article 81(1) Copyright licences No specific legislation Block exemptions regulations may apply if copyright licensing is ancillary to an agreement covered by a BER (Regulation 240/96 on Technology Transfer Regulation +Regulation 2790/99 on vertical agreements) Legislation/cases/decision on other types of licences (patent, TM) apply (except for ATP Coditel) 7

8 EC Competition law vs. Copyright ownership: article 82 Article 82 Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar it may affect trade between MS. Such abuse may in particular consist in (b) limiting production, markets or technical development to the prejudice of consumers. 8

9 EC Competition law vs. Copyright ownership: article 82 Article 82 mere ownership of an IPR cannot be attacked under article 82: ECJ, Magill BUT: can the owner of an IPR be compelled to grant a licence to a third party under art.82? ECJ case-law on licensing of IPR and art.82 First case on refusal to licence IPR and art.82: Volvo v Erik Veng Magill & IMS copyright as essential facilities Oscar Bronner refusal to licence Latest: Apple France (FCA), Microsoft (Comm.) 9

10 EC Competition law vs. Copyright ownership: article 82 Article 82: compulsory licences and IPR Principle: refusal to licences not article 82 An obligation imposed upon the proprietor of a protected design to grant to third parties a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of its exclusive right (…) a refusal to grant such a license cannot in itself constitute an abuse of a dominant position. BUT: arbitrary refusal to supply & price fixing at unfair level may = abuse basis of exceptional circumstances test in subsq. case-law ECJ, Volvo v Erik Veng 10

11 EC Competition law vs. Copyright ownership: article 82 Article 82: compulsory licences and IPR © The exercise of an exclusive right may, in exceptional circumstances, involve abusive conduct. The appellants' refusal to provide basic information by relying on national copyright provisions prevented the appearance of a new product, which the appellants did not offer and for which there was a potential consumer demand. ECJ, Magill © = essential facilities? Magill case exceptional weak nature of copyright subject 11

12 EC Competition law vs. Copyright ownership: article 82 Article 82: compulsory licences and IPR © Refusal by an undertaking holding a dominant position and owning copyrights art.82 if 1. The undertakings which requests the license intends to offer new products not offered by the copyright owner and for which there is potential consumer demand 2. The refusal is not justified by objective considerations 3. The refusal eliminates all competition ECJ, IMS Health (// Magill test) 12

13 EC Competition law vs. Copyright ownership: article 82 Article 82: compulsory licensing Essential facility: Facility without access to which competitors cannot provide complementary services on a neighboring market Refusal to grant access to essential facility art.82 if 1. Supply of information indispensable to carry out a particular business 2. Refusal likely to eliminate all competition in downstream market 3. Refusal not objectively justified ECJ, Oscar Bronner 13

14 In a nutshell, 4 conditions for compulsory licensing 1. The input is indispensable 2. The refusal eliminates competition 3. The refusal is not objectively justified 4. The refusal prevents emergence of a new product Magill/IMS & Bronner test EC Competition law vs. Copyright ownership: article 82 14

15 Article 82: compulsory licensing Refusal to license info enabling interoperability with Windows operating system to competitors in downstream market work group servers operating system Micr.: IPR = objective justification of refusal to license + Software directive ( full interoperability) Comm. non exhaustive checklist of the exceptional circumstances test an undertaking in a DP may be compelled to disclose interoperability info protected by © if this is likely to increase competitors incentives to innovate without reducing those of the dominant firm Magill/IMS test of impeding new product being placed on the market. Commission, Microsoft EC Competition law vs. Copyright ownership: article 82 15

16 EC Competition law vs. Copyright ownership: article 82 Article 82: compulsory licensing On balance, the possible negative impact of an order to supply on Microsofts incentive to innovate is outweighed by its positive impact on the level of innovation of the whole industry (including Microsoft) NB: This is uncertain though incentive to innovate test might be better suited than the new product test because basis of IPR Criticism Magill test not fulfilled: no new product offer by comp. for which there was unsatisfied consumer demand Prejudice to consumer as required by article 82 (b)? 16

17 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: FCA, Apple Apple refusal to license DRM tech. to competitor in market for music downloads ensures interoperability betw. products complementary to Apples music platform users can download licensed © songs from Apples iMusic Store to be played on computers by means of Apple media player iTunes & transfer them to hardware iPod comp. want licence to access market for iPod compatible music Downloaded music from platforms other than iTunes can be read by iPod only if provided with specification and info created and owned by Apples DRM tech. Fairplay 17

18 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing:Apple Question: is Apples refusal abusive? Claimant Apples DRM indispensable to achieve interoperability between my music downloads and iPod FCA no access to DRM tech. essential facility not indispensable in order to access market for iPod compatible music 18

19 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (1) Identification of the relevant markets 1. Market for DRM technologies not identified for the assessment of Apples market power. DRM syst. guarantees enforcement of conditions negotiated with right holders to access and use copyrighted content audio coding syst (MP3) Market definition based on: Devices they are installed upon (players, mobile phones)? risk of fragmentation Type of content DRM tech. aim to protect (music, videos…) ? would be better suited 19

20 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (1) Identification of the relevant markets 2. Market for portable music players Alleged dominant position due to iPods commercial success Specific market for hardware players protected by DRM technologies not clearly identifiable BUT not excluded fast emerging and fast changing 20

21 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (1) Identification of the relevant markets 3. The market for downloaded music peer-to-peer downloads (though pressure) physical recorded music One-by-one sale (Apple) / monthly subscriptions with entire compilations (FNAC)? Dynamism of market for music downloads demand substitution difficult to assess National rights negotiated on a national basis download distribution restricted to residents 21

22 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (2) Dominant position No DP with regard to DRM tech. Fairplay only implemented on national platforms Less developed than Microsofts DRM reference to JV Micr. /Time Warner Position on market for DRM tech. strengthened due to tying of Windows operating system with Windows Media Player 22

23 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (2) Dominant position DP on market for portable players and downloaded music not excluded BUT hindered by fast-developing market structure impossibility to apply the Commission SSNIP test (small non transitory changes in prices) 23

24 EC Competition law vs. Copyright ownership: article 82 Article 82, compulsory licensing: Apple (3) Abuse 1.No indispensability of access to DRM tech. 2.No elimination of competition oOnly small % of music downloaded from the internet transferred on portable players oMusic downloads from platforms other than Apples can be made compatible with iPod by a simple operation (ripping) oFrench market for portable players characterised by vigorous competition betw. several suppliers most of which are compatible with claimants downloads 3.Objective justification for refusal: eg, regular update of Fairplay tech. 4.No new product offered by claimant 24

25 EC Competition law vs. Copyright ownership Concluding remarks Apple checklist verification ok Microsoft FCA could have decided solely on lack of dominance dynamism of relevant markets Even if Apple was dominant DRM tech. not indispensable So long as several DRM compete ok Apple Microsoft (extraordinary force on PC op. syst ) Competition problems might occur if dev. of a de facto standard such as Microsofts DRM techn. Compulsory licensing should be exceptional Micr. decision can be criticized and could be overturned Remedies open standard or reverse engineering 25

26 Thank you for your attention Evelyn Heffermehl Associate, ULYS