Amelia Fletcher Chief Economist Office of Fair Trading IP and the role of National Competition Authorities: A perspective from the OFT Amelia Fletcher Chief Economist Office of Fair Trading 1

Introduction Some views on the IP/competition law interface, and hot issues The role of the OFT The OFT’s work to date with an IP dimension The role of NCAs such as the OFT with respect to IP

The treatment of IP by competition authorities: some traditional views? “I might just as well use this patent as wallpaper if competition law won’t let me enforce it” An anonymous patentee (attrib)

From...worlds in collision... “Intellectual Property and Competition Law: When Worlds Collide” Paper by Donald M Cameron, 1997 Annual Canadian Bar Association Competition Law Conference

...to....happy marriage? “It is of course a longstanding topic of debate in economic and legal circles how to marry the innovation bride and the competition groom. In the past some have argued that such a marriage will unavoidably lead to divorce because of conflicting aims of IPR law and competition law. But I think that by now most will agree that for a dynamic and prosperous society we need both innovation and competition. Contrary to what some might think, competition is a necessary stimulus for innovation. IPR law and competition law have a complementary role to play in promoting innovation to the benefit of consumers. I therefore firmly belief in this marriage and, like in all good marriages, the real question is how to achieve a good balance between both policies.” Former EU Commissioner of Competition Mario Monti speaking in Paris, on 16 January 2004

Some hot issues in the IP and competition law interface

Some hot issues in the IP and competition law interface

Where the does the OFT come in? Mission is to make markets work well for consumers Work consists of: Enforcing competition law Enforces the Competition Act 1998 (CA98) (and where there is an effect on trade between EU Member States, Articles 101 and 102 of the Treaty on the Functioning of the European Union) Merger control Analysing markets Competition advocacy Enforcing consumer law

Where does the OFT come in? IP is an area of focus for the OFT in its annual plan: “We also propose to take forward work on intellectual property rights (IPRs) which, by safeguarding product or service differentiation and driving innovation, are an essential part of ensuring strong competition and economic growth. Competition and consumer policy can be an important complement to IPRs in driving innovation. Where appropriate, they can also ensure that IPRs are not exercised in a manner that acts against the interests of consumers.” Page 19 of the 2012-2013 Annual Plan

OFT activity with an IP and innovation dimension to date No CA98 infringement decisions specifically concerned with the existence or exercise of IP However, a number of OFT Chapter II infringement decisions have related to the pharmaceutical sector, where IP issues have had to be considered Napp anti-competitive pricing strategies for pharmaceutical product, post-patent expiry Genzyme: margin squeeze with respect to pharmaceutical product Gaviscon finding withdrawal of Gaviscon Original Liquid with the intention of limiting pharmacy choice and hindering competition from suppliers of generic medicines, post-patent expiry (effective patent extension) Also an ongoing case under Chapter I, considering allegation of “pay for delay” in the pharmaceutical sector 10

OFT activity with an IP and innovation dimension to date “At the Races” collective selling of certain media rights infringement decision annulled by the Competition Appeal Tribunal 11

OFT activity with an IP and innovation dimension to date And note, where the OFT has not taken action under CA98: For example, BSI (2003) The British Standards Institution granted an online licence to Barbour Index plc following an investigation by the OFT into an alleged abuse of a dominant position. Barbour Index had alleged that BSI was breaching the Competition Act by refusing to grant it a licence to supply BSI standards online. The OFT closed its case without reaching any conclusion on whether BSI holds a dominant position or has abused any such position. 

OFT activity with an IP and innovation dimension to date OFT advocacy work: Commercial Use of Public Information market study (2006) Found that more competition in public sector information could benefit the UK economy by around £1 billion a year. Made recommendations, including that public sector information holders should: make as much public sector information available as possible for commercial use/re-use ensure that businesses have access to public sector information at the earliest point that it is useful to them

OFT activity with an IP and innovation dimension to date OFT advocacy work: Pharmaceutical Price Regulation Scheme (PPRS) market study (2007) Recommended that the current 'profit cap and price cut' scheme should be replaced with a patient focused value based pricing scheme in which the prices the NHS pays for medicines reflect the therapeutic benefits they bring to patients. This would enable the NHS to obtain greater value for money from its existing drug spend and furthermore, encourage innovation

OFT activity with an IP and innovation dimension to date Considerable work on mergers…for example: Princes/Premier (clearance – involved branded, own-label canned foods, divestments of the Fray Bentos brand) SUP Amisco/Prozone (clearance – pace of dynamic innovation overcoming any concern about concentration) GSK/Pfizer (clearance – though key overlaps with respect to innovation rather than product) Project Kangaroo (referred by OFT to CC – blocked – video on demand (VOD) joint venture)

OFT activity with an IP and innovation dimension to date Analysis of mergers in nascent and/or innovative sectors has tended to trade off: the likelihood of new entry into a new, fast-moving sector.... against the risk that the merger may ‘tip’ the market one way or the other

Striking the right balance It is well known that holding an IP right does not confer immunity from competition law intervention However OFT is equally alert to the need for caution when considering competition interventions dealing with IP Do not wish to undermine incentives for innovation

Striking the right balance Focus on removing anti-competitive obstacles to innovation Focus on dynamic competition, rather than static competition Consider in particular innovation markets Particular interest in ensuring that incumbents do not prevent new business models from developing What matters is the aggregate amount of inventive activity, not the identity of individual innovators

IP is global National competition authorities such as the OFT need to ensure that they are well placed when considering IP cases, in terms of being able to obtain evidence and to impose effective remedies Anti-competitive pan-national IP strategies therefore tend be better addressed by pan-national enforcement And note provisions on case allocation in ECN notice on co-operation in the network of competition authorities Where agreement or conduct affects more than three member states, then European Commission particularly well placed to deal

IP is global So…is a National Competition Authority such as the OFT well placed to deal with issues in a global “patent war”? Or better placed to deal with IP and competition issues having a particular focus on, or centre of gravity in, the UK

Some potential areas of interest... These could include: IP and competition questions arising from distribution issues with a UK-focus Particular interest in issues arising from brands... Note merger decisions, such as Princes/Premier Internet retailing and selective distribution Consider application of Vertical Agreements Block Exemption Regulation and guidelines For example, issues relating to the on-line pricing of branded goods OFT is attentive to the trade-offs between brand protection and competition

Some potential areas of interest OFT recognises IP system has built-in safeguards, for example: strict novelty, inventive step, disclosure requirements required for grant of patent, and opportunity for counterclaim for revocation in patent litigation BUT, competition authorities can have a role in dealing with anti-competitive means of subverting these safeguards Consider, for example, improperly obtained IP Compare situation in US anti-trust law with respect to “fraud on the Patent Office” And note EU cases (AstraZeneca under Article 102 (under appeal, AG’s opinion on 12 May 2012)) Or “pay for delay” allegations with respect to pharma patents

Merger control Merger control is potentially very important Many mergers are below EU notification thresholds Focus is on overlaps and prospective effects of merger on competition Could involve smaller, innovative businesses with IP and technology in fast-growing markets Which are therefore below the EU thresholds Might also involve transactions involving “Non-Practicing Entities” Consider impact on innovation Potential for packages of IP rights to constitute an ‘enterprise’ under UK merger law?

Markets work OFT can conduct market studies with IP dimension Note also the potential effectiveness of suitable market interventions in domestic markets with an IP dimension... Consider for example, section 176 of the Broadcasting Act 1990 (BA90) Requiring certain broadcasters to provide advance information about their programming to publishers And provisions allowing reproduction of that information (for example, Schedule 17 of the BA90) Arose from an 1985 MMC report (Cmd 9614) ...compare Magill....

Note too, advocacy OFT will engage with IP policy makers to ensure effective consideration of competition issues in the IP space And vice versa OFT to engage with the European Commission on the new Technology Transfer Block Exemption Regulation Ongoing engagement between the IPO and the OFT OFT welcomes the competition focus of the Hargreaves report IPO and OFT have been in discussions about working together more effectively will shortly set out how we will do this - watch this space!

So, in conclusion...with IP and competition, we want to help facilitate:

Rather than...

And now...