IPR and Competition Law: A Case of European Union

The European Union (EU) aims to establish a single market economy which might not be an easy task since the market value of various corporations needs to be evaluated. The aim here is to give an upper hand to trade to boost the economy, however, providing room for trade might not be appreciable to small and medium enterprises. The EU Competition Law has its basic framework in the Treaty on the Functioning of the European Union (hereinafter, TFEU) being one of the two Treaties of the EU, the other being the Treaty on European Union. In Article 101 and 102 of TFEU, it deals with Competition law, more particularly, with regards to abuse of dominance, while seeking an injunction. On a bare reading of the provisions, it is understandable that the EU equally understands the efficacy of having a strong IP regime on one side, and on the other side that there are certain business practices which can have anticompetitive effects that are attributable to IP. Article 101(1) of the treaty describes the conditions under which there might be a chance that it could result in distortion or restriction of competition. Article 101(3) describes the provisions where clause 1 will not be applicable giving ample room for the IP promotion.

[Image Source – European Commission]

The analysis of these two provisions provides us with another understanding of where certain exemptions are provided which can be said as legal certainty for those agreeing with the IP marketing, known as Block Exemption Regulation (hereafter, BER). BER is considered an important part of the corporation working in the IP licensing regime. Accordingly, BER derives its validity from Article 101(3).

The basic analogy of the European Commission (hereinafter, EC) has always been towards an antitrust perspective of FRAND commitments, making the implementation of standards difficult. It can be observed that the use of injunction by SEPs holder can be anti-competitive; much reliance being placed on not misusing it. The refusal to supply the interoperability information necessary to interoperate the PC operating system was indeed taken under the purview of abuse of the dominant position of Microsoft (Case T-201/04, Microsoft v. Commission).

Injunctive relief

It can be observed from EC's decisions that even though seeking an injunction is a legitimate remedy, it may still constitute an abuse of dominance if a SEP holder has voluntarily committed to license its SEP on FRAND terms and the company against whom the injunction is being sought is a willing licensee.

In the Motorola case (Motorola-Enforcement of GPRSs Standard Essential Patents (2014) OJ 344), it was found by EC that Motorola had abused its dominant position under Article 102 of TFEU by seeking an injunction against Apple, a willing licensee, as per Motorola's SEP. It was asserted by Motorola that the patent for which the injunction was sought was essential to the execution of the 2G ETSI (European Telecommunications Standards Institute.) standard, and it resolved to permit third parties to avail the SEP on FRAND terms. Furthermore, it was even concurred by Apple that if there is an occurrence of the question, the German courts would set the relevant rate and Apple would pay royalties likewise (all of which demonstrated Apple's willingness to enter into the license agreement and to pay sufficient royalty to the SEP holder). Further, the fact, that Apple was demanded by Motorola, to surrender its entitlement to challenge the validity or infringement of Motorola's SEP, was found to be anticompetitive by the EC. Inevitably, Motorola was ordered to do away with the negative impacts coming about because of the injunction. The EC, in its infringement decision, practiced its discretion (and particularly) didn't force a fine on account of the disparate decisions of the EU Member States and the absence of EU case law.

Samsung too faced a similar fate (Samsung Electronics-Enforcement of Universal Mobile Telecommunications System (UMTS) SEPs (2014) OJ C 350/8.), where EC barred Samsung to seek an injunction for SEPs against the potential licensee if there is a clear acknowledgment of the licensing structure under FRAND terms. The abuse of the law by the SEP holder against the implementer could be well checked upon, whereby the EU generally takes a stricter approach towards such cases, which also provides us with the inference that the interface of IP Licensing and Competition makes it too restrictive for the IPR holder.

Originally retrieved from- https://www.ipandlegalfilings.com/stricter-approach-of-european-union-an...

Author: Saransh Chaturvedi (Advocate, LLM (IIT Kharagpur) – an associate at  Global Patent Filing. in case of any queries please write back us via email at support@globalpatentfiling.com.

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