EC Competition Policy on Compulsory Licensing of Intellectual Property Rights

University essay from Lunds universitet/Juridiska institutionen

Abstract: Both competition law and intellectual property law are considered good for economic efficiency, but the interface between the two legal fields is, and probably always will be, a complex area of law, since these legal areas in one sense can be said to strive for the opposite things. Intellectual property rights are considered public goods, which mean that it is hard to prevent others from using the goods without paying for it. This makes intellectual property rights into a market failure, which is something that hinders the market from reaching equilibrium. The protection of intellectual property rights is considered necessary in order to stimulate investments in research and development and the intellectual property laws therefore give exclusive rights to the holders, enabling them to exclude others from manufacturing, selling and marketing the protected goods. This creates a limited monopoly, which is also considered a market failure. Compulsory licensing can be seen as a balancing tool between these two market failures and the obligation to license can be used if an undertaking tries to abuse its intellectual property right. Compulsory licensing means that the state authorities will force the holder of an intellectual property right to grant one or more licenses to one or more of the holder's competitors. The purpose of this master thesis is to make a detailed description of the Policy on Compulsory Licensing of Intellectual Property Rights in European Community Law. Furthermore, I will compare the European Policy with the policies set by International Treaties and by American Antitrust Law in order to find out what the differences are, if there are any, between the different legal systems. I will also present some microeconomic theories that could be used to explain and justify the concept of compulsory licensing. Finally, I will use this information to make a well-founded statement on the possible outcome of the IMS Health case. To sum up my conclusions on the present status of compulsory licensing I have found that the International Treaties on the subject give some limited possibilities for the participating states to legislate on compulsory licensing. Since both the Member States of the European Union and the United States are parties of these Conventions the remedy is not widely used in either continent and similar principles are used in the assessment of whether or not compulsory licensing should be ordered. The American courts are, however, a little bit more restrictive than their European colleges. Compulsory licensing is assessed under Article 82 EC within the European Union and an undertaking is not considered dominant on the mere fact that it holds an intellectual property right according to that provision. It depends, for example, on how the market is defined, which in turn depends on the number of substitutes on the market. Only a refusal that is considered an abuse of a dominant position and that affect trade between Member States can be deemed unlawful under Article 82 EC and it is only if the elements of Article 82 are fulfilled that an undertaking can be ordered to grant a license to a competitor against its will. The European case law on compulsory licensing shows that this remedy is used restrictively, just as the case law from the US courts show. In the Volvo case the ECJ ruled that the right for a holder of an intellectual property right to refuse to license that right is the specific subject-matter of the exclusive right. A refusal to license could, however, if an additional factor was present, constitute abuse within the meaning of Article 82. In the Magill case the ECJ found that some ''exceptional circumstances'' was present, which led the Court to the conclusion that the broadcasting companies abused their position. These ''exceptional circumstances'' was that the companies, by their refusal hindered the emergence of a new product, for which there was a potential consumer demand, since the information on their TV listings was indispensable in order to compete in the market. By doing so, they also reserved a secondary market for themselves and they could not show any objective justifications for their refusals. The Court ordered the companies to license their copyright protected TV listings. In Tiercé Ladbrook the CFI found that the French horse racecourses was in their full right to refuse to license the sound and picture for the races, since they were not present in the Belgian market and the sound and picture was not indispensable in order for Ladbroke to carry out their business. Finally, the outcome of the IMS Health case remains to be seen, but in my opinion, it seems to be in line with the present case law that the court finds that IMS refusal to license the ''1860 brick structure'' is an abuse of their dominant position, since it is not, in my view, an absolute demand that the refusal hinders the emergence of a new product and the ''1860 brick structure'' is in fact indispensable in order to sell pharmaceutical sales data in Germany. The ECJ could, however, come to the opposite conclusion if they find the reservation of a secondary market necessary for applying Article 82.

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