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

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EC competition law vs. Copyright ownership

The relationship between © and competition law: recent developments on compulsory licensing

under article 82 Evelyn Heffermehl

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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

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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

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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?

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EC Competition law vs. Copyright ownership: article 81 (1)

Competition law: article 81 (1)

Basics2+ undertakings agreementObject/effectAffecting trade

Example of IPR agreement

Licences: explotation by another person against royalty

• Patents

• Trade marks

• Copyright

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EC Competition law vs. Copyright ownership: article 81(1)

Article 81 (1): patent licencesECJ, Nungesser v Commission

Open exclusive licence: licensor agrees not to license anyone else in licensee’s 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.

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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)

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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.”

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Article 82mere 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.82First 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

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Article 82: compulsory licences and IPRPrinciple: 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

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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 1

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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)

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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 if1. 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 1

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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


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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


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Article 82: compulsory licensing

‘On balance, the possible negative impact of an order to supply on Microsoft’s 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

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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 Apple’s music platform ► users can download licensed © songs from Apple’s 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 Apple’s DRM tech. ‘Fairplay’

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Article 82, compulsory licensing:Apple

Question: is Apple’s refusal abusive?

Claimant ►‘Apple’s 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

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Article 82, compulsory licensing: Apple(1) Identification of the relevant markets

1. Market for DRM technologies not identified for the assessment of Apple’s 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 1

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Article 82, compulsory licensing: Apple

(1) Identification of the relevant markets

2. Market for portable music players

Alleged dominant position due to iPod’s commercial success

Specific market for hardware players protected by DRM technologies not clearly identifiable BUT not excluded ► fast emerging and fast changing

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(1) Identification of the relevant markets3. The market for downloaded music

4. ≠ peer-to-peer downloads (though pressure)

5. ≠ physical recorded music

6. One-by-one sale (Apple) / monthly subscriptions with entire compilations (FNAC)?

7. Dynamism of market for music downloads► demand substitution difficult to assess

8. National ►rights negotiated on a national basis► download distribution restricted to residents 2

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(2) Dominant position

No DP with regard to DRM tech.

Fairplay only implemented on national platforms

Less developed than Microsoft’s 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

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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)

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Article 82, compulsory licensing: Apple(3) Abuse

1. No indispensability of access to DRM tech.

2. No elimination of competitiono Only small % of music downloaded from the internet

transferred on portable playerso Music downloads from platforms other than Apple’s can be

made compatible with iPod by a simple operation (‘ripping’)o French market for portable players characterised by vigorous

competition betw. several suppliers most of which are compatible with claimant’s downloads

3. Objective justification for refusal: eg, regular update of Fairplay tech.

4. No new product offered by claimant 24

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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 Microsoft’s DRM techn.

Compulsory licensing should be exceptional ► Micr. decision can be criticized and could be overturned

Remedies ► open standard or reverse engineering25

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Thank you for your attention

Evelyn HeffermehlAssociate, ULYS

[email protected]

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mailto:[email protected]

http://www.ulys.net/

Documents

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