IP and Competition Policy

Ralph Heinrich

Jerusalem

11 September 2012

A highly innovative product

IPRs drive innovation

Enabled by IPRs

Competition drives innovation

Competition drives innovation

IPRs don’t confer monopoly

Innovation benefits everyone

Balancing IP & competition policy

Division of labor between IP policy & competition policy

• IP policy should focus on breadth of protection

• Competition policy should focus on “abuses” of IPR that confer additional market power

Graphic: L. Coppi, Compass LexEcon, presentation at UNECE, 20 June 2012, http://www.unece.org/fileadmin/DAM/ceci/ppt_presentations/2012/TOS_IP6/Coppi.pdf

8

Standard

setting abuse

Patent

infringement

Patent validity

Reasonable

royalties

Interoperab./

forced

licensing

Patent trolls

Collusive

patent

settlements

Licensing

agreements/

restraints

General principles of IP treatment in competition law

• In general, competition law can be applied to cases involving intellectual property in the same way that it is applied to cases involving other types of property

• IPRs are NOT generally a threat to competition

• In particular, the licensing of IPRs is generally

considered pro-competitive

The rule of reason

• When dealing w/ IP issues, competition authorities & courts should preferably: – Focus on actual economic effects of IPR use – Taking into account also potential pro-competitive effects – Intervene only if anti-competitive effects > pro-competitive effects

• Rather than “bright-line” rules which define certain uses

of IP as anti-competitive “per se”

• Advantage of the RoR: Avoids intervention when IP use does not have anti-competitive effects

• But possible drawback for transition economies:

requires sophisticated & costly economic analysis

Possible anti-competitive uses of IP

• Abuse of dominant position based on misuse of IPR/ fraud against the IP office – Example AstraZeneca vs Commission (2010/2012) – When IPR has been misused to gain more market power than intended

by IP law, any dominant position resulting from this is deemed an abuse – No efficiency defense allowed

• Clauses in licensing agreements which fix prices or allocate market shares (this may also be held to be anti-competitive per se depending on the jurisdiction)

• Other clauses in licensing agreements such as – Non-assertion clauses, grantbacks, reach-through licenses – Tying and bundling – In these cases, no general presumption of anti-competitive effects; RoR!

Possible anti-competitive uses of IP

• Patent Hold-up: refusal to license an essential patent when a product requires several/ many complementary technologies for its commercialization – Possible solution: patent pools

• Spam litigation: threats to sue for infringement by non-practicing entities whose patents are of questionable value

• Evergreening of patents: patenting of minor variations of the original in order to prolong the patent term

• Patent wars, patent portfolios as WMDs, as swords rather than shields

• Solution in these cases not in competition law but in IP law