Abstract
Competition law aims at promoting the competitive process by preventing anti-competitive practices, while IP law provides exclusive rights to authors and inventors. Although there are tensions between the two fields of law, they share the common goal of improving incentives for innovation. It is a difficult task for competition policymakers to determine the relationship between competition and exclusivity. In practice, the most important challenge concerns restrictions on competition in licensing agreements. This article aims to examine the existing approaches at the intersection of competition law and IP from a comparative perspective, focusing on the situation in the US, the EU and Korea. While differences exist, for example, as regards the abuse of market dominance, considerable convergence can be seen in the competition law treatment of licensing agreements. This development is welcome, because harmonisation in this field is particularly conducive to the international transfer of technology.
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Notes
In the United States, the term antitrust law is used to indicate the body of law prohibiting anti-competitive practices. In many jurisdictions outside of the United States competition law is used in a more general sense. In this article, we will continue to use competition law, except when referring to US law.
Carrier (2009), at p. 19.
Cf. Hovenkamp (2011), at p. 260.
For the EU, see European Court of Justice, Joint Cases C-241/91 P and C-242/91 P, RTE and ITP v. Commission (‘Magill’) [1995] ECR, I-743, para. 46: ‘So far as a dominant position is concerned, it is to be remembered at the outset that mere ownership of an intellectual property right cannot confer such a position.’ For US law, see the US Supreme Court, Illinois Tool Works v. Independent Ink, 547 U.S. 28 (2006), reversing the presumption resulting from older case law that a patent confers market power. See also the US Licensing Guidelines, at 2.2.
For an overview of the changing concepts in the relationship between IP and competition law, see Abbott (2014).
Dynamic efficiency usually means the gains from innovation and the emergence of new technologies. See Crane (2015), at p. 10.
Sidak and Teece (2011), at p. 93.
Myers (2007), at p. 3.
See, e.g., Goyder and Albors-Llorens (2009), at p. 261.
Leslie (2011), at p. 44. Leslie argues that the evolution of economic theories on how to balance the concerns of competition law and IP law has helped courts to issue more nuanced opinions on this subject.
Ibid, at p. 41.
Ibid, at p. 42.
See supra n. 4.
Heinemann (2008), at p. 78 et seq. Heinemann argues that the contestable market theory can justify IP protection and the limits resulting from competition law enforcement, which balances the pros and cons of each law.
Teece (2011), at p. 221.
Sometimes, US antitrust law is given credit as the first competition law of the modern world. In fact, Canada adopted a competition law in 1889 (i.e., one year earlier than the Sherman Act in the US), although this law never achieved a status comparable to that of the Sherman Act, see Gerber (2010), at p. 259.
See, e.g., ABA (2007), at p. 77; Gavil et al. (2008), at p. 1195. The Nine No-Nos were: (i) tying of unpatented to patented products; (ii) mandatory grantbacks; (iii) post-sale resale restrictions; (iv) tie-outs (restricting a licensee’s ability to deal in products outside the scope of the patent); (v) exclusive licensing; (vi) mandatory package licensing; (vii) compulsory payment of royalties not reasonably related to sales of the patented product; (viii) restrictions on sales of unpatented products made by a patented process; and (ix) utilising vertical price fixing involving the licensing of patented products.
Myers (2007), at p. 79.
Choi (2011), at p. 122.
US Antitrust Guidelines for the Licensing of Intellectual Property, available at https://www.justice.gov/sites/default/files/atr/legacy/2006/04/27/0558.pdf, accessed 15 July 2015.
Leslie (2011), at p. 45.
However, some argue that the self-assessment framework in the context of a safe harbour generates problems of legal uncertainty, because neither market definition nor the evaluation of efficiencies is an exact science. See Kuik (2007), at p. 170.
This type of restraint includes hard-core restrictions, such as price fixing and output restriction.
Sec. 3.2.2 of the US Guidelines, supra n. 25, explains that ‘[t]echnology markets consist of the intellectual property that is licensed … and its close substitutes − that is, the technologies or goods that are close enough substitutes significantly to constrain the exercise of market power with respect to the intellectual property that is licensed’.
Sec. 3.2.3 of the US Guidelines, supra n. 25, clarifies that ‘[a]n innovation market consists of the research and development directed to particular new or improved goods or processes, and the close substitutes for that research and development’.
Glader (2006), at p. 225.
Sec. 5.1 of the US Guidelines, supra n. 25.
For the ‘4-plus-test’, see Heinemann (2011b), at p. 203.
See, e.g., ABA (2007), at p. 491.
IP rights traditionally have been granted at Member State level, creating tensions between free trade and the competition rules of the EU. Not only the existence of national IP laws in each Member State but also the differences between them raise concerns because the diversity of laws can be detrimental to the objective of an EU internal market. See, e.g., Coates et al. (2014), at p. 1145; Jones and Sufrin (2014), at p. 847; Rose and Bailey (2013), at pp. 674–675; Whish and Bailey (2012), at p. 768. For further discussion about the problem of the internal market and IP in the EU, see Caggiano (2012), at p. 3 et seq.; Cornish et al. (2010), at p. 818 et seq.; Heinemann (2011a), at p. 303 et seq. See also the fundamental Cases 56 and 58/64 Consten and Grundig v. Commission [1966] ECR 299.
Commission Regulation (EC) No 240/96 of 31 January 1996 on the application of Article 85(3) of the Treaty [now Article 101(3) TFEU] to certain categories of technology transfer agreements, OJ L 31/2.
Commission Regulations (EEC) No 2349/84 of 23 July 1984 and 556/89 of 30 November 1989. In particular, the emergence of complex cases of patent licences in the 1970s seemed to bring about the thought of adopting regulations for technology transfer agreements. See, e.g., Greaves (1994), at p. 9; Korah (1996), at pp. 2–3; Ritter and Braun (2004), at pp. 791–792.
Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, OJ L123/11.
Anderman (2008), at p. 110. The legal framework of the TTBER demonstrates newly developed features: (i) a more economic focus of EU competition policy; (ii) the use of economic analysis; (iii) the offer of safe harbour-based legal certainty; and (iv) a procedural change in enforcement. See also Anderman and Schmidt (2011), at pp. 203–204.
Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, OJ L93/17. For further detail about TTBER development, see also Goyder and Albors-Llorens (2009), at pp. 263–281; Anderman (2006), at pp. 76–89.
For further details, see Korah (1996), at p. 158 et seq.
Armillotta (2010), at pp. 96–97.
Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, OJ C 2014 89/3 (hereinafter ‘TT Guidelines’).
Art. 4 TTBER.
See also Choi (2011), at p. 133.
Arts. 6 and 7 TTBER.
Armillotta (2010), at p. 103.
KFTC Guidelines, Established Rule No. 205 (amended on 17 December 2014), available in English at http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=62&pageId=0401, accessed 12 March 2015. For further detail, see also Choi (2011), at pp. 124–127.
Law No. 13071, amended on 20 January 2015.
See also Choi (2011), at p. 126.
The Supreme Court of Korea held that the market share threshold in the Guidelines is not legally binding, and the KFTC can withdraw the relevant provision in individual cases. See Supreme Court of Korea, Judgment 2009Du9543, 25 November 2010.
See, e.g., Ginsburg and Fraser (2011), at p. 49.
Art. 4 MRFTA: the market share of a single undertaking is 50 % or more; alternatively, the combined market share of three or fewer undertakings is 75 % or more (with an exception for firms with a market share below 10 %).
Art. V.1.Ga.(4) of the Guidelines for the Review of Unfair Trade Practices, amended on 12 August 2012, Established Rule No. 72 of the KFTC; Art. V.2.Ga.(2) of the Guidelines for Concerted Practice Review, amended on 20 August 2012, Established Rule No. 165 of the KFTC, the English version is available at http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=62&pageId=0401, accessed 16 March 2015.
In particular, IP law ensures higher prices for recoupment by avoiding competition by imitation; on the other hand, competition law aims to promote lower prices by preventing anti-competitive business practices. See Gilbert and Weinschel (2008), at p. 2009.
Myers (2007), at p. 3.
Cotter (2015), at p. 132.
See, e.g., Sullivan and Grimes (2006), at p. 843.
In particular, the development of the EU’s block exemption regulations is one of the important features of the modernisation of competition rules, which is based on the more economic approach. See, e.g., Mendelsohn and Rose (2001), at pp. 39–41.
Niels et al. (2011), at p. 172.
Most cases concern the abuse of market dominance, such as Microsoft, Intel and Qualcomm, but cases on restrictive agreements, such as, e.g., reverse payments, also appear in numerous jurisdictions, e.g., Supreme Court of Korea, Judgment 2012Du24498, 27 February 2014.
See, e.g., Cass and Hylton (2013), at p. 187.
Nevo (2015), at p. 10.
Nevo (2015), at p. 87.
Pleatsikas and Teece (2001), at p. 108.
Ibid, at p. 111. However, it may be useful to transform the SSNIP into an SSNDQ (small but significant non-transitory decrease in quality) test for the purpose of ‘free’ internet markets: this new test allows a determination of substitutability when prices are not available or non-existent but variations in quality will be important for demand, see Gebicka and Heinemann (2014), at p. 156 et seq.
Gavil et al. (2008), at p. 1173.
The term ‘new economy’ refers to the newly developed industries, including computer software, internet-based business, and communication services. The new-economy industries can be characterised by falling average costs over outputs, high rates of innovation, easy entry and exit, and considerable economies of scale and scope. See Posner (2001), at p. 925; Landes and Posner (2003), at p. 390.
Gavil et al. (2008), at pp. 1155–1156.
See, e.g., Gotts (2013), at p. 162.
Ibid, at p. 180.
See also Jones and Sufrin (2014), at p. 881.
See, e.g., Heinemann (2012), at p. 57.
Jones and Sufrin (2014), at p. 867.
Teece (2011), at p. 222.
Anderman (2008), at pp. 117–118.
See supra n. 33.
All this is explained in more depth in the European TT Guidelines, supra n. 44, note 79 et seq.
Gavil et al. (2008), at p. 1153.
See, e.g., Sullivan and Grimes (2006), at p. 841.
Teece (2011), at p. 208.
See, e.g., Czapracka (2009), at p. 1 et seq.
Sec. 2.0 of the US Guidelines, supra n. 25; Carrier (2009), at p. 81.
Carrier (2009), at p. 3.
See, e.g., Sidak and Teece (2011), at p. 57.
See, e.g., Bohannan and Hovenkamp (2012), at p. 9. The choice and balance between monopoly and competition is crucial for competition policymakers; IP guidelines determine the level of market power, and respectively, exclusivity which maximises the incentives to innovate.
See, e.g., Kuik (2007), at p. 143.
See, e.g., Jerez (2015), at p. 352 et seq.
See, e.g., Ginsburg and Fraser (2011), at p. 42.
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Y. S. Choi: Assistant Professor of Law, Division of Language and Diplomacy.
A. Heinemann: Professor of Commercial, Economic and European Law, Vice-President of the Swiss Competition Commission. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of the institutions to which he is affiliated.
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Choi, Y.S., Heinemann, A. Restrictions of Competition in Licensing Agreements: The Worldwide Convergence of Competition Laws and Policies in the Field of Intellectual Property. Eur Bus Org Law Rev 17, 405–422 (2016). https://doi.org/10.1007/s40804-016-0046-y
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DOI: https://doi.org/10.1007/s40804-016-0046-y