Giovanni Guglielmetti
Changing competition law
restraints on trademark licences
(vertical restraints, selective
distribution, abuse of IP rights)
5th TLI SYMPOSIUM - Rotterdam 31 October – 1st
November 2014
Antitrust rules applying to Trademark Licenses
Artt. 101-102 TFEU
Not generally block exempted under Reg. 19/65/EEC, but:
VABER (Reg. 330/2010) art. 2.3 TM license ancillary to VA
TTBER (Reg. 316/2014), art. 2.3 TM license part of TT (mixed
agreements)
EC case law: old and scarce no ECG decisions
Commission decisions: Campari (1977) Moosehad / Whitbread
(1990)
Art. 101
• pro competitive built-in principles (doctrine of separability of trademark
from product, descriptive TM, free uses, etc.) but protection of well known
trademark as property rights beyond confusion may create market power
• Ownership of trademark per se does not confer market power: other
parties are free to sell the same goods under different trademarks, but
well known trademark may confer an important advange in entering or
competing in a certain market (Moosehead/Whitbread 15)
• Branding tends to increase product differentiation and reduce
substitutability (VA Guidelines 104)
• In principle Commission does not apply the same principles developed in
TTBER to trademark licensing (TT Guidelines 50)
• If the aim of the agreement is to decentralise manufacture and rationalise
distribution to promote the sales, non compete obligation on licensees
have efficiency effects similar to exclusive dealings agreements and not
restrictive effects as in patent or other creativity results protecting IP
(Campari III.2)
Art. 101
Campari (1977):
Restrictive but exempted (improve production and distribution, protect investment)
- exclusivity
- Restriction on active sales outside allocated territory (passive not exempted)
- Non compete (different from patent licensing agreement / similar to exclusive
dealing agreement)
- Obligation to supply the Italian product to certain group of customers (diplomatic
corps, foreign armed forces etc.) promote brand loyalty
Not restrictive:
- Export ban outside the common market where reimportation unlikely (taxes,
duties, trade margins)
- Quality control (restrictions in the use of plants)
- Quality control (supply of secret raw material/ supply of non secret raw material
not exempted)
- Confidentiality
- Minimum spending adv
- non assignment obligations on licensees
Art. 101
Moosehad / Whitbread (1990)
Restrictive but exempted
- Exclusivity
- Prohibition of active sales outside the territory
- Non compete
Not restrictive:
- Limitation on the use of know-how
- Confidentiality of know how
- Qualitative standards (including purchasing obligation)
no- challenge:
- Ownership or relative ground of refusal – not restrictive (since «any other
party is prevented in any event»)
- Absolute ground the restriction is appreciable only for «well known
trademarks» which represent «an important advantage»
Per se unlawful
• Price fixing (VABER, 4(a) TTBER artt. 4.1(a) 4.2(a)) with the exception of maximum
sale price and recommended sale price between non competitors (in US also
minimum RSP under rule of reason Leegin /PSKS S.Ct 2007)
• Absolute territorial protection (C 258/78 Nungesser, 29, Campari , IB) and other
contractual provision impairing the effect of the exhaustions of rights (labelling to
monitor the parallel market, monitoring etc. see C-244/00 Va Doren 40, third party
realeased from the burden of the proof if real risk of partitioning of markets
occurs), but under TTBER absolute territorial protection possible if licensor
reserved to itself a certain territory, and between licensor and licensee
• absolute ban on selling contract goods to end user via internet breaches the
obligation not to restrict passive sales in a selective distribution network Pierre
Fabre C 439/09
• Restrictions on the use of keyword and other online adv non related to quality ?
See C 323/09 Interflora, 57-8 it is not the purpose of the trademark to protect its
proprietor against practice inherent in competition, internet adv on the basis of
keywords corresponding to trademarks costitutes such practice in that its aims is
merely to offer alternatives to the offer of the trademark proprietor
May in some circumstances be
unlawful
• Some no challenge (obiter Moosehead Whitebread, TTBER, 5.1(b) but
exempted the termination in exclusive license), in trademark license mixed
with TT (see C 193/83 Windsurfing, 81, caught by art. 101 but it did not
consider whether it can be exempted)
• Tying: obligation to buy from licensor certain non secret raw material
(Campari 1B) unless needed for quality control ? (but see in US Illinois Tool
v. Independent Ink, S Ct. 2006, tying product patented is not a
presumption of market power)
Lawful
• Limitation to certain goods/services (see art. 8 TrDir)
• Quality control (manufacturing standards, obligation to
purchase certain materials, packs and products approvals)
(see art. 8 TrDir)
• Confidentiality for know how / obligation to buy secret raw
materials
• Minimum sales / adv expenditures (if no foreclosure problem
exists)
• Exclusivity
• No challenge for ownership / relative grounds
• Enforcement obligations
• Assignment prohibition /change of control
VABER
Negative effects of vertical restrains are:
- Foreclosure of suppliers / buyers
- Softening of intrabrand (buyers) or interbrand (suppliers) competition
- Obstascle to market integration
Art. 2.3, apply to:
a) Vertical agreement (purchase, sale resale of goods/services)
b) IP not primary object
c) License to buyer (not to supplier)
d) Faciliting use, sale resale of goods/services by the buyer
VBER Covers:
Franchising agreement
Distribution agreement
Selective Distribution
Doesn’t apply to:
a) Pure license agreement
b) contract manufacturing with supplier
VABER
Block exempted : if supplier market share does not exceed 30% relevant market
Franchising agreement (VA Guid. 45):
- Franchisee non compete (whole duration of the agreement)
- Franchisee confidentiality obligations (unlimited in time)
- Grant back non exclusive know how license to francisor
- Obligation concerning the enforcement of the IPR by franchisor
- Obligation on franchisee not to use IP for any other purposes
- Non assignment obligation
- Individual Expemption:
- - importance of the transferred know how
- Non compete necessary to the common idenitity and reputation of the franchisor
network (whole duration of the agreement)
- -restriction on selling (contract territory and selective distribution)
VABER
Block exempted: Selective Distribution (qualitative/quantitative)
- Restriction of active/passive sales to unauthorised distributors in the territory
reserved by supplier to operate that system (C-59/08 Copad/Dior, 50: only
contravention of provisions in art. 8(2) the EC Directive precludes exhaustion,
trademark enforcement against unauthorised distributors to protect the aura of
luxury of the trademark, as jeopardsing it might affect quality of the luxury good
which includes aura of luxury which can be preserved by characterists and
conditions of a selective distribution system, 25-30)
- Qualitive standard also for the use of internet and excluding pure online sale shops
(54)
Block exemepted: Exclusive distribution:
- Restriction of active sales into the exclusive territory or customer group allocated to
supplyer or another buyer (C-244/00 Van Doren, 40, third party should not be
required to disclose the source of the trade marketed product provided by a
member of an exclusive distribution system as this would raise the risk of market
partitioning by trademark proprietor)
TTBER
ART. 2.3 Applies to other IPRs licenses (including trademarks):
- Contained in technology transfer agreement
- Directly related to the production or sale of the contract
products
- Even if the main interest of the parties is the exploitation of
the trademark
TTBER applies to mixed patent (and/or know how) / trademark
license with an obligation to use the trademark on the products
exploiting the technology
Art. 102 TFEU
• C 241-242/91 Magill C-418/01 IMS: exclusionary abuse
refusal to grant a license not per se abusive but it may if it
- Prevents the emergence of a new product, for which there is a potential
consumer demand
- Is unjustified by objective consideration
- prevents any competition in the secondary market which is therefore
reserved to the dominant undertaking
• But see Trips art. 21 «compulsory licensing shall not be permitted» (in
contrast to art. 31 (k) explicitly admitting compulsory patent license as a
remedy for anticompetitive practice)
• Is it applicable to trademarks which do not hinder the marketing of
products under different trademark ? Collective licensing of trademarks
sport leagues for merchandising (American Needle v NTL US SCt 2010).
How to define «relevant market» and «new product» (are apparel with
certain trademarks new products? And videogames or software which
needs to use all the trademark together ?).
• The market of spare part and the enforcing of trademark rights against
parallel importers (but see Oracle v Mtech Data Limited UK S.Ct 2012)
Art. 102 TFEU
• Exploitative abuses (102 a): Grune Punkt / Duales System
(collective waste recovery system) Commission 2001/463 /
ECG C- 385/07):
- imposing trademark licenses for all products +
- calculating license fees charged for certain services on all
products even those for which services are not provided.
- See TTBER Guidelines 101, for royalties calculated also on
sales for product non using the licensed IP
- Royalty discrimination (102 c) by collective licensing
organizations (eg. League merchandising)