Ad-Hoc Expert Group on the Role of Competition Law and
Policy in Promoting Growth and Development
Geneva, 15 July 2008
Competition law enforcement and intellectual property rights
by
Alberto Heimler
Italian Competition Authority
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
Competition law enforcement and
intellectual property rights
Alberto Heimler
Italian Competition Authority
Geneva, July 2008
Is there a difference between intellectual and
physical property?
• Inventions and innovations are public goods: no rivalry in
consumption and no appropriability
• The objective of IP rights is to exclude others from
exploiting a non physical asset. The same principles of
exclusion holds for physical property.
• Like with physical property, the right to exclude associated
with IP rights does not imply market power and indeed
most patents are of little use
• IP rights (patents) provide an incentive for R&D, they
make it possible to publicize an invention and facilitate
licensing
Antitrust enforcement
• Restrictive agreements are prohibited. Major controversy:
what is the counterfactual: a less restrictive agreement or
no agreement?
• The abuse of a dominant position is prohibited. Major
controversy: does the law protect competitors or the
consumer?
• Merger control. Major problem: the evaluation is forward
looking. Major controversy: what is the time horizon of the
prospective analysis?
• Important to remember: Antitrust does not prohibit the
creation or the strengthening of a dominant position per se
(only if achieved via a merger)
Innovation and merger control
• The problem is that a merger may affect the ability of firms
to bring innovations to the market
• Genzyme-Novazyme (FTC 2004): both firms active in the
treatment of Pompe disease. The problem was whether
R&D would diminish as a consequence of the merger . The
FTC approved it (but two years after it had been
completed)
• Shell-Basf (EC 2000) JV likely to create a dominant
position in markets associated with polypropylene and
polyethylene. The EC approved with commitments to
license third parties. Know-how to produce was
insufficient and nobody entered
Licensing agreements I
• They are evaluated under a rule of reason standard: the
agreement may be prohibited if it restricts competition that
would have existed without the agreement (major worries:
coordination of pricing or of output; foreclosure of access
to inputs).
• 2 producers established in 2 different countries agree to
cross license 2 competing technologies and agree not to
compete
• A drug manufacturer in country A signs an exclusive
agreement with a distributor in country B with a no export
clause
• Licensing between non competitors are OK
Licensing agreements II
• Portfolio cross licenses and patent pools favor the
commercialization of new products (especially patent
pools that are open to licensing). They are pro-competitive
when patents are complementary. The problem is that very
often patents are both complementary and substitutes.
• Summit and Visx (FTC 1998) created a patent pool for the
production of lasers employed in performing eye surgery.
The agreement was considered restrictive
• Rambus (FTC 2006) monopolized 4 markets of computer
memory technologies (Standard for DRAM chips) by
hiding the existence of its patents in the process of
standard setting
Refusal to deal
• It may be prohibited if a firm has market power and
refuses to deal with customers
• In the US (Kodak, 1992 and Aspen, 1985) an indication for
the existence of an abuse is that access be denied when it
had been granted in the past. Plus of course that there are
no satisfactory business justifications for it
• In the EC a refusal is an abuse when it is likely to eliminate
competition in a market and access is indispensable (Oscar
Bronner, 1999).
• In the EC Magill (1995), IMS (2004), Microsoft (2004): a
new product must be denied to consumers. No indications
on pricing.
Tie-ins and bundling
• A tie-in: the sale of one product (the tying good) on the
condition that the buyer purchase another product
• Bundling: a package of two or more products (pure-mixed)
• US Microsoft case (1994): PC manufacturers had to pay
Microsoft in any case
• US Microsoft case (2001): bundling Windows with
Internet Explorer (the problem was Windows)
• EC Microsoft case (2004): bundling of Windows with
Media player (no economies from integration)
• South Korea Microsoft case (2004): bundling of Windows
with messenger services
Other exclusionary conduct
• Shering Plough (FTC, 2003): reverse payment in a case on
counterfeiting. Shering Plough paid (60 and 10 million $)
2 generic manufactures in order for them not to produce
(formally in exchange for the use of 2 irrelevant licenses).
The FTC blocked the agreement. The 11th circuit reversed.
US DOJ not in line with FTC
• Astra Zaneca (EC 2005): abused its dominant position with
its product Losec by misleading representation with patent
offices and deregistration. The case is under appeal
Parallel trade and exhaustion
• Parallel trade impedes price discrimination that very often
is pro-competitive (leading to increase in the quantities
produced). In pharmaceuticals price regulation through
averaging is very similar to parallel trade. If parallel trade
exists the incentive to price discriminate is reduced
• Micro leader (ECJ 1999): copyright law is a justification
for Microsoft prohibition of exporting Windows from
Canada to France. However that prohibition is subject to
antitrust scrutiny
• In Australia in 1998 parallel trade for recorded music was
liberalized. The ACCC concluded a number of cases
against the Majors because they impeded parallel trade.