Intellectual Property

Overview

Intellectual property law may grant monopolies for the use of processes and technologies.  Patents allow the inventor exclusivity in respect of the invention for a period, generally up to 20 years.  Patent holders may license others to use the patent. Patent legislation provides for mandatory licensing in some limited cases.

A patent licence agreement may contain conditions that infringe competition law. Copyright and trademark and software licensing may raise similar issues. Similar considerations arise in connection with the licensing of know-how.  Know-how constitutes intellectual property short of a patent.  They potentially qualify for exemptions.

The European Union Treaty provides for the single market and the free movement of goods and service. Prohibitions or restrictions on imports and exports which are justified on the grounds of the protection of industrial and commercial property rights shall not constitute the means of arbitrary discrimination or a disguised restriction on trade between member states.

Intellectual property rights must not be used so as to constitute an abuse of a dominant position.  The mere existence of the rights will not be challenged, but their exercise may be challenged.

EU Rights

In an early European law case, the ECJ  emphasised that intellectual property rights not be exercised in such a way as dividing the common market. A strong principle emerged that intellectual property rights should not be used to prevent parallel imports of goods which are lawfully placed on the market in another state.

This so-called “exhaustion of rights” principle has the effect that where separate licenses are provided for different territories, they may not prevent parallel imports.  They may not confer a monopoly in one state which prevents the importation of goods lawfully put in the market in another state.

The so-called common origin principle arises in the context of trademarks. Where an established trademark is used in several states deriving from a common origin,  each is to be protected by national law.  National registration may not be used so as to prevent the importation of goods bearing this mark which are lawfully produced under the same mark in another EU state.

Licensing

Patent licensing in itself is unlikely to breach competition law. Certain categories of patent licence fall entirely outside competition law on the basis that they do not affect a significant part of the market. Some types of terms and conditions, which were commonly contained in patent licences, required modification so as to comply with EU law.

Know-how licenses can promote competition by spreading innovation that would not be otherwise available.  Know-how can potentially be protected longer than patents as there is no statutory time limit.

Under the former competition law approach, there was a block exemption for know-how licenses. Intellectual property licences and agreements were obliged to conform with block exemptions and categories or licences applicable. The exemption or licence no longer applies, but their terms and conditions give guidance on completion law compliance.

Refusal of Licence

The refusal of an intellectual property licence may be an abuse of a dominant position.  Accordingly, licensing may be mandatory so that there is no abuse.

In a famous case involving Magill magazine, the EU Commission decided that the former practice whereby the major TV companies published their own TV guides and did not share programming information constituted an abuse of their dominant position.  It could not be justified objectively.

Genuine quality obligations in intellectual property licences are normal. Obligations to spend monies on advertising are unlikely to breach the prohibition.

Restricted Conditions

Restrictions on assignment are generally permissible. Bans of exports are less likely to be exempted, as they tend to partition the common market. Prohibitions of sublicensing are generally permissible as they are protective of the licensor’s property rights.

Prohibitions on active sales outside the territory may be permitted. Prohibitions on passive sales are likely to be prohibited.