18 September 2015

European Commissioner on the Convergence of Competition Policy and IP Law

On 11 September 2015, Margrethe Vestager, the European Commissioner for Competition, gave a speech at the 19th International Bar Association Competition Conference in which she underlined the importance of promoting the convergence of competition policy and intellectual property (IP) law to create an environment in which “innovators and creators have the right incentives and rewards” and consumers “benefit fairly from their work.”

Commissioner Vestager noted that, by its very nature, innovation generates competitiveness, economic growth and job creation. However, the incentive for companies to invest in innovation diminishes without the appropriate IP protection. Equally, as the European Court of Justice (ECJ) has observed, companies may seek to use IP rights to restrict competition. It is therefore the responsibility of the European Commission (the Commission) and the European and national legislators to maintain the correct equilibrium between protecting competition and incentivising innovation.

To illustrate this, Commissioner Vestager explored two topics. First, she examined standard essential patents, which set a standard between competing companies who must agree to select one technology to the exclusion of others for the benefit of consumers - an example would be how a text message can be sent between mobile phones regardless of the network provider or manufacturer of the mobile phones. If a member of a standard setting organisation owns a patent for a technology that will become standard, “that member must commit in advance to license it to all third parties on fair, reasonable and non-discriminatory terms.” The objective of this is to ensure that standards are open to all and that patent holders receive fair remuneration for their innovation. As stated in the Commission’s 2014 Motorola[1] and Samsung[2] decisions, Commissioner Vestager explained that holders of the standard should not be allowed to seek an injunction against the use of the standard where there is “a willing licensee on the other side.” She noted that, despite the ECJ following the Commission’s position in its ruling in Huawei/ZTE[3], the Commission must continue to regulate this field, because companies have already started to attempt to circumvent the principle established in Motorola and Samsung by taking action against entities at different levels of the distribution chain. 

Second, Commissioner Vestager considered cross-border online trading. The internet may appear to be the ideal platform for the Single Market, as it does not have any physical barriers. However, in reality, a “series of barriers - linguistic, regulatory and contractual - keep the online world fragmented.” She explained that the Commission has launched a sector inquiry into e-commerce in Europe to investigate whether this fragmentation has occurred as a result of "company-erected or regulatory" restrictions. To give an example of company-erected restrictions in a similar market, Commissioner Vestager referred to an ongoing investigation into absolute territorial protection restrictions used by film studios in the Pay TV sector.

Commissioner Vestager's speech will be welcomed by many as it provides a clear indication that the Commission recognises the need to strike a balance between developing the right level of IP protection necessary to foster investment in innovation, and making sure that these innovations are widely shared so that consumers may ultimately benefit from them.

[1] IP/14/489 (Motorola Mobility).

[2] IP/14/490 (Samsung).

[3] Case C-170/13 – Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH (ECLI:EU:C:2014:2391), Advocate General's opinion, 20 November 2014.

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