Transcript Document
Is there a conflict between
competition law and
intellectual property rights?
Edward Whitehorn
Head, Competition Affairs Branch
Carrie Tang
Assistant Legal Adviser
Office of the Telecommunications Authority
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Competition law
Concerned with business activity
Requires the application of economic
theory
Prohibits business conduct which harms
competitive markets
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Objectives of competition law
Protects the competitive process
Economic efficiency
Prevents the harmful effects of monopoly
Secures consumer benefits such as lower
prices, wider choice and more innovation
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Market power
Important concept in competition law
Often defined as the ability to restrict
output and raise price
Is more likely to exist where there are
small number of suppliers or one dominant
supplier
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Definition of the relevant market
Economic concept
Defines the boundaries of competition
between firms
Identifies the actual competitors
Needs to be defined in terms of product or
service and geographical area
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How is a market defined?
By considering substitutability – the likely
response to a price increase
Consider both the demand side (consumers)
and the supply side (producers)
Essential first step in any competition case
work
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Scope of application
(i)
Anti-competitive agreements
(ii)
Abuse of a dominant position
(iii)
Mergers and acquisitions
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Hong Kong competition law
Applies only to telecommunications and
broadcasting sectors
Introduced in telecommunications in June
2000
Mergers and acquisitions added but not
yet in force
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Application of Competition Law to
Intellectual Property Rights
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Market power derived from Intellectual
Property Rights (IPR)
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Abuse of such power
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Licensing of patents, copyrights and
trademarks
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Competition Law in the
Telecommunications Market
Section 7K(1) – Anti-Competitive Practice
“A licensee shall not engage in conduct
which, in the opinion of the Authority, has the
purpose or effect of preventing or
substantially restricting competition in the
telecommunications market.”
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Competition Law in the
Telecommunications Market
Section 7K(2) – Factors to Determine AntiCompetitive Practice
agreements to fix the price in a
telecommunications market;
an action preventing or restricting the supply of
goods or services to competitors;
agreements between licensees to share any
telecommunications market between them on
agreed geographic or customer lines;
the conditions of relevant licences.
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Competition Law in the
Telecommunications Market
Section 7L(1) – Abuse of Dominant Position
“A licensee in a dominant position in a
telecommunications market shall not abuse
its position”
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Competition Law in the
Telecommunications Market
Section 7L(3) – Factors to Determine Dominance
“In considering whether a licensee is dominant, the Authority shall take
into account relevant matters including, but not limited to the market share of the licensee;
the licensee’s power to make pricing and other decisions;
any barrier to entry to competitor into the relevant
telecommunications market;
the degree of product differentiation and sales promotion;
such other relevant matters as may be stipulated in the guidelines.”
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Market Power and IPR
Simple existence of an IPR does not mean
that the holder automatically acquires a
monopoly for the purpose of competition
law.
The European Court of Justice said in
Magill TV Guide/ITP (1989) 91/89R that:
“So far as 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.”
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Market Power and IPR
Definition of relevant market required
Look at substitutability of product
Other factors include physical
characteristics of the goods, the prices,
intended use, and nature of buyer
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Abuse of IPR – Exclusive Licence
Exclusivity of an IP licence by a dominant
player holding a telecommunications
licence may infringe section 7L.
Exclusivity of a licence by any commercial
undertaking holding a dominant position
within the common market that may
amount to an abuse may infringe Article
82 of the EC Treaty.
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Abuse of IPR – Exclusive Licence
Refusal to license an IPR can amount to an abuse of
dominant position, thus may infringe Article 82.
The Commission in the Magill Case held that since
the broadcasters had control over access to their
weekly listings, they each had a de facto monopoly in
the market for weekly listings which was turned into a
legal monopoly.
The Commission decided that each broadcaster had
abused its monopoly over the listings, the raw
material for the magazine, by refusing to allow
publication by Magill of a guide including this material
thereby transferring the listings monopoly to the
separate market for magazines.
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Abuse of IPR – Exclusive Licence
The ECJ in the case, Nungesser v Commission
(Maize Seed) Case 258/78 [1982] ECR 2015, held
that the application of Article 81 of the EC Treaty
depended on the nature of the territorial protection
granted to the licensee.
Open Exclusive Licence vs Absolute Territorial
Protection.
Open Exclusive Licence : not caught by Article 81
Absolute Territorial Protection: breach of Article 81
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Abuse of IPR – Refusal of licence
In Erawu-Jacquery v La Hesbignonne Case
27/87 [1988] ECR 1919, another case
involving plant breeders’ rights, the ECJ held
that a prohibition on the sale or export of
basic seeds was not within Article 81 since
considerable investment had been made in
developing the basic seed.
The court had to strike a balance between
the scale of research and investment into the
technology and the restriction of competition.
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Licensing of Patents, know-how,
trademarks or copyright
Hong Kong do not have any specific
regulations governing the licensing of
patents or know-how, trademark or copyright.
The Commission Regulation No. 240/96
covers technology transfer agreements and
rules government patent licensing
agreements and agreements for licensing of
know-how.
Purpose of Regulation
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Ford Spare Parts
Facts:
Ford refused to grant licences to produce spare parts
which were protected under UK design copyright
Held:
Anti-competitive and operated against public interest
However, court could not order a company to grant
copyright licences
Situation remedied by the Copyright, Designs and Patents
Act 1988
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BBC and ITV / Publication of
Programme Information
Facts:
BBC refused to make available their programme
schedules, in respect of which they owned the
copyright, to magazines which wished to publish
a weekly publication containing details of all
programmes.
Held :
Refusal to supply the information was anticompetitive
Again there was no provision for compulsory
licences of copyright
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Windsurfing v Commission [1986]
ECR 611
Facts:
Windsurfing International granted patent licence for
the production and sale in Europe of sailboards to Ten
Cate.
The rigs were patented but not the sailboards
Held :
the following provisions fell within Article 81 (anticompetitive)
an obligation on the licensee to mount the patent rig only on
boards approved by the licensor
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Windsurfing v Commission [1986]
ECR 611
an obligation on the licensee to sell the rig only as complete
sail boards
an obligation on the licensee to pay royalties based on the
net selling price of the whole product
an obligation on the licensee to affix to boards a notice
stating “licensed by Windsurfing International”
an obligation on the licensee to acknowledge the marks
“Windsurfer” and “Windsurfing”
an obligation on the licensee to restrict production to a
specific plant
an obligation on the licensee not to challenge the validity of
licensed patents
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Thank you
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