IP And Competition Policy Can Help Each Other, Officials Say

Intellectual property and competition policy are sometimes seen as counterweights, but an efficient patent system and effective competition policy are ultimately complementary in nature, speakers said at an event yesterday at the World Intellectual Property Organization.

Improvements preventing bad patents would also prevent bad competition practice, panellists said. The 25 October Symposium on Intellectual Property and Competition Policy covered new developments and perspectives in antitrust law regarding intellectual property assets.

There has been a steep increase in patent applications and granted patents, particularly in information technology, telecommunications and pharmaceuticals, said Thomas Kramler, deputy head of the Information Industries, Internet and Consumer Electronics Unit of the Directorate General on Competition at the European Commission.

There is a strong trend in using patents more and more strategically, Kramler said. And this is where competition enforcement comes in.

Antitrust enforcement has become a global phenomenon, said Dina Kallay, counsel for intellectual property and international antitrust at the US Federal Trade Commission (FTC), who was speaking on her own behalf. But the cases where antitrust and IP come into conflict are exceptional, she said, as the exercise of IP rights “is generally pro-competitive.”

More frequent use and stronger enforcement of patent and trademark systems reduce the probability of anticompetitive practices, said Hassan Qaqaya, head of the Competition Law and Consumer Policies Branch at the UN Conference on Trade and Development. This confirms “the proposition that these are complementary not contradictory policies,” he added.

The symposium took place against the backdrop of the first-ever meeting of the WIPO Committee on Standards taking place from 25-29 October.

Patent Strategy

Strategic patenting means patents that are used as bargaining chips (particularly in the information technology or telecommunication sectors) or in order to block competition (particularly in the pharmaceutical sector), Kramler said.

At the same time, fifty percent of litigated patents are found invalid, Kramler said, meaning patents have begun to “resemble lottery tickets: you don’t know what the outcome is at the end of the process.” They are no longer a right to exclude so much as a “right to try to exclude.”

Christian Wichard, deputy director general of the WIPO Global Issues Sector, later said that litigated patents were less than one percent of patents granted, and companies “pretty much only sue when they are sure there’s a chance to invalidate.” So it is “probably more a shock that 50 percent of patents resist the challenge.”

Kramler described a case with AstraZeneca over supplementary protection certificates (SPCs) given for medical products to compensate for the long authorisation process, including clinical trials, needed to get a drug into market. Companies are meant to supply the date of authorisation of a drug. AstraZeneca was found to have misled patent authorities by deliberately supplying the wrong date to authorities in order to be granted an SPC to which it was not entitled, Kramler said. The courts further said that proof of deliberate bad faith was not necessary, and the SPC did not have to be enforced against infringers, for it to be considered abusive.

Heinz Hamman of the pharmaceutical company Boehringer Ingelheim said that the Astra Zeneca case should not be taken as a role model case for the access to medicines debate as the drug in question was the first in its class. He stressed that patents are critical to the innovative pharmaceutical sector and said that “if this comes into conflict with competition, then maybe competition overstretches its reach.”

But it may be misleading to assume that IP necessarily creates or enhances market power, said Qaqaya.

The “vast majority of competition cases in which IP is involved” have been analysed under “rule of reason,” he said, where the challenge is to define the relevant market in which the IP in question competes and then assess whether or not it possesses monopoly or market power. This can be complex, and the challenge for competition authorities in developing countries is to develop the capacity to distinguish between different types of behaviour and assess their potential impact, Qaqaya said.

Technical Standards

Technical standards are becoming “more and more important and more and more powerful,” said Kramler. This means interoperability of those standards is also more and more important, but that it increases competition issues.

Industry standards are “one of the drivers of the modern economy,” agreed Kallay. Most of these are smoothly implemented, she added, with only a handful compared to the vast number of standards adopted in the US that lead to antitrust concerns.

But whether a particular standard confers market power or not depends on the importance of the standard in the market. Guidelines published by the Commission say that standards processes which are transparent, for which participation is unrestricted, and which are available to all who wish to implement the standard are unlikely to have negative competition effects, Kramler said.

An updated set of guidelines on standards issues hopefully published by the end of the year also says that standardisation organisations should have a clear and binding IP policy to be sure of avoiding negative competition effects, Kramler said.

Also speaking at the event were Ricardo Machado Ruiz, commissioner of the Administrative Council for Economic Defense (CADE) in Brazil, Jean-Yves Art of Microsoft, Hugo Sakkers of Philips Intellectual Property and Standards and Sean Murphy of Qualcomm.