“…hard cases make bad law …” – round table discussion on Intellectual Property and Competition

11.09.2014

As you may have gathered by now, on this blog we are a little obsessed by the topic of Intellectual Property and how it is dealt with (for good and bad) by competition law.

As part of our wider focus on Intellectual Property issues, in 2013 we worked with Journal “Legal Business” on a research project looking at client attitudes to Intellectual Property and its importance to business (see here). By way of follow up to that, during the summer we hosted a round table discussion with representatives from a number of major companies who see Intellectual Property and innovation as core to their business. We asked them to discuss whether DGComp’s recent cases applying competition law to the exercise of intellectual property, or in dynamic industries where innovation is rapid and essential, might help or hinder innovation. The resulting discussion perhaps bears out the continuing relevance of the comment by Supreme Court Justice Oliver Wendall Holmes Jr (made in a dissenting opinion in an antitrust case) that “Great cases like hard cases make bad law”.

The general tension between effective long term policy choices and expedient short term resolutions was a theme of the discussion. This arose in a number of guises, indicating why policy making through case law can be a fraught exercise and why policy considerations can take a back seat when dealing with immediate pressures.

For example, several participants spoke of the incentives to settle disputes, remarking that such settlements can make perfect sense in their own immediate short term context but can have long term consequences if all of the nuances of that context are not understood. This was raised both in the context of the settlement of pharmaceutical patent litigation, which several particpants felt was capable of being misinterpreted by DGComp, and also in the context of competition cases themselves. In competition enforcement, settlements by companies who do not wish lengthy fights with DGComp, or to pursue appeals through the Luxembourg process at the General Court or the CJEU, can result in a form of “soft law”. Such legal developments evolve without rigorous testing through an adversarial process and may be the result of significant prosecutorial zeal, not always leavened with a balanced reflection on the possible long term policy impact beyond the confines of the immediate case.

It is fair to say that while some of the difficulties with aspects of IP grant and enforcement were recognised by all of the participants, there was also a good deal of frustration at the uncertainty for business caused by very active competition enforcement in novel areas, particularly when the appeal process is so long drawn out that any significant investigation can take in excess of 10 years to reach a final outcome, unless the parties agree to settle, or to accept the Commission’s decision. It was noted that the long term nature of incentives for much investment in R&D and resulting intellectual property can make this a particular problem, and it seems that the additional uncertainty caused by unexpected interventions from the competition authorities makes corporate decision making much more difficult.

During the debate, even those who have gone on record as saying that the patent system needs reform were not persuaded that the use of competition law by DGComp was an effective or appropriate mechanism for bringing about reform. Notwithstanding the current moves towards a unitary patent and a unified patent litigation system in Europe, which were the result of a huge political effort by the Commission generally (you can find more detail on everything to do with the UPC here) there was a sense that one of the difficulties is the lack of a single powerful voice within Europe on intellectual property issues capable of consistently engaging in the policy debate alongside DGComp about the potential long term impact of signals given in individual cases. While the Commission has many advocates for innovation and intellectual property within it (including within DGComp), they are spread across a number of DGs, and much of the development of intellectual property law and policy happens outside or alongside the Commission, at national patent or IP offices, within the European Patent Office or in national courts.

Having said all that, some of DGComp’s interventions were welcomed as providing valuable guidance to companies in areas where there had been real uncertainty – the decision in the recent Motorola SEP investigation about the circumstances in which a patentee can safely seek an injunction being mentioned as a case in point.

The debate was interesting and at times heated, kept moving along by comments from, among others, Fidelma Macken, formerly a judge at the CJEU, and Simon Thorley QC, one of the foremost IP barristers of the last 25 years. The discussion has been summarised in the September edition of Legal Business (see here – subscription only) – for space reasons we have given only a flavour on this blog. It will be interesting to see how Commissioner Almunia’s successor chooses to move forward on some of these charged topics – something that this blog will return to as the new era takes shape.

Pat Treacy

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