Collaboration with competitors can be an effective strategy for pharma companies seeking to develop common standards to avoid incompatible systems and costs, improve efficiency and to fill gaps not covered by regulatory bodies.
For example, Illumina’s and Sequenom’s 2014 patent pool agreement in relation to non-invasive prenatal testing (NIPT) allowed Illumina to develop and sell in vitro diagnostic kits for NIPT and enter into licensing agreements with third parties willing to develop their own laboratory-developed tests. This agreement is currently under investigation by the European Commission for anti-competitive conduct (see here).
Areas where common initiatives can make sense might include helping patients understand what is involved in clinical trials or agreeing protocols for labelling. If initiatives of this sort take place (whether inside or outside traditional trade associations) it is sensible to be aware of the potential for competition related concerns.
In general, EU competition law regards standardisation initiatives as broadly pro-competitive as they tend to lead to greater efficiency or technological improvements for consumers. Standardisation efforts that lead only to efficiencies for the participants, where the benefits are unlikely to flow down to consumers, will be regarded as more problematic.
- The key competition concerns that can arise are: direct or indirect reductions in price competition or other aspects of commercial rivalry; actual or potential foreclosure of innovative technologies; and foreclosure of any companies not involved in the collaboration.
- Competition concerns in relation to genuine standardisation initiatives are likely to arise only if those involved have a degree of market power (as a rule of thumb, a combined market share of 10% or more), unless the arrangements result in hardcore restrictions of competition such as price fixing or market sharing.
- Collaborative initiatives will generally comply with the rules on anti-competitive agreements provided they meet certain safe-harbour criteria, principally: unrestricted participation; transparency; and the obligations to comply are non-binding.
Patent pools may give rise to competition concerns if they result in a reduction of competition between the parties or the creation of an industry standard. However, the Commission’s Technology Transfer Guidelines provides a safe harbour when the creation of the pool is open to all interested IPR owners; and the pooled technologies are licensed on FRAND terms. As a rule of thumb, the more restrictive the access to membership of the group discussing the common approach, or the more likely it is that the output will become a de facto standard and occupy some form of gate-keeping role for the wider industry, the more likely it is that the collaboration could present competition concerns.
If you are thinking about proposing a common approach to an industry-wide issue, here are some high level tips:
- Keep the process as open as feasible.
- During the development process, encourage feedback from those who are not directly involved.
- Listen to and actively consider the comments of all, including those who are likely to be affected but who are not directly involved.
- Do not prevent those involved in the project from pursuing other projects as well.
- If the project results in sample forms, model contracts or anything of that nature, avoid including any price terms or similar commercial terms.
- Make the results of the collaboration easily accessible. If any IP rights are involved, allow access to these on FRAND terms.
- Do not seek mandatory imposition of any standard, or require those involved to follow it, without getting specialist advice.