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New Developments in Competition Law and Economics pp 149–168Cite as

Blocking Patents and the Process of Innovation

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Part of the book series: Economic Analysis of Law in European Legal Scholarship ((EALELS,volume 7))

Abstract

It is the very essence of patents to prevent others from using the protected invention. This does not mean, however, that there are no legal limits to exclusion. Competition law, for example, has a general scope of application that does not stop before intellectual property rights. In particular, dominant firms must not abuse their dominant position no matter if their market power is based on immaterial or material positions. It is recognized that the acquisition of patents by fraud on the patent office may constitute such an abuse. Moreover, in EU law, the refusal to licence intellectual property rights may, in exceptional circumstances, be qualified abusive as well. This paper goes one step further and asks the question if the mere acquisition of a patent, without any misleading representations to the patent office and independently of subsequent licensing strategies, may, in exceptional circumstances, constitute an abuse as well. It will be shown that this question has to be answered in the affirmative: There are situations where the grant of a patent comes into conflict with the basic rationale of patent protection, which is the encouragement of innovation. A four-prong test is proposed here, which allows identifying situations in which patents abusively block the process of innovation.

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Notes

  1. 1.

    European Commission (2012), p. 5. See also The Economist (2015a): “Studies have found that 40–90% of patents are never exploited or licensed out by their owners”.

  2. 2.

    European Commission (2009), n. 1571.

  3. 3.

    For a comprehensive survey on competition law problems in the pharmaceutical sector see for example Hancher and Sauter (2016) and the country reports in Kobel et al. (2017).

  4. 4.

    See e.g. General Court, Case T-111/96 ITT Promedia/Commission [1998] ECLI:EU:T:1998:183, n. 60.

  5. 5.

    See Devlin (2016), 8.121. For a comparison between EU law and the US-American Noerr-Pennington Doctrine see Devlin (2016), 8.126 et seq.

  6. 6.

    General Court, Case T-51/89 Tetra Pak/Commission [1990] ECLI:EU:T:1990:41, n. 23.

  7. 7.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 149.

  8. 8.

    For the EU see Art. 5(1) lit. b of Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, OJ L 93/17. For US law see MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007).

  9. 9.

    37 C.F.R. [Code of Federal Regulations] 1.56 Duty to disclose information material to patentability, lit. a: “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section”.

  10. 10.

    See Section 2016 of the USPTO Manual of Patent Examining Procedure www.uspto.gov/web/offices/pac/mpep/s2016.html.

  11. 11.

    Therasense Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1288 (Fed. Circ. 2011).

  12. 12.

    See the landmark case of the U.S. Supreme Court in Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942). Recently, the misuse doctrine has been confirmed in Kimble v. Marvel Entertainment, LLC, 576 U.S. (2015).

  13. 13.

    Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965).

  14. 14.

    Number 6 of the US Antitrust Guidelines for the Licensing of Intellectual Property, issued by the US Department of Justice and the Federal Trade Commission, January 12, 2017 www.justice.gov/atr/IPguidelines/download. The agencies add that inequitable conduct that falls short of fraud may still violate section 5 of the Federal Trade Commission Act (ibid.).

  15. 15.

    See Hovenkamp (2008).

  16. 16.

    See for example Podszun (2014).

  17. 17.

    European Commission, Press Release IP/05/737 in case COMP/A.37.507/F3 of 15 June 2005.

  18. 18.

    ECJ, Case C-457/10 P AstraZeneca v. Commission [2012] ECLI:EU:C:2012:770, n. 93.

  19. 19.

    See for example Geradin (2014).

  20. 20.

    In the AstraZeneca case, even the intent of the firm to hide the date of the first market authorization had been shown. As the concept of abuse is an objective one, such intent is not a necessary condition, but can be taken into consideration in an overall analysis, see General Court, Case T-321/05 AstraZeneca v. Commission [2010] ECLI:EU:T:2010:266, n. 356, 359.

  21. 21.

    ECJ, Case C-457/10 P AstraZeneca v. Commission [2012] ECLI:EU:C:2012:770, n. 99.

  22. 22.

    Ibid.

  23. 23.

    See Heinemann (2017), pp. 473–475.

  24. 24.

    ECJ, Case C-179/16 F. Hoffmann-La Roche et al. [2018] ECLI:EU:C:2018:25, n. 95.

  25. 25.

    For additional case law on this question see Tayar (2014).

  26. 26.

    General Court, Case T-321/05 AstraZeneca v. Commission [2010] ECLI:EU:T:2010:266, n. 362.

  27. 27.

    Drexl (2013), p. 296.

  28. 28.

    Cf. General Court, Case T-321/05 AstraZeneca v. Commission [2010] ECLI:EU:T:2010:266, n. 366: “the existence of remedies specific to the patent system is not capable of altering the conditions of application of the prohibitions laid down in competition law”.

  29. 29.

    European Commission, Press Release in case COMP/B2/39246—Boehringer of 29.3.2007; cf. supra note 17.

  30. 30.

    European Commission, Press Release IP/11/842 in case COMP/B2/39246—Boehringer of 6.7.2011.

  31. 31.

    Ibid.

  32. 32.

    European Commission (2009).

  33. 33.

    More information can be found at “ec.europa.eu/competition/sectors/pharmaceuticals/inquiry”.

  34. 34.

    See for example Colangelo (2017).

  35. 35.

    European Commission, Press Release IP/14/799 in case AT.39612—Perindopril (Servier) of 9.7.2014.

  36. 36.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 149.

  37. 37.

    The decision of the European Commission has been annulled in part by the General Court, Case T-677/14 [2018] ECLI:EU:T:2018:922 et al.; the corrections are not relevant for our context. 

  38. 38.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 5.

  39. 39.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 117.

  40. 40.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 2770.

  41. 41.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 118.

  42. 42.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 5.

  43. 43.

    Servier v Apotex [2008] EWCA Civ 445, n. 9.

  44. 44.

    See Art. 29(1) TRIPs Agreement: “Members shall require that an applicant for a patent shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor […]”.

  45. 45.

    See for example Kerber (2017).

  46. 46.

    Instead of the vast literature see The Economist (2015a).

  47. 47.

    Drexl (2013), p. 312 et seq.; Lamping (2010), pp. 138–139, 228–229; Volkmann (2013), p. 236; Zech (2011), p. 318. Dissenting Kjølbye (2009), pp. 186–188, who links the existence of an abuse to a clear ‘plus factor’, for example misleading representations before the patent office (in line with the AstraZeneca case).

  48. 48.

    See for example European Commission (1997), n. 7.

  49. 49.

    Seminally Bower and Christensen (1995).

  50. 50.

    See Art. 19 TRIPs Agreement.

  51. 51.

    This is the proposal in The Economist (2015b). For the general context of such a rule in patent law see Zech (2011), pp. 321–322.

  52. 52.

    European Commission (2012), p. 6.

  53. 53.

    In this sense Hull and Clancy (2017), p. 207.

  54. 54.

    European Commission, 9.7.2014, Case AT.39612—Perindopril (Servier), n. 2766.

  55. 55.

    ECJ, Joined Cases C-241/91 P and C-242/91 P RTE and ITP/Commission [1995] ECLI:EU:C:1995:98.

  56. 56.

    ECJ, Case C-418/01 IMS Health [2004] ECLI:EU:C:2004:257.

  57. 57.

    See EU competition commissioner Vestager (2017), p. 3: It is “important to have intellectual property rights that make sure innovators can be rewarded for their work. But those rewards can’t include the right to stop others from developing alternatives”.

  58. 58.

    For a specific scenario meeting these conditions see Ullrich (2013), pp. 268–269.

  59. 59.

    It is not convincing to reject the application of competition law with the argument that competition law can only be applied to the exercise, but not to the existence of IPR’s (in this sense Straus 2009, pp. 103, 106). The ECJ has given up this artificial distinction a long time ago and prefers substantial arguments based on the concept of competition on the merits. In a similar way, US antitrust law does not apply neither per se illegality nor immunity to the acquisition of patents but provides for a broad substantive analysis, see e.g. Devlin (2016), 10.1 et seq.

  60. 60.

    Therefore, we do not share the view of Straus (2009) who rejects the application of Art. 102 TFEU to the filing of blocking patents and points among others to the possibility of compulsory licensing. The prejudice to the innovative process cannot be prevented by compulsory licences since they would come too late. Moreover, the proposal made here does not reduce the incentives to innovate of the blocking firm since the competition law intervention only applies to destructive strategies. To the contrary, the incentives to innovate will be even increased since innovation competition will be strengthened.

  61. 61.

    For this distinction see Sect. 5.1.

  62. 62.

    See for example the evidence in the Servier case, Sect. 4.2.

  63. 63.

    See again the facts found by the European Commission in the Servier case, Sect. 4.2.

  64. 64.

    See Ullrich (2013), pp. 269–270; Volkmann (2013), p. 236 et seq.

  65. 65.

    See ECJ, Joined Cases C-241/91 P and C-242/91 P RTE and ITP/Commission [1995] ECLI:EU:C:1995:98; ECJ, Case C-418/01 IMS Health [2004] ECLI:EU:C:2004:257.

  66. 66.

    ECJ, Joined Cases C-241/91 P and C-242/91 P RTE and ITP/Commission [1995] ECLI:EU:C:1995:98; ECJ, Case C-418/01 IMS Health [2004] ECLI:EU:C:2004:257. See also Anderman (2015), p. 58: “Competition law offers a reserve power, available in occasional egregious cases”.

  67. 67.

    Nordhaus (1972), pp. 430–431. In the same line Anderman (2015), p. 58: Competition law “cannot be a substitute for the world of patent and industrial copyright law getting its house in order to achieve a more appropriate balance between initial and follow on and cumulative innovation”.

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  1. Faculty of Law, University of Zurich, Zurich, Switzerland

    Andreas Heinemann

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  1. Faculty of Law, University of Lucerne, Lucerne, Switzerland

    Klaus Mathis

  2. The School of Law, University of Notre Dame, Notre Dame, IN, USA

    Avishalom Tor

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Heinemann, A. (2019). Blocking Patents and the Process of Innovation. In: Mathis, K., Tor, A. (eds) New Developments in Competition Law and Economics. Economic Analysis of Law in European Legal Scholarship, vol 7. Springer, Cham. https://doi.org/10.1007/978-3-030-11611-8_8

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