Testing the patent pool waters

EC’s Investigation of Illumina for anticompetitive conduct

Demonstrating that life goes on outside of Brexit, the European Commission has opened an investigation into Illumina and Sequenom for suspected anti-competitive conduct. 

The Commission will investigate suspected breaches of Articles 101 and 102 TFEU, stemming from Illumina’s and Sequenom’s patent pool agreement concluded in December 2014 relating to non-invasive prenatal testing patents (“NIPT”). 

The agreement 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. The agreement settled the ongoing patent disputes between the two parties and resulted in Sequenom receiving $50 million upfront and royalty payments on sales from the patent pool structure until 2020.

The information on the Commission’s investigation emerged during a Case Management Conference in UK litigation, when Premaitha Health, itself involved in litigation with Illumina in relation to NIPT-related intellectual property, referred to a communication from the Commission regarding this investigation. The Commission is believed to be looking into, on one hand, whether the 2014 agreement constitutes a restrictive agreement and gives rise to abuse of a dominant position, and on the other, whether Illumina’s licensing practices have an anti-competitive effect.

This investigation will be a rare opportunity for the Commission to give a decision in relation to patent pools, an area in which it has previously issued guidance (for instance in the rules for the assessment of technology transfer agreements (adopted on 21 March 2014 here)).

This case is also indicative of a growing trend for patent pools in the life sciences sector. This model of licensing has traditionally been more widespread in the TMT sector. Perhaps a sign that the FRAND wars (on which we reported earlier this week) may in future spread beyond the world of telecommunications…

Vodafone v Intellectual Ventures – Is a new front about to open in the FRAND wars?

When Intellectual Ventures (IV), the world’s largest non-practising entity, sued Vodafone GmbH for infringement of a batch of its standard essential patents (SEPs) in Germany last September, it probably wasn’t expecting the communications services provider to launch a FRAND counterattack in Ireland.  But that’s exactly what has happened.

Last month, the Irish High Court gave an indication that Ireland was the appropriate jurisdiction for hearing Vodafone’s allegations that two companies in the IV group – IV International (based in Ireland) and IV LLC (based in Delaware, USA) – had breached their obligations to license their SEPs on FRAND terms.  As far as we’re aware, this is the first Irish case on issues relating to FRAND and SEP licensing.  As the Irish High Court noted in its judgment, the patent and competition law issues raised by Vodafone’s application made it “something of a first in the Irish courts”.

According to the judgment, IV first approached Vodafone to discuss the terms of a licence to various IV patent portfolios in 2012.  No agreement was reached, however; and IV LLC filed two sets of patent infringement proceedings against Vodafone GmbH in Germany in September 2015 and January 2016.  The patents in question relate to DSL technology, a type of broadband technology which connects a user to a high-speed internet connection across a telephone network.  DSL services operate in accordance with so-called ‘xDSL standards’, which are set by the International Telecommunications Union (commonly known as the ITU).  Like other standard-setting organisations, the ITU has developed policies relating to IP rights which require SEP holders to license their patents on FRAND terms.  Vodafone has alleged that IV abused its dominant position on the markets for the licensing of the relevant patents by making a licence offer to Vodafone on non-FRAND terms and failing adequately to explain how the patents in question are said to be infringed.  In making these allegations, Vodafone has expressly relied on the CJEU’s July 2015 judgment in Huawei v ZTE (which we commented on here and here).

At this early stage, two aspects of the case are interesting:

1. Vodafone’s attempt to sue IV for breach of its FRAND obligations in Ireland

Vodafone’s ‘Irish torpedo’ strategy is noteworthy.  We are not involved in the case and so can only speculate, but it is plausible that Vodafone’s aim in bringing FRAND proceedings in Ireland may be to seek to limit the prospect of IV obtaining swift injunctive relief in Germany (in the event that any of its patents are found to be infringed).  Whether this will work is unclear.  Immediately, it’s important to bear in mind that the Irish Court’s judgment is based on Vodafone’s ex parte application for permission to serve a defendant (IV LLC) out of the jurisdiction.  IV has not yet had the chance to make any points about jurisdiction or the nature of its dispute with Vodafone.  The Irish Court states that it has been “advised” that “none of the eleven sets of proceedings [which IV has commenced against Vodafone in Germany] involves or is related to issues of FRAND licensing”.  This leads the Irish Court to take the view that it may have jurisdiction because the issues before it do not involve the same subject matter or cause of action as the issues already before the German Court.  But if IV can show that FRAND / SEP licensing issues are in fact relevant to the German proceedings, this puts the Irish Court’s jurisdiction in issue.  It remains to be seen whether IV will bring a jurisdiction challenge.

2. The types of declaratory relief sought 

Vodafone has asked for a number of declarations (some in the alternative).  In particular, the Irish Court’s judgment makes clear that Vodafone wants the Court to determine that: (i) the terms of the written licence offer made by IV in March 2016 were not FRAND; and (ii) the terms of the licence counter-offer made by Vodafone in June 2016 were FRAND.  In addition, and perhaps more interestingly, if neither IV’s offer nor Vodafone’s counter-offer is deemed to be FRAND, Vodafone wants the Irish Court to determine the terms and conditions of a licence “of the relevant patents for use in Germany” which would be FRAND.  It is not entirely clear from the judgment whether Vodafone is asking the Irish Court to identify FRAND terms and conditions just for the individual patents on which IV has sued in Germany, or whether it would instead like the Court to deal with some kind of wider IV patent portfolio.  If it’s the latter, it would be interesting to see whether the Irish Court takes a similar approach to that taken by Mr Justice Birss in Vringo v ZTE ([2013] EWHC 1591 (Pat) and [2015 EWHC 214 (Pat)).  In that case, the English High Court judge held that the court should only be able to set the terms of a portfolio licence if both parties agree to be bound by such a determination.

The question of FRAND rates and “what is FRAND” has been of great interest in the TMT sector for some time (as we have discussed previously, for example here and here).  A couple of cases have grappled with it, but guidance remains sparse.  It will be very interesting to see whether the Irish Court is willing and able to grasp the thorny issue, and we will be watching closely the next move from IV in the litigation and whether it resists Vodafone’s FRAND manoeuvre. 

Brexit: What it means for competition law Q&A

As the dust begins to settle on the momentous events that unfolded in the early hours of Friday 24 June, focus inevitably turns to the practical implications of what happens next.  Many articles have already been written on this subject and no doubt many more will follow.  The honest position today is that no-one can predict precisely what the long-term future holds for the UK because there is still no clarity as to which Brexit path will ultimately be chosen.  At this stage however, we can narrow the most likely options down to the following five:

  1. Leave the EU, but remain a member of the EEA (often referred to as the ‘Norwegian model’);
  2. Leave the EU, rejoin EFTA, but stay outside the EEA (often referred to as the ‘Swiss model’);
  3. Leave the EU, but join an EU customs union (often referred to as the ‘Turkish model’);
  4. Leave the EU, but negotiate individual trade terms (often referred to as the ‘Canadian model’); or
  5. Leave the EU and fall back on WTO trade terms.

Which of these routes prevails in the long-term will determine to what extent (if at all), the EU competition rules continue to apply in the UK.  Broadly speaking, Option 1 would result in no change to the status quo as regards competition law, whereas all the others would result in greater autonomy for a UK regime, potentially operating entirely separate from, but in parallel to, the EU regime.

However, the immediate consequence of the Prime Minister’s decision to resign, initiate a leadership election and to leave the decision as to when to invoke the EU’s timetable for exit under Article 50 to his successor, has given everyone a certain breathing space with which to survey the options.  Unspoken amongst these is the possibility that a UK general election will follow in the autumn, which could mean that all bets are off, including potentially even Brexit itself.

Q.   What is the immediate impact of the Brexit vote on UK competition law

A.   Nothing is likely to change at all in the short or medium term.  The prevailing national UK and EU competition regimes will remain in full force.

Q.   What about longer-term?

A.   Again, in practice, the short answer is likely to be that very little will change.  That is of course the case should the UK remain with the EEA.  Beyond that, the UK competition rules will remain in full force, operating in parallel to the EU regime.  Businesses with international operations will continue to be bound by EU rules as regards their trade within the EU.

Q.   Business relies on the legal certainty and guidance arising from the EU’s system of block exemptions.  What will happen to these assuming EU law no longer applies?

A.   The UK no longer has any national block exemptions, relying instead on the application of ‘parallel exemptions’ meaning that the EU block exemptions result in parallel exemptions from UK competition law prohibitions in addition to the EU prohibitions.  Assuming a total exit from the EU competition regime, these would no longer automatically apply and the UK would need to consider implementing new national exemptions.  Where the UK is no longer part of the single market, this could well have the result that certain limitations in the application of the block exemptions are removed (i.e. those dealing with territorial restrictions aimed at protecting parallel trade and the single market).

Q.   What happens to merger notifications?

A.   The UK’s existing merger control regime is likely to remain, although it is possible that in the longer term its voluntary nature may come under increasing pressure.  There are, however, likely to be two main effects arising directly from Brexit should EU law no longer apply in the UK.  First, there will be an increase in mergers being notified to the UK as it will no longer be possible to rely on the one-stop shop principle inherent in the EU merger regulation regime.  Mergers raising any substantive issues in the UK that would previously have fallen under the exclusive jurisdiction of Brussels will therefore require parallel notification in the UK.  Second, it is to be expected that there may be a fall in the number of mergers notified in Brussels because UK turnover will no longer count towards the EU jurisdictional criteria.  As one of the EU’s largest economies, the removal of UK turnover may therefore be expected to have a non-negligible impact.

Q.   What happens to UK competition litigation concerning EU infringements?

A.   In the short term, we see little or no change.  The doctrine of acquired rights will mean that the UK courts will continue to apply the law as it applied at the relevant time - for competition damages litigation, this will be the time of the infringement giving rise to the cause of action for damages.  In future, Brexit will have implications for the implementation of the Damages Directive dealing with follow-on actions – however, given that the deadline for implementation is 27 December 2016, it seems most likely that the UK will still be a full member of the EU and hence that this will be implemented.  As with all EU legislation given effect by national implementing legislation, the UK will need to consider whether and how to adopt and/or amend.  As regards follow-on damages, it remains to be seen how the UK legislature and courts will treat EU infringement decisions for the purposes of establishing liability.

Q.   What steps should business take now to ensure continued compliance?

A.   Understandably, businesses operating in the UK will be concerned to ensure not only that they remain fully compliant with whatever legal obligations arise as a result of Brexit but also that compliance costs can be kept to a minimum.  Pragmatically, and whatever the final outcome, the message today is one of ‘no change’.  The EU regime remains in full force for the foreseeable future and whatever the decisions that will be taken over the course of the next few months, it seems highly unlikely that substantive alterations will be made to the base rules of the game when it comes to competition compliance.

Read our previous article on Brexit here: Brexit – What next? A competition law perspective 

Sophie LawranceStephen SmithPat Treacy

Brexit – what next? A competition law perspective

Introduction

It is difficult to think of a UK statesman who did more for European unity or was more supportive of the idea of a union amongst the states of Europe than Winston Churchill and it is hence with some hesitation that we begin this article about the UK’s exit from the European Union with one of his many quotable soundbites:

"Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning". 

Yet that is precisely the situation facing the UK after it woke up on 24 June to the reality that it had voted decisively in favour of leaving the European Union. This has left politicians, diplomats, business and lawyers wondering what this means in practice and what happens next. Of course the nature of the position is such that the greatest certainty today remains one of uncertainty as to what happens next – although the vote to leave was clear, there is no consensus whatsoever as to what happens next.

At one extreme, EU membership could be replaced by the UK joining the European Free Trade Association and the European Economic Area (alongside Norway, Iceland and Liechtenstein). From many perspectives, including as regards competition law, this would clearly be the most straightforward, giving rise as it would to the fewest changes. This would entail a continued financial contribution to the EU budget and requirement to sign up to free movement of persons in exchange for access to the single market. UK courts would in effect continue to be bound by EU legislation and by decisions of the European courts. So far so good, but politically it is difficult to see how this squares with a Brexit campaign that has focused so overtly on immigration and repatriation of UK funds away from Brussels.

At the other extreme, the UK could seek a total exit, falling back on World Trade Organisation (“WTO”) rules to continue trading with the EU, but without access to the single market. Under this outcome, EU law would simply become another overseas jurisdiction, persuasive, but no more to the UK authorities and the courts.

At this stage it is too early to say anything definitive on which direction might ultimately be pursued. However, now that we have moved beyond the hypothetical and the UK begins its journey into uncharted waters, there are some general points to be made whatever our final destination.

Of course most aspects of UK law will be affected to a certain extent, but competition law and policy is one area where integration is perhaps its deepest and hence forms the focus of this article. Patent law and particularly work towards creation of the Unified Patent Court is also deeply and directly affected and our thoughts on the Brexit implications for the UPC can be read here.

Merger Control

EU and EEA member states benefit from the ‘one-stop’ shop of the EU Merger Regulation, meaning that transactions that meet the jurisdictional criteria may be notified and assessed in Brussels to the exclusion of national regimes. If the UK joins the EEA, there will therefore be no practical change to the current system. However, a total exit would require companies to assess whether transactions need to be conditional on UK and EU merger clearances. Whilst the UK operates a voluntary notification regime, transactions giving rise to any substantive overlaps are routinely notified in advance in the interests of legal certainty.

A total exit may therefore be expected to give rise to duplication and increased costs as international transactions with a UK element fall to be reviewed under both the UK regime and in Brussels in parallel. There are also obvious resource and hence cost implications for the UK competition authority, costs which ultimately could be expected to be passed through to business.

Cartels and investigations

The main UK competition rules concerning anti-competitive agreements and abuse of dominance broadly mirror equivalent EU provisions. There is no obvious reason why the UK would choose to use a Brexit as an opportunity to undertake wholesale revision of the competition regime and hence we envisage very little in the way of practical implications as regards the implementation of UK competition law.

However, as with merger control, the biggest impact is most likely to be one of duplication – pan-European cartels and issues will probably face parallel investigations by the UK and EU competition authorities, potentially giving rise to increased fines.

State Aid and Public Procurement

If the UK were to join the EEA it would be required to comply with the EU rules on state aid and hence the position would be one of ‘no change’. However, in the event of a ‘total exit’, the UK would no longer be bound by the rules aimed at protecting the single market and the far looser rules under the WTO would apply (e.g. prohibitions on trade subsidies). Crucially, the WTO rules would not prevent the UK subsidising ‘national champions’ and hence could result in direct Government intervention to support businesses such as Tata Steel.

The situation in relation to public procurement is similar. Whilst EEA membership would bring with it a continued obligation to comply with EU rules, a total exit would leave the UK free to create its own national rules outside of the EU regime. In practice however, it seems inconceivable that any UK system would not result in similar obligations for the award of public contracts in the interests of transparency, value for money and non-discrimination as between bidders.

Competition Policy

It is to be expected that the UK competition authorities will cease to be full members of the European Competition Network upon exit, which in the absence of separate agreements will mean a reduced UK voice in the shaping and development of competition policy at an EU level and ultimately globally. Whilst that leaves the UK free to pursue its own policy objectives, this might result over the longer term in a gradual shift away from the existing alignment with EU law as the UK regime adapts to life outside the EU. At least initially, however, we would expect any practical impact to be limited.

Competition Litigation

The position is most uncertain as regards competition litigation, particularly enforcement of damages claims. The UK had sought to position itself as a leading jurisdiction for the private enforcement of EU competition rights (alongside Germany and the Netherlands). It is to be expected that once the UK has finally left the EU, EU Commission decisions and EU law will cease to have a binding effect on the UK courts and the UK courts would consequently cease to be such an attractive forum for claimants.

But that might not be the final word – the UK remains a large market with a well-respected judicial system. Given the similarities that exist and will likely persist in the substantive provisions, it is probable that EU infringement findings will remain highly persuasive to the UK courts and hence there might actually be an increase in cases pursued in parallel in the UK and an EU court. UK courts are also adept at resolving conflict of law issues and can be expected to apply the law as it stood when the infringement took place and/or when the right to sue accrued. Hence EU competition law may continue to be of relevance in the UK Courts for some time to come, whatever the outcome on the exit negotiations.

Conclusion

And so we are now at the end of the beginning of the UK’s exit from the European Union.All we can say with certainty today is that the UK electorate has delivered a clear, if far from unanimous, mandate to its government to start the process of extricating the UK from the EU. But the main message to businesses operating within the UK can also be summed up by a historic cliché:‘Keep calm and carry on’.

At a very practical level the present system is likely to persist for some time. Furthermore, most businesses will remain subject to the same general restrictions and obligations as they do today, albeit with a greater risk of duplication and/or parallel reviews. Watch this space as we move from the end of the beginning to a new chapter in the UK’s relationship with the EU.

Sophie LawranceStephen SmithPat Treacy

Time to modernise standards?

As part of its Single Market Strategy, the Commission has announced that it will take steps to modernise the EU’s policy on standardisation. In particular, the Commission will launch a Joint Initiative on Standardisation to modernise, prioritise and speed up the delivery of standards by 2019. This initiative is intended to bring together European and national standardisation organisations, industry, SMEs, consumer associations, trade unions, environmental organisations, Member States and the Commission. 
 
The Commission has also emphasised the services and ICT sector as priorities for future standard-setting. The former bolsters its digital single market initiative by facilitating cross-border services (see our previous posts here, here, here, here…). The latter follows on from its recent communication on its ICT standardisation priorities (see our post here).
 
In relation to standard essential patents, the Commission intends to “provide guidance to ensure that the licensing frameworks… continue to bring benefits to innovation and implementation of new technologies such as 5G or the Internet of Things” (see the Commission's Factsheet). The Commission doesn’t provide any detail as to the direction of its guidance other than to repeat the well-worn rhetoric of aiming to incentivise R&D investment, whilst promoting access to technology and interoperability. Interestingly, the Commission does note that royalty-free licensing agreements for SEPs are a type of FRAND agreement, rather than an alternative. Such agreements are unsurprisingly welcomed by the Commission.
 
The Commission’s initiatives promise great things but it remains to be seen what will materialise...

May Day! Competition policy: trade war by other means?

          
May 2016 was an important month for competition policy developments. We have reviewed the three key developments together, as they demonstrate the different policy drivers on the European Commission and national competition authorities: 

While the Commission’s policy anchors are the single market imperative and innovation, national competition authorities are more attuned to domestic political concerns. In the case of the French and German authorities, could their twin assault on big data be seen as a continuation of political protectionism by other means? 

25 May was a significant day for the Commission’s Digital Single Market Strategy (on which we commented on the Bristows ‘Cookie Jar’), with the publication of proposals for three new Regulations to:

  • tackle unjustified geo-blocking and other forms of discrimination on the grounds of nationality, residence or establishment;
  • improve cross-border parcel delivery services and increase the transparency of prices while reducing delivery costs; and
  • strengthen the enforcement of consumers' rights and provide guidance to clarify what qualifies as an unfair commercial practice in the digital world. This does not impose any new obligations on retailers, but rather is intended to improve the ability of consumers to enforce the EU Consumer Protection Regulation 2007 through national courts.
The proposed geo-blocking Regulation will ensure that:

  • Consumers visiting an online site from any EU Member State will no longer be prevented from ordering and taking advantage of retailers’ international delivery options where these are generally available; and
  • Consumers will be able to visit the country specific site of their choice.  In other words, a UK consumer can choose to visit, e.g. retailer.fr to take advantage of different purchasing options/prices on that site.  Retailers will not be able automatically to re-route customers (in this example back to the UK site) without the customer’s consent and even where consent is given, the domain must remain available.
However, notable by their absence are any proposals to tackle the geo-blocking of audio visual services. This is in stark contrast to the Commission’s original intention when the DSM strategy was launched in March 2015. This means that for the foreseeable future there will be no general right of EU citizens to access sports events broadcast under exclusive territorial licences in other Member States.

In tandem with these initiatives, Commissioner Vestager gave a speech on 24 May which set out the Commission’s view that competition supports innovation. Notably she said that to encourage innovation, there is a need for both competition and rewards for innovators. 

She went on to say that the Commission does not object to standards, provided they are set up in the right way. However, when standard essential patent holders try to go back on their promises to offer their technology to everyone on fair terms, that can be a serious problem for competition. 

French and German competition authorities also published a joint paper on data and competition law on 10 May. This considers the extent to which data confers market power, the types of data-related conduct that may give rise to abuse, and the interaction between competition and data protection/privacy rules. 

In particular, the paper looks at: (1) whether the collection, processing and use of data may lead to market power; (2) the types of data-related conduct that are potentially anti-competitive; and (3) whether personal data protection rules take precedence over competition law rules.

Lurking in the background is the German competition authority’s investigation into Facebook’s data protection policies and the French competition authority’s sector inquiry into the use of big data in the online advertising market.

Of recent years, there has been some uncertainty over whether the issue of ‘big data’ was really a competition issue.  It seems that at least the French and German authorities would disagree.

Qualcomm in the firing line again

Qualcomm, the largest manufacturer of baseband chipsets for mobile phones, has recently found itself under attack again for its business practices. 

In September last year, the UK chipset maker Icera and its US-based parent company Nvidia launched proceedings against Qualcomm in the UK.  Court filings that were made public last month make clear that the claimants are seeking compensation for losses suffered as a result of Qualcomm’s alleged “unlawful abuse of dominance”. 

Nvidia spent $352 million to acquire Icera in 2011 – but was forced to wind down its mobile broadband chipset business, including its Icera unit, just four years later.  Nvidia claims that Qualcomm’s aggressive pricing strategies – selling chipsets below the costs of development and production – drove Icera out of the market and caused Nvidia’s applications-processor business to incur substantial losses.

Nvidia is arguing that Qualcomm has a dominant position in essential patents for 3G and 4G wireless standards, and that this position has enhanced its strength downstream in the sale of chipsets to mobile device manufacturers.  It further argues that Qualcomm’s dominance in the market for slim modem chipsets is “reinforced by barriers to entry and expansion”. 

According to the claim filed by Nvidia and Icera, Qualcomm’s aggressive and anticompetitive behaviour led to “unexplained delays in customer orders, reductions in demand volumes and contracts never being entered into, even after a customer […] had agreed or expressed a strong intention to purchase” Nvidia’s chipsets.  Nvidia says that it was forced to reduce prices to retain customers, which had an adverse impact on revenues and impaired its technical ability to innovate. 

The recent developments in the UK-based action come on the back of the two Statements of Objections that the European Commission sent to Qualcomm in December 2015.  In the first of these, the Commission set out its preliminary findings that Qualcomm made illegal payments to a manufacturer-customer in exchange for that manufacturer exclusively using Qualcomm chipsets in its smartphones and tablets. 

In the second Statement of Objections, the Commission took the preliminary view that Qualcomm deliberately sold chipsets below cost with the aim of hindering competition, forcing Icera out of the market in particular.

EU Commissioner for Competition Margrethe Vestager said in December last year: “Many consumers enjoy high-speed internet on smartphones and other devices – baseband chipsets are key components that make this happen. I am concerned that Qualcomm’s actions may have pushed out competitors or prevented them from competing. We need to make sure that European consumers continue to benefit from competition and innovation in an area which is at the heart of today’s economy.”  

We understand that Qualcomm is due to respond to the Commission’s allegations shortly.

As we have pointed out previously, Qualcomm is no stranger to allegations of anticompetitive conduct.  It can confidently be said that many in the mobile telecoms industry will be keeping a close eye on the High Court proceedings and Commission investigations, not least Nvidia and Icera.

The Commission has seen the future and it is standardised!

For those of you who are interested in standardisation, a post about action by the Commission generally, rather than just DG Comp.
A couple of weeks ago the Commission has published a Communication to a whole host of other EU institutions (including the Parliament and the Council as well as the ECSC and the Committee of the Regions), setting out its Information Communication Technology (ICT) standardisation priorities. This forms part of the broader Digital Single Market (‘DSM’) strategy. If you are interested, have a look at our sister site, Cookie Jar for a broad perspective on all things DSM.

The objective is to ensure that ICT standards in Europe and globally facilitate the interoperability of digital technologies, which the Communication regards as essential for an effective DSM. To help achieve this the Commission intends to focus on improving standards in five strategic areas: 5G, cloud computing, internet of things, data technologies, and cybersecurity.

A key focus for the Commission is the role of ICT standards for 5G networks to ensure interoperability, security, privacy and data protection, and it intends to develop a 5G Action Plan for EU-wide development of 5G networks beyond 2020. The paper also highlights the role of ICT standards for sharing data across national borders (e.g. in relation to spare parts between vehicle manufacturers and scientific research).

The Communication argues that the proliferation of standards has created uncertainty about: what patents are standard essential patents (‘SEPs’); who owns which standard essential patent (SEP); the cost of licensing intellectual property rights; and the methodology for valuing SEP licences. 

So what happens now? 

The Commission intends to: 
  • Take steps to improve the efficiency of the standard-setting process by working with the wider standard-setting community. 
  • Regularly review and monitor progress for updating ICT standards.
  • Improve EU financial support for standard setting.
  • Ensure fair and non-discriminatory access to standards based on a balanced IPR policy with FRAND licensing terms, which take into account a variety of competing needs: 
    • fair return on R&D investment; 
    • a sustainable standardisation process; 
    • a competitive technology market; and potential barriers to entry for SMEs; and 
    • a fast, predictable, efficient and globally acceptable approach to technology licencing, which ensures a fair return on investment for SEP holders and fair access to SEPs for innovators. 
  • Strengthen the EU presence in international cooperation on ICT standards, in particular with the US, China, Japan and South Korea. 
It will probably come as no surprise to regular readers of this blog that the comments about FRAND caused us to pay particular attention as FRAND developments are key theme of this blog: see our previous posts here, here, here and here.

How about open source? 

It is interesting that the Communication makes no reference to open source, royalty free licencing of SEPs. This is in marked contrast to the Commission’s 2004 European Interoperability Framework for pan-European e-government services, which at the time considered that open source technology standards required intellectual property included in standards to be made available on a royalty-free basis.

More on mythical creatures – FRAND and hold up revisited

Those of you who are interested in FRAND and standardisation issues will, I hope, have read with interest the twin blogs that Sophie and I put up a couple of months ago reporting on a couple of conferences about standard setting, one in Liege and one in London. The organisers of the Liege conference, the Liege Competition and Innovation Institute, have now produced a more detailed summary of the proceedings at their conference. We thought we’d draw it to your attention, and you can find it here.

Keeping a weather eye on competition and innovation

Last week we updated our CLIP of the month to an article on the theme of innovation, as considered through the lens of competition law.  Pablo Ibanez Colomo’s article focuses on the identification of harm to innovation in competition cases (across the behavioural / merger spectrum).  He distinguishes between cases where such analysis has been just one factor among many (referred to as cases where innovation considerations have had an “indirect” role), and cases where "direct" harm to innovation is central.  

This academic contribution is timely, as innovation is now a topic at the forefront of debate in competition circles.  Last month, Commissioner Vestager gave a speech addressing this topic head-on, in particular in relation to digital markets - the trend of favouring disruptive innovation over repeat innovation by an ‘incumbent’ remains evident.  

DG Comp also focuses on innovation in its recently published Competition Merger Brief.  The brief notes how innovation concerns have been key in mergers relating to industries as diverse as gas turbines (GE/Alstom) and biosimilar medicines (Pfizer/Hospira).  The discussion of the Pfizer/Hospira merger decision (see p.12 of the Merger Brief) is likely to be of particular interest to readers of this blog, as it is the first case in which the Commission has engaged in detail with the markets for biological and biosimilar drugs, concluding that they belong in the same market, but observing considerable differences compared to the dynamic between originator and generic versions of small molecule medicines.  (And for those with a deeper interest in this area, Bristows’ own 2015 Biotech Review  carried an article (by two of the regular writers on this blog) looking at how innovation, in the form of competition between pipeline products, played a significant role in a couple of earlier mergers - see p.17.)

The current concern with innovation does not extend only to product innovation, but also encompasses changing business models - another subject which is a particularly hot topic at present - with the CMA’s Alex Chisholm having recently noted the fragility of such innovation, and the challenge of ensuring “an economic and regulatory environment in which new business models and consumer-friendly innovations can emerge and thrive”.  It was this concern that late last year led the CMA to reject proposals from Transport for London that would have curtailed the advances made by Uber on London’s taxi scene. 

We at the CLIP Board will continue to keep a weather eye on discussions of innovation and competition law - just click on the “innovation” tag on our home page to see more.