Protecting Intellectual Property Rights from Misuse by Their Owners - Essay Example

COMPETITION LAW Submitted to (ADDRESS) March31st, By Table of Content Table of Content 2 Introduction Competition Law throughout the world is a hot topic for the corporates and countries, where there tends to be unhealthy practices that threaten to stagnate markets. This is in regard to collusion between and amongst countries and corporations to create their own safe haven of doing business. However, of most importance is the intellectual property docket, where there are numerous regulation and malpractices that restrict the flow of information and technology in the right direction for effective use by the licensees and patentees. Regulations entail sharing of information by applying fair, reasonable and non-discriminatory terms, which is often disregarded, and failure to implement the rules that manage the markets could lead to destruction of innovative practices and introduction of new technologies into the market for the benefit of the consumers and even independent developers. When put into perspective competition laws within the European Union are meant to come up with healthy practices for intellectual property to be used effectively and to the benefit of all. However, this is provided when there is a market for new innovations and technologies coming up, and that no legal hurdles are jumped since they are in place to cushion both owners and other subscribing parties (Overwalle, 2009). In light of this, the goal of this paper is to go into the details of protecting intellectual property rights from misuse by their owners and clients who sign legal agreements for their use. The rights in this case refer to patents and partial patents that determine proprietorship of technologies and inventions, as well as how far the technologies can be used. In addition, it aims to evaluate the balance that exists between competition laws and intellectual property in light of effective competition between companies and countries, and how well this has been achieved with the application and implementation of the laws. The keys aspects up for review throughout the paper entail the origin of the law, which will define the key reasons why the law is in place and some of the challenges it faces. It will also dwell on components of the competition law, which include antitrust covering the largest part of intellectual property rights, as well as exemption rules within the same law. In addition, dominance and cartels shall be discussed, which shall include the implications of having these aspects and how they affect the industry and consumers (Zimmer, 2012). To cement the position of the law of intellectual property rights certain cases that have been deliberated on shall be used to serve as backing for the situation between the two. History of the law The European competition law stems from the need to ensure that what governments did for the good of the economy of their respective nations was not undermined by corporations that sought to meet their ends. This is in regard tomarket power, which saw the European Union come up with treaties to combat such cruel tendencies by corporates against other corporates and even governments as wholes. Competition laws in the European Union entail enforcing free competition amongst members and corporations as they go about their business. The law spans over nine areas, all of which are crucial to the running of free business with healthy competition that can spur economic development in the face of adverse economic conditions. The competition law came into force as a result of a number of issues that arose from doing business within Europe and the multiple hurdles faced by European corporations and governments in regulating their markets and movement of goods and services across and within borders (Wendt, 2013). One of these factors was the need to create a common market for the goods and services produced by the member states of the EuropeanUnion. This culminated in the creation of a totalitarian authority that was compatible and transparent in regulating business between member states. Signing of the treaty on the functioning of the European Union (TFEU) created the single market desired by member nations and this saw free movement of goods and services throughout the European Union (Nazzini, 2011; p. 9). For this treaty to be effective competition rules had to be instituted, for which purpose the EU competition rules exist. Movement of goods and services throughout the EU saw plenty of illegal activities by multinational corporations in that they did not conventional trade rules due to absence of legal establishments. However, this was only before the law was put in place, and some cases took place after institution of the regulations. Oneof the biggest challenges faced by this regulation lies in the blatant disregard for best practices in business when it comes to doing trade. The above puts governments in conflict with the authority since National Competition Authorities become sophisticated in economic analysis. As such, governments tend to come to the aid of national corporations to protect them from facing legal consequences of their actions, as this would reflect negatively on their economic output. The result of these has seen implementation of a myriad of changes to the law and application of means to counter retrogressive means of doing business within the EU such as decentralization of the body created by TFEU. Consequences of this lie within implication on copyright laws found within the European Union since business competition relies heavily on intellectual property and Directive 2001/29/EC serves to create a guideline on how to conduct cross border trade in the EU with copyrighted material (Townley, 2009). There is diverse mention of how information is spread with extensive mention of the internet and how information on business operations is conducted. In addition, based on the competition law and intellectual property law, there exists a strong system thatrelates the two forces while citing the need to create a uniform system of protecting intellectual property rights. This is particularly so in industrial property and creation of creative content with respect to international regulations such as those represented by the EU competition law (Lorenz, 2013). Anti-trust Antitrust rules of the EU are clearly stipulated in articles 101and 102 of the TFEU, where each carries specific restriction to manners of doing business without necessarily touching on copyrights, although interpretation of the law indicates a direct relationship between the two. Article 101 bans agreements and concerted practice of any form between two or more independent businesses that may affect trade between member states (Mateus et al, 2007). The same agreement could have the effect of preventing, restricting or distorting competition, which is highly prohibited under the competition law. This makes the article similar to a caveat emptor only that this is prohibitive on industrial dealings blocking economic relations between member nations and different companies. Collectively, these two articles cover areas that require disambiguation for clear definition of the relationship between copyright and competition laws. As such, to develop a clearly effective framework for competition, there is need to enhance international trade, where trade must remain healthy otherwise some corporations involved might end up collapsing. One such case of antitrust breach involves Google and European Antitrust regulators, with Google suffering a minor setback in terms of changes to implement in its organization. As such, the case involves not offering adequate exposure to competitors with Google’s prominence in the European Market at roughly 90% of the market share. With this, Google was slapped with harsh penalties for violating competition laws, although they were not as severe as expected by competitors. This makes Google’s concessions the largest it has ever given into since foundation although it did not lose to revelation of its search algorithm, which is protected by intellectual property rights. The case against Google is indicative of restriction or blocking competition, where Google shows minimal results from other competitors. The settlement arrived at between Google and European competition regulators requires that Google displays results from at least three competitors whenever it shows its own results (Miller & Scott, 2014). In addition, competitors are bound to pay for having their search results clicked on for specialised results. To ensure fair competition, the terms of the settlement are meant to run for five years and this marks the level of balance where competition laws focus heavily on protecting all players in a sector and ensuring that intellectual property rights of are not violated despite acting as assists to law break. Implications of this case in the balance are that the balance needs to be struck, with adequate consideration for the role of others in the same industry such as promoting a company’s own services and properties rather than opening to competitors. Benefits of exemption By creating a blockexemption on intellectual property countries and corporation can enjoy a larger field of freedom when it comes to productivity and providing diverse services and goods to their respective clients. By having exception in the law, transfer of knowledge is covered by law to cater for both parties in the agreements, which are still covered by the TFEU 101 to ensure that no unfair practices engaging multiple parties (Geradin et al, 2012; p 9). This if of course unless they are approved, since the transfer exemption aims at creating a safe haven for deals involving intellectual property, where the seller and the buyer know how they are legally bound by law and to what extent they can license they products. It, therefore, means that the competition law in comparison to intellectual property law dwells heavily on transfer of rights and licensing. However, it is crucial to note that there are restriction to this all too critical rule, where TFEU article 101 does not cater as the exemption rule is depicted as semi-autonomous. Semi-autonomy, here, implies that there are sections of the intellectual property law that can fall under the influence of TFEU article 101 exclusively, while others remain within exemption. Those that can only be governed by TFEU, but are still under technology block exemption include research and development agreements, and certain categories of specialization agreements. Consumer protection and antitrust Antitrust has been argued as a means of lowering consumer protection and welfare through inception of articles 101of TFEU. This is because it restricts competition due to reduced variety within the market and allowing predictability of the market. Thanks to the presence of competition laws and intellectual property rights laws, consumers are restricted to variety, as refusal to license technologies and other intellectual properties such as knowledge denies competition in the market. Competition is spurred by the presence of similar products that can serve similar purposes, but only from different sectorial players. These practices of competition laws creates a state of anti-competition due to the need to create a single product and rake in profits from the product, and this is only done but the possessors of the unlicensed technology, thanks to TFEU (Mateus et al, 2007). It is for this reason that there should be a definitive balance between competition and intellectual property rights to sustain development and motivate competition amongst different companies and countries. In addition, presence of intellectual property rights laws and application of article 101 of TFEU prevents appearance of new products that could satisfy consumer demand. The above case is evidenced by the case between the General Court and Microsoft, where failure to license the specifications required to ensure complete inter-operability with Microsoft Windows Operating platform to manufacturers of rival work group server operating system. The ruling by the court was that Microsoft be compelled to reveal the information on reasonable and non-discriminatory terms to vendors of work group servers. This was to allow development and distribution of interoperable products. The above ruling shows the need to enforce a balance between intellectual property rights and effective competition, as absence and oppression of such a balance is oppressive to both developers of services and products, and consumers through denial of essential goods and services (Cseres, 2005). The law, therefore, draws a clear line of how the two aspects of competition should collaborate for the good of the consumer. Cartels TFEU article 101 (1) bears clauses that allow exemptionof prohibition of certain conditions meaning that efficiencies that are granted from any given agreement in intellectual property at all times overpower anti-competitive effects. As a result, this implies that benefits reaped from anti-competition agreements ground on TFEU, must be passed on to the consumer, and tis often gives rise to cartel, from this results serioushard-core infringement of competition laws touching on intellectual property rights, and these have negative market effects that cannot be exempted or overlooked. Cartels, according to TFEU involve participation of parties owning intellectual property rights coming together and colluding with interested parties, and this is not just one party, but could include two or more parties as indicated in article 101. These parties then create agreements on howbest to use their licensed property in accordance to the terms they agree regardless of the laws regulating their agreement. Agreements in this case entail sharing of information, besides violating licensing terms spelled out by TFEU. One such case is evident in illegal market sharing and exchange of commercially sensitive information in the case of Car Glass. The Car Glass case involved a cartelcomposed of Asahi, Pilkington, Saint-Gobain and Soliver, where they shared inside information about the car glass industry in order to allocate orders to supply glass to car manufacturers (Harding et al 2003; p 40). With such eventstaking place, the Car Glasscase indicates the competition law saw the companies involved slapped with fines for possession of internal market information and defrauding the car making industry over a period of five years. This is in spite knowing of the negative consequences that their practices would lead in the market to other competitors by denying a market share. In addition, the companies involved in the Car Glass case were in blatant violation of article 101(3), which states, - the agreement (a) contributes to improving the production or distribution of goods or to promoting technical or economic progress; (b) allows consumers a fair share of the resulting benefit; (c) does not impose restrictions which are not indispensable to the attainment of (a) and (b); and (d) does not afford the possibility of eliminating competition in respect of a substantial part of the products in question (Bradgate, 2012: p 12). In similar cases where there exists conflict between competition law and intellectual property rights, the European Commission imposed leniency, which allows creation of a sense of balance between the two policies. Leniency ensures that competition is fostered in cases of violation of TFEU laws since it allows investigations to find the underlying cause of the case and all cooperating members of involved cartels receive a slash in their fines. Consequently, the balance between the two policies may not be as clear as required, but it does show promise of development to eliminate anti-competitive practices within intellectual property sectors. Evidence of this appears in the adoption of leniency programs by EU member states, which allow them to act against cartels effectively and reach competition benefits down to consumers. Abuse of dominance Dominance, competition law and intellectual property laws have a strong relation when it comes defining the extent to which competition law influences intellectual property rights. A dominant position is defined as a situation in which on company holds the greater economic power and uses it to hinder efficient and healthy competition against other companies. Article 102 of the TFEU prohibits any form of abuse of dominance by any one arty in a market provided the abuse will interfere with trade between and amongst member states. In the case of intellectual property rights entails the use of patents, information and technologies that can be shared with other companies, and that are provided in bad faith by the dominant company and at friendly terms (Chalmers, 2006). These may include refusal to supply, where companies lack reasonable or fair reasons for cutting off supply to customers. In cases of technology and patents, Volvo and Magill have been found guilty of abuse of dominance thanks to the provision in TFEU that entails refusal of supply. The two companies have been found to be in violation following refusal to license intellectual property rights, which was before the law was overturned in a ruling in 1987. Prior to this case, Volvo was an abuser of dominance, but under the new technology exemption rule of TFEU article 101(3), this is no longer case provided there is a clause mentioning sole proprietorship of the said technology or property in question. In addition, there is the earlier stated case of Microsoft, in which Microsoft was required to disclose to other software developers information to ensure interoperability of their products with Windows OS by Microsoft. However, it is important to note that in certain exception al cases, refusal to license is deemed as abuse of dominance, in which case competition law and intellectual property come into conflict. For such reasons, there exists a new level of balance between these laws, with the European Commission adoptingnew measures meant to regulate competition on intellectual property. The measures cover patents, know-how and software copyright, where this cover market dominance over which having exclusive rights of right over intellectual property does not automatically a corporation dominant in its field. Paying attention to these exemptions and dominance with respect to intellectual property rights, there is a distinct aspect that comes out, competition restriction. This bends the balance between the two out of proportions where licensing agreements for these forms of property by restricting competition. As a result, the two laws work hand in hand to ensure that market dominance is used in a pro-competitive manner involving integration of complementary assets. In turn, there is rapid entry of new technologies into the market, which spurs innovation, while at the same time rewarding innovators and inventors for what is normally risky business. An example of this is drawn out in the 2007 case of Microsoft and independent software companies, where the General Court ruled on distribution of inter-operability information to open source software developers. Microsoft, however, had to pay a penalty for abuse of market dominance, and it had to pay €860 million, which was a reduction from the initial €899 million (Bael, 2011). As a result, Microsoft posted the interoperability information on its official website free of charge. The above gains by software developers can be attributed directly to the competition law that serves to protect developers, consumers and even dominant market players. This takes place through definition of acceptable sharing and consumer needs that might be inhibited by dominant players. Prevention of development of new products thanks to market abuse and the move by the European commission allows consumers to enjoy the products provided by intellectual property rights coupled with competition laws. In addition, abuse results in remuneration for the abuser since agreements made with abusive corporations require massive expenditure of revenue to ensure that investments by owners of the property are recouped. National Competition Authorities In addition to TFEU, there are also National Competition Authorities, which serve similar purposes to the TFEU, only that NCAs tend to handle competition cases at the national level of member states. Some states have these NCAs, and these bodies have laws to regulate competition nationally regardless of its influence on other member states, which is often in contradiction to TFEU. As such, NCAs prohibit or correct unilateral behavior of companies, where violations of national competition laws on intellectual property rights do not violate Article 102 (Cahill, 2004). As such, restrictive tendencies on intellectual property are investigated on companies that do not enjoy the dominance stated in article 102 of TFEU. An example of this lies in Germany, where companies that do not enjoy market dominance, but practice abusive practices similar to those conducted by Microsoft, can be investigated and charged. Besides this, non-dominant companies stand to gain substantially in intellectual rights properties by applying competition laws effectively in their favor. This is evident in companies that use their dominant positions to the disadvantage of other minor companies. For such, all that can be done entails filing complaints with NCAs or the European Commission to correct the situation by invoking the domestic litigation implied by article 101 and 12 of TFEU. Putting together these bodies (NCAs and the European commission), a balance is struck between competition law and intellectual property rights with consumers gaining the largest benefits due to violation of dominant position by companies. It occurs this way when issues of tying and discrimination are resolved at the agreement level since tying passes extra costs to consumers from companies that experience unfair trade practices. Discrimination, on the other hand, imposes extra costs to both companies and consumers since to gain a piece of intellectual rights it has to be paid for and the prices vary from company to company. The above makes some companies suffer revenue losses due to expensive transaction and pricing wars for products. Consequently, the EU law can be expressed as exclusively balanced in intellectual property when it applies to dominance since it covers both national and competition and member state collective competition. However, only one situation requires remedying, and this applies to conflict between NCAs and TFEU. It is illegal under article 102 of TFEU to apply national competition law to any activity that is illegal by order of the same article without invoking article 102 to the abuse case altogether. Implications of this are that there is definite integration of TFEU within NCAs and national law on competition, where balance is struck between the intellectual property rights and competition laws as long national law is derived from article 102 of TFEU. Patents and cooperation Cooperation between organizations in a given sector serves as a motivator for competition. Mainly, cooperative practices between and amongst companies lead to enhanced benefits passed on to the consumers and even the companies purchasing into the technologies that parent companies offer. Mostof the times, cooperation are perceived by the commission as part of creating cartels that are in breach of antitrust law in article 102 of TFEU (Harding et al 2003; p. 12). This implies the level of suspicion on cooperating parties by the EU commission. For intellectual property, cooperation between different companies takes place in the research and development sector requiring that these parties be often covered under the exemption clause of competition laws. In light of the above, standard setting organizationshave to obtain patents for the technologies they invent. Most importantly, this ensure that intellectual property rights are not infringed or stolen, while in some cases they are not used to their maximum potential (Overwalle, 2009). These standard setting organizations tend to apply patents, and this is allowed for in the TFEU, where there are guidelines to ensure that the intellectual property invented is put out to the public for general use. The TFEU goes on to define the clauses that can be used to ensure competitive application of the technologies. As a result, there is use of license agreements, where the patent owner licenses others to use the technology under given to guide usage. However, there are attempts by some patent owners to impose limitations that are beyond the scope of intellectual property rights by regulating pricing and the amount of goods produced. Such scenarios are prohibited by article 102 of TFEU since they violate competition rules through attempted dominationof the market. This shows a definite balance between competition law and intellectual property rights. A demonstration of such patent and competition law wars is evident in the case between Qualcomm and IPCom, where Qualcomm breached a commitment to license essential patents on fair, reasonable and non-discriminatory terms. The case was of high interest as it raised questions on whether a licensee had to deliver or pass on the fair, reasonable and non-discriminatory terms of acquiring rights from initial owners. Double standards In analysis of patents and cooperation, standard setting organizationsby way of having innovative technologies and other forms of intellectual property, it is clear to see that standard setting companies redefine TFEU. This is in light of antitrust laws when it comes to competition and passing on licensing agreements the European commission outlines the consequences of standard setting. These include reduction in price competition, foreclosure of innovative technologies and discrimination against some companies thus restricting effective access to certain standards. As a result, the TFEU does not necessarily apply exclusively to all companies dealing with intellectual property rights on competition. Consequences of competition laws and intellectual property rights in standard setting organization have instead resulted in low state of balance with disputes amongst standard setters for patent infringement in the EU concerning large well-known companies (Lindsay et al, 2012). To express this lack of balance, the case of ZTE vs. Huawei in Germany depicts the lack of a clear framework, where standard essential patents laws were violated by ZTE failing to license to Huawei essential technologies responsible in the running of LTE /4G cellular telecommunications standard. ZTE was opposed to licensing this technology to Huawei in a case that ZTE lost (Geraldin, 2012). All this took place before referral of the case to Court of Justice of the European Union (CJEU). When comparing this case to that of Qualcomm vs. Ipcom, there is a clear difference between how courts in the EU dispense justice relating to intellectual property and patents pertaining competition. This is because the double standards in both cases, where one case had to go to the court while the other was settled amicable out of court is an indicator of how much balance is required between the need for intellectual property rights and the need for effective competition. In such cases, patent litigation has seen companies make attempts to gain advantages in commercial negotiations before reaching terms of purchase of rights or licensing. For this reason, there are few decisions made by the EU commission on patent infringement on a formal scale. In addition, making any formal decisions, affected parties would most likely make appeals to the same commission, which would end up reversing the decisions and loss of commercial value in regard topatents. For the same patents, the EU commission and the courts have their own way of dealing with patent infringements where the rules of TFEU do not apply to all cases, but rather a double standard comes in with a case-by-caseanalysis situation. As a result, no general intervention of competition can be made on these companies for infringing intellectual property rights on essential patents, where the commission is under consideration against anti-competition claims by some companies. This is where the commission suggests that it might treat some complaints invoked under Article 102 as abusive in some circumstances. This implies that some companies are implying antitrust to bring down their competitors using claims of violation of fair, reasonable and non-discriminatory terms. The EU commission is therefore applying the TFEU in accordance to adaptive measure to protect both intellectual property and competition with minimal damage to standard setters such as Samsung and Qualcomm through innovative practices. With minimal intervention by the commission, openness and transparency in standard setting is termed as the best way to strike a balance between competition and intellectual property. Mergers TFEU covers mergers in to regulate competition amongst member states and assess innovation, especially when dealing with research and development. As such, the commission in implementation of TFEU assesses the potential of a merger to limit innovation within a given market, where mergers often contribute largely to creation of dominance. This lowers the ability of other junior firms to acquire intellectual property through licensing agreements thus inhibiting the ability of the public gaining benefits of new products. Mergers contribute largely to reduced investments in research and development as they lower competition and innovation, which the EU commission focuses on. The commission under TFEU only acts favorably towards mergers that promote innovation and promotion of competition thanks to creation of new products from knowledge and technology possessed by the acquiring or acquired companies (Lindsay et al, 2012). As a result, the EU competition law tends to focus on the impact of mergers on innovation (intellectual property rights), where they are termed as positive impacts should they improve in the event of a merger. In the event of a merger, the commission also grants NCAs the authority to regulate transactions based on their impact on the market, but these also regulate joint venture between any two companies. In such cases, TFEU consists of merger regulations, where their practices of running a joint venture do not fall under any regulated environment of the TFEU, thus they need to evaluate themselves under the same law, but under Article 101 (Gore, 2013). Parties are required to evaluate the effect of their mergers of joint ventures on the competitive positions of other parties, and the possibility of restricting competition in the market. Conclusion Altogether, based on TFEU, there are numerous aspects to be considered before judgment of the EU competition law is considered to be either balanced or unbalanced in comparison to intellectual property rights. This is because following the provisions of article 101 and 102, as well as their subheadings, which define the relationship between companies and nations when it comes to competing healthily within the EU in trade and sharing of intellectual property. The balance can be labeled as clearly lacking when evaluating some aspects such as the double standards that exist when applying TFEU to different companies, where each case has to be handled exclusively and uniquely. This means that the competition law does not create a balance between the two to ensure that all cases are handledjustly, but rather as per the discretion of the commission. In addition, there is the case of labeling complaints by companies against other refusing to license their intellectual property rights as abusive. This brings up the question on the criteria used to define hoaxes and exploitative tendencies by companies attempting to eliminate their competitors, which is not clearly defined in the laws, but rather as a comment. As a result, this creates a favorable condition for dominant companies to abuse their positions through favors granted to then by the commission, whether willfully or not. Implications of these lies on the potential of increased blatant abuse by dominant abuse at the expense of potential licensees and consumers who do not access to technologies and other patented products. These include those created by standard setters who are unwilling to deliver fair, reasonable and non-discriminatory terms of license agreements thus restricting competition. In addition, the balance is breached by cartels, which are a result of numerous considerations that may emanate from antitrust laws. As such, a look at TFEU exemption rule reveals that it allows for cartels to thrive through restriction f market competition and pricing, as well as sharing market information to their own benefit, which is in contradiction of article 102. However, there are strong balance points such as exempting technology sharing from restricted sharing and investigating cartels, as well as abuse of dominance, where these promote competition in a healthy manner and spur a balance between competition and intellectual property rights to the advantage of consumers. Reference List Bael, I. 2011, Due process in EU competition proceedings. Alphen aan den Rijn: Kluwer Law International. Bradgate, R. 2012, Commercial Law: LPC Guide 2012..London: OUP. Cahill, D. 2004, The modernisation of EU competition law enforcement in the European Union: FIDE 2004 national reports. Cambridge: Cambridge University Press. Chalmers, D. 2006, European Union law: text and materials. Cambridge, UK: Cambridge University Press. Cseres, K. 2005, Competition law and consumer protection. The Hague: Kluwer Law International ;. Geradin, Damian & Farrar, Anne (2012).EU competition law and economics. Oxford, U.K.: Oxford University Press. Gore, D. 2013. 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