An Interdisciplinary Approach to Improving Competition Policy and Intellectual Property Policy
Fordham International Law Journal
William E. Kovacic
Andreas P. Reindly
Copyright c 2004 by the authors. Fordham International Law Journal is produced by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/ilj
Competition Policy and Intellectual Property
William E. Kovacic and Andreas P. Reindl
This Paper suggests that interdisciplinary cooperation and coordination should focus on IP
policy issues as well. This Paper discusses whether greater emphasis on interdisciplinary
cooperation and coordination could contribute to more effective international convergence. We address
the topic as follows. Part 2 describes the interdependency between the CP and IP regimes and
potential benefits of expanded cooperation between the two fields on a domestic level. Part 3
sketches the existing collection of domestic and international institutions that make up the CP and
IP communities and examines the consequences of institutional multiplicity for efforts to achieve
better harmony between the two regimes. Part 4 suggests approaches for improving coordination
between the two fields.
AN INTERDISCIPLINARY APPROACH TO
IMPROVING COMPETITION POLICY AND
INTELLECTUAL PROPERTY POLICY
William E. Kovacic & Andreas P. Reindl*
The interdependency of the competition policy ("CP") and
intellectual property ("IP") regimes is becoming more apparent,
as the significance of high technology and other IP-intensive
industries grows, and IP rights ("IPR" or "IPRs") play a major role
in shaping competition in these industries.1 There is broad
agreement that the two systems are to a great extent
complementary in their efforts to promote innovation and consumer
welfare.2 However, most observers also agree that the two
systems use different methods to promote these goals, and are not
always equally successful in doing so.' Better coordination could
limit inconsistencies between the two systems and ensure that
both can more effectively encourage innovation and
Broadly speaking, IP regimes and competition law and
policy intersect - and therefore require coordination - in two
ar* Mr. Kovacic is the E.K. Gubin Professor of Government Contract Law at the
George Washington University Law School and is the former General Counsel of the
U.S. Federal Trade Commission ("FTC"). Mr. Reindl is with the Organization for
Economic Cooperation and Development ("OECD"). The Authors would like to thank
Barry Hawk for his useful comments and suggestions. The views expressed here are
those of the Authors alone.
1. These developments received extensive attention in a recent FTC report that
studied the operation of the U.S. system for granting patent rights. See FED. TRADE
COMM'N, TO PROMOTE INNOVATION: THE PROPER BALANCE OF COMPETITION AND PATENT
LAW AND POLICY (2003), availableat http://www.ftc.gov/os/2003/1O/innovationrpt.pdf
(last visited Mar. 19, 2005) [hereinafter To PROMOTE INNOVATION].
2. See Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir.
1990) (stating that even though "the aims and objectives of patent and antitrust laws
may seem, at first glance, wholly at odds ... the two bodies of law are actually
complementary, as both are aimed at encouraging innovation, industry and competition.")
(citing Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 876-77 (Fed. Cir. 1985)).
3. See, e.g., Michael A. Carrier, Resolving the Patent-AntitrustParadoxThrough
Tripartite Innovation, 56 VAND. L. REV. 1047, 1049-53 (2003) (discussing the different
approaches to innovation taken by patent and antitrust law); TimothyJ. Muris, Remarks
Before the American Bar Association Antitrust Section Fall Forum 2 (Nov. 15, 2001)
(transcript available at http://www.ftc.gov/speeches/muris/intellectual.htm)
(discussing limitations of the antitrust and intellectual property ("IP") regimes as policy tools).
COMPETITION/INTELLECTUAL PROPERTY POLICIES 1063
eas. On the one hand, the definition of IPR and the
circumstances in which IPRs are granted may affect competition.
Poorly functioning IP regimes distort competition and may chill
innovation.4 On the other hand, competition enforcement
affects how IPR holders can use their rights. Poorly functioning
competition law and policy at the interface with IPRs can distort
IP-based innovation.5 Traditionally, CP agencies have, to a
much greater extent, or even exclusively, considered the
enforcement aspect at the interface between IP and competition
regimes. This Paper suggests that interdisciplinary cooperation
and coordination should focus on IP policy issues as well.
While international cooperation and convergence activities
involving CP and IP policy have grown more intense in recent
years,6 to date, they have tended to be intra-disciplinary.7 Few
cooperation and convergence activities account for the
interdependency of the CP and IP regimes. This Paper discusses
whether greater emphasis on interdisciplinary cooperation and
coordination could contribute to more effective international
We address the topic as follows. Part 2 describes the
interdependency between the CP and IP regimes and potential
benefits of expanded cooperation between the two fields on a
domestic level. Part 3 sketches the existing collection of domestic and
international institutions that make up the CP and IP
communities and examines the consequences of institutional multiplicity
for efforts to achieve better harmony between the two regimes.
4. See infra note 12 and accompanying text.
5. These two areas are not separated by a bright line, but it appears helpful to look
at the issues that can arise in each area separately.
6. For example, in revising its Technology Transfer Block Exemption ("TTBE"),
the Directorate General for Competition of the European Commission ("DG Comp")
consulted extensively with competition authorities from other jurisdictions, including
the United States. See, e.g.D,EPARTMENT OF TRADE AND INDUSTRY, COMMISSION DRAFT
REGULATION ON TECHNOLOGY TRANSFER BLOCK EXEMPTION: UK RESPONSE (2003),
http://europa.eu.int/comm/competition/antitrust/technology-transfer_2/72dtien.pdf (last visited Mar. 19, 2005). Officials from DG Comp have observed that
contributions from foreign authorities played an important role in shaping the revised
guidelines. See Phillip Lowe, Address at the Intellectual Property and Antitrust
Roundtable in FoRDHAM CORP. L. INST., INTERNATIONAL ANTITRUST LAw & POLICY 301-02
(Barry Hawk ed., 2005).
7. As we point out below, discussions about improvements in competition policy or
IP policy within individual jurisdictions also tend to be intra-disciplinary. See discussion
infra Pt. III.B.3.
Part 4 suggests approaches for improving coordination between
the two fields.
I. CP AND IP INTERDEPENDENCY
A. Imperfections in Each Regime Can FrustrateValuable
The need for a stronger interdisciplinary perspective stems
from the links between the CP and IP fields. The operation of
CP and IP regimes features substantial interdependencies.
Imperfections in the design and implementation of policy in each
regime can frustrate the attainment of valuable economic
objectives that each regime is intended to achieve.' The following
possibilities indicate the potential benefit of continuing efforts
to improve the operation of each regime in ways that take
account of the interdependencies between the two systems.
A central concern of CP is the improper creation or
maintenance of substantial market power.9 The question of whether
the existence of an IPR establishes substantial market power
often is an issue in antitrust analysis.10 Inherent in the definition
of property rights in most IP regimes is the power of the
rightsholder to deny others the use of the property right in question
unless the rights-holder consents to such use. In many instances,
the capacity to deny others the ability to use a species of IP does
not confer substantial market power upon the rights-holder.11
Other property rights not within the control of the
rights8. See To PROMOTE INNOVATION, supra note 1, Executive Summary, at 1, 3 (noting
that errors or biases in competition and patent law policies can harm their
9. See ANDREW I. GAVIL ET AL., ANTITRUST LAW IN PERSPECTIVE: CASES, CONCEPTS
AND PROBLEMS IN COMPETITION POLICY 22 (2002) (noting that the "primary economic
aim of competition law is to prevent the acquisition or exercise of 'market power,' as
that term is used in microeconomics.").
10. See Independent Ink, Inc. v. Ill. Tool Works, Inc., 396 F.3d 1342, 1345-46 (9th
Cir. 2005) (discussing whether presumption of market power attaches to the existence
of patent or copyright in the context of analyzing allegations of illegal tying
arrangements), petitionfor cert. granted,- S.Ct. - (2005).
11. See ROBERT L. HARMON, PATENTS AND THE FEDERAL CIRCUIT 21 (5th ed. 2001)
("Patent rights are not legal monopolies in the antitrust sense of the word. Not every
patent is a monopoly, and not every patent confers market power."); see also DEP'T OF
JUSTICE & FED. TRADE COMM'N, ANTITRUST GUIDELINES FOR THE LICENSING OF
INTELLECTUAL PROPERTY § 2.0 (1995) [hereinafter ANTITRUST GUIDELINES] (noting that the
Department ofJustice Antitrust Division and FTC "do not presume that intellectual
property creates market power in the antitrust context").
holder may serve as good substitutes for the property in
question. In other cases, however, there may be few close substitutes
for the rights-holder's property. In such instances, the right to
exclude conferred by the IP system can be a source of substantial
market power. Improvidently granted property rights -
improvident either because the dimensions of the right are defined
by law in an unduly broad manner, or because the
rights-granting authority did not exercise its review of a rights application in
a sufficiently rigorous manner - can have the
pressing competition and innovation unnecessarilye.f1f2ect of
Poorly conceived CP rules can have correspondingly adverse
effects on the operation of the IP regime. Unwise antitrust rules
can diminish incentives to create certain forms of property and
the capacity to use such property efficiently.1 3 For example, an
antitrust rule that imposed an unreasonably broad duty upon a
rights-holder to license her property right to others might harm
innovation and the competition to devise new ideas. Similarly,
excessively harsh antitrust strictures on licensing, or the
recognition of antitrust rules that create excessive uncertainty about the
legality of various licensing approaches, can frustrate the
adoption of practices that promote the efficient exploitation of the
Our hypothesis is that judicial tribunals observe and
respond to mitigate the consequences of spillovers of imperfect
policies from one regime to the other, either from IP to CP or
from CP to IP. The adjudication of IP or CP issues at the
inter12. See To PROMOTE INNOVATION, supra note 1, Executive Summary, at 5 (noting
that questionable patents "can block competition ... and harm innovation in several
ways"); see alsoJoseph E. Stiglitz, Address at Fed. Trade Comm'n Hearings on Global
and Innovation-Based Competition (Oct. 12, 1995) (transcript available at http://www.
ftc.gov/opp/global/GC101295.htm) (last visited Mar. 12, 2005). The Nobel
Prize-winning economist observed that an appreciation for the role of IP rights ("IPR" or "IPRs")
in stimulating innovation does not warrant "the conclusion that the broader the patent
rights are, the better it is for innovation." Id. at 11. Emphasizing the cumulative nature
of many innovations, Stiglitz cautioned that "[i]f you get monopoly rights down at the
bottom, you may stifle competition that uses those patents later on, and so .. . the
breadth and utilization of patent rights can be used not only to stifle competition, but
also have adverse effects in the long run on innovation." Id.
13. The modern history of CP provides memorable examples of how competition
authorities have, at times, slighted the value of IPR in promoting industrial progress
and encouraging expansive interpretations of antitrust doctrine in order to curtail the
exercise of such rights. See GAVIL ET AL., supra note 9, at 1111-22 (recounting the
announcement and subsequent abandonment by U.S. antitrust authorities of the "Nine
section of the two fields offers an example of what one
commentator has labeled "equilibrating tendencies."' 4 This concept
refers to the inclination of courts to adjust substantive, procedural,
and remedial rules to correct apparent flaws in any single rule of
Judicial equilibration could occur in two ways that
illuminate the interdependency of the CP and IP regimes. The
decisions of CP enforcers and courts in antitrust disputes may reflect
their impressions of the efficacy of an IP system. When CP
enforcers and courts perceive that IPRs ought not to have been
recognized by the rights-granting authority, they may adjust CP
doctrine to offset the excessive breadth of IPR. By the same
token, when IP policy makers or courts perceive that CP doctrine
is inattentive to the logic and legitimacy of IP principles, they
may seek to interpret IPRs broadly to curtail overreaching by the
CP system. 1 6
Both forms of equilibration can generate unfortunate
distortions in the legal rules governing CP and IP, respectively.
The impulse to correct improvidently defined or granted IPRs by
adjusting CP doctrine can tempt CP decision makers to adopt
analytically questionable approaches that undermine the
coherence and rationality of antitrust rules generally. By the same
measure, using adjustments in IP doctrine to push back against
expansive applications of antitrust rules can lead to
interpretations of IPRs that do not promote the achievement of the IP
system's innovation and consumer welfare goals.
Equilibration, as we have used the term above, is a relatively
crude, second-best solution to curing imperfections in the CP
and IP systems. We advocate a first-best approach that would
14. This phrase originates in an article by Stephen Calkins. See Stephen Calkins,
Summary Judgment, Motions to Dismiss, and Other EquilibratingTendencies in the Antitrust
System, 74 CEO. L.J. 1065, 1066 (1986).
15. See ERNEST GELLHORN ET AL., ANTITRUST LAW AND ECONOMICS IN A NUTSHELL
170-96 (5th ed. 2004) (describing how the U.S. Supreme Court has curbed the impact
of the per se rule against minimum resale price maintenance by imposing more
demanding standards for the proof of agreement in such cases); see also William E.
Kovacic, PrivateParticipationin the Enforcement of Public Competition Laws, in 2
COMPETITION LAW YEARBOOK 167, 175-77 (Mads Andenas et al. eds., 2004) (hypothesizing that
U.S. courts sometimes curtail the reach of the doctrine concerning abuse of dominance
in order to address indirectly perceived perfections in the operation of private rights of
action under the U.S. antitrust laws).
16. See In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322 (Fed. Cir. 2000)
(declaring broad antitrust immunity for refusals to license IPRs).
have the CP and IP policy communities correct the flaws in their
own regimes that cause destructive inter-system distortions. On
the IP side, this calls with respect to patents for enhancements in
the rights-granting process to ensure that applications genuinely
meet standards of recognition established in the relevant patent
statute; for other areas of IP, it requires statutory or judicial
definitions of IPRs that recognize the negative impact on
competition inappropriately broad IPRs can have. On the CP side,
competition authorities must take measures to correct doctrine and
enforcement policy that discourage the efficient creation and
exploitation of IPR.
As we explore in more detail below, progress toward a
firstbest solution requires expanded cooperation between the two
fields of legal policy. Some degree of lasting tension between
the CP and IP regimes is probably inevitable, but better
cooperation would serve to reduce the level of tension and avoid
particularly destructive distortions that result from a failure to
understand interdependencies between the two systems. Better
cooperation has the promise to improve policies affecting innovation,
and could increase desirable innovation.
B. Expanded Cooperationand Coordination
1. Improvements Within Each Regime
The recent Federal Trade Commission ("FTC") Report
recommends several areas in which modifications to the patent
system could result in a better balance between competition and
patent law and policy.1 7 In very general terms, the Report
suggests that an increase in the number of patents alone will not
necessarily result in more innovation and competition. 8 Patent
quality, as well as legal standards and procedures, are also
important parameters to ensure that a patent system does not create
unwarranted market power and unnecessary costs.19 While the
FTC Report is limited to patents, similar questions can, in
principle, be raised with respect to other IPR systems.2 0
17. See To PROMOTE INNOVATION, supra note 1, Executive Summary, at 4-18; see also
NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES, A PATENT SYSTEM FOR THE
21sT CENTURY 4-7, 81-129 (2004) (recommending improvements in the U.S. process for
granting patent rights).
18. See To PROMOTE INNOVATION, supra note 1, Chapter 2.
19. See id., Ch. 3, at 20 (biotechnology) and 53 (software patents).
20. See also infra notes 49-53 and accompanying text (discussing European
Corresponding improvements in the CP system can
manifest in policy reforms that account for the efficiency-enhancing
properties of various licensing practices. For example, criticism
of U.S. antitrust policies that treated a range of licensing
practices in the 1970s skeptically prompted important adjustments in
the 1980s and 1990s. 21 Although individual approaches vary, the
trend in a number ofjurisdictions over the past decade has been
to give IPR-holders greater freedom in designing licensing
2. Continued Inter-disciplinary Cooperation
The FTC Report and its careful examination of how patent
law and policy can affect competition suggest that CP agencies in
general ought to pay closer attention to developments of IP
regimes. 2' The definition of new IPRs, the rights-granting process,
as well as modifications to the standards of patentability or
copyright protection that IP agencies and courts develop potentially
affect competition and innovation activities. CP agencies should
be willing to contribute their understanding of competition
issues and economic expertise in the debate about IPR and IP
For example, as IP communities discuss challenges created
by difficult and novel patent rights issues, such as the optimal
scope of biotech patents, or patents for software and internet
industries, CP agencies may have unique economic
understanding of competitive processes and innovation in an industry. If so,
they should thus be prepared to provide input in the debate,
preferably before an increasing number of competition cases
indatabase directive and judicial efforts to limit the scope of the IPR granted to database
21. See, e.g., ANTITRUST GUIDELINES, supra note 11.
22. The recent reforms of the EC's TTBE can be said to move in this direction, at
least to some extent. See, e.g., Maurits Dolmans & Anu Pilola, The New Technology Transfer
Block Exemption: A Welcome Reform, After All, 27 WORLD COMPETITION 351, 362 (2004)
(concluding that the TTBE brings more flexibility to the analysis of license
agreements). There is a question, however, whether the Commission has moved far enough.
See Robert C. Lind & Paul Muysert, The European Commission's Draft Technology Transfer
Block Exemption Regulations and Guidelines: A SignificantDeparturefrom Accepted Competition
Policy Principles, 25 EUR. COMPETITION L. REV. 181, 187-88 (2004) (criticizing
Commission's proposed analytical framework for vertical license agreements as overly
23. See To PROMOTE INNOVATION, supra note 1, Executive Summary, at 17-18.
dicate that IPRs might cause competitive harm.2 4
3. Greater Investment in Research Exploring CP/IP Links
Understanding the interrelationship between the CP and IP
regimes involves wrestling with difficult conceptual issues and
developing a sound understanding of industry circumstances in
which many CP/IP issues arise. An important ingredient of
cooperation between CP and IP regimes is a greater commitment
of resources by CP and IP agencies to perform research
concerning these issues. For example, competition agencies seeking to
develop enforcement programs at the CP/IP interface must use
research to build up expertise related to IPR and IP policy.25
The FTC's recent study of entry by generic drugs is an example
of the type of work that CP agencies must perform in order to
have a reliable conceptual and empirical foundation for work in
II. IMPACT OFMULTIPLICITY IN POLICY MAKING REGIMES
- AN INTERNATIONAL PERSPECTIVE
On an international level, intra-disciplinary difference and
divergence increase the likelihood that implementation of one
system can affect the attainment of economic objectives other
regimes are intended to achieve. The goals and enforcement
standards of CP systems differ with regard to innovation and
development of new technologies. And even though more
progress has been made in the process of convergence of IP systems
than in the CP area, IP regimes continue to differ in key aspects,
including their sensitivity to the impact they have on
competition. As a result, one should expect that jurisdictions treat
differently the interface between their CP systems and IP systems, and
have different views as to how the two systems can be
coordinated. The discussion below provides some examples of major
differences between regimes and discusses how the institutional
framework might contribute to this situation. We then explore
major implications of the differences between jurisdictions.
A. Possible Sources of InternationalTension
1. Differences Between CP Systems Across Jurisdictions
Cooperation and convergence have become major topics in
the international antitrust community.27 In some areas (such as
cartel enforcement and merger control) there has been more
cooperation, and greater convergence has occurred towards
what are recognized to be superior practices, policies, and
enforcement standards. The antitrust/IP interface, on the other
hand, belongs to the areas where convergence has been limited.
Efforts to address antitrust/IP issues in international treaties,
codes, or international best practices documents have
highlighted differences, rather than a process toward greater
convergence. 28 As a result, jurisdictions take different views in
considering how CP and competition law enforcement can best
contribute to innovation and efficient dissemination of technologies.
This applies even to mainstream antitrust jurisdictions.
For example, in certain jurisdictions, competition rules
applicable to technology transfers may prefer to protect interests of
smaller firms and/or licensees. Such rules may be based on the
belief that more competition and innovation, and more effective
dissemination of technologies, will result from a more
fragmented market structure. Others might believe in the benefits
of competition among licensees of the same technology
(intratechnology competition).2 With this approach, competition law
systems are likely to more strictly scrutinize the reasonableness of
27. See William E. Kovacic, Extraterritoriality,Institutions,and Convergence in
InternationalCompetitionPolicy, 97 AM. Soc'v INT'L L. PROc. 309, 311 (2003) (discussing
international initiatives to encourage cooperation among competition authorities and
promote convergence of procedure and substantive standards).
28. See, e.g., HERBERT HOVENKAMP ET AL., 2 IP AND ANTITRUST: AN ANALYSIS OF
ANTITRUST PRINCIPLES APPLIED TO INTELLECTUAL PROPERTY LAW § 40.2 (2002 & 2003-2005
29. See, e.g., Commission Notice - Guidelines on the application of Article 81 of the
EC Treaty to technology transfer agreements, O.J. C 101/2 (2004), 26 [hereinafter
TTBE Guidelines] (discussing benefits of intra-technology competition); Luc
Peeperkorn, IP Licences and CompetitionRules: Strikingthe Right Balance, 26 WORLD
COMPETITION 527, 538 (2003).
PROPERTY POLICIES 1071
restrictions which licensors seek to impose on licensees. They
will develop enforcement standards that ensure greater freedom
of licensees and their ability to compete with each other. The
ability of the rights holder to design the most efficient
exploitation of its technologies and to maximize returns from the
exploitation of its IPR will play a lesser role.
Other jurisdictions might rely to a greater extent on an
innovation process based on competition among technologies
(inter-technology competition) and among different right
holders.30 Robust competition among rights holders will in most
cases be sufficient to eliminate or substantially reduce concerns
about restrictions right holders impose on licensees. As a
general rule, restraints on license agreements that restrict
competition no more than the licensed IPR itself will be subject to less
scrutiny.3 1 Restrictions that limit competition among licensees
of the same technology therefore will escape antitrust scrutiny.
The consequences of different policy approaches to license
arrangements were highlighted, for example, when the EU
published its draft block exemption for technology transfer
agreements and the related guidelines.3 2 Several restrictions that the
draft block exemption threatened to prohibit under its
"objectively unreasonable" standard are standard licensing practices
that U.S. antitrust law would consider lawful.3 In particular,
30. See, e.g., RICHARD GILBERT, CONVERGING DOCTRINES? U.S. AND EU ANTITRUST
POLICY FOR THE LICENSING OF INTELLECTUAL PROPERTY 9 (2004), available at
31. See Lind & Muysert, supra note 22, at 184 (noting that in general competition
authorities should not question restrictions in a license agreement that affect only the
use of the license and are required for the full transfer of the exclusive right granted by
IP laws); see also Robert C. Lind & Paul Muysert, Innovation and Competition Policy:
Challengesfor the New Millenium, 24 EUR. COMPETITION L. REV. 87, 91 (2003) ("The key
question that competition authorities should seek to answer in a licensing case is whether a
licence harms competition that would otherwise have occurred.").
32. For the final versions of the TTBE and the accompanying guidelines, see
Commission Communication, O.J. C 235/10 (2003) (Communication pursuant to Article 5
of Council Regulation No. 19/65/EEC of 2 March 1965 on the application of Article
81 (3) of the EC Treaty to certain categories of agreements and concerted practices, as
last amended by Regulation (EC) No 1/2003); Commission Notice, O.J. C 101/02
33. See Joint Comments on Draft Commission Regulation on the Application of
Article 81 (3) of the EC Treaty to Categories of Technology Transfer Agreements and
Draft Commission Notice on Guidelines on the Application of Article 81 to Technology
Transfer Agreements, A.B.A. SEC. ANTI-TRUST L., A.B.A. SEC. Bus. L., A.B.A. SEC. INT'L
L. & PRAc., A.B.A. SEC. INTELL. PROP. L. 4 (2003), available at http://europa.eu.int/
concerns were expressed that significant differences in the
treatment of certain horizontal arrangements would have interfered
with global licensing practices and collaborative efforts to a
much greater extent than differences in the treatment of vertical
restraints.3 4 Opposition to the draft text prompted the
European Commission to amend the draft, and the final text of the
block exemption eliminated the most obvious areas of
Nevertheless, differences continue to exist, especially in the
treatment of vertical restraints.3 " Considerations that rights
holders should be able to decide how their IPRs are exploited, and
how to maximize their returns as an incentive for future
investment, play a lesser role in European competition law.3 7
Along the same lines, some jurisdictions will be more
concerned than others about the strategies used by firms with
appreciable market power to exploit their IPR. They will be more
likely to find, for example, that refusals by a right holder to
share its IPR with competitors, or attempts to impose
"discriminatory" licensing terms, could unreasonably limit competition. 8
Other jurisdictions more likely will consider restrictions imposed
on licensees and refusals to license, even in the case of a firm
with market power, a legitimate use of rights established by an
IPR system with which competition laws should not interfere. 9
that the Commission focuses "exclusively on whether firms could have adopted a less
restrictive agreement," whereas "U.S. enforcement authorities will not engage in a
search for a theoretically least restrictive alternative that is not realistic in the practical
prospective business situation faced by the parties.").
34. See, e.g., id.
35. See generally Dolmans & Pilola, supra note 22, at 354-57 (discussing changes
concerning license arrangements between competitors).
36. See, e.g., GILBERT, supra note 30, at 3-5.
37. See, e.g., Lind & Muysert, supra note 22, at 184-88 (criticizing the European
Commission for adopting an analytical approach to license agreement that does not
sufficiently respect the need to allow an IPR holder to appropriate the value of its IPR
through restrictions in license agreements).
38. See, e.g., John Temple Lang, The Application of the Essential Facility Doctrine
to Intellectual Property Rights Under European Competition Law 6-7 (2004), available
TempleLang.pdf (last visited Mar. 19, 2005).
39. See GILBERT, supra note 30, at 6-7. See also Damien Geradin, Limiting the Scope of
Article 82: What Can the EU Learnfrom the U.S. Supreme Court'sJudgmentin Trinko in the
Wake of Microsoft, IMS, and Deutsche Telekom?, 41 COMMON MARKET L. REv 1519,
1533-46 (2004) (contrasting European Commission's analysis in Microsoft of a refusal to
deal with U.S. approach ir Trinko).
For example, once a rights holder is found to hold a
dominant position under EU competition law, and restrictions it
imposes in licensees no longer benefit from the Technology
Transfer Block Exemption ("TTBE"), EU competition law limits the
rights holder's ability to develop a licensing strategy. ° A
conservative interpretation of Article 82 of the EC Treaty4 1 suggests
that several licensing practices that may be lawful under U.S.
antitrust law could be considered a violation of EU competition
2. Differences Among IP Systems Across Jurisdictions
IP systems have a long tradition of cooperation and
convergence towards (at least) minimum standards. Convergence and
cooperation by far exceed what has so far been achieved among
CP systems. For many years, international treaties have been
effective instruments for reducing differences among national IP
systems.43 As a result, both with respect to patents and
copyrights, substantial similarities exist among IP systems in
Yet, despite a long tradition of dialogue, cooperation, and
convergence with respect to broad principles, differences
continue to exist even among mainstream IP systems. And
frequently these differences exist in areas that matter a great deal
for the interaction between an IP system and competition. As
regards patent rights, for example, the recent FTC Report
highlighted features in the application and rights-granting process
before the U.S. Patent and Trademark Office ("USPTO"), which
FORDHAM INTERNATIONAL LAWJOURNAL
raise concerns about their potential effects on competition.4 4
These include, for example, insufficient resources to thoroughly
examine large numbers of complex and novel patent
applications, and unreasonably strict standards for third parties to
challenge USPTO-granted patents.4 5 Interestingly, several
recommendations in the FTC Report to make the USPTO system more
sensitive to competition issues are similar to already existing
features of the European Patent Office ("EPO") patent system.4 6
One example is the proposed opposition procedure that would
facilitate challenges to newly granted patents.4 7
Another example of differences with potential effects on
competition is the IP protection for databases.4 8 Here, the EU
member countries agreed on an IPR-type system that confers
strong rights on database owners. 49 In contrast, no IPR
protection exists under U.S. law for databases, and efforts to introduce
similar protection have not been successful." The European
system, which has meantime been exported to several other
coun44. See generally To PROMOTE INNOVATION, supra note I (making recommendations
for the patent system to maintain a proper balance with competition law and policy).
45. See id., Executive Summary, at 8-9.
46. See id., Executive Summary, at 23 (noting suggestions that the United States
implement an opposition system challenging questionable patents drawing from the
best features of the European system).
47. There is, however, apparently no conclusive evidence that the European
opposition procedure results in significantly lower social costs than the current U.S.
re-examination system. See STUARTJ.H. GRAHAM ET AL., PATENT QUALITY CONTROL: A
COMPARISON OF U.S. PATENT RE-EXAMINATIONS AND EUROPEAN PATENT OPPOSITIONS, IN PATENTS
IN THE KNOWLEDGE-BASED ECONOMY 74, 114 (Wendy M. Cohen & Stephen A. Merrill
eds., 2003) (noting that any comprehensive assessment of the social costs and benefits
of the U.S. and European challenge systems would require consideration of both
postgrant challenges within the patent office processes and litigation).
48. Digital rights enforcement could become another area where jurisdictions
adopt different approaches in their copyright laws, sometimes with perhaps unintended
consequences for competition. This is an area that needs to be further explored,
49. See Council Directive No. 96/9, O.J. L 77/20 (1996) [hereinafter EU Database
Directive]. For an overview and critical assessment of the Directive, see, e.g., J.H.
Reichman & Pamela Samuelson, IntellectualPropertyRights inData?,50 VAND. L. REV. 51,
); P. Bernt Hugenholtz, Implementing the EuropeanDatabaseDirective, in
INTELLECrUAL PROPERTY AND INFORMATION LAW, EssAys IN HONOUR OF HERMAN COHEN
JEHORAM 183 (JanJ.C. Kabel & GerardJ.H.M. Mom eds., 1998), available at http://www.
ivir.nl/files/database/index.html#toptop (last visited June 6, 2005).
50. See, e.g., Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349 (1991)
(holding that defendant's practice of copying names, addresses, and phone numbers
from a competitor's phone directory for inclusion in defendant's phone directory did
not violate copyright laws); Reichman & Samuelson, supra note 49, at 126.
tries,5" has been criticized for its potentially anticompetitive
effects. Critics have been concerned, in particular, that the
database right can confer substantial market power on
producers of single source data that can be exploited in downstream
markets for derivative information products and services. 52 It
appears that these were unintended consequences of a poorly
designed law, which in turn led to several courtjudgments trying to
limit the law's anticompetitive effects by adopting analytically
questionable approaches to the competition/IP interface.5 3
Importantly, recent European Court of Justice judgments on the
EU Database Directive may have addressed some of these
concerns related to single source databases. 54 The Court denied IP
protection where the data would have been created irrespective
of the existence of IPRs and therefore, consistent with the
approach advocated above, 55 corrected a flaw in the IP regime
applicable to databases which had caused distortions to
competition. By aligning the scope of the database right more closely
with the rationale that IPRs should be granted only where they
are necessary to protect an incentive to invest and develop new
products, the Court reduced the need to use questionable
competition rules to achieve better policy outcomes. 56
55. See supra notes 17-20 and accompanying text.
56. In essence, the Court denied protection under the Database Directive to data
that have been drawn up in the course of a different principal business activity, as in
Different approaches of IP systems exist in other areas as
well. For example, what is exempted under one jurisdiction's
patent law research exemption may constitute an infringing act
in another jurisdiction that interprets a research exemption
more narrowly.57 Effects on competition are possible, where
research exempted in one jurisdiction leads to a broader range of
new products. Along the same lines, one jurisdiction may
institutionalize an early review of patents, thus facilitating the
elimination of bad patents. This approach could favor a broader
public domain, and thus also more vigorous competition.
Otherjurisdictions may lack a comparable review process and thus
enable right holders to hold on to questionable patents."
3. CP and IP Systems: Understanding Reasons for
Jurisdictions also may have different perspectives
concerning the proper interaction between IP policy and CP, including
the willingness of CP agencies to engage in a dialogue with IP
stake holders to ensure greater coherence between the two
systems. A greater reluctance by some CP agencies may be based
on different policy approaches, as in some jurisdictions, CP
makers may consider it outside their expertise and appropriate
responsibilities to interfere with policies and the rights-granting
process of IP systems.
Different institutional backgrounds also may affect the
interaction between CP makers and IP law and policy. Resolution
of IP cases under EC competition law, for example, tends to get
this case the creation of the database did not involve substantial investment. The
Court's approach contrasted with the approach suggested by the Advocate General who
supported a broader definition of the database right, and suggested that distortions of
competitions that could result from such a broader right should be remedied by ex-post
antitrust intervention. As suggested above, this would have been at best a second best
solution to curing an imperfection in an IP system. For a discussion of the cases, see
Mark J. Davison & P. Bernt Hugenholtz, FootballFixtures,Horse Races and Spin-offs: The
ECJDomesticates the DatabaseRight, 27 EUROP. INTEL. PROP. REv. 113 (2005).
57. See, e.g., Dominique Guellec & Catalina Martinez, Overview of Recent Changes
And Comparison of PatentRegimes in the United States,Japan, andEurope 154-55, in OECD,
PATENTS, INNOVATION AND ECONOMIC PERFORMANCE (2004).
58. Differences in the scope and breadth of IPR include patentable subject matter,
such as business methods, computer programs, and genes. Such differences are
perhaps more likely in newly emerging areas of IPR. Biotechnology and software patents
might be good examples of areas where some jurisdictions may be more reluctant than
others to grant strong and broad IPRs.
less involved in CP and IP policy aspects than is the case in
comparable U.S. cases. Some have opined that the difference exists
because in Europe, IP policy making is a federal matter only to a
limited extent - only with respect to areas in which
harmonization has occurred. The definition of rights remains, to a large
extent, a matter of Member State jurisdiction. This situation
might make a coherent analysis of competition issues from both
a CP and an IP perspective more difficult.
B. The InstitutionalFramework: Self Contained Institutions
To speak of the CP or IP communities is to refer to a large
collection of institutions within any single jurisdiction and across
jurisdictions. This part of the Paper outlines the relevant
institutions through which policy in both areas is formed and
executed. The brief summary demonstrates that the institutional
framework has allowed for intra-disciplinary cooperation, but
has contributed little to more interdisciplinary work.
1. The CP and Enforcement Community
Nearly 100 jurisdictions have adopted competition statutes
and created mechanisms for their enforcement. 59 Despite a
number of common features, competition systems feature
important differences in substantive commands, procedure,
institutional design, and the capability of enforcement authorities.6 °
In addition to diversity across jurisdictions, significant degrees of
decentralization of CP authority exist within selected
Recent years have featured increased efforts to coordinate
CP-making within and across jurisdictions.6 2 The EU has
recently established a European Competition Network to
coordinate enforcement activity and policy among the DG Comp and
the EU Member States.63 International coordination takes the
form of bilateral cooperation programs, regional initiatives, and
global networks such as the OECD.6 4
Non-government bodies also play a major role as
instruments of domestic and international cooperation. Legal
societies and trade associations are active participants in debates
about CP within individual jurisdictions and in international
fora. In their teaching and research activities, universities and
academic societies provide important instruments for
developing an international consensus concerning theory, empirical
research, and analytical techniques.
2. The IP Policy and Enforcement Community
Most nations have adopted IP laws and established
government bodies to issue patents and patent-like IPRs. As with CP,
the design of the relevant institutions varies across jurisdictions.
For example, the United States vests all responsibility for patents
in the national government and has a unified patent system. By
contrast, EU Member States play a much greater role in patent
policy, although the EU has pursued a number of measures in
recent years to establish a unified system. In a number
ofjurisdictions, a variety of public authorities share authority in
determining how IPR may be issued and exploited.6"
As with competition law, various institutions have a hand in
promoting convergence across jurisdictions. As mentioned
earlier, major government-to-government initiatives include the
WTO (the venue for the TRIPS agreement),66 WIPO,6 7 and
varigence activities involving the United States and the EU) [hereinafter Kovacic,
Competition Policy Cooperation].
63. See Council Regulation No. 1/2003, art. 11, OJ.L 1/1 (2003); Commission
Notice on Cooperation within the Network of Competition Authorities, O.J. C 101/43
64. See generally ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT,
About OECD, at http://www.oecd.org/home/ (last visited Apr. 4, 2005).
65. For example, the U.S. Food and Drug Administration has significant
responsibilities for overseeing the operation of the "Orange Book" mechanism that governs the
entry of generic equivalents to branded pharmaceutical products. See Elizabeth
Stotland Weiswasser & Scott D. Danzis, The Hatch-Waxman Act: History, Structure, and
Legacy, 71 ANTITRUST L.J. 585, 593-94 (2003) (discussing role of the FDA in approvals of
66. TRIPS Agreement, supra note 43.
ous components of the OECD.68 Here, also, NGOs, such as the
American Intellectual Property Law Association, supply
influential networks for policy discussion within and across jurisdictions.
3. Largely Self-Contained Communities
The frameworks described above for CP and IP are
generally intra-disciplinary. With occasional overlap, the relevant
institutions and networks tend to be either CP centric or IP centric.
Even within institutions (e.g., OECD, WTO, and NGOs such as
legal societies) that contain subunits addressing CP and IP,
respectively, discussion across disciplinary groups tends to be
limited. Truly interdisciplinary policy frameworks and networks
that integrate CP and IP perspectives are rare. A major theme of
this Paper is the need to add a stronger interdisciplinary
dimension to existing institutions as a means for improving CP/IP
coordination, nationally, and internationally.
Differences between legal regimes may sometimes be
without significant consequences for the way firms do business.
Rights and enforcement standards that affect only local/national
business activities will raise little concerns on an international
level. Where markets are global and activities of right holders go
beyond a single jurisdiction, however, differences between
jurisdictions can affect the ability of right holders to efficiently
exploit their IPR.
1. Firms Must Follow Standards of Most-restrictive
The most severe result of different enforcement standards is
forcing right holders to follow in the worldwide exploitation of
their rights the standards of the most restrictive major
jurisdiction. Right holders usually will be able to avoid such drastic
results, given the territorial nature of IPR and the ability of firms to
enter into local license arrangements. However, carving out
68. See supra note 64.
strictive jurisdictions from worldwide license agreements or
worldwide IP strategies might not always be feasible.
The risk of one jurisdiction imposing its more restrictive
standards on licensing agreements worldwide became apparent
in the above mentioned case of the European Commission's
draft TTBE. Concerns were expressed that the TTBE could have
affected numerous licensing agreements beyond the EU,
particularly between firms considered actual or potential
competitors. 69 The criticism on the first draft led the Commission to
reconsider its approach and to adopt standards that were more
in line with industry practices and U.S. antitrust law. y°
A well known example of competition enforcement in one
jurisdiction affecting a right holder's worldwide business
practices is the Commission's IBM case. 7 1 Remedies imposed by the
European Commission on IBM in connection with alleged
violations of Article 86 of the Treaty of Rome [now Article 82]72
forced IBM to change its worldwide business strategy, even
though outside Europe, its conduct was not found to be
anticompetitive.7 3 Several other instances are known where
U.S.based firms submit complaints in Europe, seeking help before
the European Commission in their disputes with other U.S.
firms. These complaints are based on the expectation that
stricter standards in European competition law will impose
stricter limits on business practices of market leaders than U.S.
antitrust law. There is always a risk in these cases that these
stricter standards (which may not always result in more
competition and innovation in the long term) will in effect become
The Commission's Microsoft Decision"4 illustrates these
concerns, although it also demonstrates that firms may be able to
limit the effects of remedies to the jurisdiction in which they
were imposed. With respect to the most controversial portion of
the decision addressing Microsoft's bundling strategies related
to the Media Player, Microsoft decided to implement a remedy
only in EU Member States and did not make any changes to its
product integration strategy outside the EU, including the
United States, where the Commission approach has been
criticized. With respect to Microsoft's refusal to provide interface
information to competitors in the business server market,
Microsoft will implement a remedy worldwide,7" and the
Commission's enforcement standards therefore will effectively
become worldwide standards. There is, however, much less
practical divergence between the United States and the EU, and much
greater overlap and complementarity, with respect to this
portion of the case, even though the Commission's finding of
antitrust liability was based on a potentially divisive refusal to license
2. Compliance Costs Rise With Multiplicity
It is commonly assumed that differences between
competition laws concerning the evaluation of vertical restraints are less
likely to become the sources of international tensions because
vertical arrangements are predominantly local in nature. Even if
this assumption is true (and it may not always be), differences
between antitrust systems raise firms' costs of doing business
worldwide. Compliance with local laws becomes more
burdensome and requires greater resources. Recently, two authors
opined that a greater convergence of approaches could remove
some of the uncertainty as to permissible licensing restrictions,
and limit potential sources of litigation that accompany
uncertainty.77 It is unclear whether much litigation involving antitrust
and IP issues has been caused by differences between CP
regimes. Experience shows that private antitrust litigation outside
the United States continues to be a rather limited phenomenon.
It does appear to be a reasonable assumption, however, that
compliance costs increase where differences between
jurisdictions are substantial.
Business models that can successfully be implemented in
some jurisdictions may not be transferable elsewhere without
changes, because antitrust laws may not permit right holders to
impose the same kind of restrictions on licensees in all
III. ACHIEVING A MORE COHERENT APPROACH
We submitted earlier that within a single jurisdiction,
progress toward improving CP and IP policy within each regime
requires greater attentiveness by CP and IP authorities to the
interdependency between the two policy fields. 79 Recognition of the
interdependency can provide the foundation for specific
measures to reduce friction between the two systems and promote
the achievement of shared policy aims. We discuss in the final
chapter how policies concerning the interface between CP and
IP policy can converge across jurisdictions. Greater recognition
of the interdependence of the two policy regimes could support
such convergence. We shall first consider possible goals of
A. Policy Objectives
Greater coordination among competition policies, as well as
among competition policies and IP policies, can serve two goals.
First, it can lead to the acceptance of superior norms in a greater
number ofjurisdictions. Second, coordination can reduce costs
to private firms. Both objectives have been successfully pursued
77. SeeJames F. Rill & Mark Schechter, InternationalAntitrust andIntellectualProperty
Harmonizationof the Interface, 34 LAw & PoL'Y INT'L Bus. 783, 787 (2003).
78. This could occur, for example, with certain business models for the online
distribution of products that require some territorial or other restrictions on licensees.
79. See supra text accompanying notes 8-11.
in other areas of competition law, particularly with respect to
cartel enforcement and merger control policy and practices."
1. Promote Global Policy Evolution Toward Acceptance
of Superior Norms
At least in some cases, it could be beneficial to overcome
differences regarding IPR and CP by achieving greater
acceptance of superior norms and policies. This would be the case
where practices and policies differ between jurisdictions, and
where analysis and empirical evidence suggest that certain
practices and policies are more likely to encourage innovation and
promote dissemination of technologies than others."'
More rigorous application of mainstream economic
principles should eventually lead to greater convergence in areas
where differences persist today. One author examined existing
differences in the evaluation of IP licensing agreements and
concluded that the prospects for gradual harmonization appeared
to be strong, as more and more Nations recognized the
efficiencies of licensing arrangements that were designed to implement
cost minimizing arrangements. 8 2 He also suggested approaches
to economic analysis that, in his view, should be acceptable
across jurisdictions.8 3
The differences among jurisdictions in the assessment of
single firm conduct involving IPR are even more significant than
in the area of license arrangements. 8 4 Even within single
jurisdictions, the standards applied to single firm conduct by courts
and competition agencies, including refusals to license, are not
always entirely consistent.85 Both aspects of this inconsistency
suggest that convergence may be even more difficult in
dominance or monopolization cases involving IPR. However, these
aspects also suggest that the potential benefit from convergence
could be substantial. As in the area of license agreements,
various changes could lead to a wider use of better enforcement
standards: (1) more rigorous application of mainstream
economic principles; (2) greater recognition that competition
enforcement should, in the first place, encourage innovation, even
by firms with significant market power; and (3) better
understanding of how firms with significant market power can
strategically use IPR to create entry barriers beyond the scope of the
rights they hold.
2. Reduce Avoidable Costs
Merger review laws and practices are also a good example
for better coordination to reduce costs to firms and agencies.8 6
This goal is justified also with respect to IPR and competition
law. If licensing activities, for example, are considered desirable
because they help diffuse technologies, then lowering the costs
of these activities makes sense, as lowered costs will make it more
likely that the activities occur. If the costs of seeking partners
outside a firm's jurisdiction are manageable and the legal
environment for licensing arrangements is based on familiar
principles (if not identical principles), firms without extensive
international activities and experience might be more likely to seek
partners outside their own jurisdiction. Thus, lowering the risks
of unexpected costs and consequences for business strategies
could encourage more international activities, and therefore
B. CooperationAcross Jurisdictions
1. Within Disciplines
Continued cooperation among competition agencies and
across jurisdictions can improve enforcement standards,
especially as new issues develop in information based industries.
Ultimately, such cooperation should eventually lead to greater
convergence toward best practices in certain areas such as IP
licens1195 9th Cir. 1997) with In re Independent Service Organizations Antitrust Litigation,
203 F.3d 1322 (Fed. Cir. 2000), cert. denied, 121 S. Ct. 1077 (2001).
86. See supra note 80.
ing, and, ultimately, the development of internationally
recognized superior norms. CP agencies have experience with
this kind of cooperation, though mostly in areas other than IPR,
and are sometimes able to reach substantial results.
Cooperation among competition agencies with respect to IPR has not yet
occurred in the same, systematic way as in other areas."7
Commentators have therefore suggested that this process be
strengthened and expanded within the framework of different
international institutions.8 8
However, our hypothesis is that convergence is more likely
to occur if cooperation among CP agencies focuses on the
interdependency of CP and IP policy regimes. Focusing on
interdependency also includes efforts to improve CP agencies'
understanding how IP policy and IPR affect competition and
innovation, and how to effectively promote their views with IP policy
makers and IP agencies. In fact, examining regulatory regimes
from a competition angle is not a novel idea for cooperation
among CP agencies. With respect to areas other than IP, CP
agencies traditionally have shown great willingness to cooperate
and consider jointly the competitive impact of regulatory
regimes, as well as to advise non-competition agencies on the
benefits of pro-competitive regulatory regimes. 89 Competition
agencies traditionally have not focused on IP and innovation policy
"regulatory regimes" in their cooperation efforts. However, the
interdependency of IP systems and CP systems and their effects
on innovation suggest that CP agencies should exchange views
and cooperate also in this aspect of the IPR/competition
inter87. Examples include OECD roundtables, UNCTAD work, and the bilateral U.S. /
EU working group for IPR. See, e.g., OECD, Intellectual Property Rights, supra note 24;
OECD, Competition Policy and IntellectualProperty Rights (1998), available at http://www.
oecd.org/dataoecd/34/57/1920398.pdf (last visited June 1, 2005).
88. See Rill & Schechter, supra note 77.
89. OECD cross-sector work provides numerous examples, including, e.g.,
concerning regulatory reform and structural separation in network industries. See, e.g.,
OECD, RESTRUCTURING PUBLIC UTILITIES FOR COMPETITION (2001), availableat http://
www.oecd.org/dataoecd/6/60/19635977.pdf (last visitedJune 8, 2005); OECD Reviews
of National Competition Frameworks (reviewing regulatory reforms in many OECD
member countries), available at http://www.oecd.org/document/43/0,2340,en-2649_
33759_2489707_lljA,00.html (last visitedJune 8, 2005). The International
Competition Network ("ICN") also recently started a working group on regulation and
competition. See http://www.internationalcompetitionnetwork.org/aers.html (last visited June
2. Across Disciplines
While intra-disciplinary cooperation at international level
has a long tradition within CP regimes as well as IP regimes,9 1
there has been very little, if any, interdisciplinary international
cooperation. Yet, it appears that innovation policies could
sometimes benefit from more international, interdisciplinary
For example, the IP community may develop unique
insights in IP intensive industries that the more generalist CP
One example is the OECD Committee for Sci
ence and Technological Policy's study on IPR, Innovation, and
Economic Performance.9 2 The project is designed to provide
factual evidence and analysis that shed light on the policy debate
about IPR, and the project sets out implications for the
development of IPR regimes that contribute more efficiently to
innovation and economic performance. 3
Studies on the technology
licensing practices can provide important information for CP
agencies when they discuss policies concerning licensing
agreements in areas such as biotech patents.
There could be also a role to play for well-informed CP
agencies on an international level. When cooperation occurs
among IP agencies, IP policy makers, and IP stakeholders, there
has been a tendency to focus exclusively on strengthening of
90. So long as CP agencies have different views, or unclear views, about how a CP
regime can best interact with IP policy regimes to attain common economic objectives,
convergence of competition enforcement standards might be less likely to occur. Some
observers have expressed doubts about the effectiveness of a convergence process based
on informal cooperation and exchanges of views and experiences. See, e.g., David J.
Gerber, The U.S. -European Conflict Over the Globalizationof AntitrustLaw: A
LegalExperience Perspective, 34 NEw ENG. L. REv. 123, 131-35 (1999). We believe, however, that
informal cooperation processes among competition authorities across jurisdictions can
successfully lead to greater convergence. In addition to the examples discussed earlier
(including the European Commission's adjustment to the TTBE), we find ample
evidence for our position in, for example, bilateral U.S./EU relations as well as the work of
the ICN and OECD. See, e.g. Kovacic, Competition Policy Cooperation, supra note 62
(discussing convergence activities involving the United States and the EU). A more
detailed discussion of international convergence mechanisms, however, cannot be
undertaken here, and will be the subject of future work.
91. See supra notes 6-7 and accompanying text.
92. See OECD, COMPENDIUM OF OECD ACTMTIES RELATED TO IPR 1 (2005),
available at http://www.oecd.org/dataoecd/60/61/34305040.pdf (last visited Mar. 19, 2005).
93. See id.
rights. As IPR policy makers look across borders to consider IPR
policies in other jurisdictions, convergence typically will occur at
the highest level of protection. Concerns about finding the best
balance between stronger IPR and competition appeared to play
a much lesser role.94 Rarely, if ever, will harmonization of IPR
and setting of international minimum standards for the
definition of IPR include considerations of the effects stronger IPR
can have on innovation and competition. In fact, it sometimes
appears that moving discussions about new rights to an
international level can be a mechanism for IP stakeholders to escape a
annadtiocnoamlpdeetbitaioten.9c5oncerning the proper balance between IPR
Such a trend can be observed, for example, in the bilateral
relationship between the United States and the EU. For
example, efforts in the European Union to introduce legislation
providing for the patentability of computer programs referred to a
great extent on the U.S. experience where the U.S. Patent and
Trademark Office ("USPTO") and courts have long held that
computer programs are patentable subject matter.96 The
creation of a "level playing field" was one of the arguments used by
the Commission in support of the new IPR legislation. 97 While
the Commission attempted to distinguish the proposed system
from the situation in the United States, arguing that stricter
patentability standards in Europe would avoid negative effects of
software patents that are frequently criticized in the United
States," not everyone would agree that the European case was
really sufficiently distinguished.99 Despite the Commission's
repeated efforts, the proposed legislation has not yet been
adopted. Conversely, EU legislation providing for IP protection
of databases has triggered (so far also unsuccessful) efforts by
stakeholders in the United States to lobby for the introduction
of similar IP protection.
But the trend is not limited to U.S./EU bilateral contacts.
Free trade agreements that are used to introduce IPR beyond
minimum TRIPS standard are becoming more frequent. In the
area of database rights, for example, competition agencies might
have been able to raise questions about the wisdom of requiring
third-world countries to introduce IP-based database rights
along the lines of the European Union. Serious concerns have
been raised by several scholars in Europe about the potentially
anticompetitive effects of EU database legislation. 00 National
courts have struggled to limit the rights of database owners by
applying national and EU competition laws.10 1 Language in
some of the reported cases raises some of the concerns discussed
earlier in the Paper that poorly designed IP regimes distort
competition, which in turn may trigger reactions by CP agencies and
courts and result in bad antitrust case law.
In such international discussions, CP agencies could, where
appropriate, contribute to the debate by advocating the view that
IPR should be defined - and such definition should be
harmonized on an international level - only to the extent necessary to
encourage innovation, and that creating or granting excessive
exclusive rights could be undesirable from a competition point
of view. The question whether certain IPRs are necessary to
encourage innovation (or the same amount of innovation likely
would exist without a given IPR and the social costs associated
with it) will rarely have an unambiguous answer. But raising
questions about competitive effects may add an important aspect
to discussion whether and at what level IPR should converge.
This Paper does not suggest that CP agencies will frequently
100. See P. BERNT HUGENHOLTZ, ABUSE OF DATABASE RIGHT 2 (2004), available at
Hugenholtz.pdf; see also John H. Barton, The Balance Between Intellectual Property Rights
and Competition: Paradigmsin the Information Sector, 18 EUR. COMPETITION L. RaV. 440,
101. See John Edwards, Has the DreadedData Doomsday Arrived?: Past, Present, and
FutureEffects of the European Union'sDatabaseDirective on Databaseand
InformationAvailability in the European Union, 39 GA. L. REv. 215, 239 (2004).
have significant contributions to the process of international
convergence of IP systems and cooperation among IP agencies.
In fact, in many cases, if anything, they likely will support efforts
to achieve greater harmonization and cooperation. For
example, CP agencies will have no specific views on or will support
improving the international patent filing system within the
Patent Cooperation Treaty ("PCT") to facilitate international
filings, eliminate duplication, and therefore reduce the costs of
applying for patents. Strengthening copyrights in a digital
environment by way of international treaties also appears at first sight
unlikely to trigger any concerns about harmful effects on
innovation and competition, so long as the rights are carefully defined.
In this case, harmonized levels of protection might well facilitate
cooperation among right holders and the exploitation of works,
and therefore increase competition and consumer choice. 10 2
C. GreaterInvestment in CP/IPResearch by CP Agencies
As in the domestic context discussed above, taking a more
active interest in IP policies in an international context and in
the context of cooperation would impose significant burdens on
CP agencies. In order to cooperate effectively, and to contribute
to the debate about the competitive effects of IPR systems on
competition, CP agencies would have to invest in research and
build up expertise. If they want to contribute to a debate about
IPR and IP policies in an international context, CP agencies
must ensure in their own jurisdictions that they understand IP
issues and can anticipate areas in which novel competitive issues
are likely to emerge.
Other areas could include joint efforts by CP agencies to
better understand competitive issues raised by overly broad
biotech patents, which would require an extensive analysis of the
biotech industry and the way patents may affect innovation.
There also appears to be a great need to invest in
developing better understanding of CP/IP issues in emerging market
economies. Much has been written about the effects of TRIPS
IPR requirements on emerging market economies and
continued efforts by industrialized countries to push for even higher
levels of IP protection. The views expressed cover a broad
spectrum from strong support for TRIPS standards and concerns
102. Further research would be required, however, to verify such an assumption.
about efforts in emerging market economies to undermine
them, 10 3 to a rejection of TRIPS standards and concerns that
stronger IPR in emerging market economies favor only right
holders in industrialized economies.1 0 4
Emerging market economies with little domestic research
and patenting activities may consider balancing the interests
between right holders and (potential) users of technologies
differently than industrialized economies. At least, this would be an
intuitive reaction, given that they find themselves in a
disadvantaged situation as regards the development of, and/or access to,
new technologies. It is not clear, however, whether every
emerging market economy will always be better off by adopting stricter
enforcement standards for licensing agreements or unilateral
conduct, or by adopting efficiency oriented enforcement
standards. Too much emphasis on the transfer of existing
technologies and on limiting the right to exercise exclusive rights could
harm the interests of domestic firms who would benefit from
more innovation based competition. And/or it could deter
investment by foreign firms who will be less likely to transfer
technology. 10 5
Much more rigorous research would be required, taking
into account the situation of domestic firms, before an emerging
market economy develops an optimal IP and CP policy mix. In
the long term, CP agencies might be able to contribute to the
debate of proper levels of IP protection and help develop CP
laws and policies as regards IPR and IP policy that take the
specific situation of emerging market economies into account. This
would require both research in emerging market economies
about industry structures and the effects of IP regimes on
innovation, and a focus in technical assistance programs on
competition and innovation issues. But much work remains in this
largely unexplored area in terms of research, evaluation of
empirical data, technical assistance, and formulation of appropriate
24. See , e.g., ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT , INTELLECTUAL PROPERTY RIGHTS 26-30 ( 2004 ), available at http://www.oecd.org/dataoecd/ 61/48/34306055.pdf (last visited May 30 , 2005 ).
25. See William E. Kovacic, Remarks at the Intellectual Property and Antitrust Roundtable, in FoRDHAM CORP . L. INST., INTERNATIONAL ANTITRUST LAW & POLICY 285 , 314 - 15 (Barry Hawk ed., 2005 ) (making argument for investments by competition agencies in "competition policy research and development" relevant to competition issues involving IPR) .
26. See , e.g., FEDERAL TRADE COMMISSION, GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION: AN FTC STUDY ( July 2002 ), available at http://www.ftc.gov/os/2002/07/ genericdrugstudy. pdf (last visited Apr. 4 , 2005 ).
40. See Temple Lang, supra note 38 , at 6-7 (stating that there is a "duty under Article 82 to contract on strictly non-discriminatory terms" when certain conditions are met, including dominant market position).
41. See E.C. Treaty , art. 82, O.J. C 325/1 ( 2002 ), at 65.
42. In addition to refusals to license, the granting of an exclusive license, noncompetes, grant backs, and the use of discriminatory terms in license agreements could be practices subject to harsher treatment under EU competition law .
43. See , e.g., Agreement on Trade Related Aspects of Intellectual Property Rights, Apr. 15 , 1994 , Marrakesh Agreement Establishing the World Trade Organization, reprinted in 31 LEGAL INSTRUMENTS - RESULTS OF THE URUGUAY ROUND , Annex IC , 33 I.L.M. 81 ( 1994 ) [hereinafter TRIPS Agreement]; Paris Convention for the Protection of Industrial Property , Mar. 20 , 1883 , as amended on July 14 , 1967 , 21 U.S.T. 1583 , 828 U.N.T.S. 305 ; Berne Convention for the Protection of Literary and Artistic Works , Sept. 9 , 1886 , as amended on July 24 , 1971 , 828 U.N.T.S. 221 ; North American Free Trade Agreement, Dec. 17 , 1992 , Can.- Mex .-U.S., 32 I.L.M. 289 .
51. See P. BERNT HUGENHOLTZ , ABUSE OF DATABASE RIGHTS 2 (Paper Presented at the Cerna Conf . on Antitrust, Patent and Copyright , Paris, Jan. 2004 ), availableat http:/ /www.cerna.ensmp.fr/cernaregulation/Documents/ColloqueAntitrust2004/Hugen holtz. pdf (last visited Mar . 30 , 2005 ).
52. See Hugenholtz, supra note 51 , at 2. Even commentators who are generally in favor of strong database protection concede this problem, see also G. M. Hunsucker, The EuropeanDatabaseDirective: RegionalStepping Stone to an InternationalModel?, 7 FORDHAM INTELL . PROP. MEDIA & ENr . LJ. 697 , 750 ( 1997 ) (stating that "[the] power to control the dissemination of sole-source data enables the first database maker . .. to charge monopolistic fees for access to the database.").
53. See , eg., Hugenholtz, supranote 51 , at 2 (noting that some national courts have applied competition law to cure abusive practices under the EU Database Directive) . For further information, see generally the resources page provided by the Amsterdam University Institute for Information Law , availableat http://www.ivir.nl/files/database/ index. html (last visitedJune 7 , 2005 ) (providing list of national court judgments involving Database Directive, including some that found antitrust liability to simple refusals to license).
54. Case C - 338 /02, Fixtures Marketing Ltd v. Svenska AB; Case C-444/02 , Fixtures Marketing Ltd v Organismos Prognostikon Agonon Podosfairou EG; Case C - 46 /02 Fixtures Marketing Ltd v. Oy Veikkaus Ab; Case C-203/02 , British Horseracing Board Ltd v William Hill Organization Ltd., Judgments of November 9 , 2004 .
59. The modern development of competition systems is analyzed in William E . Kovacic, InstitutionalFoundationsfor Economic Legal Reform in TransitionEconomies: The Case of Competition Policy andAntitrust Enforcement , 77 CHi .-KENrr L. REV . 265 ( 2001 ).
60. U.S. and EU enforcement mechanisms illustrate possible differences. Private rights of action are integral, important means of enforcing the U.S. antitrust laws, but thus far have been relatively unimportant in the enforcement of the competition laws of the EU and its Member States .
61. Seegenerally William E. Kovacic, Toward aDomestic CompetitionNetwork, in COMPETITION LAwS IN CONFLICT 316 (Michael S. Greve & Richard A . Epstein eds., 2004 ) (discussing decentralization of competition authority within the United States) .
62. See William E. Kovacic, CompetitionPolicy Cooperationandthe Pursuitof BetterPractices, in THE NEW TRANSATLANTIC AGENDA AND THE FUTURE OF TRANSATLANTIC EcoNOMIC GOVERNANCE (Gregory C . Shaffer ed.) (forthcoming 2005 ) (discussing conver67 . WIPO Copyright Treaty, Dec. 20 , 1996 , S. Treaty Doc . No. 105-17 , 36 I.L.M. 65 ; WIPO Performances and Phonograms Treaty , Apr. 12 , 1997 , S. Treaty Doc . No. 105-17 , 36 I.L.M. 76; Patent Cooperation Treaty , June 19, 1970 , 28 U.S.T. 7645 , 1160 U.N.T.S. 231 .
69. See Commission Regulation 240 /96, O.J. L 31/2 ( 1996 ).
70. See supra notes 32-36 and accompanying text.
71. See Int'l Bus . Mach. Corp. v. Comm'n, Case 60 /81,  E.C.R. 2639 .
72. See Treaty Establishing the European Economic Community , Mar. 25 , 1957 , 298 U.N.T.S. 11 . Article 86 became Article 82 following revisions pursuant to the Treaty of Amsterdam.
73. The worldwide effects of the Commission decision resulted primarily from the disclosure of know-how, rather than IPR . See David J. Gerber, Law and the Abuse of Economic Power in Europe , 62 TUL. L. REV. 57 , 97 - 98 ( 1987 ) (stating that "[t]he investigation did not lead to formal action by the Commission, because IBM consented to make [certain information publicly] available"). The Commission's recent Microsoft decision might become another example of an antitrust decision in one jurisdiction that prompts a right holder to adjust some of its business practices worldwide, even though certain conduct was not found to violate antitrust laws elsewhere. See Commission Decision No . COMP/C-3/37.792 ( Eur. Comm'n Mar . 24 , 2004 ), availableat http://europa. eu.int/comm/competition/antitrust/cases/decisions/37792/en.pdf [hereinafter Microsoft Decision].
74. Id .
75. The worldwide scope of this element of the European Commission's remedy is identified in Commission Press Release IP/05/673, June 6, 2005 .
76. See Press Release, Assistant Attorney General for Antitrust, R. Hewitt Pate, Issues Statement on The EC's Decision in its Microsoft Investigation (Mar . 24, 2004 ) (remarking that "[w]ith respect to the EC's 'interoperability' remedy, which requires Microsoft to license technologies used by Microsoft server software to communicate with other Microsoft software on a network, there is considerably more overlap with the United States' approach" ), available at http://www.usdoj.gov/atr/public/press.re leases/ 2004 /202976.htm.
80. See The Work of the International Competition Network Related to Merger Review and Procedures , availableat http://www.internationalcompetitionnetwork.org/ notification.html; see also OECD , Recommendation of the Council on Merger Review , availableat http://webdominol.oecd.org/horizontal%5Coecdacts.nsf/Display/907BCF EA6DDFCA41C1257013005B86El? OpenDocument (last visited June 1, 2005 ).
81. Convergence towards superior norms may be limited to countries that are at similar stages of economic development. Some countries may be in different economic positions, and may find IP and CP, as well as enforcement norms, that differ from the norms in other jurisdictions are preferable in order to maximize consumer welfare in their jurisdictions .
82. See Alden F. Abbott , IntellectualPropertyLicensing andAntitrustPolicy: A Comparative Perspective , 34 LAw & POL'CINT'L Bus . 801 , 826 ( 2003 ).
83. See Abbott, supra note 82 , at 826.
84. See id. at 809.
85. Compare , e.g., Image Technical Services , Inc. v. Eastman Kodak Co., 125 F.3d
94. See , e.g., J.H. Reichman , The TRIPS Agreement Comes ofAge: Conflict or Cooperation With the Developing Countries , 32 CASE W. RES. J. INT'L L . 441 , 44243 ( 2000 ).
95. For a discussion IPR treaty making negotiations in which countries may push for the inclusion of IPRs in international treaties which may not have sufficient domestic support see , e.g., Pamela Samuelson , The U.S. DigitalAgendaat WIPO , 37 VA.J. INT'L L . 369 , 418 - 428 ( 1997 ) (describing - unsuccessful - U.S. efforts to include database ights in new WIPO Treaty, even though similar rights did not exist under U.S. law, and there was not sufficient domestic support for the introduction of such an IPR) .
96. See Commission of the European Communities, Proposal for a Directive of the European Parliament and of the Council on the Patentability of Computer-implemented Inventions, COM ( 2002 ) 92 Final (Feb . 2002 ), at 5, available at http://europa. eu.int/eur-lex/lex/LexUriServ/site/en/com/2002/com2002_0092enO1 .pdf.
97. See id.
98. See id.
99. See , e.g., P. BERNT HUGENHOLTZ , A BRIEF CASE AGAINST SOFTWARE PATENTING (Presentation at the Conf . Industrial Prop . - Quo Vadis?, Oct. 7 , 2003 ), available at http://www.ischiaconference-ipr.org/ppt/HUGENHOTLZ.ppt.
103. See Silke von Lewinski, Copyright in Central and Eastern Europe: An Intellectual PropertyMetamorphosis, 8 FORD-Am INTELL . PROP. MEDIA & ENT. L .J. 39 , 50 - 51 ( 1997 ) ; see also Rill & Schechter, supra note 77, at 791.
104. For a discussion of various interests involved in the debate , see Reichman, supra note 94 , at 450-55.
105. See , e.g., OECD, PROMOTING IPR POuCv AND ENFORCEMENT IN CHINA 23 ( 2005 ) (emphasizing that decisions in developing countries about strengthening IPRs should take levels of scientific, economic and industrial development into account).