Competition

Case Note: Intel Corporation v Via Technologies Inc. and others

Jane Lambert

14 Apr 2003

Last updated 22 Dec 2005

The tension between competition policy and intellectual property ("IP") has been recognized ever since the Statute of Monopolies 1623. The question where to draw the line between encouraging innovation and creativity on the one hand and safeguarding fair competition and freedom of trade on the other has come before the European Court of Justice and Court of First Instance in a number of cases, notably Case 238/87 A B Volvo v Erik Veng (UK) Ltd. [1988] ECR 6211, Magill (Joined cases C-241/91 P and C-242/91 P. Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission of the European Communities.) [1995] ECR I-00743 and IMS. Although cases containing that same issue have also come before the English courts on occasions, they have generally turned on procedure rather than substantive law largely because the Commission was the only organ capable of granting an exemption under art 81 (3) or negative clearance under Regulation 17. That changed to a degree when the Competition Act 1998 came into force in that it imported into national law the prohibitions in arts 81 and 82 of the Treaty of Rome which are known in the Act as the Chapter I and Chapter II prohibitions respectively. It was further changed with the implementation of the Enterprise Act 2002 and the devolution of responsibility for enforcing Community antitrust trust law to national courts and competition authorities pursuant to the Modernization Regulation (Council Regulation 1/2003).

Significance of the Case
Because a defence based on arts 81 and 82 EEC, known as a Euro-defence could effectively stymie the enforcement of an otherwise valid IP right ("IPR") indefinitely, English courts have tended to regard those defences sceptically. In the overwhelming majority of cases, Euro-defences have been struck out under CPR 3.4 (2) or the corresponding provision of the Rules of the Supreme Court. Indeed, the regularity and frequency of such strike-outs prompted Lawrence Collins J to remark in this case (which would have been added to the list of failures but for the successful appeal) that the expression Euro-defence must not be treated as a pejorative term. Explaining the reason for the courts scepticism, his lordship said:

"the ease with which a defence based on Art 81 or 82 may be generated on the basis of vague and imprecise allegations make it necessary to scrutinise them with some care in order to avoid defences with no merit going to a lengthy trial with expert evidence: HMSO v Automobile Association [2000] ECC 272 at 299. I would also add that, although the burden of proof on the party asserting conduct to be unlawful under arts 81 and 82 may be the normal civil standard, the penal consequences of those provisions reinforce the need for careful scrutiny."

Although it endorsed Lawrence Collins J's proposition, the CA cautioned against striking out Euro-defences in patent case where essential facts giving rise to the defence cannot be known until the validity of the claims are determined. Also, the CA warned that it is dangerous to assume that it is beyond argument with real prospect of success that the existing case law will not be extended or modified so as to  encompass the defence being advanced at a time that the case law of the European
Court is still in the course of development. The importance of this case is that it is likely to mark a watershed in the willingness of English judges to take competition law issues more seriously as a defence to IP cases.

The Issues
This was an appeal from an order of Lawrence Collins J striking out part of the  defences pleaded by DD to two patent infringement actions. One action alleged infringement of various patents relating to chipsets and the other infringement of various patents relating to central processing units ("CPUs") called respectively "the chipset action" and "the CPU action". In the chipset action, DD had pleaded, that

	bringing these proceedings constituted an abuse by C of the exercise of its IPRs;
	C was estopped or otherwise precluded from obtaining the relief sought in the proceedings; and
	the refusal of C to grant a licence to DD at all or on reasonable terms was an abuse of a dominant position that precluded C from enforcing the relief sought.

DD also pleaded the last point in the CPU action. In their defence they also alleged that C's refusal to license DD in respect of the CPU patents was abusive in that it formed part of a plan to withdraw from the market certain products for which there was a continuing demand, and to force consumers and users to adopt a new and more expensive technology. The judge's reasons for striking out those defences were, first, that the defence lacked specificity, secondly, that it did not disclose any infringement either of art 81 (1) or the Chapter I prohibition or of art 82 or the Chapter II prohibition and, thirdly, that an owner of an IPR is always entitled to refuse a licence save in the sort of exceptional circumstances that occurred in Magill and there was nothing in DD' pleadings to allege such exceptional circumstances. Because of the CA's decision in British Leyland Motor Corporation Ltd. v T I Silencers Ltd .[1981] FSR 213, Lawrence Collins J recognized that there were circumstances in which the enforcement of an IPR
might amount to an abuse of a dominant position within the meaning of art 82 or Chapter II of the Competition Act 1998 but he did not feel obliged to determine that issue in the case before him because of his other findings. He added, nevertheless, that the British Leyland judgment probably went no further than holding that infringement proceedings may not be brought by the owner of an IPR if he is abusing
that right in order to enforce unrelated terms on a trader who "desperately" needs a licence in order to trade.

Abuse of a Dominant Position
Before the CA, C submitted that the only circumstances in which the enforcement of an IPR might be abusive were where refusal of a licence would exclude an entirely new product from the market as in Magill or all competition for the patentee as in IMS. The CA was not so persuaded. In Sir Andrew Morritt's view, it did not follow that there were no other circumstances in other cases that could be regarded as exceptional. In particular, it was at least arguable that the ECJ might import the "essential facilities" reasoning as applied in the United States into its consideration of art 82. The language of the article and of the corresponding provisions of the Competition Act 1998 was certainly wide enough to support other exceptions. It was at least arguable that the range of exceptional circumstances which could give rise to an abuse by the owner of an IPR of a dominant position contrary to art 82 or Chapter II could extend to the facts pleaded by DD in both the chipset and the CPU actions. Accordingly, the CA allowed the appeal on that ground.

Asymmetric Licensing
In the chipset action, DD had argued that a term requiring them to grant to C gratuitous licences under all their patents as a condition for the grant to DD of a royalty bearing licence to use only a limited range of C's patents infringed art 81 EEC and the Chapter 1 prohibition. As mentioned above, Lawrence Collins J regarded DD' pleading of that point to be devoid of specificity. The CA disagreed reasoning that a pleading of that nature was bound to be unspecific as it anticipated events that had not yet happened. It held that there was a real prospect of success in showing that the condition would be
incompatible with art 81 EEC if contained within an agreement or understanding. The appeal was allowed on that ground too.

Conclusion
The CA allowed the appeal, restored those parts of the defence that had been struck out and remitted the case to the Patents Court for further directions. Although Mummery and Tuckey LJJ agreed with the Vice-Chancellor, it is, however, worth noting Mummery LJ's provisional view that the defence under art 82 EEC was stronger than that under art 81 and that there were serious difficulties in the way of both competition defences eventually succeeding at trial. It may still be rare for competition defences to succeed if only because national legislatures have already conduct a balancing exercise of the interests of free competition and encouraging research and development and creativity by limiting the availability of exclusive rights to a finite period as Mr Advocate General Jacob pointed out in his opinion in Case 7/97 Oscar Bronner GmbH v Media Print GmbH. [1998] ECR 1-7791, 7812. However, competition and patent law are supposed
to be complementary, as the Federal Circuit recognized in Integraph Corporation v Intel Corporation 195 F 3d 1346, 1362 and, as no statute can ever anticipate all the  circumstances in which the imperatives of safeguarding competition and fair trade and promoting innovation and creativity will interact, it is not appropriate to leave the fine tuning to the judiciary.

 

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