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Patents and Competition Law

Written by Corinne Day on 15 May 2008

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Exploiting intellectual property rights may lead to possible breaches of competition law.

In particular, it is the rights which patents confer which may cause competition problems. English law gives patent holders a right which in itself could restrict trade and competition. A patent right holder can rely on their patent to stop anyone else making or selling that patent. Even if that patent holder allowed other businesses to use the patent (by licensing it out), it could directly or indirectly restrict trade and competition by the terms which it includes in the licence. For example, it could grant a licensee exclusive territory, or stop a licensee exporting the machine from that territory.

Therefore, EC law must try to balance two potentially conflicting situations: on the one hand, the desire of the patentee to be rewarded for his creativity, and on the other hand, the need to stop IP rights granted under national law from interfering with trade and competition within the common market.

Art 295 of the EC Treaty provides that the treaty 'shall in no way prejudice the rules in the Member States governing the system of property ownership', which has led the EC competition authorities to take the view that EC law should not seek to control the existence of IP rights. However, EC law does try to control the 'exploitation' of these rights.

The ECJ's interpretation is that Art 295 is concerned with safeguarding the existence of national IP rights, and that Art 81 and 82 (concerning competition) with controlling their exercise. As a basic rule, if the exercise of an IP right interferes with a Treaty provision (other than Art 295) that right will be compromised and its exercise will be forbidden or restricted.

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