European Commission Raises Stakes in IP/Antitrust Battle

June 16, 2005

On June 15, 2005, the European Commission ended its long-running investigation of AstraZeneca’s behaviour on the "proton pump inhibitor" market by imposing fines of €60 million ($72 million). The level of fines was reduced because of certain novel elements of the case.

This is a major step in the development of the way the antitrust rules are applied to intellectual property rights (IPRs) in the European Union.

The Infringement. According to the EU, AstraZeneca misused the patent system in a number of European countries so as to mislead regulators into granting additional patent protection for its ulcer drug Losec. The purpose and effect of this behaviour was, the Commission found, to prevent the entry on to the market of generic versions of Losec. As such it was found to amount to an infringement of Article 82 of the EU Treaty which prohibits the abuse of a dominant position.

Analysis. The Commission’s full analysis is not yet publicly available. However, the following key points have emerged.

  • There may be circumstances where the acquisition of further IPRs reinforces a dominant position in such a way that the acquisition is abusive in its own right.
  • However, generally speaking, the fact that a company is exhausting the legal means offered to obtain the recognition of an IPR cannot be considered a violation of competition law in and of itself.
  • For an abuse to be established, the company in question should be dominant on the market for the technology in question or, if no such separate market exists, on the market for goods or services incorporating the IPR.
  • "Irregular" conduct in the context of the application for an IPR could be a constitutive element of an abuse, or even an abuse itself. However, irregular conduct should not normally be the basis for intervention by competition authorities but should rather be addressed by means of legal proceedings against the outcome of the application.
  • To establish anti-competitive conduct, there should be additional elements that make clear that the dominant company adopted the behaviour in question in order to eliminate competitors while avoiding any normal competition on the merits of the product or technology concerned.

IP/Antitrust Interface. The EU is at pains to point out that its decision is not intended to have a chilling effect on innovation since the conduct complained of was related to the authorisations process and not the right to sell a medicine. However, IP rights holders will see this as a further case which constrains their commercial freedom and increases uncertainty.

Conclusion. Whilst it is encouraging that the EU continues to stress the importance of innovation and the need to reward innovation, this decision does not help that cause. It points to a policy where the antitrust analysis of whether or not any given behaviour is abusive should be assessed on a case-by-case basis. In the real world, that is a recipe for uncertainty and risk-taking.

For more details on the application of the EU Antitrust rules to IPRs, please see "An effects-based approach to technology transfer agreements" [PDF] authored by Gibson Dunn partner David Wood, published in the May 2004 issue of Competition Law Insight

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For further information, please contact:

Peter Alexiadis Brussels (+32 2 554 72 00; palexiadis@gibsondunn.com)

David Wood Brussels (+32 2 554 72 10; dwood@gibsondunn.com)

James Ashe-Taylor London (+44 20 7071 4221; jashetaylor@gibsondunn.com)

Nicolas Baverez Paris (+33 1 56 43 13 00; nbaverez@gibsondunn.com)

Michael Walther Munich (+49 89 189 33-180; mwalther@gibsondunn.com)

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