The European Union

• Pages: 181-237

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Chapter VI

THE EUROPEAN UNION

A. Introduction

1. Regulatory Landscape

Articles 101 and 102 of the Treaty on the Functioning of the

European Union (TFEU, formerly known as EC Treaty) set out the basic

competition rules that apply to activities affecting trade between member

states of the European Union (EU).1 Today, the EU has 27 member

states. 2 The EU institutions, on the one hand, and the national

competition authorities (NCAs) of the member states and their courts, on

the other, apply Articles 101 and 102 in parallel.

1. Consolidated Version of the Treaty on the Functioning of the European

Union, Sept. 5, 2008, 2008 O.J. (C 115) 47 [hereinafter TFEU], as

amended by the Treaty of Lisbon amending the Treaty on European

Union and the Treaty establishing the European Communities, Dec. 13,

2007, 2007 O.J. (C 306) 1 [hereinafter Treaty of Lisbon]. The Lisbon

Treaty is the most recent treaty that amended the treaties on the basis of

which the European Union (formerly known as Communities, prior to

Lisbon Treaty) is based, following the Single European Act (1986), the

Treaty on European Union (Maastricht Treaty) (1992), the Amsterdam

Treaty (1997) and the Treaty of Nice (2001). It changed the numbering

but not the text of the EU competition rules formerly contained in

Articles 81 and 82 of the EC Treaty. The EU published a consolidated

version of the TFEU, as currently in force, in 2010 O.J. (C 83) 47.

Where this chapter refers to Articles without citing a source, such

reference is to the TFEU.

2. The original six founding states were Belgium, France, West Germany,

Italy, Luxembourg, and the Netherlands. Denmark, Ireland and the

United Kingdom joined in 1973, Greece in 1981, Spain and Portugal in

1986, Austria, Finland and Sweden in 1995, Cyprus, the Czech Republic,

Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and

Slovenia in 2004 and Bulgaria and Romania in 2006. In addition, the EU

competition rules apply in Iceland, Liechtenstein and Norway (but not in

Switzerland) pursuant to the Agreement on the European Economic Area,

May 2, 1992, 1994 O.J. (L 1) 3 [hereinafter EEA Agreement]. The EEA

Agreement contains specific competition provisions, principally Articles

53 to 64, which closely mirror those of the TFEU.

182 Antitrust Issues in International IP Licensing Transactions

In addition, each member state has a system of national competition

rules (as opposed to the EU competition rules that apply in member

states), in many cases directly modeled on the EU competition rules.3 In

practice, the application of these national rules is often informed by the

policy and decisions of the European Court of Justice (ECJ), the General

Court (GC, formerly known as Court of First Instance) and the European

Commission (Commission) under Articles 101 and 102.4

In the EU, the intersection of intellectual property rights and

competition rules always has the additional dimension of single market

integration. One of the EU’s “four fundamental freedoms” provides that

products shall move freely across borders.5 For many decades, it has

been a principal enforcement objective of the EU in the area of

competition law to ensure cross-border supply of goods incorporating

intellectual property rights (IPRs) within the EU’s internal market.6

In particular, the ECJ regards parallel trade (i.e., where traders

purchase goods in member states with low price levels and resell those

goods in member states with higher price levels) as inherently

procompetitive and prointegrative.7 Conversely, the court regards a

restraint of parallel trade as restrictive of competition in the sense of

Article 101(1). As a result, the Commission does not have to establish

that such restraints of trade result in actual consumer harm for a finding

of an infringement of Article 101(1).8

2. Relationship Between EU Competition Rules and Freedom of

Goods

EU law (including Articles 101 and 102) may not prejudice national

rules of IP ownership.9 However, the TFEU prohibits any member state

3. See infra Chapters VII-XII (discussing national competition rules in

France, Germany, Italy, Netherlands, Spain, and the United Kingdom).

4. See id.

5. TFEU, supra note 1, art. 26(2).

6. See, e.g., Case 192/73, Van Zuylen Frères v. HAG AG, 1974 E.C.R. 731.

7. See, e.g., Joined Cases C-468/06 & C-478/06 CaSot. Lelos kai Sia EE v.

GlaxoSmithKline AEVE Farmakeftikon Proionton, 2008 E.C.R. I-7139,

¶ 38.

8. See GlaxoSmithKline Services Unlimited v. Comm’n, Joined Cases C-

501/06 P, C-513/06 P, C-515/06 P & C-519/06 P, 2009 E.C.R. I-9291, ¶

64.

9. TFEU, supra note 1, arts. 34-35.

The European Union 183

rules (including their IP laws) that hinder cross-border trade.10 The ECJ

has developed a number of principles aimed at reconciling these

conflicting principles.

In particular, the ECJ’s “theory of exhaustion” holds that the EU

rules for competition and freedoms of goods (Article 34 TFEU) and

services (Article 56 TFEU) may not prejudice the existence of IPRs

granted under national laws, while their exercise is subject to the EU

rules.11 An IPR is “exercised” when the IPR holder brings a product

incorporating its IPR to the market, or consents to such product being

brought to the market. Once exercised, the IPR is “exhausted” with the

result that it can no longer be used to control the sale of that product.12

On this basis, the ECJ takes the position that “the substance of a patent

right lies essentially in according the inventor an exclusive right of first

placing the product on the market.”13

The ECJ’s distinction between the existence of IPRs (which is

protected against EU intrusion) and their exercise (which is subject to

EU law) is primarily directed by the court’s objective to ensure single

market integration, especially with respect to prohibitions on parallel

trade or re-packaging.14 While the exhaustion doctrine has served this

purpose, it is somewhat arbitrary in terms of logical analysis and has

made it necessary for the ECJ to address a variety of issues on a case-by-

case basis.15

Most importantly, in geographic scope, the ECJ’s exhaustion

doctrine applies across the European Economic Area (EEA, i.e., the EU

as well as Iceland, Liechtenstein, and Norway),16 and exhaustion and

10. TFEU, supra note 1, arts. 34-35. To the extent EU law allows for

exceptions (such as for the protection of IPRs), exceptions must not

restrain trade between member states. TFEU, supra note 1, art. 30.

11. The ECJ used to apply the exhaustion doctrine to the freedom of goods.

Recently, however, the ECJ extended the scope of the doctrine to the

freedom of services. See Football Association Premier League Ltd et alt.

v. Karen Murphy et al., Joined Cases C 403/08 and C 429/08 (Oct. 14

2011) ¶¶ 83, 134 et seq.

12. Joined Cases 56 & 58/64, Consten & Grundig v. Comm’n, 1966 E.C.R.

299, ¶ 50.

13. Case 187/80, Merck & Co. Inc. v. Stephar BV & Petrus Stephanus Exler,

1981 E.C.R. 2063, ¶ 9.

14. See supra notes 6-7.

15. See Valentine Korah, Intellectual Property Rights and the EC

Competition Rules 5 (2006); Christopher Stoffers, Parallel Trade in

Europe 40 (2007).

16. EEA Agreement, supra note 2, Protocol 28, art. 2.