Beyond Refusal to Deal: A Cross-Atlantic View of Copyright, Competition, and Innovation Policies

Conventional wisdom holds that the European Union has opted to apply its competition law to the exercise of intellectual property rights to a much greater extent than has the United States. In a new article, published in Vol. 79(1) of the Antitrust Law Journal, Paul-Erik Veel and I argue that, at least in the context of copyright protection, this conventional wisdom is false.

While European antitrust regulation of refusal to license one's intellectual property does seem much more robust and activist than U.S. antitrust regulation of similar conduct, focusing solely on one narrow aspect of antitrust doctrine—the treatment of a unilateral refusal to deal—tells less than half the story.

The More Interesting Question in Eli Lilly v. Apotex

The Federal Court of Appeal recently held that where an agreement to assign a patent increases the assignee's market power in excess of that inherent in the patent itself, the assignment may be subject to scrutiny under the Competition Act. This holding shouldn't have been really surprising, but the judge at the lower court thought that since the patent act provides that a patentee may assign the patent, such an assignment--even if results in a lessening of competition--can never be undue.  He also rejected the argument that all that the patent act meant was to reiterate the principle that a property right may be assigned.  In his view, if that was all that the patent act meant to say, that would be a redundancy because it was obvious that patents (like any other property) may be assigned.   

So luckily the court of appeals reversed.  It makes a lot of sense to hold that holders of substitute patents may not be allowed to combine them together and have a carte blanche to eliminate competition between themselves. 

Competition Between Copyright Holders? How Horrendous!

The European Commission announced last Wendesday that it has decided to open formal proceedings against CISAC (the “International Confederation of Societies of Authors and Composers”) and the individual national collecting societies that are members of CISAC and has sent them a Statement of Objections (SO).

The Commission doesn't question the practice of collective administration of performing rights. The SO concerns only certain relatively new forms of copyright exploitation: internet, satellite transmission and cable retransmission of music.

With regard to these new forms of copyright exploitation, what the Commission probably envisages is competition between the national collecting societies, each of which would be allowed to recruit members and customers on a EU-wide basis.   

The merit of the Commission's views requires a separate discussion.  Yesterday, however, CISAC issued a press release reacting to the SO, and containing the following hilarious statement: 

Schumpeter in the Supreme Court

Last November, in  Kirkbi AG v. Ritvik Holdings Inc. the Supreme Court of Canada dismissed Lego's case against Mega Blocks.

The plaintiff was the manufacturer of the well-known LEGO construction bricks for children. It had obtained patent protection for the locking system of interlocking studs and tubes that held the bricks together. On expiry of the patents, the defendant had commenced the manufacture and sale of its Mega Blocks, similar construction bricks using the same locking method. The plaintiffs had commenced an action for passing off, claiming trade-mark rights in the orthogonal pattern of the raised studs distributed on the top of each brick (the 'LEGO Indicia'). The trial judge had found that the LEGO Indicia was purely functional and dismissed the action, a finding that was upheld by the Federal Court of Appeal. The plaintiffs obtained leave to appeal to the Supreme Court of Canada.  The SCC held that the appeal should be dismissed.

Lebel, J. writing for a unanimous court ended the decision with the following paragraph:

Copyright Board's New Ringtone Decision

The Copyright Board issued yesterday its decision certifying SOCAN's Tariff 24 for ringtones.   The Board set a base rate of 6% of the price paid by the subscriber for the ringtone (net of any network usage fees) with a minimum of $0.06 per ringtone.  The main legal controversy before the tribunal was whether the delivery of ringtones is "communication to the public" but I don't want to comment on that here.  Instead, I want to comment on a more fundamental issue, and ask why should the royalties be set by a tribunal at all?  Why wouldn't copyright holders and ringtone suppliers enter into voluntary agreement and decide who should pay and how much?  Ordinarily, prices are determined by the "market".  Why then are these prices set in a strange way in which one seller (SOCAN) proposes prices and then, over a period of three years lawyers, prominent economists and other experts try to convince a tribunal what those prices should be?

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