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#Competition and Patents

Introduction

The objective of competition policy is to ensure a fair functioning of the market and, in particular, that market entry is not unduly prevented or made difficult. Anti-competitive practices include a range of activities, such as abusive exclusionary conduct by a dominant company, refusal to provide certain goods or to grant licenses on market conditions, charging excessive prices, vertical arrangements between suppliers and distributors and other agreements among firms which lead to the distortion of competition on the market.

There is a close link between patent rights and competition, which, in simple terms, can be characterized by two factors: on the one hand, patent laws aim to prevent the copying or imitation of patented goods, and thus complement competition policies in that they contribute to a fair market behavior. On the other hand, competition laws may limit patent rights in that patent holders may be barred from abusing their rights. In sum, experience shows that too high or too low protection of both patents and competition may lead to trade distortions. A balance has thus to be found between competition policy and patent rights, and this balance must achieve the goal of preventing abuses of patent rights, without annulling the reward provided for by the patent system when appropriately used.

The search for this balance between patents and competition policy objectives is reflected both within the patent system as well as in respect of its relationship with competition law:

• Within the patent system, the core principles of the system have been framed precisely with a view to ensure that the system simultaneously fosters innovation and remains consistent with fair market rules. Therefore, safeguards and boundaries have been built into the patent system to allow it to generate patents only for those inventions which are most likely to serve the public interest, but should prevent patents for those inventions that would appear not to benefit society. In particular, such safeguards and boundaries include the fact that most patent systems protect only inventions, not discoveries, the limitation of patent rights as to their contents and their duration, the availability of exceptions to the rights conferred, and the conditions of patentability which prevent grant of patents for obvious and not novel creations.

On the other hand, competition law has as its objective to prevent undesired market behavior and, in particular, abuses of a market position. In relation to patent rights, such behavior would cover activities going beyond the objectives and boundaries set by the patent system. Such situations may occur, for example, where an exclusive license totally excludes other competitors from market entry, through restrictive selling practices or where patent rights are used to create horizontal agreements for fixing price levels.

Against this backdrop, competition policies and laws can be an important instrument to regulate potential abuses of patent rights and to complement patent inherent boundaries.

Studies and Articles

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