Abuse of a dominant position and intellectual property

Abuse of a dominant position is conduct by which an undertaking with substantial market power exploits that position in a way that distorts competition. It is prohibited by Article 102 TFEU and by Article L. 420-2 of the French Commercial Code. Holding an intellectual property right does not in itself create a dominant position, and its normal exercise does not constitute an abuse, but certain ways of exercising it may be sanctioned under competition law.

Refusal to license

The Court of Justice of the European Union (CJEU) holds that a refusal to grant a licence in principle falls within the very subject matter of the exclusive right. It becomes abusive only in exceptional circumstances, where access to the right is indispensable for carrying on business in a neighbouring market, the refusal prevents the emergence of a new product for which there is potential demand, it is likely to exclude all competition and it is not objectively justified. The General Court has accepted that a limitation of technical development to the prejudice of consumers may suffice. These criteria extend the essential facilities doctrine and have been applied to interoperability information.

Standard essential patents and the use of procedures

The holder of a standard essential patent who has undertaken to grant licences on FRAND terms may commit an abuse by seeking an injunction against a user willing to take a licence. The CJEU has defined a sequence of conduct (notice of infringement, written offer from the holder, diligent response and counter-offer from the user, provision of security), and compliance with it determines access to injunctive relief. Abuse may also result from misleading representations made to offices to obtain supplementary protection certificates, a practice sanctioned by the Commission with the approval of the CJEU and linked to abuse of regulatory procedures.

Sanctions and reliance on abuse in litigation

The abuse exposes the undertaking concerned to fines imposed by the European Commission or by the Autorité de la concurrence, capped at 10% of worldwide turnover, as well as to damages actions before the civil courts. In infringement proceedings, the defendant may raise the abuse to defeat a claim for an injunction or bring a counterclaim. This defence requires prior proof of a dominant position on a precisely defined relevant market, which often calls for economic analysis.

Key points

Competition law leaves the existence of intellectual property rights intact and regulates their exercise by a dominant undertaking. Refusal to license, injunction actions based on a standard essential patent and the misleading use of procedures are the main areas concerned. A dominant holder must document the objective justification for its strategy and, for a standard essential patent, scrupulously follow the negotiation sequence. A defendant should raise the abuse at the outset of the proceedings, supported by a substantiated market analysis.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats handles FRAND licences, standard essential patents and contracts bearing on patents, in advisory work as well as in litigation.

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