The interplay between patent law and competition law is among the most delicate questions in economic law. The two disciplines seem to pull in opposite directions. A patent grants its holder an exclusive right to prevent any unauthorised third party from exploiting the invention and to profit from the research behind it. Competition law, for its part, targets conduct that distorts the market, first and foremost the abuse of a dominant position. Between patents and competition law, the boundary cannot be drawn once and for all, and it shifts from one case to the next.
Patents and competition law, complementary yet in tension
The opposition is less stark than it appears. By reserving the invention to its holder for a limited period, the patent prevents copying and rewards investment in research, which in time feeds competition on the merits. Patent law thus complements competition policy. Competition law may nonetheless restrict the exercise of a patent where the holder abuses it.
European case law has long distinguished between the existence of the exclusive right, which competition rules leave untouched, and its exercise, which may fall within their reach. The aim is to prevent abuse without depriving the patent system of the benefits it brings when rights are exercised in the ordinary way.
Agreements on the exploitation of patents
Although it is a recognised and protected exclusive right, a patent may still be exercised in an anticompetitive manner. The risk is all the more serious, and its consequences all the heavier, where the holder also enjoys a dominant position on the relevant market.
French and EU law prohibit agreements whose object or effect is to restrict competition (Article 101 TFEU and Article L. 420-1 of the French Commercial Code). Agreements concerning the exploitation of inventions are not, by their nature, exempt from the rules on anticompetitive agreements. Licences, assignments and settlements ending patent disputes may all be examined on that basis.
Servier and pay-for-delay agreements
The Servier case is the clearest illustration. Several generic manufacturers were preparing to enter the perindopril market and were challenging the validity of a Servier patent known as the 947 patent. Servier entered into settlements with them under which they dropped their challenge and undertook to stay out of the market for the life of the patent, in return for payments.
In 2014, the European Commission fined Servier and five generic manufacturers a total of 427.7 million euros. It took the view that these agreements, presented as settlements, in fact had the object and effect of restricting competition. In 2018 the General Court upheld their classification as restrictions by object for most of the agreements concerned. Ruling on the appeals in 2024, the Court of Justice maintained that analysis in line with its Generics (UK) judgment of 2020, which accepts that a pay-for-delay agreement is a restriction by object where the transfer of value granted to the generic manufacturer can be explained only by the commercial interest of the parties in not competing with each other.
Essential facilities applied to patents
The essential facilities doctrine was born to secure access to certain infrastructure. The Court of Justice extended it to intellectual property rights in Magill, decided on 6 April 1995, holding for the first time that a rightholder’s refusal to license was abusive. The conditions are strict. The refusal must come from a dominant undertaking, concern an input indispensable for carrying on business on a secondary market, prevent the emergence of a new product for which there is potential demand, be liable to exclude all competition on that market and lack any objective justification.
The IMS Health judgment of 29 April 2004 restated and refined those conditions. IMS had developed a modular structure dividing Germany into geographical areas, protected by copyright and used to present pharmaceutical sales data, which had become a de facto industry standard among its customers. NDC wished to use it to compete with IMS and was refused a licence. It complained to the Commission, while the Court, on a preliminary reference from a German court, held that it is sufficient to identify an upstream market, even a merely potential or hypothetical one. Some commentators saw this as a relaxation of the new product condition, since the licence seeker intended to offer a service close to the holder’s own. The reasoning, developed in relation to copyright, applies equally to patents.
These criteria leave competition authorities a wide margin of appreciation. The point at which an input becomes indispensable, or a product genuinely new, cannot be defined in the abstract.
Standard essential patents
The question becomes particularly acute where the patent is essential to a technical standard. Such a patent is one whose use is indispensable to any manufacturer of products complying with the standard. Competitors then have no choice but to use it.
A holder taking part in the development of the standard therefore usually undertakes, before the standard development organisation, to grant licences on fair, reasonable and non-discriminatory terms, hence the term FRAND licence. The terms must not unduly restrict competition, the royalty must not be prohibitive and licensees in comparable situations must be treated in a comparable way. Disputes over the royalty rate are resolved before the courts or through arbitration.
In Huawei v. ZTE, decided on 16 July 2015, the Court of Justice set out the conditions under which the holder of a standard essential patent, in a dominant position and committed to granting FRAND licences, may bring infringement proceedings seeking an injunction without abusing that position. The holder must first alert the alleged infringer, then make a specific written offer of a licence on FRAND terms. The alleged infringer must respond diligently, make a counter-offer where appropriate and provide security if it is already using the technology. This procedural framework, applied by national courts and by the Unified Patent Court, strikes a balance between the rights of the holder and the requirements of competition.
A shifting boundary
The boundary between patents and competition law keeps moving as technology evolves. When they consider imposing a licence, competition authorities must weigh the expected benefits of that licence, the innovation that disclosure of the information at stake would allow and the effect of such an obligation on the holder’s incentive to innovate.
The case law reflects closer scrutiny of patent holders’ practices, especially where they hold a dominant position. That scrutiny must nevertheless preserve the incentives to innovate that justify the very existence of patents. The balance remains fragile and calls for constant reassessment in the light of technical and economic change, particularly in high-technology sectors where standard essential patents increasingly shape markets.