An extract from The Intellectual Property and Antitrust Review, 6th Edition
Licensing and antitrusti Anticompetitive restraints
In German law, anticompetitive restraints in licensing agreements fall under Section 1 of the ARC and Article 101(1) of the TFEU. This includes, inter alia, market and customer sharing, pricing, output limitations or non-compete clauses.10 In this context, the Horizontal Guidelines of the Commission (2011/C 11/01) and Commission Regulation (EU) No. 316/2014 on technology transfer agreements (TTBER), which is applicable in German law according to Section 2(2) of the ARC, are of particular importance. Based on the TTBER, in particular, hardcore restrictions are of crucial relevance, such as the restriction of a party's ability to determine its prices when selling products to third parties, limitation of output, allocation of markets or customers, and restriction of the licensee's ability to exploit its own technology rights.
One additional IP-related highlight was the decision of the Higher Regional Court of Düsseldorf on the marketing of football media rights. The Court dismissed the appeal brought by one of the various third-party interveners, Sky, against the decision of the German Federal Cartel Office (FCO) of April 2016 on the centralised marketing of media rights for the first and second German Federal Football League (Bundesliga).11 The FCO had considered the centralised marketing by the German Federal Football League to fall under Section 1 of the ARC and Article 101(1) of the TFEU, and had cleared it on the basis of a commitment decision pursuant to Section 32b of the ARC. The commitments, inter alia, referred to how the media rights in question are to be structured in various 'rights packages' and included specific provisions on the tender proceedings, most importantly a 'no-single-buyer rule'. This rule aims to ensure, by way of a certain two-step approach, that no single undertaking would have a chance to acquire all rights for live broadcasting.
One of the joined parties of the FCO proceedings, Sky, which had acquired practically all live media rights in the previous tender, appealed against the FCO's decision, mainly attacking the 'imposition' of the no-single-buyer rule by the FCO on the German Football League (by way of accepting a corresponding commitment) as being an unnecessary and excessive restriction severely harming Sky in its rights and commercial interests.
The Higher Regional Court of Düsseldorf dismissed the complaint in its decision of 3 May 2017,12 holding the complaint to be inadmissible.
The Court denied that the FCO's decision infringed any of Sky's rights as the decision itself had no legal effect on Sky since the decision's effects materialise only upon its implementation by a private third party – the German Federal Football League offering the media rights. However, even if one were to take these effects into consideration, the decision did not infringe Sky's rights as the no-single-buyer rule was obviously pro-competition, aiming to open up markets and increase competition – an objective clearly consistent with the legal framework and thus obviously not capable of infringing Sky in any of its rights whatsoever. In addition, the claimant was considered not to be affected sufficiently in its commercial interests. The Court already denied Sky's commercial interests in this context to be legitimate, inter alia, stressing that the no-single-buyer rule aims to avoid a monopoly-like situation in the relevant end-consumer market, and that Sky's interest in a tender without this rule thus consists in avoiding competition. Furthermore, the Court raised doubts as to whether the claimant's interests were 'directly' affected and stressed that Sky, in any case, would not be 'individually' affected since the no-single-buyer rule would apply equally to all potential bidders for the media rights concerned, in a similar way. The fact that the FCO in its decision explicitly referred to Sky when explaining its concerns was seen merely as a consequence of Sky having secured nearly all live broadcasting rights in the previous tender. Whether this past success might trigger the need for Sky to modify its business strategy now, in the light of a no-single-buyer rule, was not considered relevant by the Court. The Court stressed that media rights, from the outset, are only offered for a limited period, after which all market participants have to adjust their behaviour equally to the new tender proceedings, and the Court did not see any indication why claimant Sky would have been affected by the no-single-buyer rule in an appreciably stronger or structurally different way than its competitors. Subsequently, the no-single-buyer rule has again been adopted for the next German Football League's media rights offering.13ii Refusals to license
There are no specific statutory provisions regarding the refusal to license. Abuse of a market dominant position pursuant to Section 19(1) of the ARC is interpreted closely along the lines of its EU counterpart, Article 102 of the TFEU. In particular the conditions under which a refusal to license is deemed abusive derive from the case law of the CJEU, which has mainly been formed by the leading judgments in Magill 14 and IMS Health.15,16 Accordingly, a refusal to license may be abusive and a claim for a compulsory licence successful where (1) using the intellectual property right in question is indispensable for carrying out business on a neighbouring or downstream market; (2) the refusal to grant a licence prevents a new product for which there is a potential consumer demand; or (3) the refusal is not objectively justified and would exclude competition. According to the Higher Regional Court of Düsseldorf, a product is 'new' in this sense where, from a demand-side perspective, there is no substitutability between the product of the licence-seeking undertaking on the one side and the intellectual property right owner's existing product on the other side.17
As regards patents that have already been licensed out by the patent owner, a refusal to license may be abusive and thus lead to a compulsory licence if the licensing practice of the patent owner is discriminatory or exploitative under Sections 19 and 20 of the ARC or Article 102 of the TFEU.18
This principle was also applied in relation to a design right infringement dispute between manufacturers of automotive spare parts, namely of tail lights and headlights by the Higher Regional Court of Düsseldorf.19 The Court decided in its decision of 3 April 2019 that a refusal to license out design rights is not abusive under competition law owing to the fact that the design holder and the plaintiff did not grant design licences to third parties. In this regard, the defendant who bore the burden of proof did not sufficiently demonstrate that design licences were granted to other spare part producing companies.
Refusal to license regarding SEPs is discussed in Section IV.iii Unfair and discriminatory licensing
Unfair or discriminatory licensing practices can fall under Sections 19 and 20 of the ARC and Article 102 of the TFEU and may be considered as an abusive (discriminatory) behaviour by a market-dominant intellectual property right owner (see Section III.ii).iv Patent pooling
In practice, the rules established at EU level apply.v Software licensing
With regard to a market dominant software provider, the Higher Regional Court of Munich20 ruled in its decision of 23 November 2017 that, regardless of its market dominant position, an undertaking must be free to operate its sales and distribution system at its own discretion, which also includes the possibility to set different licence conditions for different customer groups. In the specific case, the defendant software provider ceased to supply the plaintiff with software solutions at special price conditions (i.e., at conditions applied to research and teaching institutions, such as universities). The defendant, thereby, refused to offer the special conditions to the plaintiff after finding that the plaintiff did not fulfil the defendant's internal criteria under which special conditions for research and teaching institutions should be applied. The court held that refusing those research and teaching institution price conditions to the plaintiff did not violate German cartel law although the defendant software provider in the past had not consequently applied its own criteria with regard to the plaintiff.vi Trademark licensing
In general, restrictions of competition in trademark licensing agreements are compatible with the cartel prohibition of Section 1 of the ARC and Article 101(1) of the TFEU, if they are necessary to protect the continued existence of the trademark and legitimate reasons for the restriction are given.21 Agreements on territorial protection, prohibition or restrictions on exercising, restrictions in quantity, reservation of customer groups, non-assertion and non-compete agreements are principally deemed to be infringing Section 1 of the ARC and Article 101(1) of the TFEU.22
In practice, delimitation agreements are of particular importance at the interface with competition law, as these agreements typically aim to settle disputes between the parties. Further details are provided in Section VI.iii.
In a trademark infringement case, the Higher Regional Court of Frankfurt23 – as appealing court – in its decision of 30 January 2020, dismissed the trademark owner's and the plaintiff's antitrust objection, claiming that the licence agreement was invalid due to its long duration of 57 years, which in the plaintiff's opinion restrained competition. The Court argued that the raised objection of an antitrust infringement in the appeal instance was precluded according to German civil proceeding law decision. If possible, relevant facts must be presented during the first instance and in particular, they must be submitted up until the end of the first-instance oral hearing. In this regard, the Court noted that a restriction of competition also depends on factual conditions; in other words, there must be an appreciable restriction of competition in the relevant product and geographic market, which must be factually demonstrated by the party claiming that the agreement restricted competition. However, a late submission of the factual basis constitutes a new plea in the appellate body (see section 296a, 531 (2) German Code of Civil Procedure), which, in general, cannot be taken into account by the appeal court.