An extract from The Intellectual Property and Antitrust Review, 5th Edition
Licensing and antitrusti Anticompetitive restraints
Under Spanish law, anticompetitive restraints included in licensing agreements are subject to the prohibition stated in Article 1 of the AA and Article 101 of the TFEU. In accordance with these provisions, those agreements, collective decisions or recommendations, or concerted or consciously parallel practices, which have as their object or effect, the prevention, restriction or distortion of competition in all or part of the national market (in the case of Article 1 of the AA) or the EU market (in the case of Article 101 of the TFEU) are prohibited. Examples of these agreements include price-fixing, market share-out or limitation of production.
When analysing the compatibility of licensing agreements with antitrust laws, the Spanish antitrust authorities have considered the TTBER provisions. For instance, in the Haller case, what was then the former CNMC, the National Competition Commission (CNC), applied the former TTBERs of 1996 and 2004 to assess whether the licence agreements entered into by Haller with its distributors in Portugal and Spain were in accordance with antitrust law. The licence agreements included an absolute restriction on passive sales because the licensees were only authorised to produce and market the licensed equipment in the territories assigned to them. Although the companies held a small market share within the Spanish market and the TTBERs applicable at that time established a more benevolent treatment to passive sales restrictions to incentivise investment and efficiency, the CNC concluded that these clauses constituted a hardcore restriction and could not benefit from the TTBER exemption. However, this resolution was reversed by the National High Court by application of the de minimis rule, as Haller's market share in Europe and in Spain was less than 4 per cent and 5 per cent, respectively, and, consequently, it was considered that its conduct was not sufficiently material to significantly restrict competition.
Passive sales restrictions were also analysed by the CNC in the Carpa Dorada case, which involved licences to exploit a Community plant variety right over a specific variety of mandarin named Nadorcott. The CNC analysed whether the passive sales restrictions included in the licensing agreements could be justified to form part of a selective distribution system in accordance with Commission Regulation (EU) No. 330/2010 on vertical restraints. The CNC concluded that the tracking system included in the granting of exploitation licences of this plant variety infringed Article 1 of the AA and Article 101 of the TFEU, as it allowed the control of the production and marketing of the Nadorcott mandarins. Moreover, this tracking system could not be justified as forming part of a 'selective distribution system' as it only affected the first level of the production chain (manufacturers and wholesalers) and did not continue through to retailer level.
The CNMC has reached a settlement with Adidas España that puts an end to the case brought by the CNMC for potential anticompetitive restraints on Adidas España's franchisees. Among the commitments made by Adidas España were the removal of the post-contractual non-competition clause included in some of the franchise agreements, the clarification of the requirement to provide prior notice of the internet addresses (URLs) used by distributors, and the lifting of the ban on cross-sales between distributors in general, and between franchisees in particular.ii Refusals to license
Refusal to license could be considered an abuse of dominant position under Article 2 of the AA and Article 102 of the TFEU if the IPR holder has a dominant position in the market. This conduct has been the subject of the ongoing Oracle case involving Oracle's decision to suspend the development of its software for Intel's Itanium processor, which was used in Hewlett Packard's Integrity servers.
The CNC, on the basis of the Commission's principles on establishing when a refusal to supply can be considered abusive, concluded that there was no evidence to class Oracle's conduct as an exclusionary abuse of dominant position and it closed the file. This decision was revoked by the National High Court, which considered that Oracle's decision aimed at preventing the continuation of Hewlett Packard in the high-performance database servers market could not be justified by the fact that the Itanium processor was obsolete. This judgment was also revoked by the Supreme Court, which ruled that, although the National High Court was right in concluding that the CNC should not have closed the case without properly assessing the evidence before it, it was wrong in attempting to replace the CNMC and decide the case by itself, by declaring that Oracle's conduct constituted an abuse of its dominant position. Consequently, the Supreme Court ordered that the case be referred back to the CNMC, which reopened the case. After reassessing all the evidence on file, the CNMC Council issued a new decision declaring that the Investigation Division failed to demonstrate that Oracle had breached Article 1 of the AA or Article 102 of the TFEU. Among other findings, the CNMC concluded that the classic refusal-to-supply theory of harm cannot be applied to products that still need to be developed, and that, in such cases, the test must be stricter and was not met in the case at hand.
In the Arándonos case, the CNMC also looked at a refusal to license, but considered that there was no abuse of dominant position. Rústicas del Guadalquivir (the exclusive licensee of the Community plant variety right protecting the Snowchaser blueberry variety) voluntarily opened collective proceedings to remedy the situation of cooperatives and farmers who were using the Snowchaser variety without a licence. The association that filed the complaint did not request formalisation within the established period and, when it finally did so, Rústicas del Guadalquivir denied the sub-licence due to the lack of transparency of the association regarding its activity, purpose, cultivated varieties, licences obtained and members of the association. The CNMC concluded that the reasons given to justify the refusal to licence could not be deemed abusive, let alone the fact that Rústicas del Guadalquivir could not be deemed to have a dominant position in the market. Moreover, the CNMC concluded that there was no discrimination or exclusionary purpose based on the establishment of unreasonable conditions or excessively high prices.
When a refusal to license is deemed an abuse of dominant position, the Spanish Patent Act envisages the possibility of granting a compulsory licence, in line with Articles 8(2), 31(k) and 40 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights and with the CJEU case law stated in the Magill, IMS and Microsoft cases. According to this case law, in exceptional circumstances the IPR holder can be obliged to grant a licence to a third competitor if the refusal to grant constitutes an abuse of dominant position. The Spanish Patent Act establishes this possibility when the competent authority has handed down a final decision (i.e., a decision that cannot be further appealed) declaring the infringement of antitrust law by the patent holder.iii Unfair and discriminatory licensing
Unfair and discriminatory licensing could constitute an abuse of dominant position within the meaning of Article 2 of the AA or Article 102 of the TFEU. A good example of this is the Spanish Supreme Court judgment in the Audiovisual Producers Rights Management Organisation (EGEDA) case. EGEDA's conduct consisted of determining the amount of the applicable tariffs based on the hotel category (i.e., deluxe and five-star hotels were subject to higher tariffs, whereas hotels of two or fewer stars were exempted from payment). By referring to the CJEU doctrine of the Kanal 5 case, the Supreme Court concluded that EGEDA had committed an abuse of its dominant position as the tariffs imposed were discriminatory and could not be justified because they were neither related to the nature of the economic value of the services of public communication of audiovisual productions rendered, nor to the effective use of these rights.
On 31 May 2019, the CNMC sanctioned another management society, the Spanish Society of Authors, Composers and Publishers (SGAE), for abuse of dominant position for, among other conducts, having fixed unfair and discriminatory tariffs for hotels and restaurants. When assessing whether the discriminatory prices applied by a dominant company may result in a 'competitive disadvantage' in the sense of Article 2(2)(d) of the AA and Article 102(c) of the TFEU, the CNMC has taken into account, among other precedents, the CJEU judgment in the MEO case.
The Supreme Court confirmed, by final judgment, the sanctions imposed by the CNMC on the SGAE for an abuse of the fee system for the public performance of musical works in concert. The CNMC concluded that the rates charged by the SGAE to concert promoters were excessive and, therefore, unfair and abusive. In analysing the case, the CNMC compared the rates charged by the SGAE (10 per cent of ticket sales after deduction of VAT; 9 per cent for venues with capacity for under 1,000 spectators) with the rates charged in 14 other European Union member states, which were far lower (in the United Kingdom the rates charged were 3 per cent of gross ticket sales). Based on the CNMC decision (now final), in the parallel civil proceedings brought by SGAE for non-payment of the disputed concert fees, the Barcelona Court of Appeal declared the agreement signed by the SGAE and Producciones RocknRock null and void. The Barcelona Court of Appeal declared that the fees charged were excessive and ordered that they be reduced to 3 per cent (as in the United Kingdom).iv Patent pooling
Within the scope of a cartel investigation regarding paper envelopes, the CNC had to analyse whether the creation of a patent pool was compatible with antitrust laws. The investigated companies created the 'Open System' patent pool, which was formed by co-owned IPRs protecting a technology for easy-opening envelopes. The companies transferred their IPRs and limited technological innovations and agreed not to license their IPRs to companies outside the pool. The CNC concluded that these agreements to share their own technologies were similar to a price-fixing cartel, in application of the 2004 TTBER.v Software licensing
Software licensing agreements will be treated as vertical agreements under the principles of the Vertical Block Exemption Regulation when the purpose of the agreement is the mere reproduction and distribution of software copyright protected products. This standard was applied by the CNMC in the Alquicarp case regarding the distribution and implementation of the software SAP Business One. However, in those cases where the technology to produce the software is also licensed, the software licensing agreement will fall within the scope of the 2014 TTBER (Recital 7).
As previously mentioned in discussing the Oracle case, depending on the particularities of the case, a refusal to license software could be considered a refusal to supply, constituting an abuse of dominant position.vi Trademark licensing
Trademark licensing and, in particular, exhaustion and territorial restrictions, have been in vogue in recent years in Spain as a result of the Schweppes case.
The Schweppes case arises from the fact that, since 1999, the Schweppes trademark was owned in Europe by two different corporate groups. The Coca-Cola group owned the Schweppes trademark in 11 Member States of the EU, including the United Kingdom; meanwhile, the Orangina Schweppes group owned the Schweppes trademark in the other EU Member States, including Spain. In 2013, the Spanish affiliate of the Orangina Schweppes group became aware that parallel importers were introducing Schweppes tonic water, mainly from the United Kingdom, into the Spanish market. As licensee of the Spanish Schweppes trademark, it brought several legal actions against these parallel importers on the basis that, as the tonic water imported had been manufactured by the Coca-Cola group (and not by the Orangina Schweppes group), the Schweppes trademark in Spain, owned by this latter group, was not exhausted.
As a result of these actions, several agreements were entered into with some of the parallel importers accused of infringing the Spanish trademark. These agreements were the subject matter of an investigation by the CNMC, which considered that the rights over the Schweppes trademark were not exhausted on the basis of the control doctrine developed by the CJEU in the Hag II and Ideal Standard cases. According to such doctrine, each IPR holder should be entitled to oppose the import and marketing of products manufactured by the other holder provided that the products are designated by a similar trademark and that this could cause confusion within the market, as these products have not been manufactured under its control. On this basis, the CNMC analysed the agreements entered into by the Spanish affiliate and some parallel importers and accepted the undertaking to amend them to clarify that it only opposed the introduction of the Schweppes tonic water coming from the United Kingdom and manufactured by the Coca-Cola group into the Spanish market.
In parallel, Spanish courts have also handed down some decisions on this same case, mainly ruling in favour of Schweppes, SA. However, the Barcelona Commercial Court No. 8 decided to refer some questions related to this Schweppes case to the CJEU, which clarified the ownership doctrine developed in the Hag II and Ideal Standard judgments in the sense that the proprietor of a national trademark cannot oppose the import of identical goods bearing the same trademark originating in another Member State in which the trademark that initially belonged to that proprietor is now owned by a third party that has acquired the rights thereto by assignment, when, following that assignment, either of the following two circumstances takes place:
- the proprietor has actively and deliberately continued to promote the appearance or image of a single global trademark, thereby generating or increasing confusion as to the commercial origin of goods bearing that trademark; or
- there exist economic links between the proprietor and that third party, inasmuch as they coordinate their commercial policies or exercise joint control over the use of the trademark, so that it is possible for them to determine the goods to which the trademark is affixed and to control the quality of those goods.
On the basis of this CJEU judgment, Barcelona Commercial Court No. 8 issued a judgment in which it did not follow the same approach as the other Spanish courts dealing with similar matters. It concluded that there were sufficient indicia to deem that, after the fragmentation of the trademark in 1999, the trademark holder in Spain, alone or in coordination with the Coca-Cola group, has actively and deliberately promoted the image of Schweppes as a global and unique trademark, creating confusion among the public as to the corporate origin of the Schweppes products. This confusion undermined the essential function of the trademark and, consequently, on the basis of the CJEU judgment, the patent holder cannot oppose the parallel imports of identical products designated with the same trademark coming from a Member State in which the trademark is currently owned by the third party (i.e., the Coca-Cola group) with which it has been coordinating the exploitation strategy of the trademark within the European Economic Area. However, this first-instance decision was revoked by the Barcelona Court of Appeal, which considered that, based on the evidence provided in the proceedings, it could not be concluded that the two requirements set by the CJEU were fulfilled.
Trademark exhaustion within a selective distribution system in high-quality, but not luxury, goods has been analysed in detail by the Barcelona Court of Appeal in the Mustela case; on the basis of the principles laid down by the CJEU in the Parfums Christian Dior and Coty cases and by the Supreme Court in the L'Oreal case. It understands that the exception to the trademark exhaustion stated by this case law for luxury products can also apply to 'quality' products to preserve the prestige and image of their trademark.