The European Commission today published results of a program which monitored patent settlements in the pharmaceutical sector between July 2008 and December 2009 and in particular the effect of those settlements on the entry of generic medicinces after the expiraton of patent protection for originator medicines.
The exercise took place as a follow up to the Commission’s sectoral inquiry into the pharmaceutical sector which concluded in 2009 that between 2000 and 2008 originator pharmaceutical companies were using the patent system to delay entry of generic replacement medicines by an average of 7 months after the expiration of patent protection. In particular there was evidence that originators were compensating generic manufactures in return for delays in market entry.
In today’s release the commission has noted that although the number of settlements has doubled on an annual basis, the value of these settlements has fallen dramatically and that only 10% of the latest settlements are problematic from a competition point of view.
The Commission has vowed to continue monitoring the sector and to repeat the investigation into patent settlements again in 2011.
The press release is here.
Full details of the sectoral inquiry are here.
The UK budget introduces a “patent box” with a ring-fenced low tax rate for certain patent income. In addition changes are made with regard to R&D expenses for SMEs.
The former Community Patent is now the EU Patent but is it any closer to reality? After almost 40 years senior Commission official thinks it is “dead in the water“. Barnier and Belgium vow to press on with the project. Look out for legislation and opinion of the CJEU towards the end of the year. Is it a case of good-cop/bad-cop. More balanced view from IPEG.
IP meets competition after Microsoft: Good review of possible Commission plans to introduce legislation mandating software interoperability in certain circumstances. Timely in light of recent complaint against SAP.
Commission launches consultation on net neutrality. Context of Digital Agenda.
China has a plan.
Ocean Tomo is sold
The well known auction house that held regular patent auctions was acquired by British broker ICAP for $5M in cash and $5M in shares.
Bogus patent busted using mailing list archives
A bogus patent (US 6,687,746) concerning the automatic assigning of internet subdomains was invalidated by the Electronic Frontier Foundation. Interestingly archive mailing list and Usenet information was used to show that the idea was being publicly discussed prior to the patent being filed. This shows the importance of these archives in relation to finding prior art in the internet sector.
A market place for ideas
Innocentive is an ideas market place where corporations can place ideas wanted ads and inventors can offer their ideas. The fees don’t look great considering the sort of ideas being sought but it is an interesting concept nonetheless.
Chipmaker sued for Trade Libel
According to the Register, LSI has been sued in the USA by SanDisk for trade libel arising out of persistent claims of IP infrnigement by LSI, including threats against some of SanDisk’s customers.
Irish energy firm’s claims fail jury investigation
Dublin based Steorn claims to have invented a machine which can produce excess energy, in other words a perpetual motion machine. Steorn advertised for experts to form a jury to investigate the claims regarding the invention and after two years, the jury have come back to say that they cannot find any eveidence that energy is produced by the machine. The UK IPO has recenty decided to take a strict line on such inventions according to this decision.
Changes to border detention of allegedly infringing goods in UK
According to Out-Law and IPKat Her Majesty’s Revenue and Customs has had to change the procedures it uses when requested by rights holders to detain goods which are alleged to infringe those rights. Originally the burden was on the importer to prove that the goods did not infringe but now the doctrine of direct effect of Council Regulation 1383/2003 has been invoked and the burden in on the right-holder to prove infringement. Thus HMRC will now release detained materials unless court proceedings have been initiated by the right holder.
This is an interesting pamphlet written by Martin Luther in 1524 on the conflict between christianity and business.
Luther outlinines some of the immoral trading practices of the time accusing merchants of making super profits from the sale of their goods and offers a more christian way of doing business.
Some of the business swindles that Luther condems include the following:
The evil of credit
There are some who have no conscientious scruples against selling their goods on credit for a higher price than if they were sold for cash: nay, there are some who wish to sell no goods for cash but everything on credit, so that they may make large profits. Observe that this way of dealing – which is plainly against God’s Word, against reason and all fairness, and springs from sheer wantonness and greed – is a sin against one’s neighbor, for it does not consider his loss, and robs and steals from him that which belongs to him; it is not a seeking for an honest living, but only for avaricious gain. According to divine law, goods should not be sold for a higher price on credit than for cash.
Abuse of dominance
Again, there are some who buy up the entire supply of certain goods or wares in a country or a city, so that they may have those goods solely in their own power and can then fix and raise the price and sell them as dear as they like or can. Now I have said above that the rule that a man may sell his goods as dear as he will or can is false and unchristian. It is far more abominable that one should buy up the whole commodity for that purpose.
Even the imperial and temporal laws forbid this and call it “monopoly,” i.e., purchase for self-interest, which is not to be tolerated in city or country, and princes and lords would stop it and punish it if they did their duty. Merchants who do this act just as though God’s creatures and God’s goods were made for them alone and given to them alone, and as though they could take them from other people and set on them whatever price they chose.
When some see that they cannot establish their monopolies in any other way because other people have the same goods, they proceed to sell their goods so cheap that the others can make no profit, and thus they compel them either not to sell at all, or else to sell as cheap as they themselves are selling and so be ruined. Thus they get their monopoly after all. These people are not worthy to he called men or to live among other men, nay they are not worth exhorting or instructing; for their envy and greed is so open and shameless that even at the cost of their own losses they cause loss to others, so that they may have the whole place to themselves.
Three or four merchants have in their control one or two kinds of goods that others have not, or have not for sale. When these men see that the goods are valuable and are advancing in price all the time because of war or of some disaster, they join forces and pretend to others that the goods are much in demand and that not many people have them on sale; if however there are some who have these goods for sale they put up a stranger to buy up all these goods, and when they have them entirely in their own control they make an agreement to this effect: Since there are no more of these goods to be had we will hold them at such and such a price, and whoever sells cheaper shall forfeit so and so much. This trick, I hear, is practiced chiefly and mostly by the English merchants in selling English or London cloth. It is said that they have a special council for this trade, like a city council, and all the Englishmen who sell English or London cloth must obey this council on penalty of a fine. The council decides at what price they are to sell their cloth and at what day and hour they are to have it on sale and when not. The head of this council is called the “court-master” and is regarded as little less than a prince. See what avarice can and dare do.
Kings and princes ought to look into these things and forbid them by strict laws, but I hear that they have an interest in them, and the saying of Isaiah is fulfilled, “Thy princes have become companions of thieves.” They hang thieves who have stolen a gulden or half a gulden and trade with those who rob the whole world and steal more than all the rest, so that the proverb may hold true: Big thieves hang the little ones, and as the Roman senator Cato said: Simple thieves lie in prisons and in stocks; public thieves walk abroad in gold and silk.
In other words, not much has changed in the last 500 years
The mammoth judgment in Rye Investments Ltd -v- Competition Authority is on Bailii but not on the Courts website.
Enterprise Ireland have created a research commercialisation blog and forum. Good start, but nowhere near as good as the economics blogs. We need to see the scientists blogging about their role in the economic recovery since they are beneficiaries of large amounts of public money.
With an eye on the upcoming election and the younger vote, the EU Parliament has rejected legislation that was ambiguous with respect to the laws permitting consumers to be disconnected from the internet for copyright infringment or illegal downloading without due process before a court. (See the EU Observer report).
While in Competition Law, abuse of a dominant position is considered to be undesirable and at the same time agreements between competitors are normally not allowed, there may be exceptions. Technology development is one such exception. The history of technology is littered with examples of business that have sought to control technologies, with varying success but often with the result of inferior products and delayed developments. One only has to whisper the word Microsoft and you will get my drift.
On the other hand, the tech industry has many stories of how collaboration and cooperation between competitors through open standards have driven the development and adoption of many of the key technologies that we now take for granted, the internet and communications in particular spring to mind.
One such story is the development of Ethernet, led by Bob Metcalfe, the legendary founder of 3COM.
Metcalfe worked at the Xerox Palo Alto Research Centre (PARC) in the 1970’s and was tasked with networking the PARC’s computers. Xerox was developing the worlds first laser printer and wanted multiple computers to access it. The key to the adoption of Ethernet was the bringing together of Xerox, Intel and DEC who managed to have the Ethernet specification adopted by the IEEE as standard IEEE 802.3. The cooperation of the three technology firms was the key.
Even though IBM and General Motors put up stiff resistance, going so far as to standardise their own proprietary protocols, Token Ring (802.4) and Token Bus (802.5) respectively, it was the collaboration between Xerox, DEC and Intel which sealed Ethernet’s fate as the de facto standard for the internet. The IBM and GM standards are now consigned to the dustpan of history.
According to Metcalfe, IBM sabotaged the success of its own Token Ring protocol by preventing interoperability between its own and third party products.
Ethernet has become one of the most pervasive communications standards with 100’s of millions of ports deployed every year. The story shows how collaboration and interoperability between competitors can enhance technology and benefit society and consumers.
This concept is embodied as an exception to the prohibition on anticompetitive agreements between undertakings in Section 4(5) of the Competition Act which states:
(5) The conditions mentioned in subsections (2) and (3) are that the agreement, decision or concerted practice or category of agreement, decision or concerted practice, having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and does not—
(a) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives,
(b) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.
Mr Justice Liam McKechnie today handed down a 9 month suspended sentence and a €50,000 fine to Patrick Duffy of PG Duffy and Sons, a Citroen dealer who had been found guilty of fixing the price of Citroen cars. His company was also fined €50,000.
I may be wrong but I think this is the heaviest sentence handed down for Section 4 offences to date although a long way from the €4 million allowed for in the Competition Act, 2002.
A press report states that Judge McKechnie signalled that the “next generation” of cartelists could expect to receive custodial sentences in the future.
There has been much focus on white collar crime in the financial services industry of late due to revelations about certain transactions and allegations of golden circles. Indeed politicians have called for more prosecutions of white collar crime. Often we are told that the it is difficult to obtain sufficient proof to bring charges and indeed even more difficult to secure convictions.
However at least one state agency has been having consistent success at securing convictions for white collar crime over the last few years. The Irish Competition Authority (Authority) secured the first custodial sentence for cartel offences in Europe. In its 2008 annual report, the Authority announced that it had secured 23 convictions for breaches of competition law by the end of 2008 with a further three guilty pleas entered subsequent to the end of 2008. The convictions were secured in relation to price fixing of perol, home heating oil and motor vehicles.
The Authority’s report also notes that there are nine further prosecutions before the courts. Interestingly the Auhtority brought its first prosecutions for bid rigging in 2008. According to the Authority’s report
Bid rigging occurs when two or more firms agree not to bid against one another for a tender or contract, or agree on their individual bids, to supply goods or services. Alternatively competing firms may allocate specific customers or types of customers or geographic areas to one another, so that competitors will not bid (or will submit only a complementary bid) on contracts offered by a certain class of potential customers which are allocated to a specific firm. In return, that competitor will not competitively bid to a designated group of customers allocated to other firms in the agreement. This enables each firm to set prices knowing that the others will not undercut them.
The report goes on to note that:
Collusive tendering in public sector procurement is particularly harmful to society as it diverts funds that could be used to provide other worthwhile services to the public. When Government agencies pay higher prices for goods and services the taxpayer ends up paying more.
It is significant that the Authority has, for the first time, brought prosecutions with respect to another form of cartel behaviour and the broadening of its expertise is to be welcomed. Bid rigging, particularly in terms of public procurement contracts is particularly damaging to society since it consumes valuable state resources which otherwise could be applied to the benefit of society.
Bid rigging in the construction sector has been the centre of a massive investigation in the UK by the OFT with over 100 firms in the spotlight. No doubt the Authority will be watching the activities of its sister organisation in the UK closely.
Finally, in its strategy statement 2009-2011, the Authority renews its commitment to enforcing competition law for the good of consumers and society and calls for stiffer sentences for breaches of competition law:
While the Competition Authority regards these achievements as substantial, in relation to the level of fines imposed to date in particular, the Competition Authority is of the view that to ensure the continued effectiveness of competition policy and enforcement in Ireland, the quantum of fines must rise in order to create an effective deterrent to anti-competitive conduct. The courts have signalled the seriousness with which they regard breaches of competition law.
Perhaps the Competition Authority should be receiving more credit and resources in its fight against criminal breaches of competition law.
Brian Cowen invoked the ancient Irish tradition of Meitheal in his speech to the Fianna Fail Ard Fheis two weeks ago. According to RTE, this is what he said:
This government is determined to manage our way through this recession and to prepare for growth again. But Government alone cannot make it happen.
Tá focal Gaeilge a theastaíonn a thabhairt isteach sa gcomhra seo anocht. Agus an focal sin ná meitheal. Daoine ag obair le chéile ar son a chéile. Teastaíonn spiorad an Mheitheal anois níos mó ná riamh. Spiorad an chomharsanacht, spiorad an chomhoibriú. Ni neart go cur le chéile a chairde agus seo í an t-am chun brú ar aghaidh I teannta a chéile agus le tacaíocht dá chéile.
Ireland now needs a Meitheal mentality if we are going to get through this together.
The State can do its part but the State cannot replace the people.
We need a ‘whatever it takes’ attitude. Whatever it takes for our country to win again.
Meitheal (m?h?l) is the Irish name for a work group, conveying the idea of ‘connection with neighbour.’ Traditionally, the term referred to rural agricultural groups. The practice was, and is, for a group of neighbours to come together to help each other in tasks such as preparing the hay, or gathering the harvest. Each person would help their neighbour who would in turn reciprocate.
Perhaps Brian Cowen had in mind EU law when he made this comment, on the other hand perhaps he didn’t since he said “The State can do its part but the State cannot replace the people.”
A recent judgment from the European Court of Justice gives an example of Meitheal, or solidarity in the European Context, whereby activities which have as their aim social objectives, are based on principles of solidarity and are overseen by the state are exempt from the normal rules of competition which apply to economic activities in the EU.
The framers of the EC Treaty recognized, on the one hand, the benfits of a common market in goods and services and established the various freedoms and competition rules. On the other hand the recognized that there were certain activities such as health care, social security etc which could be provided by the state and as such were not to be classified as economic activities.
The judgment in the case in question, Case C-350/07 Kattner Stahlbau GmbH v Maschinenbau-und-metall-Berufsgenossenschaft, is an example of this.
The case concerned the applicability of Articles 81 and 82 of the EC Treaty to the activities of a German employers’ liability insurance association, affiliation to which was compulsory under German Law. The Plaintiff in the case argued that it should be free to engage its own insurance supplier on commercial terms.
The ECJ held however that the activities of the German insurance association was not an economic activity under EU law. The ECJ first noted that Community Law does not detract from the powers of Member States to organise their own social security systems and that the insurance scheme in question pursued a social objective.
The Court found that the scheme operated according to the principle of solidarity since
- Payments were made irrespective of fault
- Payments were made even when contributions due were not paid
- Rate of contributions was not systematically proportionate to the risk insured
The final point is important since it entailed situations where high earners with large contributions could only benefit up to a maximum payment whereas low earners with low contributions may have been entitled to larger payments. In other words there was an element of redistribution characteristic of solidarity between members.
In terms of state control, even though the insurance scheme had some latitude in its operations, the degree of latitude was strictly limited by statute, particularly in terms of setting the minimum contributions and maximum benefits under the scheme.
For these reasons the court held, subject to verification by the national court, that the insurance scheme was not an economic activity under Articles 81 and 82 of the EC Treaty.
In other words Meitheal is part of EU Law and the State can play its part.
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