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A recent decision of the European Court of First Instance (CFI), the trial court of the European Union, in the ongoing case of IMS Health v. Commission, No. C-481/01 P(R) (April 11, 2002), provides some reassurance to intellectual property rights holders doing business in the European Union that competition law will not deprive them of these rights. The CFI upheld the right of a firm with a significant market share, Intercontinental Marketing Services Health Inc. (IMS Health), to refuse to license its copyright to rivals while they pursue a competition action against IMS relating to that copyright. With this ruling, the CFI reversed interim measures imposed by the European Commission (EC), the European Union’s executive body, which had ordered IMS Health to engage in compulsory licensing of its intellectual property while awaiting a final decision in the main competition action. Though the CFI’s decision is a narrow one concerning only interim measures, rather than a final adjudication on the merits, it is significant. The holding sends a strong signal that the court may not accept the notion that a dominant firm’s mere refusal to license its IP, unaccompanied by other allegations of anti-competitive behavior, violates EU competition law. Notably, while the IMS case concerns the obligations of dominant firms operating in the EU market, the action involves U.S. corporations as both plaintiff and defendant. The case arises from a copyright held by IMS Health, a U.S. corporation that tracks sales in the pharmaceutical and health care products industries in more than 100 nations and supplies firms in these sectors with data on the sales performance of their products. IMS obtained a copyright in Germany for a system that it created over a period of 30 years to divide Germany into 1,860 geographical segments, or “bricks.” IMS uses this “1860 brick structure” to analyze sales information for its clients. IMS was the only provider of regional pharmaceutical sales data in Germany until 1999, when two rival firms, Pharma Intranet Information A.G. (PI), a U.S. corporation, and AzyX Deutschland GmbH Geopharma Information Services, a German subsidiary of a Belgian corporation, entered the market using brick structures different from that of IMS. Both eventually switched to variants of the 1860 brick structure, however, in response to the demands of potential clients for whom this system had become the industry standard. In May 2000, IMS initiated a copyright infringement action in the German national courts and has prevailed thus far in the proceedings in that action, which are expected to continue until 2004. As the copyright actions were pending in the German courts, both PI, which had been acquired by National Data Corp. (NDC), a U.S. corporation that succeeds PI as a party in these cases, and AzyX requested from IMS licenses to use the 1860 brick structure, but met with refusal. In December 2000, they lodged a complaint with the EC, alleging that IMS was violating Art. 82 of the Treaty of Amsterdam, which prohibits any firm with a dominant market position from abusing that position to the detriment of trade within the European Union. In particular, NDC and AzyX invoked the essential facilities doctrine, which provides that a company with a dominant market position that controls an indispensable intermediate good or service must grant access to its downstream competitors in order to foster competition. ESSENTIAL FACILITIES DOCTRINE In this competition case, NDC and AzyX argued that they needed access to the intermediate good held by IMS, the copyrighted 1860 brick structure, in order to compete in the downstream market for analysis of pharmaceutical sales data. According to IMS’ rivals, and the testimony of IMS’ clients themselves, it would be too expensive for these pharmaceutical firms to switch away from the 1860 brick structure, which had emerged as an industry standard. Traditionally, EU courts have applied the essential-facilities doctrine in cases involving access to raw materials or infrastructural facilities such as telecom and electricity gridlines, ports and tunnels. Application of the doctrine is more problematic in cases involving IP, however, because IP law posits that the state should grant a limited monopoly in order to reward and stimulate creative and inventive activity. In the United States, for example, which recognizes the essential-facilities doctrine, no court has ever applied the doctrine in an IP case. In contrast, the Court of Justice of the European Community (ECJ), the European Union’s highest court, relied upon essential facilities analysis in ordering compulsory licensing of copyrighted works in the 1995 case Radio Telefis Eireann & Independent Television Publications v. Commission, 1995 ECR. I-743 (known as Magill), a precedent invoked by IMS’ competitors. In Magill, each of the three television stations broadcasting in Ireland and Northern Ireland published its own weekly television program guide, and refused to license this copyrighted information to the Irish publisher Magill TV Guide Ltd., which wished to create a single comprehensive weekly listing. The ECJ ordered the stations to license their copyrighted material to Magill, holding that under certain “exceptional circumstances” a dominant firm’s mere refusal to license its IP could violate Art. 82 of the Treaty of Amsterdam. Commentators have observed that the ECJ’s holding in the Magill case is based upon three factors in particular. First, the court clearly emphasized that “exceptional circumstances” existed in that the dominant firms’ refusal to license their television program listings prevented the emergence of a new downstream product, a single comprehensive television guide. Second, the ECJ evidently believed that enforcing compulsory licensing of television listings would not reduce significantly the television broadcasters’ incentive to produce and disseminate television listings, as the broadcasters still needed consumers to be aware of their television programs. Third, some suspect that the ECJ’s ruling derives in large part from the court’s view that the IP at issue in Magill was unworthy of copyright protection because it involved little creative activity. Relying upon the Magill precedent, as well as its finding that no reasonable alternative to the 1860 brick structure existed, the EC granted NDC and AzyX interim relief on July 3, 2001, in the form of an order requiring IMS immediately to license the 1860 structure to its competitors on reasonable terms pending a final decision on the merits. The EC also seemed to be influenced by its belief that the 1860 brick structure did not require much creative effort on the part of IMS. European Commissioner for Competition Mario Monti emphasized the singularity of the EC’s decision, declaring it “a rare step.” The CFI acted quickly to suspend the operation of the EC’s interim decision, issuing on Aug. 10, 2001, its first ex parte order in nearly 20 years. The CFI then gave the EC’s interim compulsory licensing order fuller consideration, and on Oct. 26, 2001, issued an interim decision overruling the EC’s order of compulsory licensing. In its most recent decision in this action, on April 11, the CFI confirmed its prior holdings, such that IMS is under no obligation to license its IP to its competitors pending a final decision on the merits. DIFFERENT RATIONALES The CFI expressed several different rationales for its reversal of the EC’s compulsory licensing order. First, the CFI noted that EU courts have applied the essential-facilities doctrine only when there are two separate markets, meaning that a dominant firm’s refusal to grant access to its indispensable facility has negatively affected another firm that is active in a distinct, albeit related, market. The reason for this is clear; firms would not be stimulated to compete and operate efficiently if they were simply permitted access to the essential facilities of their direct competitors. In the IMS case, the CFI suggested that perhaps IMS’ rivals were active in the very same market where IMS had secured its IP right. Thus, the CFI did not automatically accept the EC’s analysis that the 1860 brick structure that organizes the gathering and presentation of market data regarding pharmaceutical products can be marketed separately from the regional sales data services sold by IMS and its competitors. Second, the CFI questioned whether NDC and AzyX had established the “exceptional circumstances” required under Magill to support a compulsory licensing order. Many commentators have expressed the view that a refusal to license IP does not violate Art. 82 unless such a refusal actually impedes the emergence of a new product or service. In the IMS case, no new service is blocked, as IMS’ rivals simply wish to offer alternative versions of the very same service offered by IMS. The CFI declined to rule on the importance of this factor in interim proceedings, stating that it preferred to resolve this significant legal issue through fuller review on the merits. Finally, the CFI’s decision seems based at least in part on its notion that the EC had not accorded sufficient respect to the German national court decisions upholding IMS’ copyright. The German courts found that IMS had expended substantial effort to create the 1860 brick structure. These national court decisions concerning IP carry great weight, pursuant to Art. 295 of the Treaty of Amsterdam, which expressly states that IP protection is in the first instance a matter for the EU member states. Moreover, the German law under which IMS claimed its copyright was enacted pursuant to a 1996 EU directive that requires member states to adopt a sui generis form of IP protection for previously uncopyrightable databases. At present, IMS’ copyright action against NDC and AzyX is wending its way through the German national courts, and the EC and the CFI continue to consider the competition case. All of these proceedings may prove moot, however, in light of the fact that the ECJ is considering the competition questions pursuant to a provision in EU law that permitted the German national courts to refer the matter directly to the ECJ. Holders of IP and their competitors are watching closely for the ECJ decision, expected some time between winter 2002 and spring 2003, in order to see how the European Union’s highest court will resolve the tension between competition law and IP rights. If the ECJ follows the preliminary opinions expressed by the CFI, dominant firms holding IP rights in the European Union will continue to profit from their first-mover advantage. Donna M. Gitter is assistant professor of legal and ethical studies at the Fordham University Schools of Business in New York. She can be reached at [email protected].

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