For years Article 82 of the European Community Treaty--the provision that outlines improper conduct for companies with market dominance--languished in a state of uncertainty. Defined through a series of 30-year-old court cases, the article wasn't the regulatory tool the modern-day European Commission wanted. Several years ago the authority decided to review Article 82 and focus its efforts on "exclusionary abuses"--company conduct that bars competitors from the market.
"[I]t is sound for our enforcement policy to give priority to so-called exclusionary abuses, since exclusion is often at the basis of later exploitation of consumers," said European Competition Commissioner Neelie Kroes in a 2005 speech on Article 82 policy review. "I will therefore focus on exclusionary abuses."
The Commission seems to be making good on its promise. Recently it has been targeting market-dominant technology companies for allegedly excluding competition through questionable IP practices. The Commission's most notorious such matter concluded back in September when the agency defeated Microsoft Corp. on allegations that its refusal to share its IP excluded competitors. To show it meant business, the Commission levied a whopping $613 million fine against the company, which a court upheld.
For U.S.-based market dominators, the Microsoft case should serve as a clear warning--if you're protecting your IP at the expense of market competition, be prepared to take on the Commission.
"The Microsoft judgment has given a boost of confidence to the Commission in relation to applying Article 82 to the technology sector," says Ian Forrester, partner at White & Case and co-lead attorney on the Microsoft case.
This softer test has allowed the Commission to push forward with similar market exclusion cases. Specifically the authority has targeted several U.S. multinational technology companies for similar Article 82 violations, including Rambus Inc., Intel Corp. and Qualcomm Inc.
Both the Rambus and the Qualcomm matters deal with the companies' involvement in standard-setting organizations--groups of companies that band together to develop an industry standard. In Rambus' case the Commission claims the company "engaged in intentional deceptive conduct ... by not disclosing the existence of ... patents which it later claimed were relevant to the adopted standard."
This is known as "patent ambushing," and the Rambus case represents the first time the Commission has targeted a company for such practices. If Rambus goes to court and loses, it may have to relinquish its IP to competitors.
In Qualcomm's case the Commission is accusing the company of charging excessive royalty fees for the use of one of its patented technologies, which was previously incorporated into a set of standards. In the U.S. a series of bitter private actions ensued between Qualcomm and competitor Broadcom Corp. regarding this issue--with Qualcomm coming out on top, at least for now. However the company likely won't find the same fortune in the EU.
"There's the suggestion within the technology sector post-Microsoft that market leaders may be obliged to supply technology to a competitor either free of charge or at a reduced price to encourage competition," Forrester says.
"I'm pretty certain that the U.S. authorities would not at all take such an interventionist approach."