Article 82, Ip Rights and Industry Standards: In Reply

Abstract

In a recently published article ("Article 82: Excessive pricing - An outline of the legal principles relating to excessive pricing and their future application in the field of IP rights and industry standards", Competition Law Insight, 4 July 2006, p. 3), Marcus Glader and Sune Chabert Larsen ("the authors") briefly reviewed the current legal standards for excessive pricing under article 82 EC. The authors then proposed a perfunctory framework under which those principles should be applied in the complex field of IP rights incorporated into industry standards. We disagree with the positions put forward by the authors, not least because they rest on several faulty premises regarding the economics of technology licensing, as well as on misunderstandings concerning the notion of licensing under Fair, Reasonable and Non-Discriminatory ("FRAND") terms in the standards development context, and its connection - if any - with Article 82 EC.

We show that, contrary to the authors' view, FRAND commitments cannot constitute the basis for an excessive pricing test and are not an adequate, relevant or useful instrument for the application of Article 82 EC. We also show that patent counting is an inappropriate benchmark for measuring royalty levels which finds no support in EC competition law (or US antitrust law for that matter). Should it ever be adopted, it would be a serious disincentive to innovation.

Keywords: Article 82, patent counting, standards, IP, patents, competition law, numerical proportionality