Competition Law and its Effect on the use of Patent Rights
Which? has launched a £480 million complaint in the UK against 4G chip maker Qualcomm alleging that it has abused its dominant position in the marketplace by inflating prices for licenses of the patents that it holds. Which? alleges that these prices were then passed on to the consumer in the form of higher handset prices.
A patentee grants a patent license to a third party so that the third party can practice the invention without the risk of being sued. Licenses are often granted in exchange for a fee – or in exchange to license technology from the third party – so called “cross-licensing”. In this case Which? alleges that the terms of the licenses were inflated to Qualcomm’s benefit as a result of its dominant position in the marketplace.
The Federal Trade Commission in the United States brought a similar action in the United states in 2017 – but this was ultimately dismissed. However, in Europe Qualcomm was found to have broken competition law for deals it made with Apple, and for its 3G licensing deals. It received significant fines at the time.
What does this tell us about IP? Regardless of the eventual outcome of this particular case, it shows us that patent rights and competition law can be in contrast to one another. Patent rights grant monopolies – the right to exclude others from a market, whilst competition law attempts to stop dominant companies from abusing that position of dominance. Therefore, once a company is large enough that it has a dominant market share it must consider competition law when utilising its patent portfolio.
For technology companies that have a licensing based business model a successful patent strategy could mean that they become dominant in a burgeoning technology market very quickly. It’s therefore necessary to continually assess the market share you have in a particular marketplace and how that may affect your trading practices. As ever it is always best to seek professional representation if you are concerned about such matters.