Significant Victory for Rights Holders in Battle with Commission

In July we reported how the European Commission had ordered IMS Health in Germany to license use of its copyright "1860 brick structure for collecting pharmaceutical data."

IMS appealed against this ex parte imposition of the compulsory licence order and, at the end of last month, succeeded in having the order suspended by the European Court of Justice pending a full hearing of the case. Although this was only an interim decision the ECJ appeared critical of the Commission's approach and attracted by IMS's argument that assertion of exclusive rights within the main operating market of the right owner to which the rights apply is not an abuse of a dominant position (although attempting to extend a dominant position into a "downstream" market by using such rights maybe).

If this attitude is reflected in the final judgment it will be a significant victory for rights holders against the increasingly oppressive approach of the Commission in recent years. In the context of intellectual property rights it must be possible to enforce one's rights in a particular market and not be compelled to license them, since without exclusivity there can be no value in a right which is by its nature supposed to be monopolistic.

The Commission had found that the failure to license the structure to potential new entrants to the German market constituted an abuse of dominant position. IMS supplies information on sales and prescriptions of pharmaceutical products and had devised a "brick" structure reflecting the divisions of pharmacies in Germany into small geographical units with which to present its data. IMS was the only provider of such information in the German market and this brick structure had become the industry standard. When competitors tried to enter the same data market in 1999 using different structures potential customers were not prepared to do business with them because they were not using the IMS structure.

The Commission had concluded that the IMS structure had been tailored to the pharmaceutical industry's needs so as to become the industry standard and in such a way that no other structure could be viable. Further any attempt to create an alternative structure which could be acceptable would be likely to infringe IMS's copyright. IMS's refusal to license its structure could not be justified, stated the Commission, but was aimed at eliminating competition in Germany and this was therefore an abuse of dominant position (contrary to Article 82 of the EC Treaty).

What was particularly unusual about this case was that the Commission, in consideration of the risk of irreparable harm to the potential competitors, applied for and was granted an interim measure, ordering IMS to grant licences upon non-discriminatory and commercially reasonable terms.

IMS appealed to the European Court of Justice on the grounds that its refusal to license its data collection structure to competitors was not an abuse of dominant position because it was simply asserting its copyright within IMS's core business market and was not attempting to extend this dominance to any related market. IMS argued that it was not an abuse of a dominant position where the exclusivity granted by a right is used as the central feature of the right holder's business and where its dominance may turn on the maintenance of the exclusivity of that right. "The mere fact that a protected feature has itself become the subject of a strong customer preference such that the product or service incorporating it dominates the market does not suffice to require the right holder to license those who wish to compete against it on that market".

In its appeal IMS drew a distinction between the circumstances of its case and those of the now famous case of Magill where the Commission prevented the BBC, RTE and ITV from controlling the TV listings market. IMS argued that it was the attempt by the broadcasters to extend their dominance from a market where they were already dominant (broadcasting) into a downstream market (weekly television guides) that amounted to the "exceptional circumstances" which characterised a refusal to license a legitimate right as an abuse. The Commission claimed that Magill had put a broader definition on "exceptional circumstances" and that the prevention of the emergence of a new product or service for which there is potential consumer demand "is not an indispensable part of the notion of exceptional circumstances".

The ECJ concluded that there was a serious legal issue to be decided as to whether such "exceptional circumstances" exist in the IMS case to justify the imposition of compulsory licence obligations. As this was an interim application (to suspend the interim injunction granted to the Commission ex parte) the ECJ did not have to decide the matter finally. It did however suspend the injunction pending judgment in the main action.

Although this case appears to give a strong indication of the ECJ's opinion of the Commission's approach to abuse of dominant position in the context of exclusive rights such as copyright as it is only an interim statement the final decision could still go either way. In the mean time those in the lucky position of owning the rights to any industry standard service or goods should still be cautious about their licensing policies whilst this crucial point still awaits final determination.

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