documents that are not necessarily merger specific are The US example highlights the collaboration between the often the subject of these requests. There have been cases DOJ's civil and criminal sections. The fines in the European in which documents submitted pursuant to a request issued cases serve to remind companies that the exchange of in the context of a merger investigation have triggered commercially sensitive information may be forbidden by competition law concerns unrelated to the merger. competition rules. Similarly, the examples from the rest of the For example, when various franchise agreements were world emphasise the growing risks and implications following requested as part of a merger investigation,the Competition the submission of documents to antitrust authorities. Commission expressed concerns with exclusivity provisions Companies need to be increasingly aware of the risks contained in the agreements, claiming that they would ordinary course documents present, and implement proper have a restrictive effect on competition. The Competition document management procedures, as well as compliance Tribunal, the adjudicative body deliberating upon the programmes to ensure compliance with the relevant merger, noted that non-merger specific antitrust issues competition laws. Whilst easy to state, ongoing compliance cannot be investigated through the "back door of merger with competition law is the most straightforward way to control" but invited the Competition Commission to ensure that documents submitted for a merger review tell investigate its concerns separately. the story the merging parties want to be told. In a case involving a merger investigation of property funds, lease exclusivity provisions were raised by the Pou! Johnson is of counsel, Craig Lee is a partner, and Creighton Competition Commission as a concerning feature ofthe way Macy is a partner at Baker McKenzie in Brussels and Washington DC. in which business is done.Similarly, the Competition Tribunal With additional information and analysis from Bethan Lukey remarked that while the impugned clauses in the lease (Baker McKenzie, Brussels), Stephen Crosswell and Tom Jenkins agreements existed pre-merger and the implementation (Baker McKenzie, Hong Kong), Zhi Bao (Baker McKenzie, FenXun of the merger would not alter that situation, "enforcement ee~ing), Lerisha Naidu (Baker McKenzie, South Africa), Raymundo through the prohibited practices regime is the more effective Enriquez and Gerardo Calderon-Villegas(Baker McKenzie, Mexico), tool." Following this, the Competition Commission initiated and Adriana Giannini and Isabella Giorgi (Trench Rossi Watanabe a market inquiry with a specific focus on lease exclusivity Advogados,Sao Paulo in cooperation with Baker McKenzie). provisions in contracts. What is clear from these examples is that documents Endnotes submitted within the context of a merger investigation 1. China's MOFCOM handled 395 notifications in 2016. In the run the risk of unearthing unrelated antitrust issues. These Philippines, a new competition regime came into force in issues carry administrative, civil and criminal consequences 2015,with more than 70 mergers reviewed as of31 December if the respondent firm is ultimately found to be liable. 2016. Singapore, Japan, Australia, Korea and Taiwan all have well-established merger control regimes. New regimes are in Key lessons the process of being implemented in Thailand and Myanmar, which include merger control provisions. Merger review does not exist in a vacuum. Documents 2. The Administrative Council for Economic Defence (CADE). always tell a story, and attorneys need to be sure that 3. It should be noted that CADE only has jurisdiction over the documents that have to be submitted as part of investigations of anti-competitive conducts, but can work the merger review process tell a story that supports the alongside the Public Prosecutor's Office if the investigation relates to certain anti-competitive practices (essentially proposed deal and do not result in other investigations cartels) that could also be considered criminal offences. being launched. Once documents are submitted to a In fact, these authorities currently hold a series of co- competition enforcer or regulator, parties can expect operation agreements, through which both offices can that they will be closely reviewed, not only with respect work together sharing documents and evidence to support each other's investigation, increasing the of to the transaction at hand, but also with an eye toward exposure those involved in the investigations. both civil and criminal actions. Boundary issues Recent developments at the interface of IP and competition law by Pat Treacy, Edwin Bond and focusing on two main areas: (i) recent cases examining Sivaloganathan Kumaran factors that need to be taken into account when assessing There are often tensions at the crossover between whether royalties charged by copyright collecting societies (IP) and competition law. This article are excessive or discriminatory under Article 102 TFEU; and explores some recent developments at this interface, (ii) recent debates on what constitutes fair reasonable and

Foltow us on competitionlawinsight.com 17 I mil non-discriminatory ("FRAND") behaviour in the context of • All relevant circumstances must be examined to standard essential ("SEP") licensing.[1] determine whether the discrimination produces, or is capable of producing, a competitive disadvantage; Charging appropriate royalties • Proof of actual, quantifiable deterioration of a particular AKKA (excessive royalties) customer's competitive position is not required for a In September 2017 the UEU handed down a relatively finding of competitive disadvantage; and rare judgment on the criteria applicable when assessing • The mere presence of an immediate disadvantage excessive or unfair pricing by a dominant firm in the context affecting operators who are charged more does not of copyright licensing.[2] The Latvian Competition Council mean that competition is distorted or capable of being had found that AKKA, a collecting society with the exclusive distorted. right to issue licences for the playing of music in commercial generally, in premises in Latvia, had abused its dominant position by More emphasising thatdiscriminatory pricing only where charging excessively high licence fees. Following a series is abusive it "tends to distort competition", of appeals, the Latvian Supreme Court referred several the CJEU's ruling is the latest in a line of recent cases questions to the CJEU. taking an effects-based approach to applying Article 102. The ruling also The first three questions related to the issue of how to has potential implications for in the make appropriate comparisons when assessing whether disputes FRAND arena. Price discrimination between a price is excessive under Article 102. Endorsing the two- licensees has received relatively littlejudicial or egulator stage test in United erands,[3] the CJEU acknowledged r attention to date (although the comments of Mr that a number of different methodologies can be used to Justice Birss in Unwired Planet v Huawei (English High are determine the "benchmark price". The Court confirmed Court) discussed below). This issue is likely to become increasingly that (at least) in the context of copyright licensing, one significant as the Internet of Things results in new market entrants appropriate method is to compare the prices charged requiring SEP licences. by the collecting society in its home country with those charged in other Member States, provided that the FRAND developments reference Member States are selected using "objective, EU Commission Communication on SEPs appropriate and verifiable criteria". The UEU also held In November 2017 the European Commission published an that when making cross-country comparisons, the eagerly anticipated Communication, "Setting out the EU purchasing power parity (PPP) index must be used to approach to Standard Essential ".[5] Although not take into account differences in economic conditions legally binding, the Communication is intended to address between countries. some of remaining uncertainties in SEP licensing after the The UEU then considered what standard should CJEU's 2015 ruling in Huawei v ZTE, and to drive progress be required for a dominant firm's price to be deemed towards EU-wide adoption of 5G. It sets out several key excessive. In its view, whilst there is "no minimum principles, including: threshold", a difference between the dominant firm's price and the benchmark price should give rise to concerns • FRAND is not a "one size fits all" concept, and may differ only if it is both "significant and persistent on the facts". from sector to sector and over time; The Court emphasised that even if there appears to be a • The current SEP declaration system needs modernising significant and persistent price difference, it is still open to to ensure greater transparency about ownership and the dominant firm to justify the difference on the basis of essentiality of SEPs; "objective factors" (in AKKA's case by reference to factors • "In principle", a FRAND royalty should not include any having an impact on "management expenses or the value attributable to the inclusion of the technology remuneration of rights holders"). In the authors' view, the in the standard; and it should also take into account a CJEU's call for caution reduces the significant risks of false reasonable aggregate royalty rate (to prevent royalty- positives under Article 102. stacking);and • Global licensing is capable of being FRAND where the MEO (discriminatory royalties) SEP holder has a portfolio of global scope and the n I another collecting society case, MEO v Autoridade da implementer operates globally. Concorrencia,[4] the CJEU gave a preliminary ruling in April 2018 on the circumstances in which discriminatory Perhaps disappointingly, the Communication does not pricing may constitute abuse of dominance. Article 102(c) provide much further guidance on each of the steps in the TFEU says it is abusive to apply "dissimilar conditions to framework for licence negotiations established in Huawei equivalent transactions with other trading parties, thereby v ZTE. It also avoids some of the more controversial placing them at a competitive disadvantage". The CJEU's issues in the world of SEP licensing. For instance, one of ruling sheds important light on the meaning of "competitive the main current areas of dispute is whether the FRAND disadvantage", holding that: obligation requires SEP holders to license all comers, Volume 17 Issue 7 •July 2018 •Competition Law Insight

including component manufacturers, or whether they FRAND jurisdiction battles: Conversant v Huawei and can decide to license end-manufacturers to the exclusion ZTE and Apple v Qualcomm of those higher up the value chain. Apart from stating Luxembourg-based Conversant brought proceedings that business models may vary from sector to sector against Huawei and ZTE in the English High Court in July and that SEP holders should not discriminate between 2017, alleging infringement of its UK SEPs and seeking similarly situated licensees, the Communication stays a determination of global FRAND licence terms.[8] Both silent on this issue. Future cases will therefore have to defendants challenged the Court's jurisdiction to hear grapple with it from first principles, which is likely to Conversant's claims, arguing that its claim to a global become increasingly important with the advent of 5G FRAND determination was not justiciable by the English and the Internet of Things. courts and that those courts were not the convenient forum for the determination of the claims. In April 2018, r defendants' arguments on Determining global FRAND rates: Unwired Planet v M Justice Carr rejected the j holding that Conversant's claims were "claims Huawei and TCL v Ericson urisdiction, for infringement of four UK patents" rather than "foreign Following Mr Justice Birss's ground-breaking first instance portfolio infringement claims or worldwide royalty FRAND judgment of April 2017,[6] an air of expectation claims".[9] Whilst both defendants have appealed, Carr J's surrounded the recent Court of Appeal hearing in Unwired that the UK remains -for the moment Planet v Huawei. decision suggests at least - a favourable forum for SEP holders seeking to Huawei appealed on three main grounds: resolve global licensing disputes. i. Globa! licensing -that the High Court was wrong to FRAND developments in the UK took a further hold that there should only be one set of FRAND terms jurisdictional twist in May 2018, when the High Court in and that those terms should be global. Huawei claims Apple v Qualcomm[10] declined to allow Apple to advance it should have been able to enter into a national licence its claim that Qualcomm had violated its FRAND licensing set by the Court. obligations. Mr Justice Morgan was troubled by Apple's ii. Non-discrimination (ND) -that the High Court was attempt to use the UK Qualcomm subsidiary -which mistaken in deciding that the ND limb of FRAND allows does not own relevant patents, and did not give FRAND a SEP holder to charge similarly situated licensees such undertakings to ETSI - as an anchor defendant for a as Huawei and substantially different royalty claim based on FRAND undertakings given by its ultimate rates for the same SEPs, provided that the difference parent company, Qualcomm Inc. He therefore granted in rates does not result in a distortion of competition Qualcomm "reverse summary judgment" against Apple's (the MEO case discussed above may be of interest in claim. Apple's damages case, which includes a competition this context). claim that Qualcomm charged "supra-FRAND" royalties, iii. Huawei v ZTE -that the High Court should have found hangs in the balance -the judge expressed doubts about that Huawei had a defence to UP's injunction claim whether the claimants suffered loss in the jurisdiction, under Article 102 TFEU, as UP had failed to comply with and has permitted Qualcomm to adduce evidence on the steps set out by the CJEU in Huawei v ZTE. this point.

The Court of Appeal's judgment is expected this summer, Conflicting future international approaches pored over by all those interested in the and will be to FRAND enforcement? FRAND debate. In recent years, the EU and US competition authorities have Atlantic, in Meanwhile, on the other side of the been relatively consistent in their approach to non-FRAND of District Court for December 2017, Judge Selna the US behaviour by holders of SEPs. However, things may be the most the Central District of California released perhaps about to change. The US Department of Justice (DOJ) has significant US FRAND decision to date in TCL v Ericsson.[7] signalled, in a series of public comments by officials, that Judge Selna's approach has similarities to P(anet, Unwired it is considering rolling back the role of antitrust in FRAND, making useofa "top-down" methodologyand comparable leaving it to the courts to resolve cases on the basis of licences to determine royalty rates for a global licence. contract law principles. For example, speaking in Brussels in But there are also several differences which, if adopted in February 2018, Makan Delrahim, assistant attorney general future judgments, could significantly affect how FRAND in the DOJ's Antitrust Division, argued: rates are calculated. For instance, Judge Selna held that a range of rates could be FRAND; and he dismissed the "The duelling interests of innovators and implementers relevance of competition law in determining whether always are in tension, but the tension is best resolved Ericsson had breached its non-discrimination obligation. through free market competition and bargaining. And Judge Selna's decision is significantly more licensee- that bargaining process works best when standard friendly than Unwired P(anet: unsurprisingly, Ericsson has setting bodies respect the intellectual property appealed to the Federal Circuit. rights of technology innovators, including the very important right to exclude. To the extent a patent LLP in and Brussels. The views expressed in this article holder violates its commitments to a standard setting are personal and do not necessarily represent the opinions of organization, remedies under contract law, rather than LLP or its clients. antitrust remedies, are more appropriate to address licensees' concerns." Endnotes By contrast, the European Commission appears committed 1. Space precludes discussion of recent cases in the to looking at FRAND and SEP licensing issues in their pharmaceutical sector which involve issues at the IP/ competition interface. For a detailed analysis of the competition law context. Speaking in Washington DC in CJEU's January 2018 ruling in Case C-179/16 F. Hoffmann- April 2018, Nicholas Banasevic, head of unit (Antitrust - IT, La Roche, see the article, "Restriction by object: Analysing Internet and Consumer Electronics) in DG Competition, off-label use of pharmaceuticals", in the February 2018 suggested: "What our jurisprudence has confirmed is that edition of CLI. 2. Case C-177/16 AKKA/LAA. you cannot look at some of these issues exclusively through 3. Case C-27/76 United Brands v Commission. the IP prism [...]." He added: "Intellectual property and 4. Case C-525/16 MEO vAutoridade da Concorrencia. competition law have common aims - it's an overstatement 5. The Commission also published companion papers giving to say that they are in tension." guidance on certain aspects of the IP Enforcement Directive IP system'. These comments by EU and US officials suggest that, and on `A balanced enforcement 6. Unwired Planet International v Huawei Technologies [2017] as we enter the second half of 2018, debates over the EWHC 711 (Pat). appropriate balance between IP and competition laws will 7. TCL Communications v Ericsson (C.D. Cal., 21 December 2017, continue to rumble on. SACV 14-341 JVS(DFMx) and CV 15-2370 JVS (DFMx)) 8. Conversant Wireless Licensing S.a.r.l vHuawei Technologies Co. Ltd &Others. Bristows LLP acts for ZTE in these proceedings. Pat Treacy is a partner, Edwin Bond is an associate, and 9. [2018] EWHC 808 (Pat). Sivaloganathan Kumaran is a trainee at Bristows 10. [2018] EWHC 1188 (Pat).

Editor Judge Nicholas Forwood Suzanne Rab formerly Judge o([he General Court Serle Court chambers Dr Alan Riley o(the European Union, counsel, Dirk Schroeder [email protected] White 6 Case (Brussels) partner, Cleary Gottlieb (Cologne) Julian Joshua Jonathan Scott Editorial Board formerly ofcounsel, Shearman &Sterling LLP (Brussels) consultant and former senior partner, Bernardine Adkins Nicole Kar Freehills partner, Cowling WLG LLP partner, Linkloters Fran4ois Souty William Bishop Mark Katz counsel for multilateral affairs, French Competition CRA International partner, Davies Ward Phillips & Vineberg (Toronto) Authority

Alec Burnside Stephen Kon John Temple Lang partner, Dechert LLP (Brussels) senior consultant, (London) solicitor, professor, Trinity College, Dublin

John Davies Valentine Korah Pat Treacy co-head of Freshfelds' antitrust, competition Professor Emeritus of Competition Law, partner, Bristows and trade practice University College London David Wood Claus Dieter Ehlermann senior counsel, Alex Nourry partner, Gibson, Dunn & Crutcher (Brussels) Wilmer Hale (Brussels) partner, (London)

Leo Flynn Nigel Parr ;Y Legal Service, European Commission partner, Ashurs[(London) Yl.

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