Tuesday, 8 June 2010

Albanian scrutiny of IP licences: will the burden be lifted?

"IP licences examined through a competition lens" is the title of a recent contribution in International Law Office by Shpati Hoxha (Hoxha Memi & Hoxha, Tirana), on developments in IP commercialisation in Albania. The author writes:
"The need to integrate Albania into the global market has prompted the authorities to undertake regulatory reforms. The recently approved Law on Industrial Property (9947/2008) includes provisions which carefully delineate the proprietary rights granted to holders and users of IP rights.

IP rights are increasingly crucial to all sectors of the economy. As such, the use and circulation of IP rights in the market are resulting in an unavoidable intersection with competition policy. ...

Like EU competition legislation, Albanian competition law applies to any type of agreement - whether formal or informal, tacit or explicit, horizontal or vertical - that may damage or hinder competition in the market. ...

Under Article 7 of the Competition Law, agreements related to the licensing and transfer of IP rights may be exempted from the prohibition under Article 4 [of the Competition Law] if (i) the commercial freedom of the acquirer or licensee or other undertakings is not unfairly restricted, and (ii) competition on the market is not substantially impaired.

In particular, the general prohibition on anti-competitive clauses set out in Article 4 will not apply to commitments restricting the acquirer or licensee if:

* they are justified by the seller's or licensor's interest in a satisfactory exploitation of the subject matter of the protected right;
* they impose obligations to exchange experience or to grant non-exclusive licences in respect of inventions relating to improvements or new applications, provided that such obligations correspond to similar obligations on the part of the seller or licensor;
* they do not challenge the licensed protected right;
* they provide for minimum use of the licensed protected right or payment of a minimum fee; or
* they provide for labelling of the licensed products in a manner which does not exclude a reference to the manufacturer.
However, such restrictions must not exceed the term of the acquired or licensed protected right or of the right which constitutes the object of the licence.

Under Article 50 ..., licence agreements are considered to be permitted if the Competition Authority does not issue a decision opposing them within three months of receipt of notification".
The author however identifies problems where competition principles collide with IP rights:
" ... It is therefore necessary to strike a balance between the fight against anti-competitive behaviour and the provision of adequate guarantees for research and development investments through appropriate IP rights. ...

It is only when the rights holder goes beyond the legitimate exercise of rights granted under the respective legislation that the Competition Authority should exercise its powers under the competition legislation to curb such behaviour. The current regime, which requires that each IP licence be notified to the Competition Authority and a decision (or not) awaited, seems overly burdensome and inappropriate. In practice, the Competition Authority receives few such notifications.

In addition, there is a lack of supplementary measures such as block exemptions (corresponding to the EU Technology Transfer Block Exemption or the Antitrust Guidelines for the Licensing of Intellectual Property of the US Department of Justice and Federal Trade Commission) ,and of de minimis provisions that would exclude licences where the parties have a low market share. This produces a paradoxical situation whereby each IP licence needs an exemption from the Competition Authority, regardless of its effect. ...

The Competition Authority recently proposed amendments to the Competition Law in order to harmonize the legislation with EU law pursuant to the Stabilization and Association Agreement with the European Union. Based on these proposals, specific criteria to exempt IPR licences, as well as relevant exemption procedures, would be introduced. In addition, the proposed amendments would introduce new provisions allowing the Competition Authority to approve block exemptions for certain categories of anti-competitive agreement, as well as new de minimis provisions.

The amendments were officially reviewed and approved by a special competition taskforce of the Council of Ministers during April 2010. The draft amendments will be soon submitted to the Council of Ministers for the initiation of the legislative process".
The clash of IP monopoly power and competition principles has been the basis for justifying the current notification provisions, but it seems to me that the government of a jurisdiction which has hitherto exercised fairly tight controls on its economy and on commercial activity within it may have other reasons for continuing burdensome notification requirements. The collection of tax revenue from IP exploitation is not always easy and depends on knowledge of the transactions that give rise to taxable events and income streams. Notification of licences -- particularly in a country in which information passed to one government agency may filter through to another -- may thus serve a secondary purpose to that of regulating competition.

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