Thu, Nov. 13, 2003

Compulsory Licensing in Germany under EU Law

SW - Washington.   Since a national court of a member state of the European Union is bound by European law, it has to interpret its national law in conformity with the supreme European law. To assure an accurate interpretation, a national court can make a request to the European Court of Justice (ECJ) to pronounce on the interpretation of European law.

In a new case, the Frankfurt Civil Court, a court at the district level, asked the ECJ if businesses may prohibit the use of their "infrastructure", in this instance an internally-used software program designed to gather and evaluate data.

The court provided the following facts to the ECJ: Plaintiff, market survey firm IMS Health GmbH & Co.OHG, filed suit against Defendant, NDC Health GmbH & Co. KG, a firm run by a former CEO of Plaintiff for an alleged infringement of its copyrights.

Plaintiff had developed a program to gather and evaluate data on regional sales of pharmaceuticals. The program is being used since 1970 by pharmaceutical businesses and constitutes the standard in this industry.

Defendant intended to start a business and developed a program for the same purpose. Its system failed, however, and Defendant began to use Plaintiff's program to develop a new system with it. Plaintiff then sued Defendant for violation of its copyrights in a German court and requested injunctive relief.

Based on the facts provided, before the final interpretation of European law is pronounced by the ECJ, an EU advocate general makes a closing statement.

In this case, the advocate general argued in favor of a permission to use the infrastructure of a competitor under certain conditions to prevent abuse of a monopoly. As guideline when such an abuse in violation of European law is present, he enumerated the following factors:

(1) The refusal to permit the use of the infrastructure is objectively not justifiable,
(2) the use of the immaterial good is indispensable for a related, but different market and
(3) the owner of the good would prevent competition by refusing to license.
However, the prerequisite for opening the market to compulsory licensing of innovations is that the competitor does not intend to use the license exclusively to imitate or develop similar products with view to the licensor. Rather, the licensee may use the infrastructure only to develop distinguishable products.

If all these requirements are satisfied, a copyright owner might be obligated to license his innovation.

In the present case, the German court would have to verify, therefore, which objective Defendant pursues by using Plaintiff's infrastructure.

In the event that the ECJ shares the view of the advocate general, its decision may have significant consequences if put into practice. Here, at first sight, the consequences might not seem too grave but only an application over time can reveal to what extent this compulsory licensing principle may hurt IP owners. At least, the condition that the innovation being the subject of the compulsory license has to be an industry standard as well as the other restrictions appear to ensure that a core of copyright protection remains untouched.

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