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Reach-Through Rights in Biomedical Patent Licensing: A Comparative Analysis of their Anti-competitive Reach

Published online by Cambridge University Press:  24 January 2025

Jane Nielsen
Jane Nielsen*
Affiliation:
Faculty of Law, University of Tasmania
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Extract

Medical biotechnology offers vast opportunity for the treatment of human genetic conditions, including the development and improvement of drugs, diagnostic capabilities and therapeutic techniques. Australian health and medical research has a rich and proud history. This has been recognised in numerous federal government reports, which examine the sustainability of research momentum and the ability of the Australian industry to capitalise on this research base. Australia‘s increasing $1 billion trade deficit in pharmaceuticals, medical equipment and other health and medical industries has been a major impetus for the push to develop Australia's medical research base.

Many domestic and export market opportunities for the Australian biotechnology industry exist. These opportunities have been taken up for the most part by the existing research sector, and by small companies, whether spin-off companies from research institutions, or companies independently conducting research. The industry is highly competitive and motivated to participate in the biotechnology revolution on an international level. To enable them to do this, intellectual property protection is crucial as a tool to enable trade, collaboration, and competitive advantage.

Type
Research Article
Information
Federal Law Review , Volume 32 , Issue 2 , June 2004 , pp. 169 - 204
Copyright
Copyright © 2004 The Australian National University

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Footnotes

Many thanks to Dr Dianne Nicol, Lynden Griggs, Rhys Edwards, Professor Don Chalmers and two anonymous referees for their helpful comments on drafts of this article.

References

1 See Health and Medical Research Strategic Review Committee, Parliament of Australia, The Virtuous Cycle – Working Together for Health and Medical Research – Health and Medical Research Strategic Review (1999) (the 'Wills Review'); Biotechnology Australia, Australian Biotechnology: A National Strategy (2000) ('National Strategy'); Biotechnology Australia, Developing Australia's Biotechnology Future: Discussion Paper (1999); Ralph Committee, Parliament of Australia, Review of Business Taxation – A Tax System Redesigned: Final Report (1999). See also Commonwealth of Australia, Backing Australia's Ability: An Innovation Action Plan for the Future (2001).

2 Health and Medical Research Strategic Review Committee, above n 1, 125-6.

3 See, eg, Biotechnology Australia, National Strategy, above n 1, 11, 19-20; Biotechnology Australia and Spruson and Ferguson, Biotechnology IP Management Manual (2001); Australian Research Council et al, National Principles of Intellectual Property Management for Publicly Funded Research (2001) National Health and Medical Research Council <www.nhmrc.gov.au/research/general/ipman.pdf> at 11 March 2004.

4 For example, the Biotechnology Innovation Fund assists companies by providing grants for early-stage commercialisation. See AusIndustry, Fact Sheet: Biotechnology Innovation Fund (2003) <http://www.ausindustry.gov.au/content/content.cfm?ObjectID=01A28EB4-A066-4D7E-99AAA16094536488&L2Parent=0786C9BE-08B7-4973-93429A645AEEC8E4&L3Parent=FD34329B-F6F6-4C98-B963D0A59C20A603> at 11 March 2004.

5 'Exploit' includes making, hiring, selling and otherwise disposing of the invention: Patents Act sch 1.

6 Statement by Alex To, Head of Biotechnology Research Group, Credit Suisse First Boston contained in Ernst & Young, Convergence: Ernst & Young's Biotechnology Industry Report, Millenium Edition (2000) 17.

7 The terms 'upstream' and 'downstream' are used here to describe the position of institutions and companies in the research and development continuum. Researchers and companies at the furthest upstream end of the continuum produce broadly enabling technologies, while companies at the furthest downstream end produce drugs, diagnostic products and other therapeutics. Many researchers and companies fall somewhere between these two extremes, and are classified broadly as 'intermediate'. Note, however, that this distinction is not static: see Arti Rai, 'Fostering Cumulative Innovation in the Biopharmaceutical Industry: The Role of Patents and Antitrust', (2001) 16 Berkeley Technology Law Journal 813 n 9 ('… these classifications are quite fluid. Thus, for example, research identifying a gene linked to a disease might be quite “upstream” if the commercial goal is a drug therapy. By contrast, if the commercial goal is a diagnostic test, research identifying the gene might be relatively “downstream."”).

8 Nicol, Dianne and Nielsen, Jane, 'Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry' (Occasional Paper No 6, Centre for Law and Genetics, 2003)CrossRefGoogle Scholar. The focus of the report was on medical applications.

9 See Heller, Michael and Eisenberg, Rebecca, 'Can Patents Deter Innovation? The Anticommons in Biomedical Research (1998) 280 Science 698, 699CrossRefGoogle ScholarPubMed; Eisenberg, Rebecca, 'Bargaining Over the Transfer of Proprietary Research Tools: Is This Market Failing or Emerging?' in Rochelle Dreyfuss, Diane Zimmerman and Harry First (eds), Expanding the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (2001) 223CrossRefGoogle Scholar; National Institutes of Health, Report of the National Institutes of Health Working Group on Research Tools (1998) <http://www.nih.gov/news/researchtools/index.htm> at 3 October 2002 ('NIH Report'). Reach-through rights in licence agreements are distinct from reach-through claims in patents. In the latter case, the issue is whether the patent claims are interpreted so broadly as to enable patent holders to claim royalties over any product developed that utilises the patented technology: See OECD, , Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies (2002) 15-16Google Scholar. The Australian Patent Office released new guidelines for the examination of reach-through claims in patent applications in November 2003: see IP Australia, Australian Patent Office Manual of Practice and Procedure (1996) vol 2,[3.12.10],[10.10].

10 See generally the discussion on the economic rationales for the patent system in Richard Nelson and Mazzoleni, Roberto, 'Economic Theories About the Costs and Benefits of Patents' in National Research Council, Intellectual Property Rights and Research Tools in Molecular Biology (1997)Google Scholar; and the discussion in Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation Under the Competition Principles Agreement: Final Report (2000) (the 'IPCRC Report') 22-3.

11 Australian Law Reform Commission, Gene Patenting and Human Health, Issues Paper 27 (2003) ('ALRC Issues Paper'); Australian Law Reform Commission Gene Patenting and Human Health, Discussion Paper 68 (2004) ('ALRC Discussion Paper').

12 It should be noted that the term 'research tool' is subject to varying interpretations. A narrow definition would limit research tools to those technologies that are traditionally understood to comprise methodologies employed in research laboratories for identifying potential drugs. Notable examples are recombinant DNA technology, polymerase chain reaction, Taq polymerase, and genes and receptors. A broad definition, however, would encompass virtually all upstream and intermediate technologies that primarily constitute inputs into further research and are not in themselves end products. As well as the 'foundational' tools that would be encompassed in a narrow definition, examples might include genomics databases, combinatorial libraries, clones and transgenic mice.

13 See, eg, Scotchmer, Suzanne, 'Standing on the Shoulders of Giants: Cumulative Research and the Patent Law' (1991) 5 Journal of Economic Perspectives 29CrossRefGoogle Scholar; Green, Jerry and Scotchmer, Suzanne, 'On the Division of Profit in Sequential Innovation' (1995) 26 Rand Journal of Economics 20CrossRefGoogle Scholar; Chang, Howard, 'Patent Scope, Antitrust Policy, and Cumulative Innovation' (1995) 26 Rand Journal of Economics 34CrossRefGoogle Scholar; Merges, Robert and Nelson, Richard, 'Market Structure and Technical Advance: The Role of Patent Scope Decisions' in Thomas Jorde and David Teece (eds), Antitrust, Innovation, and Competitiveness (1992) 185.Google Scholar

14 See Scherer, Frederic, 'The Economics of Human Gene Patents' (2002) 77 Academic Medicine 1348, 1361-3CrossRefGoogle ScholarPubMed; Scotchmer, above n 13, 31.

15 Scotchmer, above n 13, 31.

16 Rai, above n 7, n 4 points out that the cumulative nature of biopharmaceutical research can be differentiated from cumulative innovation in most other industries. In many industries, the second generation improvement competes in the same end product market as the first generation product. In contrast, most second-generation improvements within the context of the biopharmaceutical industry occur in the pre-commercial stage prior to the development of a marketable product such as a drug.

17 The so-called 'junk' DNA patents are a series of patents that claim a method of using non-coding regions of human DNA to predict mutations in coding sections of DNA. The patents are potentially very broad. The patent holder, Genetic Technologies Ltd, has entered into a number of licence agreements, and has indicated a willingness to actively enforce the patents. For details see ABC Television, 'Patently a Problem', Four Corners, 11 August 2003 <http://www.abc.net.au/4corners/content/2003/transcripts/s922059.htm> at 11 March 2004.

18 See also NIH Report, above n 9; Eisenberg, above n 9, 229.

19 See, eg, NIH Report, above n 9; Walsh, John, Arora, Ashish and Cohen, Wesley, 'Effects of Research Tool Patenting and Licensing on Biomedical Innovation' in Wesley Cohen and Stephen Merrill (eds), Patents in the Knowledge-Based Economy (2003) 285, 287Google Scholar; cf Straus, Joseph, Holzapfel, Henrik and Lindenmeir, Matthias, Empirical Survey on 'Genetic Inventions and Patent Law' (2002).Google Scholar

20 See Eisenberg, above n 9, 228-9.

21 See Nicol and Nielsen, above n 8, 100-3. See also Ernst & Young, Australian Biotechnology Report (1999) 35.

22 See Nicol and Nielsen, above n 8, 184-6. See also Ernst & Young, above n 21.

23 See, in particular, Levin, Richard et al, 'Appropriating The Returns from Industrial Research and Development' (1987) 3 Brookings Papers on Economic Activity: Microeconomics 783CrossRefGoogle Scholar; Wesley Cohen, Richard Nelson and John Walsh, 'Protecting Their Intellectual Assets: Appropriability Conditions and Why US Manufacturing Firms Patent (or Not)' (Working Paper No 7552, National Bureau of Economic Research, 2000).

24 See, eg, the discussion in Scherer, above n 14, 1351-2.

25 Sometimes referred to as 'non-severable', as opposed to 'severable' inventions: see Anderman, Steven, EC Competition Law and Intellectual Property Rights: The Regulation of Innovation, (1998) 110.Google Scholar

26 Biotechnology Industry Association, Biotechnology Industry Statistics <http://www.bio.org/er/statistics.asp> (2004) at 11 March 2004.

27 OECD, 'Biotechnology Statistics in OECD Member Countries: Compendium of Existing and National Statistics' (Working Paper No 2001/6, OECD Directorate of Science, Technology and Industry, 2001).

28 See Nicol and Nielsen, above n 8, 100-3, 184-6.

29 While around 10 per cent of patents granted each year originate in Australia, only two percent of patent applications filed in the biotechnology category up until 1998 originated in Australia. Note that the biotechnology category includes both medical and agricultural biotechnology. It also includes gene patents. The author thanks Jodi Lawler and Rod Crawford from IP Australia for providing this data. See further Dianne Nicol and Jane Nielsen, 'The Australian Biomedical Industry and Access to Intellectual Property: Issues for Patent Law Development' (2000) 23 Sydney Law Review 347, 361-2.

30 IPCRC Report, above n 10, 210-11.

31 See also Merges, Robert and Nelson, Richard, 'On the Complex Economics of Patent Scope' (1990) 90 Columbia Law Review 839, 843CrossRefGoogle Scholar; Barton, John, 'Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation' (1997) 65 Antitrust Law Journal 449, 453-5.Google Scholar

32 See also Kitch, Edmund, 'The Nature and Function of the Patent System' (1977) 20 Journal of Law and Economics 265CrossRefGoogle Scholar; Merges and Nelson, above n 31; Heller and Eisenberg, above n 9.

33 Non-rivalrous, or non rival-in-use technologies refer to the situation where the use of a research tool or technology by one party will not normally reduce the profits of others from using it, in that resulting products generally not compete. Conversely, rival-in-use technologies will usually be used to develop products that will compete with one another.

34 Anderman, above n 25.

35 Indeed, allowing initial innovators to coordinate subsequent research (and thereby development of their initial patents) may provide social benefits and is therefore an important justification for the patent system: see Kitch, above n 32, Nelson and Mazzoleni, above n 10.

36 Heller and Eisenberg, above n 9, 699.

37 Ibid.

38 Ibid. See also Eisenberg, above n 9, 230-1.

39 The concept was initially advanced by Michael Heller: Heller, Michael, 'The Tragedy of the Anticommons: Property in the Transition from Marx to Markets' (1998) 111 Harvard Law Review 621.CrossRefGoogle Scholar

40 See, eg, Merges, Robert, 'Contracting into Liability Rules: Intellectual Property Rights and Collective Rights Organizations' (1996) 84 California Law Review 1293.CrossRefGoogle Scholar

41 Coase, Ronald, 'The Problem of Social Cost' (1960) 3 Journal of Law and Economics 1.CrossRefGoogle Scholar

42 Broadly defined, transaction costs of licensing intellectual property include the costs of searching for a licensee or licensor, negotiating a licence, monitoring performance, and enforcing the terms of the licence and protecting against infringement: Long, Clarisa 'Proprietary Rights and Why Initial Allocations Matter' (2000) 49 Emory Law Journal 823, 827-8.Google Scholar

43 See Heller, above n 39. The reasons for breakdown in negotiations within industries reliant on cumulative innovation will vary from industry to industry: see Merges and Nelson, above n 31, 843-4.

44 See Nicol and Nielsen, above n 8.

45 These issues are canvassed in detail in Walsh, Arora and Cohen, 'Effects of Research Tool Patenting', above n 19. The focus of this article was to report the results of an empirical study into primarily, these issues. See also Walsh, John, Arora, Ashish and Cohen, Wesley, 'Working Through the Patent Problem' (2003) 299 Science 1021CrossRefGoogle ScholarPubMed; Nicol and Nielsen, above n 8, 53-7.

46 See Heller and Eisenberg, above n 9.

47 See Rai, above n 7.

48 Heller and Eisenberg, above n 9, 699-700.

49 See NIH Report, above n 9.

50 Heller and Eisenberg, above n 9. See also ALRC Issues Paper, above n 11, 175.

51 See also Straus, Holzapfel and Lindenmeir, above n 19, 17.

52 See Eisenberg, above n 9, 223-50.

53 HUGO Ethics Committee, Statement of Patenting of DNA Sequences (2000) Human Genome Organisation <http://www.hugo-international.org/hugo/patent2000.html> at 11 March 2004.

54 NIH Report, above n 9. The NIH Study culminated in the release of a set of Guidelines, the response to which was fairly guarded. One of the recommendations contained in these Guidelines was the drafting of a uniform Material Transfer Agreement with provisions as to reach-through claims excluded. See National Institutes of Health, Basic Guidelines for the Transfer of Research Tools to and from Recipients of NIH Funds (1998). The Guidelines were released as Appendix A to the NIH Report and are available at <http://www.nih.gov/news/researchtools/appenda.htm?> at 3 October 2003. Material Transfer Agreements are agreements for the exchange of tangible materials required for research. The same issues that arise in relation to the licensing of technologies can also arise in relation to the exchange of materials for research purposes.

55 NIH Report, above n 9, 13-14.

56 Eisenberg, above n 9, 230.

57 NIH Report, above n 9, 14.

58 Ibid 10-11.

59 Ibid 15.

60 Ibid.

61 Straus, Holzapfel and Lindenmeir , above n 19, 17.

62 Ibid 6-7.

63 Walsh, Arora and Cohen, 'Effects of Research Tool Patenting', above n 19; Walsh, Arora and Cohen, 'Working Through the Patent Problem', above n 45.

64 Walsh, Arora and Cohen, 'Effects of Research Tool Patenting', above n 19, 321.

65 Ibid 299-300.

66 Nicol and Nielsen, above n 8.

67 For a detailed discussion on the methodology employed, see ibid 64-71.

68 Ibid 41-9.

69 The average number of licensing-in deals recorded per respondent was relatively low. For example, of the 23 company respondents who had licensed in patents, 14 had between one and four licensing-in deals. Single transactions may require more than one in-licence. Thus it would be fair to conclude that, relatively speaking, issues relating to reach-through rights were encountered in a significant proportion of transactions.

70 Nicol and Nielsen, above n 8, 163-4.

71 See also ibid 10-11.

72 Ibid 166.

73 Ibid 164.

74 Walsh, Arora and Cohen, 'Effects of Research Tool Patenting', above n 19, 301-2.

75 IPCRC Report, above n 10, 24.

76 There are other measures of ensuring that patent rights do not impact too heavily on the innovative process. For example, strengthening the statutory grounds for obtaining a patent can operate to reduce the scope of patents granted. Other methods facilitate access to patents or rectify bargaining breakdowns. There is provision in the Patents Act, for example, for application to be made for a compulsory licence to a patent: see s 133 Patents Act. Similarly, a practice-based research exemption currently operates in Australia that exempts research with no commercial implications from liability for patent infringement; see Nicol and Nielsen, above n 8, 218-22; see also Advisory Council on Intellectual Property, Patents and Experimental Use, Issues Paper (2004).

77 See Hovenkamp, Herbert, Lemley, Mark and Janis, Mark, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law (2002) vol 2, 25-6.Google Scholar

78 Barton, above n 31, 461.

79 See the text accompanying n 9, above.

80 Hovenkamp, Lemley and Janis suggest that one possible circumstance is where a patent holder attempts, through the imposition of a non-exclusive grant-back provision in a licence agreement, to extend the life of a patent that is near its expiry by claiming rights to a significant improvement. They conclude, however, that the law should not readily intervene to 'level the playing field' where a licence agreement reflects marketplace risks at the time the agreement was negotiated: the law should not protect licensees who have foolishly acceded to restrictive terms. In addition, it is likely that a licensee in this instance will receive some benefit in return, for example, a reduced royalty rate: Hovenkamp, Lemley and Janis, above n 77, 25-5 — 25-6.

81 The circumstances in which a term giving an exclusive grant-back may be in breach of competition law will be discussed below at Part V(A)(1).

82 Trade Practices Act s 2.

83 The other sections in Part IV are s 47 (exclusive dealing), s 48 (resale price maintenance) and s 50 (prohibiting anti-competitive mergers).

84 These provisions will be referred to as 'section 45'.

85 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177 (' Queensland Wire'), 191 (Mason CJ and Wilson J); Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 ('Melway'), 13 (Gleeson CJ, Gummow, Hayne and Callinan JJ); Boral Ltd v Australian Competition and Consumer Commission (2003) 195 ALR 609 ('Boral'), 625 (Gleeson CJ and Callinan J).

86 Melway, 13-4 (Gleeson CJ, Gummow, Hayne and Callinan JJ); Boral, 636 (Gleeson CJ and Callinan J).

87 Melway, 48 (Gleeson CJ, Gummow, Hayne and Callinan JJ). A causal nexus must be established between the market power and the exclusionary conduct such that it can be said that the conduct is materially facilitated by the market power: 23.

88 Melway, 17-9 (Gleeson CJ, Gummow, Hayne and Callinan JJ); Boral, 625 (Gleeson CJ and Callinan J).

89 See, for example, Zumbo, Frank, 'The Boral Case: Has the High Court Done Justice to s 46?' (2003) 11 Trade Practices Law Journal 199, 222.Google Scholar

90 Trade Practices Commission, Background Paper: Application of the Trade Practices Act to Intellectual Property (1991) ('TPC Background Paper'), 27.

91 Although the same practice may be undertaken using non-exclusive grant-backs, non-exclusive grant-backs will not give the licensor the same degree of market power that a licensor will gain by accumulating patent rights through exclusive grant-backs.

92 Hovenkamp, Lemley and Janis, above n 77, 25-7.

93 Ibid 25-9.

94 Trade Practices Act s 51(1)(i).

95 Sections 45, 45A and 47 are covered by the exemption, but ss 46, 48 and 50 are not.

96 See IPCRC Report, above n 10, 207-12; National Competition Council, Review of Sections 51(2) and 51(3) of the Trade Practices Act 1974: Final Report (1999) ('NCC Report'), 193-7.

97 See TPC Background Paper, above n 90, 12-13.

98 Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83. The implications of this decision are discussed in the TPC Background Paper, ibid 12-13.

99 IPCRC Report, above n 10, 207. In many cases, these terms would be unlikely to contravene the Trade Practices Act in any event.

100 NCC Report, above n 96, 160-4, 166.

101 Ibid 165-7.

102 IPCRC Report, above n 10, 210-11.

103 Ibid 211.

104 The IPCRC recommended that s 51(3) be replaced with the following sub-section:

a contravention of Part IV of the Trade Practices Act, or of s 4D of that Act, shall not be taken to have been committed by reason of the imposing of conditions in a licence, or the inclusion of conditions in a contract, arrangement or understanding, that relate to the subject matter of that intellectual property statute, so long as those conditions do not result, or are not likely to result, in a substantial lessening of competition.

Ibid 213. They also recommended the expansion of s 51(3) to apply to all intellectual property statutes.

105 NCC Report, above n 96, 190.

106 Fisse, Brent, 'Intellectual Property Rights and Competition Law' (2001), (copy on file with author) 3.Google Scholar

107 IPCRC, above n 10, 212.

108 Ibid 211.

109 OECD, , Competition Policy and Intellectual Property Rights (1989) 15.Google Scholar

110 See Part V, 'Reach-Through Rights and Competition Law in Australia'.

111 Government Response to Intellectual Property and Competition Review Recommendations, Information Package available at <http://www.ipaustralia.gov.au/pdfs/general/response1.PDF> at 31 May 2004.

112 Eagles, Ian and Longdin, Louise, 'Competition in Information and Computer Technology Markets: Intellectual Property Licensing and Section 51(3) of the Trade Practices Act 1974' (2003) 3 Queensland University Journal of Technology Law and Justice Journal 28, 36-7Google Scholar, Fisse, above n 104.

113 See also ibid 3-4.

114 TPC Background Paper, above n 90.

115 Of the categories of reach-through rights, grant-back provisions are the most likely to undermine competition by reducing incentives to innovate. Reach-through royalties are likely to make development of a downstream product unprofitable, but it is difficult to conceive of a situation where this will be anti-competitive.

116 TPC Background Paper, above n 90, 27.

117 Ibid.

118 Ibid.

119 Ibid. This is unlikely to be the case where the follow-on research is conducted on a contract basis.

120 Ibid.

121 Ibid. The TPC point out in the TPC Background Paper, that s 45 may be contravened where an exclusive grant-back provision substantially lessens competition, although this is unlikely to be the case where the agreement between the licensor and the licensee is a contract for the development of improvements: ibid 27.

122 US Department of Justice and the Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property, (1995) ('US Guidelines') <http://www.usdoj.gov/atr/public/guidelines/ipguide.htm> at 27 October 2003.

123 US Guidelines, § 2.0.

124 Ibid § 3.1.

125 Ibid §§ 3.4, 4.2.

126 Ibid § 3.4.

127 Ibid § 4.3.

128 Ibid.

129 See ibid §§ 3.1, 3.3, 4.1. In practice, this will not apply to companies in a horizontal competitive relationship.

130 Ibid § 3.2.2. A technology market analysis will be used when rights to intellectual property are marketed separately from the products in which they are used.

131 Ibid.

132 Ibid § 3.2.3. Innovation market analysis may be used in conjunction with goods or technology market analysis.

133 Ibid § 5.6.

134 Ibid.

135 Ibid.

136 '…such as (1) promoting dissemination of licensees' improvements to the licensed technology' (2) increasing the licensors' incentives to disseminate the licensed technology, or (3) otherwise increasing competition and output in a relevant technology or innovation market.': ibid.

137 Gutterman, Alan, Innovation and Competition Policy (1997) 317-8.Google Scholar

138 See, eg, Transparent-Wrap Machine Corp v Stoke & Smith Co 329 US 637, 72 USPQ 148 (1947),where the court treated an exclusive grant-back as part of the consideration given for the licence.

139 Hovenkamp, Lemley and Janis, above n 77, 25-8. There is considerable case law in support of this statement. See, eg, San Marino Electronic Corp v George J Meyer Manufacturing Co 155 USPQ (BNA) 617 (CD Cal 1967) affirmed in 422 F2d 1285 (9th Cir 1970).

140 [2002] OJ C 325/65.

141 Article 81 prohibits practices, decisions or agreements 'which have as their object or effect the prevention, restriction or distortion of competition' within the EU. Article 82 prohibits the abuse of a position of dominant market power.

142 Commission Regulation (EC) 240/96 on the Application of Article 81(3) of the Treaty to Certain Categories of Technology Transfer Agreements [1996] OJ L 31/2 ('Regulation 240/96'). Article 81(3) provided a limited exemption from the application of Article 81, but not Article 82.

143 See NCC Report, above n 96, 189.

144 Commission Regulation (EC) 240/96 on the Application of Article 81(3) of the Treaty to Certain Categories of Technology Transfer Agreements [1996] OJ L 31/2, Article 7. Although use of the withdrawal power has been very limited, the threat of its use has been utilised to induce parties to change their conduct: see Anderman, above n 25, 85.

145 Commission Regulation (EC) 240/96 on the Application of Article 81(3) of the Treaty to Certain Categories of Technology Transfer Agreements [1996] OJ L 31/2, Recital 20 and Article 2(1)(4). Article 2(1)(4) applies in respect of severable improvements, and provided the term does not require disclosure of the know-how communicated by the licensor that is still secret.

146 Ibid Recital 20. Article 2(1)(4) implements this principle. It states that any grant-back obligation placed on the licensee must be accompanied by a provision '… that the licensor undertakes to grant an exclusive or non-exclusive licence of his own improvements to the licensee'. It has, however, been pointed out that this represents only a partial implementation of the reciprocity principle set out in Recital 20 and as such the principle has the potential to be far more wide-reaching: see Anderman, above n 25, 111-18.

147 Commission Regulation (EC) 240/96 on the Application of Article 81(3) of the Treaty to Certain Categories of Technology Transfer Agreements [1996] OJ L 31/2, Article 3(6).

148 See Anderman, above n 25, 118.

149 See ibid 111-18.

150 Commission Regulation (EC) 240/96 on the Application of Article 81(3) of the Treaty to Certain Categories of Technology Transfer Agreements [1996] OJ L 31/2, Article 2(1)(4).

151 See Anderman, above n 25, 111-2, 115.

152 See generally ibid 113-5, 117.

153 See ibid 83.

154 See Mario Monti, EU Competition Policy After May 2004 (Paper presented at the Fordham Annual Conference on International Antitrust Law and Policy, New York, 24 October 2003) <http://europa.eu.int/comm/competition/speeches/index_speeches_by_the_commissioner.html> at 31 May 2004.

155 Commission Evaluation Report on the Transfer of Technology Block Exemption Regulation No 240/96: Technology Transfer Agreements Under Article 81, COM (2001) 786 ('Mid-Term Report').

156 See ibid. See also Kirtikumar Mehta and Luc Peeperkorn, Licensing of Intellectual Property Under EU Competition Rules: The Review of the Technology Transfer Block Exemption Regulation (Statement to the FTC/DOJ Hearings on Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy, Washington, 22 May 2002) <http://www.ftc.gov/opp/intellect/020522mehtadoc.pdf> at 12 March 2004. See also Summary of Submissions on TTBE Review Report, Annex 1 (2002) <http://europa.eu.int/comm/competition/antitrust/technology_transfer/summary_of_ comments.pdf> at 20 January 2004.

157 See Commission Regulation (EC) No 772/2004 of 27 April 2004 on the Application of Article 81(3) of the Treaty to Categories of Technology Transfer Agreements [2004] OJ L 123/11 ('Revised TTBE') and Guidelines on the Application of Article 81 of the EC Treaty to Technology Transfer Agreements [2004] OJ C 101/02 ('TTBE Guidelines'). See also 'Commission Proposes New Safe Harbour for the Licensing of Patents and Know-How', EU Press Release (3 October 2003) Stockholms Universitet <http://www.juridicum.su.se/jurweb/utbildning/master/master_of_european_intellectual_property_law/Commissionpressroom.pdf> at 31 May 2004.

158 See Commission Regulation (EC) No 772/2004 of 27 April 2004 on the Application of Article 81(3) of the Treaty to Categories of Technology Transfer Agreements [2004] OJ L 123/11.

159 Guidelines on the Application of Article 81 of the EC Treaty to Technology Transfer Agreements [2004] OJ C 101/02.

160 See Commission Regulation (EC) No 772/2004 of 27 April 2004 on the Application of Article 81(3) of the Treaty to Categories of Technology Transfer Agreements [2004] OJ L 123/11 and Guidelines on the Application of Article 81 of the EC Treaty to Technology Transfer Agreements [2004] OJ C 101/02; Monti, above n 154, 4; David Hull and Amy Toro, 'Reform of the Technology Licensing Rules' (2004) The European Antitrust Review, 34; Ratliff, John, Gutermuth, Axel and Bhojnani, Rajeshree, European Commission Proposes New Competition Rules for Technology Licensing (2003)Google Scholar Wilmer Cutler Pickering Hale and Dorr LLP <http://www.wilmer.com/files/tbl_s29Publications/FileUpload5665/2904/News_215243279180219011515101300.pdf> at 31 May 2004.

161 Parties who are competitors will not benefit from the block exemption if their combined market share exceeds 20 per cent. Parties who are not competitors will not benefit from the block exemption if their individual market share exceeds 30 per cent. Note that this analysis applies to product markets only, and special rules apply to technology markets.

162 Mid-Term Report, above n 153, 38.

163 Commission Regulation (EC) No 772/2004 of 27 April 2004 on the Application of Article 81(3) of the Treaty to Categories of Technology Transfer Agreements [2004] OJ L 123/11, Articles 5(1)(a) and 5(1)(b).

164 Relevant factors in making this evaluation include the payment of consideration in return for exclusivity, and the market position of the licensor on the technology market: see Guidelines on the Application of Article 81 of the EC Treaty to Technology Transfer Agreements [2004] OJ C 101/02, guidelines 99-102.

165 Barton, above n 31, 461-2.

166 Although it should be recognised that the two approaches are very different in the timing of the review of licensing arrangements, with the detailed EU approach being intended to facilitate review prior to entry into licence agreements: Gutterman, above n 137, 13. The European approach also represents an ex ante attempt to prescribe rules governing intellectual property licensing, while the US Guidelines are intended to be applied ex post: Nancy Gallini and Michael Trebilcock, 'Intellectual Property Rights and Competition Policy: A Framework for Analysis of Economic and Legal Issues' in Robert Anderson and Nancy Gallini (eds), Competition Policy and Intellectual Property Rights in the Knowledge-Based Economy (1998) 17, 21-41.

167 See generally Hull and Toro, above n 160, 36-7.

168 NCC Report, above n 96, 186-92.

169 IPCRC Report, above n 10, 204-6.

170 Indeed, intellectual property will confer market power only in rare cases: Kitch, Edmund, 'Elementary and Persistent Errors in the Economic Analysis of Intellectual Property' (2000) 53 Vanderbilt Law Review 1727, 1729-39Google Scholar. An accumulation of intellectual property rights could, however, operate to confer market power.

171 Gallini and Trebilcock, above n 166, 22.

172 Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (2003) ch 1, 14.

173 Ibid.

174 See Tom, Willard and Newberg, Joshua, 'Antitrust and Intellectual Property: From Separate Spheres to Unified Field' (1997) 66 Antitrust Law Journal 167, 199-200.Google Scholar

175 Gilbert, Richard and Tom, Willard, 'Is Innovation King at the Antitrust Agencies?: The Intellectual Property Guidelines Five Years Later' (2001) 69 Antitrust Law Journal 43, 83-6.Google Scholar

176 Langenfeld, James, 'Intellectual Property and Antitrust: Steps Toward Striking a Balance' (2001) 52 Case Western Reserve Law Review 91, 94-7.Google Scholar

177 See, eg, NCC Report, above n 96, 193-9.

178 Willard Tom and Joshua Newberg, 'US Enforcement Approaches to the Antitrust-Intellectual Property Interface' in Anderson and Gallini, above n 166, 343, 359.

179 These arguments are summarised in Langenfeld, above n 176, 93-94. See also OECD, above n 109, 8.

180 Langenfeld, above n 176, 93; IPCRC Report, above n 10, 210.

181 A general analysis undertaken by Richard Gilbert and Willard Tom indicates that the US antitrust agencies have adhered to the principles espoused in the 1995 Guidelines since their inception: Gilbert and Tom, above n 175.

182 This implication of adopting a very wide view would tend to suggest that a narrower interpretation of the amended s 51(3) is likely.

183 See the discussion in Eagles and Longdin, above n 112, 37-40; Lawson, Charles, 'Patenting Genes and Gene Sequences and Competition: Patenting at the Expense of Competition' (2002) 30 Federal Law Review 97, 122CrossRefGoogle Scholar. Note also that the ALRC has proposed that the ACCC develop guidelines on the relationship between intellectual property and competition law with particular regard to patented genetic materials and technologies: ALRC Discussion Paper, above n 11, 674.

184 Hovenkamp, Lemley and Janis, above n 77, 25-6.