United States: Intel Suit Affects EU Intellectual Property Rights Holders

The U.K. Court of Appeal recently issued a decision, which raises the possibility of senior company executives’ intellectual property rights-holders having to justify their European intellectual property exploitation and licensing policies under the spotlight of public cross-examination in the U.K. Courts. Intel Corp. v. VIA Technologies, Inc. (Court of Appeal (Civ. Div.) Dec. 20, 2002). Intel brought two suits for patent infringement against VIA Technologies in the U.K. Patents Court. VIA raised antitrust defences to both suits (Eurodefences) based on Articles 81 and 82 of the European (EC) Treaty; the two main planks of European antitrust law. Article 81 prohibits agreements that have as their object or effect the prevention or distortion of free competition in Europe and European trade. Article 82 prohibits undertakings by those in an economically dominant market position from carrying out certain acts (termed "abuses") that are incompatible with free competition in Europe.

At an early stage of the case, a bifurcation of the patent law and the antitrust aspects of the case were ordered. Intel then mounted a summary application to have the antitrust defences removed from the case, on the grounds that they did not raise triable issues. Although Intel was successful before the trial court, the Court of Appeal comprehensively overruled the initial decision and reinstated all of VIA’s "Eurodefences" in both actions.

The Court of Appeal recognised that there is a tension between the exercise of intellectual property rights, which, in general, subsist by virtue of national laws in the various European member states and the need to respect European antitrust law. The Court noted that in the earlier case of ITT Promedia v. Commission, the European Court of Justice had held that in specific circumstances, Article 82 may prohibit certain undertakings by those in a dominant market position from adopting a course of conduct or from taking measures that under ordinary circumstances would be legitimate. The Court of Appeal, therefore, concluded that the exercise of intellectual property rights by those in a dominant market position was not necessarily unobjectionable under European competition law. The Court of Appeal decided that it was open to VIA to argue at a trial that there were exceptional circumstances which would allow it to bring
forward its defences to patent infringement based on Article 82.

Via also alleged that the terms of a draft agreement upon which Intel proposed to licence VIA, its patents contained a market division term and a cross-licensing term, both of which were contrary to Article 81. The Court of Appeal held that VIA had a prospect of success in demonstrating that both the market division term and the cross-licensing term would be contrary to Article 81, if contained in an executed agreement.

Practice Note: The Intel v. VIA decision is of special relevance to those concerned with licensing and the policing of access to industry standard technologies. European jurisprudence on the question of when Article 82 should apply, insofar as intellectual property rights are concerned, is still in a state of development. There is only one test of general application (the Magill case), which states that it is only in exceptional circumstances that the exercise of intellectual property rights by a dominant market player may involve abusive conduct contrary to Article 82. "Eurodefences" based on Articles 81 and 82 have, in the past, been treated with skepticism by the U.K. judiciary system. With this decision, the U.K. Court of Appeal has firmly opened the door to antitrust arguments (of the kind familiar to many U.S. lawyers) in intellectual property infringement cases. Antitrust defences are now likely to play a more prominent role in U.K. trials concerned with the enforcement of intellectual property rights. The Intel case is also relevant in the context of the broader European debate about whether European antitrust law operates to constrain the exercise of intellectual property rights in certain situations, and if so, how any such constraint should operate in practice.