A Follow-on Innovation Perspective in the Biopharmaceutical Industry
New Horizons in Competition Law and Economics series
Chapter 5: Unilateral Conduct, Intellectual Property Rights and Competition Law: A Systems’ Interaction
5.1 Introduction The relationship between intellectual property (IP) and competition is a controversial subject. Whilst both share a common objective, namely, the enhancement of consumer welfare and promoting innovation, some problems arise as they operate in different ways. Antitrust seeks to achieve the object of maximising allocative and productive efficiency by preventing monopolistic output reduction and unlawful restrictions on competition, whilst intellectual property rights (IPRs) endeavour to achieve the same result by providing a legal monopoly as an incentive for innovation and for the manufacture of new and cheaper products. ‘In the short run consumers are supplied with an additional choice, albeit at a monopoly price; and in the long run when the patent expires, the industry as a whole can produce more and at lower cost.’ Hence, while the relationship between IP and competition is no longer perceived as inherently conflictual, and the possible pro-competitive role of IPRs has been recognised, at least for long-term competition, there are still cases where EC competition law will intervene if it is perceived that the shortterm impact on competition outweighs the long-term efficiencies. This is usually the case where the patent holder is able to extend his legal monopoly beyond the statutory grant, often to overlap with an economic monopoly, or to pursue aims against the letter and the spirit of the EU competition provisions. Allocative efficiency presupposes that the price mechanism will ensure that producers produce what the consumers want, and productive efficiency presupposes that competition from other producers will produce...
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