The Gazette 1973

PATENTS AND PATENT LICENSING

UNDER EUROPEAN COMMUNITY LAW

by DR. HORST HELM, Stuttgart

(Lecture delivered in Burlington Hotel, Dublin, on 27 January 1973)

EUROPEAN SECTION

LECTURE 2

(1) The first judgment of the European Court deal-

ing with the influence of European cartel law on

patents was the

Parke-Davis decision

of 29 February

1968. Here the Parke-Davis Co. instituted proceedings

in the Netherlands based on a Dutch patent. The de-

fendant was a company importing the medicament

which was the object of the patent from Italy, where

patent protection for medical products does not exist,

and where consequently the article had been lawfully

manufactured.

The European Court held that only national legisla-

tion decides on the existence of a patent right, whereas

the exercise of this right is subject as much to Com-

munity as to national law. In the specific case the

Court held that no objection under European cartel

law could be sustained in respect of the action of Parke-

Davis, as Art. 36 of the Rome Treaty expressly allows

restraints to protect industrial property, providing,

however, that "such prohibitions or restrictions shall

not constitute either a means of arbitrary discrimina-

tion or disguised restriction of trade between Member

States".

The prohibition of cartels under Art. 85 was in-

applicable, as the action of Parke-Davis was not based

on a specific agreement restraining competition.

From the Parke-Davis decision the conclusion can be

drawn that, by means of a national patent, imports

from EEC countries can be stopped, if the products

were manufactured there by a third company which is

entirely independent from that of the owner of the

patent. The question of whether and why there is no

patent protection abroad is of no material importance.

(2) The judgment of the European Court of 8 June

1971 called

German Gramophone Co. case

is of much

greater importance for the exercise of national protec-

tion rights. German copyright law grants the manufac-

turer of records a special protection right similar to

stituted proceedings endeavouring to prevent the im-

portation of its own records from France to Germany.

These records had been delivered by the company to

its French subsidiary which apparently sold them to

some firm who re-exported them to Germany.

The European Court in its judgment declined to

decide whether the action constituted a violation of

Art. 85 of the Treaty; this would require that the

action should be based on a cartel agreement. On

the contrary, the European Court based its judgment

on Art. 36, sentence 2, EEC Treaty. In its opinion a

veiled restriction of trade between Member States

obtains, if by means of a protection right the import of

such products shall be prevented, which the owner of a

protection right himself or a third party sold with his

approval in another EEC country. The National Courts

could not allow such an action to succeed because this

might endanger the objectives of the Community

Treaty.

(3) The judgment in the

German Gramophone

Co.

case was welcomed by the European Commission. It

applies as much to copyright as to patents and trade-

marks. Prior to this judgment the European Court

endeavoured in its

Grundig-Consten

and

Sirena

deci-

sions to prevent restraints on imports caused by trade

marks with the help of Art. 85 EEC Treaty. This would

presuppo-e the proof that the action on account of

the trademark, wa sbased on a licence or purchase

agreement. In future, attempts to partition the Com-

mon Market by means of protection rights will mainly

be stopped with the help of Art. 36 EEC Treaty and

less through the application of Articles 85 or 86.

The

German Gramophone Co.

decision has a con-

siderable impact on the exercise of protection rights.

Befire this decision the assumption had been that

patents could positively be used to prevent the importa-

tion of products legitimately sold abroad, even by the

patent owner himself or his licensees. The judgment

corresponds to the European Court's tendency to react

vigorously against all measures tending to erect trade

barriers between Community countries.

(4) The decision

German Gramophone

Co.

does,

however, create problems of interpretation. Under this

judgment the owner of an Irish patent can certainly

not raise objections against the importation of products

from France, which his licensee sold there, and which

were exported to Ireland by the licensee's customers.

The situation is already different, however, if the Irish

patent owner did not grant a licence in France, but

sold his French patent to a third party. In such a case

it can hardly be said that the products were sold in

France with the Irish patent owner's approval.

Most important for practical use is the case in which

the foreign licensee does not sell products to a customer

in his territory who exports them to Ireland, but

instead imports them directly to Ireland himself. It

would seem in such a case, that the principles of the

decision

German Gramophone Co.

are not applicable,

because the products were not marketed abroad and

the sale to Ireland was not effected with the approval

of the Irish patent owner. How the European Court

will decide on such a case can, however, hardly be

foreseen.

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