The Competitor : Canada Competition / Antitrust Blog by Stikeman Elliott Lawyers & Attorneys

On April 29, 2004, the European Court of Justice (the ECJ) provided guidance on when, under European law, a company could be considered to be abusing its dominant position when it refuses to grant an intellectual property (IP) licence. This article will review the ECJ's decision in IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG, and then consider whether Canadian competition law can be used to compel an IP owner to license its IP to a third party.

The IMS Health case concerns the rights to IMS Health's proprietary system for collecting and distributing drug sales data. In 1988, an IMS Health director left the company to establish a competing business, which eventually adopted a new database structure resembling that used by IMS Health.

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The Federal Court of Canada, in Michael J. Culhane v. ATP Aero Training Products Inc., Reilly James Burke, recently rejected a private-action claim for damages under s.36 of the Competition Act in relation to alleged predatory pricing contrary to s.50(1)(c) of the Act. The alleged conduct involved the defendants making available, on-line and at no charge, certain Canadian aviation exam guides, which according to the plaintiff reduced sales of his competing publications.

In its analysis of the claim, the Court first determined that the defendants, by providing their publications at no cost, were nevertheless engaged in a policy of "selling" products. The Court also concluded that they were doing so at "unreasonably low prices," taking into consideration such factors as the discrepancy between the defendants' costs and the price charged, the "indefinite period" for which the defendants intended to make the publications available at no charge, the offensive (rather than defensive) nature of the price reduction and the absence of evidence that the "free giveaways" had increased sales of the defendants' other products (or would do so in the future). However, the Court was not satisfied that the defendants' conduct had the effect or tendency of substantially lessening competition or that they had intended such an effect or to eliminate the plaintiff as a competitor. With this essential element of the offence absent, the Court rejected the plaintiff's claim.

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Section 65 of the Patent Act allows Canada's federal Attorney General or "any person interested" to apply to the Commissioner of Patents, at any time after three years from the date a patent is granted, for a remedy in respect of an alleged abuse of a patent. The provision has been so little used in its history that it would be easy to forget about it. However, a recent decision of the Federal Court of Canada serves as a reminder that, so long as a provision remains on the books, it is possible that someone will come along and try to breathe life into it.

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The U.S. Department of Justice has twice levied significant civil penalties for failure to notify transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Hart-Scott-Rodino Act) in recent weeks.

William H. Gates III was ordered to pay US$800,000 as a result of his acquiring, through a limited liability company, 500,000 shares of Republic Services Inc. The acquisition resulted in Mr. Gates owning approximately 10.1% of the company's outstanding voting securities. Mr. Gates' failure to notify the transaction was the result of an improper, albeit inadvertent, reliance on an investment exemption.

Like Mr. Gates, Manulife Financial, a Canadian corporation, improperly relied on an investment exemption with costly consequences. Manulife was ordered to pay US$1,000,000 in relation to a failure to notify an acquisition of stock issued by John Hancock Financial Services, Inc. The Hart-Scott-Rodino Act exempts acquisitions of 10% or less of a company's stock if they are made "solely for the purpose of investment"; however, the government alleged that this exception was not available to Manulife since, by the spring of 2003, it was considering a merger with John Hancock

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