This is an informal case summary prepared for the purposes of facilitating exchange during the 2023 WIPO IP Judges Forum.
Court of Justice of the European Union (Fifth Chamber) [2004]: IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG, Case No. C-418/01
Date of judgment: April 29, 2004
Issuing authority: Court of Justice of the European Union
Level of the issuing authority: Final instance
Type of procedure: Judicial (Civin( �br>
Subject matter: Copyright; Competition
Plaintiff: IMS Health GmbH & Co. OHG
Defendant: NDC Health GmbH & Co. KG
Keywords: Database, Copyright, Refusal to grant a license, Abuse of dominant position
Basic facts: IMS Health GmbH & Co. OHG (“IMS”) was a German company engaged in tracking sales of pharmaceutical and healthcare products. IMS provided pharmaceutical laboratories with data on regional sales of pharmaceutical products in Germany, formatted according to brick structures consisting of a number of bricks created by taking account of various criteria. IMS not only marketed its brick structures, but also distributed them free of charge to pharmacies and doctors’ surgeries. That practice helped those structures become the industry standard, to which IMS’s clients adapted their information and distribution system.
A former manager of IMS created a new company, “PII”, whose activity also consisted of marketing regional data on pharmaceutical products in Germany formatted on the basis of brick structures. Eventually, on account of reticence expressed by potential clients, who were accustomed to the database distributed by IMS, PII decided to use brick structures very similar to those used by IMS.
PII was later acquired by NDC Health GmbH & Co. KG (“NDC”).
On application by IMS, an interlocutory order prohibiting PII from using the abovementioned structures was granted by the Landgericht Frankfurt am Main (first instance court). After PII’s acquisition by NDC, the same prohibition was issued in respect of the latter. Those orders were both confirmed by the Oberlandesgericht Frankfurt am Main (appellate court), which based its decision on the finding that the brick structure used by IMS was a database within the meaning of Section 4 of the Urheberrechtsgesetz (Act on Copyright and Related Rights) and therefore eligible for copyright protection.
In the main proceedings, IMS pursued a final injunction prohibiting NDC from using the controverted brick structure. The Landgericht Frankfurt am Main took the view that IMS could not exercise its right to obtain an injunction prohibiting all unlawful use of its work if it acted in an abusive manner, within the meaning of article 82 EC, by refusing to grant a license to NDC on reasonable terms. It therefore stayed the proceedings and referred the matter to the Court of Justice of the European Union (CJEU) for a preliminary ruling.
Held: When an undertaking holds a dominant position and owns an intellectual property right in a brick structure indispensable to the presentation of regional sales data on pharmaceutical products in a Member State, its refusal to grant a license to another undertaking that wishes to provide such data in the same Member State constitutes an abuse of a dominant position within the meaning of Article 82 EC where the following conditions are fulfilled:
– the undertaking that requested the license intends to offer, on the market for the supply of the data in question, new products or services not offered by the owner of the intellectual property right and for which there is a potential consumer demand; and
– the refusal is not justified by objective considerations; and
– the refusal is such as to reserve to the owner of the intellectual property right the market or the supply of data on sales of pharmaceutical products in the Member State concerned by eliminating all competition on that market.
Relevant holdings in relation to intellectual property and competition issues:
The CJEU considered whether an undertaking that holds a dominant position in a given market, and owns an intellectual property right to a product indispensable for carrying on business in that market, engaged in abusive conduct by refusing to grant a license to use that product. Referring to the case law, the Court bases its answer on the following grounds:
– The exclusive right of reproduction forms part of the rights of the owner of an IPR, so that refusal to grant a license, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position.
– Nevertheless, exercise of an exclusive right by the owner may, in exceptional circumstances, involve abusive conduct.
– In order for such a scenario to be deemed to exist, it is sufficient, in the case of a refusal by an undertaking which holds a copyright to grant access to a product or service which is indispensable for carrying on a particular business, that three cumulative conditions are met: (i) the refusal prevents the emergence of a new product for which there is potential consumer demand; (ii) it is unjustified; and (iii) it is likely to eliminate all competition on a secondary market.
The circumstances of the case revealed a significant dispute as to the interpretation of the third condition. In this respect, the Court held that: (i) it is sufficient that a potential market or even hypothetical market can be identified, which is the case where the products or services are indispensable in order to carry on a particular business and where there is an actual demand for them on the part of undertakings wishing to carry on the business for which they are indispensable; and (ii) what is decisive is that two distinct stages of production can be identified and that they are interrelated, the upstream product being indispensable for supplying the downstream product.
The Court also clarified the interpretation of the first condition, stating that it is only fulfilled if the undertaking seeking the license does not intend to limit itself to essentially duplicating the goods or services already offered on the secondary market by the intellectual property right holder, but intends to produce new goods or services not offered by the right holder and for which there is a potential consumer demand.
Relevant legislation:
Article 82 of the Treaty establishing the European Community (EC Treaty), now Article 102 of the Treaty on the Functioning of the European Union (TFEU)
Article 4 of the Act on Copyright and Related Rights (Urheberrechtsgesetz)