As a result of the intensive work conducted throughout the years, a unified intellectual property law has finally been codified in Industrial Property Law No. 6769 (the IP Law), which entered into force on 10 January 2016 and collectively regulates in detail trademarks, geographical indications, designs and patents, in compliance with European Union regulations. Prior to the creation of the IP Law, the entirety of the intellectual property regime was implemented through separate statutory decrees. Competition in Turkey, on the other hand, is regulated by Law No. 4054 on the Protection of Competition (the Competition Law), published in the Official Gazette on 13 December 1994.
Following the introduction of the IP Law, the interaction between competition law and intellectual property law in Turkey still remains unregulated, and both regimes obey separate legislation. Turkish intellectual property law seeks to protect the owners' exclusive control over their intellectual assets, and Turkish competition law aims to ensure effective competition in the marketplace and prevent anticompetitive actions such as cartels and abuse of dominance, etc.
Moreover, the recent Turkish IP Law and other existing legal regulations related to intellectual property rights (IP rights) confer exclusive rights on the right holders. The owner of intellectual property is entitled under the relevant legal regulations to exploit the subject of the right exclusively, to prevent illegal use of it by third parties and confer the right to use it by licensing it to third parties. The fact that legal regulations related to intellectual property grant exclusive rights of exploitation to right holders does not imply that IP rights are immune from the area of application of the competition law. Article 4 (restrictive agreements), Article 5 (individual exemption conditions) and Article 6 (dominance) of the Competition Law are also applicable to agreements whereby the holder of IP rights licenses another undertaking to exploit its IP rights. Overall, it would be prudent to consider intellectual property law and competition law as complementary rather than contradictory concepts.
As elaborated above, the main legislation for the competition law regime in Turkey is the Competition Law. The Turkish competition law regime consists of three main branches: (1) restrictive agreements, concerted practices and cartels, (2) dominance, and (3) merger control. The national competition authority for enforcing competition law in Turkey is the Turkish Competition Authority (TCA). Under the current Turkish competition law regime, the general competition law enforcement structure is also applicable for IP rights.
Within the framework of competition law, the secondary law that relates to the interaction between antitrust and intellectual property law is as follows:
- a Block Exemption Communiqué No. 2008/2 on Technology Transfer Agreements (Communiqué No. 2008/2), which provides a protective cloak for agreements involving the transfer of IP rights and in particular technology licensing agreements;
- b Block Exemption Communiqué No. 2016/5 on R&D Agreements (Communiqué No. 2016/5), which provides a block exemption for research and development (R&D) agreements, including an exemption for R&D agreements that contain provisions relating to the assignment or licensing of IP rights to carry out joint R&D, paid-for R&D or joint exploitation, so long as those provisions are not the primary object of such agreements, but are instead directly related to and necessary for their implementation;
- c Block Exemption Communiqué No. 2002/2 on Vertical Agreements (Communiqué No. 2002/2) applies to standardisation, franchise and contract manufacturing agreements to the extent they satisfy the conditions set out in the relevant communiqué; and
- d Block Exemption Communiqué No. 2013/3 on Specialisation Agreements (Communiqué No. 2013/3) establishes the conditions for granting block exemptions to specialisation agreements between undertakings and extends this exemption to licensing or intellectual property transfer agreements that are directly related to, or necessary for, the functioning of the exempted specialisation agreements.
In terms of intellectual property law, there are a range of criminal, civil and administrative laws to protect IP rights that cover a range of fields, including copyrights, trademarks, patents and trade secrets, among others. Turkey is a signatory or a party to various international and bilateral agreements, conventions and treaties, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights, the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, the Strasbourg Agreement Concerning the International Patent Classification, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of Registration of Marks, the Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks, and the European Patent Convention.
II YEAR IN REVIEW
With respect to relevant legislative changes, the Turkish law regime has not witnessed any specific amendments that relate to both competition law and intellectual property law. Undoubtedly, the major change in terms of legislation has been the introduction of the IP Law, which consolidates all the separate regulations pertaining to intellectual property law.
As for case law, the Turkish Competition Board (the Board) has dealt with several cases that bear witness to the interaction between IP rights and competition law, and these are summarised below.
In Tuborg/Ecocaps (18 May 2016, No. 16-17/282-125), the Board evaluated the application brought by Anadolu Efes Biracılık ve Malt Sanayi AŞ (Anadolu Efes) alleging that the Board's previous decision, in which it granted the exemption to the supply agreement between Türk Tuborg Bira ve Malt Sanayi AŞ (Tuborg) and Ecocap's SRL Socio Unico (Ecocaps), was issued based on missing and false information and thus the exemption should be withdrawn. To that end, Anadolu Efes claimed that the exclusive agreement concluded between Tuborg and Ecocaps regarding the supply of beverage can protection systems does not provide any technical improvement and innovation and thus the agreement does not benefit from individual exemption. In its evaluation, the Board concluded that the beverage can protection system supplied to Tuborg by Ecocaps brings a new method of providing hygienic solutions and impermeability for beverage packages and, in this sense, it promotes an innovation that is protected by intellectual property rights. Moreover, the Board stated that Tuborg, through making considerable investments and using this new technology in its products, is bringing an innovation for consumers. As a result of this evaluation, therefore, the Board rejected Anadolu Efes' request for withdrawal of the exemption granted in relation to the relevant agreement.
In ArcelorMittal (21 January 2016, No. 16-03/54-19), the Board evaluated the individual exemption request regarding the production agreement between ArcelorMittal Flat Carbon, ArcelorMittal Tailored Blanks, Bamesa Aceros, Bamesa Çelik and BAMI Çelik. The relevant agreement concerned the production of welding plates used in the automobile industry. In its evaluation, the Board took into consideration the fact that the agreement was a horizontal cooperation agreement concluded between undertakings all operating in the same market. Moreover, the Board noted that the agreement contained certain technology transfer (licence and know-how) between the parties, and thus the Board assessed whether the exemption provided under Communiqué No. 2008/2 applied to the agreement. In this regard, the Board stated that to benefit from the protective cloak of Communiqué No. 2008/2, the primary purpose of the agreement would have to be the licensing of intellectual property rights and know-how. This condition was not satisfied in the case at hand as the main purpose of the agreement at stake was the joint production of welding plates, with the transfer of certain know-how and technology being solely an ancillary element of the agreement. This led the Board to evaluate the agreement within the scope of Communiqué No. 2013/3, which applies to specialisation agreements, and the Board further decided that Communiqué No. 2013/3 did not apply in the case at hand either, because of the market share held by the undertakings concerned. Finally, the Board evaluated the applicability of the general individual exemption regime to the agreement and decided to grant an individual exemption on the basis of the efficiencies that derived from the agreement (e.g., increase in quality and cost reductions, benefit to consumers, etc.).
III LICENSING AND ANTITRUST
i Anticompetitive restraints
Article 4 of the Competition Law is akin to and closely modelled on Article 101(1) of the Treaty on the Functioning of the European Union. It prohibits all agreements between undertakings, decisions of associations of undertakings and concerted practices that have (or may have) as their object or effect the prevention, restriction or distortion of competition within a Turkish product or service market or a part thereof. Article 5 of the Competition Law (the ‘individual exemption mechanism') provides that the prohibition contained in Article 4 may be declared inapplicable in the case of agreements between undertakings:
- a that contribute to improving the production or distribution of products, or to promoting technical or economic progress;
- b that allow consumers a fair share of the resulting benefits;
c that do not impose restrictions that are not indispensable to the attainment of these objectives; and
- d that do not afford the undertakings the possibility of eliminating competition in respect of a substantial part of the products concerned.
This individual exemption test is conducted on a case-by-case basis.
The general provisions of Turkish competition law regulating anticompetitive agreements apply in cases of obtaining, granting or transferring IP rights, to the extent they fail to meet the conditions of a block or individual exemption (namely Block Exemption Communiqués No. 2002/2 and No. 2008/2 on Vertical Agreements and on Technology Transfer Agreements). Such agreements are likely to be deemed anticompetitive where they contain resale price maintenance, regional restraints, quantitative restraints on production or sales, customer allocation and selective distribution systems.
ii Refusal to license
There is currently no specific provision under the Turkish competition regime regulating unilateral conduct or refusal to license in relation to IP rights. Under Article 6 of the Competition Law, all dominant undertakings are bound by the obligation not to abuse their dominant position. Therefore, the general provisions of Article 6 would also apply to refusal-to-license situations.
Refusal to license can be a form of abuse of dominance, as established by the landmark decision of Turkcell/Telsim (9 June 2003, No. 03-40/432-186). This decision sets out the basis of the criteria required to establish an abuse of dominance for refusal to supply in IP-related markets. The Board identified the following conditions that are necessary to establish an abusive refusal to supply:
- a the access to IP rights is essential to the competitors for entry into the market;
- b there exists sufficient capacity to supply the demand;
- c the undertaking controlling the essential facility is no longer able to supply the demand on the market or it impedes competition on existing or potential services and products;
- d the undertaking requesting access to the IP rights is ready to pay a reasonable and non-discriminatory indemnity for access; and
- e there exists no reasonable justification for denial.
Although over a decade has passed since the Turkcell/Telsim case, the Board's most recent decisions on this point reaffirm the position taken; see, for instance, the Board's decisions Türk Telekom (9 June 2016, No. 16-20/326-146); Krea İçerik Hizmetleri (9 September 2015, No. 15-36/544-176); Surat Basim/Zambak (19 March 2013, No. 13-15/230-114); and Digital Platform (3 May 2012, No. 12-24/710-198).
The Board also reviewed the abuse of dominance with respect to tying and bundling practices, where the licensing of IP rights was tied to the licensing of other IP rights (Logo Yazilim, 28 April 2011, No. 11-26/497-154) or rebate systems in the sales of computer software (Microsoft, 13 June 2013, No. 13-36/481-211). In these cases, the Board applied the general provisions of Article 6 and did not adapt a particular standpoint as regards IP rights.
iii Unfair and discriminatory licensing
As with refusal to license, the general provisions of Article 6 of the Competition Law on the abuse of dominant position would also be applicable to unfair and discriminatory licensing as there are currently no specific provisions under Turkish competition legislation regulating this area. An undertaking holding a dominant position would risk allegations of abuse of dominant position in the event of discrimination in connection with licensing fees, discrimination in providing the main IP rights required for a certain activity or through offering different terms to purchasers with equal status for the same and equal rights, obligations and acts. Similarly, refusal to license may be found to be abusive where it is discriminatory.
In any event, discriminatory conditions imposed by an undertaking holding a dominant position are governed under Article 6 of the Competition Law.
iv Patent pooling
Patent pooling has been referred to as ‘technology pooling' in the Guidelines on Technology Transfer Agreements, which define technology pools as agreements where two or more parties agree to assemble their technologies and create a pool and license them as a package. The concept of a technology pool also covers arrangements whereby two or more parties agree to license the package of technologies in question to a third party and empower that party to license the package. However, the Guidelines on Technology Transfer Agreements do not cover such arrangements and thus patent pools are subject to the general provisions of Article 4 of the Competition Law. If all the conditions of individual exemption are satisfied, patent pools may also benefit from the individual exemption under Article 5 of the Competition Law.
While there has been no prior case law dealing specifically with patent pooling or technology pooling arrangements, it can be said that the patent pooling arrangements would generally be viewed as creating pro-competitive efficiencies. That said, the patent pooling arrangements should not be used in an anticompetitive manner to fix prices, allocate markets or restrict output, which would be in violation of the Competition Law.
v Software licensing
Provided certain conditions are met, Communiqué No. 2008/2 provides for a protective cloak for agreements involving the transfer of IP rights and in particular technology licensing agreements. A technology transfer agreement is an agreement where a licensor authorises another party (licensee) to use its technology (patent, know-how, software licence) for the production of goods and services subject to the licence agreement. The exemption applies to sub-licensing as well, provided that they are granted to third parties by the licensee solely in relation to the licensed technology.
Communiqué No. 2008/2 is applicable only if certain market share thresholds are not exceeded: for licensing agreements between competing undertakings, the aggregate market share of the parties should not exceed 30 per cent in the affected technology market. The threshold is 40 per cent in the case of licensing agreements between non-competing undertakings. Hardcore restrictions, such as the restriction of a party's ability to determine the prices it charges third parties (i.e., resale price maintenance), territory or customer restrictions, or both, and non-compete obligations are also listed in Article 6 of Communiqué No. 2008/2 as clauses that exclude the application of the block exemption.
vi Trademark licensing
The Guidelines on Technology Transfer Agreements provide that a licensor may authorise a licensee to use its trademark on the products incorporating the licensed technology, as this trademark allows consumers to make an immediate link between the product and the characteristics imputed to it by the licensed technology. However, if the value of the licensed technology is limited because the licensee already uses the same or similar technology and the main objective of the agreement is the trademark, then the licensing agreement will not benefit from the block exemption provided under Communiqué No. 2008/2. That said, under Article 6 of the Competition Law, all undertakings holding a dominant position are bound by the obligation not to abuse their dominant position. The abuse of dominant position can occur in cases of discrimination in connection with trademark licensing fees, discrimination in providing the trademark licence and offering different terms to purchasers with equal status for the same and equal rights, obligations and acts, and if found to be abusive, in cases of refusal to license the trademark. Therefore, the general provisions of Article 6 of the Competition Law would also apply to the licensing of trademarks.
Most recently, in Toshiba/Vestel (24 November 2016, No. 16-41/666-299), the Board evaluated an exemption request regarding the ‘brand licence agreement', which concerns the trademark-use licence granted to Vestel by Toshiba for the production and distribution of Toshiba branded televisions. In its evaluation, the Board held that the relevant agreement was a production and distribution agreement concluded among competitors, which falls within the scope of Article 4 of the Competition Law. As the Block Exemption Communiqué No. 2002/2 on Vertical Agreements does not apply to such horizontal agreements, the Board proceeded to an individual exemption analysis under Article 5 of the Competition Law and decided to grant an individual exemption on the basis that the agreement contributed to the promotion of improvement of technical or economic progress with regard to consumers.
IV STANDARD-ESSENTIAL PATENTS
Standard-essential patents could provide substantial market power to their holders. Any abuse by an undertaking that is in a dominant position in a market for goods or services within the whole or part of Turkey is considered as abuse of dominant position under Article 6 of the Competition Law regardless of whether it is on the part of one or more undertakings, individually or through joint agreements.
The Board has not so far considered the issue of standardisation as far as its intersection with standard-essential patents and any potential abuse of dominant position claims. Nevertheless, general competition law provisions in Turkey would be applicable to any related issues, such as patent ambush, hold-up, refusal to license, etc. Hence, such arrangements and practices would be closely scrutinised under the relevant applicable provisions of Turkish laws.
Pursuant to Article 389 of the Turkish Civil Procedure Law, in the event of a suspicion that it would be very difficult or totally impossible to earn a right because of a change in the existing circumstances, or that a drawback or severe losses may arise because of a delay, an injunction may be established in connection with the issue under dispute. Requests for injunctions may be addressed to the competent courts.
In addition, pursuant to Article 9(4) of the Competition Law, where the occurrence of serious and irreparable damage is likely until the final decision is taken, the Board may take interim measures that maintain the situation as it was before the infringement and that shall not exceed the scope of the final decision.
As to seeking an injunction on the basis of standard-essential patents and any interplay with competition law, this issue has not been considered by the Board to date.
iii Licensing under fair, reasonable, and non-discriminatory (FRAND) terms
As standardisation generally occurs as a result of coordinated actions made by several undertakings, the issues would therefore fall within the scope of Article 4 of the Competition Law. As there is no specific legislation applicable to industrial standards as far as competition law is concerned, the Guidelines on Horizontal Cooperation Agreements would be relevant for determining the propriety of the industrial standards.
According to the Guidelines on Horizontal Cooperation Agreements, FRAND commitments are designed to ensure that any essential technology under IP rights protection incorporated in a standard is accessible to the users of that standard on a fair, reasonable and non-discriminatory basis. Further, according to the relevant guidelines, these commitments can prevent IP right holders from making the implementation of a standard difficult by refusing to license or by requesting unfair or unreasonable (excessive) fees or discriminatory fees after the industry has been locked into a standard. The assessment of whether the agreement restricts competition must be based on the issue of access to the standard.
In Digiturk (10 February 2016, No. 16-04/82-36), where the Board assessed whether the agreement between the Turkish Football Federation and Digiturk satisfies the conditions for an individual exemption within the meaning of Article 5 of the Competition Law, the Board explicitly referred to FRAND terms for the first time. The Board provided that in licensing agreements the parties would need to comply with FRAND terms. Without proceeding to an assessment as to whether FRAND terms were satisfied in the case at hand, the Board decided to grant an individual exemption to the agreement on the grounds that it allows the licensees' platforms to access several technical developments and provides a customer benefit.
As the Board has not so far considered the intersection of standard-essential patents and competition law (or IP rights in the standardisation process in general), the Board's approach on standardisation agreements may be considered by analogy. In Yonga Levha (14 August 2003, No. 03-56/650-298), the Board evaluated the application of a negative clearance in regard to a standardisation decision made by the Turkish Particle Board Industrialists Association concerning setting a standard for particle boards that are subject to numerous patents registered with the Turkish Patent Institute. The Board considered the agreement as a standardisation agreement and evaluated the application pursuant to Article 4 of the Competition Law. The Board decided to grant a negative clearance for the Association's application. This decision can be considered as the first decision ever where the Board has evaluated the concept of standardisation under the Turkish competition law regime.
In Turkish Pharmacists' Association (15 November 2007, No. 07-86/1088-422), the Board evaluated, from a competition law perspective, the conformity certification, issued by the Turkish Pharmacists' Association and granted to pharmacies, that regulates the formal standards that pharmacies' signboards should satisfy. The Board examined the conformity certification in view of its purposes and decided that it is proportionate under the Turkish competition law regime. Accordingly, the Board rejected the complaint petition.
As indicated above, there are only a few instances where the Board has evaluated standardisation agreements. It is fair to say that the application of standardisation is not as common in Turkey as it is in other jurisdictions, such as the EU.
iv Anticompetitive or exclusionary royalties
Under the Turkish competition regime, there is no regulation on the royalty rates or the calculation elements of the royalty calculation. Nevertheless, according to the Guidelines on Horizontal Cooperation Agreements, the assessment as to whether the fees charged for access to IP rights in the standard-setting context are unfair or unreasonable would be based on whether there is a reasonable relationship between these fees and the economic value of the IP rights. Licensing fees charged for the same IP rights within the context of similar standards may also be used as an indicator for FRAND licensing fees. However, the guidelines do not include an exhaustive list of appropriate methods to assess whether licensing fees are excessive. Also, an independent expert analysis may be requested, stating that the relevant IP rights portfolio is objectively important and essential for the standard at issue. In certain cases, it may also be possible to refer to ex ante disclosures concerning licensing terms in relation to a specific standard-setting process.
In conclusion, where the royalty is so excessive so as to be contrary to FRAND commitments, then this could raise an issue under Article 6 of the Competition Law.
V INTELLECTUAL PROPERTY AND MERGERS
i Transfer of IP rights constituting a merger
Concentrations that result in a permanent change of control (either sole or joint control) are subject to the Board's approval, provided they exceed the applicable turnover thresholds.
A transaction that involves the acquisition of IP rights such as brands, patents, designs or copyrights would be deemed a merger or an acquisition within the meaning of the Turkish merger control regime so long as the relevant IP rights constitute a business with a market turnover. In Mey/Anadolu Efes, the transaction concerned the acquisition of a certain trademark in the sector for beer (25 August 2009, No. 09-38/925-218). In this decision, the Board deemed the transaction as an acquisition within the scope of the merger control regime and approved it. In ACC Austria (27 September 2013, No. 13-55/758-318), which concerned the acquisition of ACC Austria's tangible and intangible assets such as office consumables, several licences, trademark and patent rights and other IP rights by Secop GmbH, the Board deemed the transaction an acquisition.
More recently, in FIH Mobile/Microsoft Mobile (Vietnam) (18 August 2016, No. 16-28/472-211), the Board approved the transaction regarding the acquisition by FIH Mobile of the entire share capital of Microsoft Mobile (Vietnam) and other assets related to the operation of the feature phone business that imply the transfer of IP rights. The Board proceeded to an examination as to whether the transfer of IP rights could be considered as a separate transaction requiring a separate merger control filing. To that end, and based on the information provided by the parties that no turnover could be attributed to the relevant IP rights, the Board considered the acquisition of share capital and assets as one single transaction.
ii Remedies involving divestitures of intellectual property
The Board is likely to challenge concentrations that create or strengthen a dominant position, which would result in a significant lessening of competition in a market for goods or services within the whole or a part of Turkey. The acquisition of IP rights would not be an exception to this rule, and thus would be evaluated under the same test to assess whether the competitive problems arise from a market position gained as a result of the relevant IP rights.
In (exceptional) cases where competition problems arise from a market position based on the superiority of owning a certain technology or IP right, the divestiture of the said technology or IP right may be considered a suitable remedy (Guidelines on Remedies Acceptable by the Turkish Competition Authority in Mergers/Acquisition Transactions). A divestiture package that includes only trademarks and relevant production or distribution assets may only be accepted as a suitable remedy if sufficient proof is adduced showing that at the hands of a suitable purchaser the said package would turn immediately into a competitive and viable asset (Guidelines on Remedies Acceptable by the Turkish Competition Authority in Mergers/Acquisition Transactions). The Board is familiar with cases where the remedies partly involve divestiture of IP rights such as certain trademarks and brands (e.g., Mey İçki (17 August 2011, No. 11-45/1043-356)).
VI OTHER ABUSES
i Sham or vexatious IP litigation
While there has been no prior case law under the Turkish competition law practice dealing specifically with sham or vexatious IP litigation cases and competition law intersection, such arrangements and practices would be closely scrutinised under the applicable provisions of Turkish competition laws.
ii Misuse of the patent process
While there has been no prior case law under the Turkish competition law practice dealing specifically with a misuse of the patent process (e.g., misleading patent offices or misusing the patent system to gain a competitive advantage) and competition law intersection, such arrangements and practices would be closely scrutinised under the relevant applicable provisions of Turkish laws, especially under Article 6 of the Competition Law dealing with abuse of a dominant position.
iii Anticompetitive settlements of IP disputes
Turkish competition law is yet to witness the practice of manipulation of the patent process and its interaction with competition law, or other practices such as artificially extending the term or geographical scope of patent protection, or enforcing patents obtained through fraud or anticompetitive settlements of intellectual property disputes or pay-for-delay arrangements. Nevertheless, such arrangements and practices would be closely scrutinised under the relevant applicable provisions of Turkish laws.
VII OUTLOOK AND CONCLUSIONS
The Draft Competition Law, which was issued by the Turkish Competition Authority in 2013 and officially submitted to the Presidency of the Turkish Parliament on 23 January 2014, is now null and void following the beginning of the new legislative year of the Turkish Parliament. At this stage, it remains unknown whether the new Turkish Parliament or the government will renew the draft law. However, it could be anticipated that the main topics to be held in the discussions on the potential new draft competition legislation will not significantly differ from the changes that were introduced by the previous draft. Therefore, in this hypothetical scenario, the discussions are expected to mainly focus on: (1) conformity with the EU competition law legislation; (2) introduction of the EU's SIEC (significant impediment of effective competition) test instead of the current dominance test; (3) adoption of the term of ‘concentration' as an umbrella term for mergers and acquisitions; (4) elimination of the exemption of acquisition by inheritance; (5) abandonment of the Phase II procedure; (6) extension of the appraisal period for concentrations from the current 30-calendar-day period to 30 working days; and (7) removal of the fixed turnover rates for certain procedural violations, including the failure to notify a concentration and hindering on-site inspections, and set upper limits for the monetary fines for these violations.
As for intellectual property law, the enactment of the IP Law is expected to bring a more solid framework for the application of the intellectual property rules. As the new IP Law does not regulate the intersection between the intellectual property rules and competition law, the Board's case law will be of importance for further clarifications with respect to the competition law standards that apply to intellectual property matters.
1 Gönenç Gürkaynak is the managing partner at ELİG, Attorneys-at-Law.