On 23 September 2008, the Cabinet of Ministers (the Government) of Latvia has adopted new regulations on minimum monthly salary and minimum hourly pay in Latvia. The regulations will enter into force as of 1 January 2009. According to the Regulations, the minimum salary will be increased from the present LVL 160 to LVL 180 (approximately EUR 256), and the minimum hourly rate – from LVL 0,962 to LVL 1,083.

The minimum monthly salary represents the statutory minimum which an employer is required to pay to employees for a full time work per month. This amount includes income tax to be withheld from employment income and employee’s share of mandatory social security contributions, but does not include the employer’s share of the social security contributions which are payable on top of the monthly salary. In addition the minimum monthly salary figure is used as a benchmark for determination of certain salaries in the government sector, certain criminal and administrative penalties and other purposes.

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It seems undoubted that IPRs, which grant their owner a monopoly on the market of his or hers protected work, may give rise to a conflict with national and EC competition rules, aimed at ensuring that competition in the Common Market is not distorted by national rules. This does not imply that such conflict cannot be solved, or that national IPR and competition rules are totally incompatible. IPRs are not, by themselves, in conflict with competition rules, it is their abuse or forbidden extension of the legal monopoly which IPR grant to their owner that is prohibited. However, in recent judgments conduct by intellectual right owners, such as copyright collecting societies, which is otherwise considered lawful under the IPR legislation, has been prohibited because it contravenes the rules of competition law.

On 11 September 2008, the Advocate General delivered an opinion on questions referred to the European Court of Justice (“ECJ”) by the Swedish Market Court. The questions arose in a dispute between the commercial TV channels TV4 and Kanal 5 and the Swedish copyright collecting society, Stim, where the TV channels claimed that Stim had abused its dominant position through a remuneration model imposed on them to calculate the use of copyright protected music. The remuneration model used by Stim is based on a so-called main tariff, which is a percentage of the TV channels’ revenues set on the basis of how much copyright protected music the TV channels have broadcasted during a year.

The Advocate General concluded that the compensation for the use of copyright-protected music calculated as a proportion of the revenues generated by the final product is a normal form of compensation, at least insofar as it sufficiently takes into account the potential or expected use of the copyright protected works. Since the exact value of the provision of copyright protected music is difficult to determine, such a remuneration model appears to be appropriate in order to ensure that both the copyright collecting society and its members are compensated for sharing musical works. However, the musical works have to be provided under similar conditions to actors in the same market so as not to create a competitive disadvantage for those who otherwise pay the higher price to avoid a discrimination claim.

In order to determine whether Stim’s remuneration model is discriminatory, the Swedish Market Court will have to assess, inter alia, whether Stim in fact charges different fees for the same services by applying different remuneration models to different TV channels. Even if the outcome is uncertain, Stim and its members are facing a difficult, costly, and lengthy legal process in court.

Another case reflecting the conflict between competition law and IPR, is a preliminary ruling delivered by the ECJ on 16 September 2008, where the Court concluded that a dominant pharmaceutical company active on the medicinal products market is abusing its dominant position if it refuses to meet ordinary orders of wholesalers in order to stop parallel exports. The Court held that by refusing to meet orders, the pharmaceutical company aims to limit parallel exports to other Member States where the medicines in question are sold at a higher price.

The Court also stated that a company in a dominant position must be able to take reasonable and proportionate steps to protect its own commercial interests. It is for the national court to decide whether the wholesaler’s orders are ordinary in the light of their previous trading relations with the pharmaceutical company and the size of the orders in relation to the requirements of the market in the relevant Member State. It is, however, unclear why the reasonableness and proportionality of a pharmaceutical company’s steps to curb parallel imports should be judged based on the extent to which a wholesaler’s orders exceed national demand. The judgment allows pharmaceutical companies to prevent some unspecified percentage of parallel imports, but it remains unclear why preventing some, but not all, parallel trade is a reasonable and proportionate response to the threat posed to the pharmaceutical company’s business.

Indeed, the Court’s insistence on fitting this case into the framework of previous ‘refusal to supply cases’, despite the fact that the pervasive state regulation of the pharmaceutical industry distinguishes it from nearly all other industries, suggests that the Court may have been more interested in maintaining a uniform approach than in providing a rational and workable analysis. Further, the judgment indicates that dominant pharmaceutical companies are abusing a dominant position in violation of Article 82 EC as they are not justified entirely by either Member State intervention in prices or the limited benefit obtained by final consumers. It remains to be seen how the Commission, the national competition authorities and the courts will apply the judgment in the future.

Finally, a collective society representing approximately 2,500 writers in Sweden, recently lost a legal process in the Stockholm District Court. The Court held that the collecting society is engaged in anti-competitive cooperation through its sales cooperation and exclusive agreements with the intellectual rights owners in violation of Article 81 EC and Section 6 of the Swedish Competition Act. If the judgment is upheld by the final Court of Appeal, the very existence of collecting societies throughout Europe will be threatened, a system which has been very effective, cost-efficient and advantageous for both IP rights holders and users for centuries. Once again, competition law curtails the ‘specific subject matter’ of the IPR legislation, that is, the right of IP rights holders to restrain others from using the invention or selling goods through its use and the reward to those investing in innovation.

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