Published 17 Mai 2025 / Revised 22 Mai 2025
The Swiss Federal Supreme Court’s recent ruling in the HCI Solutions case (2C_244/2022, January 23, 2025) offers insights for legal practitioners drafting intellectual property agreements. I have reported on the importance of this ruling for the effects-based approach in Switzerland (read the post here), and now I want to expand on another learning from this case for IP-related contract drafting. The FSC’s analysis also provides a particularly valuable guide to the often overlooked IP aspects of the case, illuminating the complex intersection of intellectual property rights, unfair competition law, and antitrust considerations. In my book, I could only briefly touch on the topic of the interface between IP and the Cartel Act (see Section 1.3.3 of Competition Law in Switzerland), and this is an excellent opportunity to elaborate further on its practical implications.
The Case in Brief
HCI Solutions held a dominant position with over 90% market share in Switzerland’s pharmaceutical information database market. Their contracts with software houses contained clauses restricting how third-party data could be integrated. One particular clause prohibited software houses from inputting third-party data “structured the same as or substantially similar to” HCI’s XML data structure.
This clause became a key element of the dispute. The FSC determined that while parts of the clause legitimately protected HCI’s copyright in its XML structure, the prohibition against “substantially similar” structures overreached legitimate IP protection and violated the Cartel Act.
The Scope Equivalence Test: The IP Dimension
Swiss law recognizes the tension between intellectual property protection and competition law. Article 3(2) of the Swiss Cartel Act excludes from the Cartel Act scrutiny effects that result “exclusively from intellectual property legislation”.
The key question to ask is simple: Does the contractual clause prohibit only actions that would already be prohibited under IP law? In other words, does the restriction go beyond what IP law directly protects? If yes, the part of the clause that extends beyond IP protection would be subject to the Cartel Act and could be found abusive, such as in this case.
In HCI’s case, the FSC found that prohibiting direct copying of the XML structure aligned with copyright protection. This part of the contractual clause merely restated existing copyright law protection. However, prohibiting “substantially similar” structures extended beyond copyright protection and therefore made it subject to Cartel Act scrutiny, specifically regarding abuse of dominance.
Unfair Competition Law: The Other Dimension
The FSC added another layer to the analysis by considering unfair competition law (UCL). The Court leaves open whether UCL can restrict the application of the Cartel Act. This question is valid since unfair competition law protects investments against free riding, ultimately preserving innovation and market competition.
Unlike IP laws, the Cartel Act contains no statutory exclusion for UCL-protected subject matter. However, works protected against behaviors prohibited under the UCL may still be shielded from Cartel Act scrutiny. Companies should consider using this argument more often.
The FSC ruling offers valuable guidance for IP-related contracts, as their subject matter is often protected by both IP and unfair competition laws. In this case, the FSC made an important distinction between technical reproduction of an XML structure on the one hand, which is prohibited under UWG Article 5(c), and imitation on the other, which is generally permitted under UWG.
This distinction further clarified why HCI’s “substantially similar” prohibition overreached. The FSC found that this language restricted behavior that was protected neither by IP law nor by UWG – specifically, the permissible imitation of the XML structure. This left the contractual prohibition fully exposed to Cartel Act scrutiny.
Practical Implications for Contract Drafting: The Dangers of Overbreadth
The HCI case serves as a warning for practitioners. When drafting IP-related contracts, especially for clients with significant market power, precision matters.
Catch-all provisions like “substantially similar” may provide apparent flexibility and comprehensive protection. Yet these drafting techniques can transform a legitimate IP protection clause into an anti-competitive restriction.
Overbroad contractual provisions create several risks. Courts may find them unenforceable. Competition authorities may impose significant fines.
The FSC’s analysis shows that dominant companies cannot freely use contract law to extend their IP rights beyond what legislation directly provides. Contractual provisions that restrict activities of business partners beyond the scope of legitimate intellectual property protections may constitute unlawful market foreclosure under the Cartel Act, provided such provisions have foreclosure effects on the market. On this point, read our previous post here.
For legal practitioners drafting intellectual property agreements, the following principles should be considered:
– avoid catch-all language when defining prohibited activities related to IP. Phrases like “substantially similar,” “resembling,” or “based on” may exceed legitimate IP protection.
– consider market position. Dominant companies face heightened scrutiny. Contractual provisions that might be acceptable for smaller players can trigger competition concerns for market leaders.
For legal practitioners, the message is clear: precise drafting aligned with specific IP rights creates more enforceable contracts than catch-all provisions attempting to capture all possible competitive threats. When it comes to IP restrictions in contracts, less is often more.