Microsoft, Refusal to License Intellectual Property Rights, and the Incentives Balance Test of the EU Commission

Abstract

This article contributes to the analysis of refusal to license cases as abuse of a dominant position pursuant Article 82 EC from an economic perspective. In the Microsoft case, the European Commission introduced an "Incentives Balance Test" to assess whether the refusal to give access to interface information can be justified by arguing that this information is protected by Intellectual Property Rights (IPRs): The Commission argued that if the overall innovative effects evoked by a compulsory license are significantly higher than without this access, the IPR owner is obliged to license. This should be assessed through balancing the different incentives to innovate between the dominant firm and its competitors. In the paper we pursue two objectives: Firstly, we analyze to what extent the decision of the Court of First Instance, which confirmed the decision of the Commission, helps to clarify the criteria in refusal to license cases; in fact, it is disappointing in this regard. Secondly, we demonstrate that the basic idea of the Incentives Balance Test can be interpreted as a test whether the specific IPRs of the dominant firm can be defended from the perspective of the economics of IPRs. This implies that Article 82 allows competition law to correct economically not optimal IPRs through a specific economic analysis. This is followed by a broad overview on theoretical and empirical insights from economics of IPRs, innovation economics and competition and network economics that can help to develop a more general and sophisticated Innovation Effects Test that can be applied in Article 82 refusal to license cases.

Keywords: Microsoft, refusal to license, competition law, intellectual property rights

JEL Classification: K21, L44, O31, O34