Innovation, Leveraging and Essential Facilities: Interoperability Licensing in the EU Microsoft Case
25 Pages Posted: 2 Sep 2006
Date Written: March 2005
This paper provides an economic analysis of the European Commission's decision against Microsoft's refusal to supply information on interoperability. It surveys the exceptional circumstances examined by the Commission in applying the essential facility doctrine to the case. It analyses the Commission's reasoning on Microsoft's leveraging its market power from one market to another. It discusses the amount Microsoft can request as a reasonable remuneration for the licensing of its property rights on interface. According to the author, the analysis of incentives to innovate, as proposed by the Commission, provides a sounder test forordering compulsory licensing that the new product condition introduced in Magill. However, the author points out that the assessment of incentives to innovate in the whole industry cannotbe conclusive in absence of more guidance on what constitutes a reasonable, non discriminatory and non strategic license. Regarding leveraging, the author considers that the Commission proposes a convincing story. Prejudice to consumers remains however hypothetical.
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