Intellectual Property Rights and Market Power in the European Union: The Fil Rouge of Consumer Welfare

Andrea Stazi

European University of Rome; Luiss Guido Carli University of Rome; University of Bologna

June 1, 2011

Comparazione e Diritto Civile, June 2011

Intellectual property rights are commonly defined as exclusive rights in the sense that they vest only some people, usually creators or inventors, with the exclusive right to dispose of their intellectual works. Such a definition, however, is often misunderstood and IPRs are intended as a sort of guarantee towards the recoupment of the expenses incurred in the inventive or creative activity. On the contrary, intellectual property rights come with intrinsic limitations. First of all, their duration is limited. Secondly, the faculties granted to inventors or creators bear limitations and they do not confer an absolute control over their intangible creations. In fact, several tradeoffs exist within intellectual property paradigms, which make the protection conditional on the fact that the intangible knowledge comes immediately to the enrichment of society at large. Because commentators, generally economists, use to refer to intellectual property rights as monopolies, there is a widespread misleading belief that patents and copyrights entitle the author to obtain a monopoly in the economic sense.

This is very far from reality. IP paradigms vest inventors and creators with a set of exclusive rights, but such rights do not grant absolute control over their intangible works, nor monopoly power in the economic sense. Conversely, authors are vested with a degree of market power severely constrained by the presence of substitute products.

In general, only where peculiar economic factors – such as network effects – intertwine with IPRs, does the market power grow and IP become a potential tool for exclusionary strategies.

In such circumstances, often the product covered by IPRs gains an essential position on the market so that IP-owners, by foreclosing its access, can exclude actual and potential competitors.

In these exceptional cases, antitrust intervention is necessary, because competition is restricted, but even the whole innovative process risks being hampered, to the detriment of consumer welfare, which should be the fil rouge for dealing with the liaisons dangereuses between IPRs and market power.

Number of Pages in PDF File: 26

Keywords: Intellectual Property Rights, Antitrust, Market Power, Patent, Copyright, Trademark, Consumer, Welfare, Monopoly, Network Effect, Lock-In, Switching Cost, Enforcement

JEL Classification: K00, K10, K12, K21

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Date posted: July 29, 2011 ; Last revised: September 2, 2011

Suggested Citation

Stazi, Andrea, Intellectual Property Rights and Market Power in the European Union: The Fil Rouge of Consumer Welfare (June 1, 2011). Comparazione e Diritto Civile, June 2011. Available at SSRN: https://ssrn.com/abstract=1898185

Contact Information

Andrea Stazi (Contact Author)
European University of Rome ( email )
Via degli Aldobrandeschi, 190
Rome, 00163
HOME PAGE: http://www.unier.it
Luiss Guido Carli University of Rome ( email )
Via Parenzo 11
Rome, 00198
HOME PAGE: http://www.luiss.it
University of Bologna ( email )
Via Zamboni 22
Bologna, 40126
HOME PAGE: http://www.unibo.it
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