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Refusal to License- Intellectual Property Rights as Abuse of Dominance

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Claudia Schmidt

Refusal to license intellectual property rights (IPRs) are an ongoing topic within the enforcement of Article 102 TFEU (ex Article 82 EC). Nevertheless, so far an economic founded instrument to analyse these cases is missing. To close this gap, the Innovation Effects and Appropriability Test will be developed throughout this book. Innovation research has been showing that firms rely on more appropriation mechanisms than only IPRs. The availability of these alternative instruments depends on the involved technologies, the kind of innovation, the concerned industry and so on. Consequently, it is in the centre of the Innovation Effects and Appropriability Test to analyse whether the dominant firm could rely on other appropriation instruments to protect its innovation and to recoup its investments in R&D.

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1 Introduction 1

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1 Introduction Article 102 TFEU (ex Article 82 EC) prohibits the abuse of dominance. Basi- cally, this implies that firms with market power shall not abuse their strength to impede competition or to leverage their market power to another market. In con- trast, intellectual property rights allow their right holders to exclude competitors from the usage of the protected item. If exercised by a dominant firm, conflicts with Article 102 TFEU may occur. In refusal to license cases, for instance, the intellectual property right of the dominant firm protects a good or service which is deemed necessary for competition on a related market. Thus, although the in- tellectual property right entitles the right holder to exclude others, a refusal to license by a dominant firm may hamper or even prohibit competition on a re- lated market and may enable the dominant firm to leverage its market power to this market. That is to say, a refusal to license intellectual property rights can constitute an abuse of dominance according to Article 102 TFEU. In this context competition authorities such as the European Commission have to solve the question whether such a refusal to license is just a legal exploitation of intellec- tual property rights or an attempt to extend the own market strength with anti- competitive means.1 One of the most discussed cases in the last decade is the 2004 European Mi- crosoft case. Subject to Article 102 TFEU, the European Commission scruti- nized whether Microsoft’s refusal to disclose interface information...

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