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Print articleAnd When the European Commission Plays the Monopoly? Microsoft Case (part II)
April, 2006 -
The interoperability information on Microsoft’s decision deserves special attention by the undertakings that have a dominant position in the market.
Intellectual property rights, granted as an incentive for the creation of innovation and as a tool to recoup the investments made by companies, used to be understood as providing several rights to its owners. Among those specific rights it was possible to identify: a) the exclusive right to produce the products under intellectual property protection; b) the exclusive right to commercialize the products under such protection; c) the right to refuse or to grant licenses, limited in time and region, with some restrictions on exploring them; d) the right to put products in the market similar to those protected by intellectual property rights and to extend the protection to the new products; e) the right to get a protection on the developments made on those products under intellectual property rights.
Therefore, it used to be common sense that intellectual property rights would constrain competitor’s behaviour since the competitors’ actions were bounded not to infringe intellectual property rights.
However, the European Commission has been meddling with these ideas. In Microsoft case, the European Commission has ruled Microsoft’s decision on refusal to license interoperability information to competitors as illegal, based on the fact that it limits the production of compatible software, able to run on Windows operating system. This conduct was qualified as abusive by limiting the production of new software and by hindering technical developments to the prejudice of consumers.
After several attempts to offer the interoperability information, by creating and filing over 12,000 pages of detailed technical documents and two independent expert reports by software system engineering professors, the European Commission disregarded this effort.
As any good corporate decision based on risk assessment, Microsoft went further than required by the European Commission and announced its will to licence the Windows Server source code for the technologies covered by the European Commission’s Decision of March 2004. Regardless of the justice of this decision, which is being reviewed by the European Court of First Instance, and its long term risks, especially in what concerns lack of incentive to invest in intellectual property by undertakings, one lesson has to be taken: the need to act cautiously by undertakings in a dominant position.
The European Commission started acting more aggressively, restricting intellectual property rights of undertakings in a dominant position whenever it reaches the conclusion that the possible negative impact on the incentives to innovate by limiting intellectual property rights of a certain undertaking is outweighed by its positive impact on the level of innovation of the whole industry.
Nowadays, when setting the company’s strategy, competition law deserves the same level of attention as budget drafting, hiring policies, marketing strategy and client management, thus all of them will play a significant role on the success or failure of a company.
Intellectual property rights, granted as an incentive for the creation of innovation and as a tool to recoup the investments made by companies, used to be understood as providing several rights to its owners. Among those specific rights it was possible to identify: a) the exclusive right to produce the products under intellectual property protection; b) the exclusive right to commercialize the products under such protection; c) the right to refuse or to grant licenses, limited in time and region, with some restrictions on exploring them; d) the right to put products in the market similar to those protected by intellectual property rights and to extend the protection to the new products; e) the right to get a protection on the developments made on those products under intellectual property rights.
Therefore, it used to be common sense that intellectual property rights would constrain competitor’s behaviour since the competitors’ actions were bounded not to infringe intellectual property rights.
However, the European Commission has been meddling with these ideas. In Microsoft case, the European Commission has ruled Microsoft’s decision on refusal to license interoperability information to competitors as illegal, based on the fact that it limits the production of compatible software, able to run on Windows operating system. This conduct was qualified as abusive by limiting the production of new software and by hindering technical developments to the prejudice of consumers.
After several attempts to offer the interoperability information, by creating and filing over 12,000 pages of detailed technical documents and two independent expert reports by software system engineering professors, the European Commission disregarded this effort.
As any good corporate decision based on risk assessment, Microsoft went further than required by the European Commission and announced its will to licence the Windows Server source code for the technologies covered by the European Commission’s Decision of March 2004. Regardless of the justice of this decision, which is being reviewed by the European Court of First Instance, and its long term risks, especially in what concerns lack of incentive to invest in intellectual property by undertakings, one lesson has to be taken: the need to act cautiously by undertakings in a dominant position.
The European Commission started acting more aggressively, restricting intellectual property rights of undertakings in a dominant position whenever it reaches the conclusion that the possible negative impact on the incentives to innovate by limiting intellectual property rights of a certain undertaking is outweighed by its positive impact on the level of innovation of the whole industry.
Nowadays, when setting the company’s strategy, competition law deserves the same level of attention as budget drafting, hiring policies, marketing strategy and client management, thus all of them will play a significant role on the success or failure of a company.
