The conflict in the European Community between competition law and intellectual property rights: a call for legislative clarification of the essential facilities doctrine

The conflict in the European Community between competition law and intellectual property rights: a call for legislative clarification of the essential facilities doctrine

“[A]n obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of his exclusive right, and … refusal to grant such a licence cannot in itself constitute an abuse of a dominant position.”–Judgment of the European Court of Justice of 5 October 1988, Case 238/87,AB Volvo v. Erik Veng (UK) Ltd., 1988 E.C.R. 6211, 6235, [1989] 4 C.M.L.R. 122, 135.

“[I]n certain cases a dominant undertaking must not merely refrain from anti-competitive action but must actively promote competition by allowing potential competitors access to the facilities which it has developed.”–Opinion of Advocate General Jacobs of 28 May 1998, Case C-7/97, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791, I-7802, [1999] 4 C.M.L.R. 112, 122.

I. INTRODUCTION

The two quotes above from European Community (EC) competition judgments illustrate the undeniable tension between intellectual property rights (1) and competition law. (2) While the former grant a limited monopoly in an original creation in order to stimulate innovation, the latter aims to prevent abuse (3) by a dominant (4) firm of its market power in order to achieve economic efficiency. (5) The difficulty of reconciling these two competing goals is especially pronounced in the EC, where the intellectual property protection available in certain Member States (6) contravenes the efforts of the European Commission (Commission) (7) to foster competition. The Commission proscribes market domination by any one firm or group of firms in order to facilitate a single market (8) and to ensure competition for the benefit of consumers. (9)

Fundamentally, both competition law and intellectual property law are directed toward the same objectives, promoting innovation and enhancing consumer welfare, but they employ different strategies to attain these ends. According to Professor Cotter, “whereas antitrust law seeks to achieve economic efficiency by promoting competition over monopoly, intellectual property law can be viewed as an effort to achieve this goal by stifling competition, at least in the short term.” (10) Moreover, competition law, unlike intellectual property law, aims to attain free operation of the market as opposed to any particular outcome. In contrast, intellectual property law focuses on achieving a specific social goal, namely technological innovation, through regulation, and assumes that “efficiency will be achieved only if the social planner correctly estimates the proper mix of incentive and access to go into the formulation of intellectual property rights.” (11)

The contradictions inherent in any effort to reconcile intellectual property rights and competition law are exemplified by the “essential facilities” doctrine, one of the analytic tools invoked by the Commission and the EC courts (12) to enhance market competition. This doctrine provides that “a company which has a dominant position in the provision of facilities which are essential for the supply of goods or services on another market abuses its dominant position where, without objective justification, it refuses access to those facilities.” (13) Intended to benefit consumers by increasing competition in downstream markets, (14) the essential facilities doctrine directly challenges the very precepts underlying intellectual property rights, which have been described as conferring a “limited monopoly.” (15) Thus, since the 1970s, when the essential facilities doctrine was first articulated in the U.S. and then adopted in Europe, (16) EC courts and competition authorities continually have sought to refine it in order to balance the competing goals of enhancing market competition and stimulating innovation. Certainly, overuse of the essential facilities doctrine would both reduce the incentive for rivals to establish competing facilities, because they could simply demand access to existing ones, and would also discourage dominant firms from investing in efficient facilities, because they would not be able to prevent free-riding by competitors. (17)

The application of the essential facilities doctrine within the EC is of concern to domestic and foreign firms alike, as demonstrated by an action currently pending before the European Court of Justice (ECJ) (18) that represents the most recent development in the doctrinal line of essential facilities cases dealing with intellectual property. (19) The legal proceedings began in May 2000, when Intercontinental Marketing Services Health Inc. (IMS), a U.S. corporation describing itself as “‘the world’s leading provider of information solutions to the pharmaceutical and healthcare industries,'” (20) initiated a copyright action before Germany’s Frankfurt District Court, alleging that NDC Health GmbH & Co. KG (NDC), a German subsidiary of a U.S. corporation, (21) and AzyX Deutschland GmbH Geopharma Information Services (AzyX), a German subsidiary of a Belgian corporation, (22) were infringing Germany IMS’s copyright in a database relating to pharmaceutical sales. (23) Without conceding their infringement, NDC and AzyX brought a complaint before the Commission contending that, notwithstanding its intellectual property protection, IMS must grant its competitors a compulsory license for this database. Invoking the essential facilities doctrine, IMS’s competitors argued that IMS abused its dominant market position by refusing, without objective justification, to license a facility that is essential for the supply of services. (24) IMS countered that such an interpretation of the essential facilities doctrine would render intellectual property protection granted under national law nugatory, thereby deterring investment and innovation. (25)

The Commission, persuaded by the arguments of IMS’s competitors, issued an interim decision (26) in July 2001, ordering IMS to engage in compulsory licensing pending resolution of the main competition action. (27) On October 26, 2001, the President of the Court of First Instance (CFI) (28) suspended the Commission’s interim decision with another interim order, such that IMS is not required to license its intellectual property while the main competition action is still pending before the CFI. (29) Less than six months later, the President of the ECJ confirmed this interim order of the President of the CFI, dismissing in its entirety NDC’s appeal against this interim order. (30) These proceedings before the CFI ultimately may prove moot, in light of the Frankfurt District Court’s judgment on August 30, 2001, to refer the competition questions raised by IMS and its competitors directly to the ECJ. (31) The ECJ held an oral hearing in this action on March 6, 2003, (32) and ultimately its judgment will resolve the case on its merits. (33)

This Article explores the tension inherent in the application of the essential facilities doctrine to refusals to license intellectual property in the EC. In particular, it focuses on the pending competition action involving IMS, NDC, and AzyX, in order to assess the future vitality and effect of this doctrine. Part II discusses the development of essential facilities jurisprudence in the EC, examining cases relating to goods and services as well as to intellectual property. Part III describes the action among IMS Health and its competitors, which is the most recent case to test the parameters of the essential facilities doctrine in the context of intellectual property. Part IV then examines, in light of established essential facilities precedent, how this doctrine should be applied in the IMS action. This Part advocates analysis ex ante, meaning that the long-term implications for investment in intellectual property must be weighed against the short-term competition considerations. It concludes that, although IMS’s copyright effectively does enable it to suppress competition in the market for pharmaceutical sales data, at least during the term of the copyright, the EC courts should not order compulsory licensing in this case for several reasons.

First, as a threshold matter, the essential facilities doctrine proves inapposite in the instant action. EC courts and competition authorities traditionally have applied this doctrine only where there are two separate markets, that is to say, where a dominant firm’s refusal to grant access to its indispensable facility has negatively affected another firm that is active on a second, related market. (34) By contrast, IMS has refused a license to competitors who are active on the very same market where IMS secured its intellectual property right. Clearly, it cannot be an abuse for IMS to refuse to license rivals who seek access to its copyright in order to compete in precisely the same market, because that would undermine the very idea of intellectual property rights.

Second, in ordering compulsory licensing, the Commission committed a legal error in its overreliance upon judicial precedent that does not concern intellectual property. This approach fails to balance carefully the competing interests of intellectual property law and competition policy, thereby essentially eviscerating protection for dominant firms that have created non-substitutable intellectual property.

Third, as a factual matter, the Commission improperly analogized the instant action to an earlier competition case in which the ECJ’s judgment declining to annul a compulsory licensing order issued by the Commission seemed, in the view of some commentators, to be based upon the Court’s belief that the intellectual property at issue was non-meritorious and less deserving of protection than other forms of intellectual property. In contrast, IMS expended much money and effort in developing its database, and might not have done so had it not expected to exclude its rivals. Indeed, EC law mandates intellectual property protection for databases of this type. To order compulsory licensing simply because IMS’s creation has emerged, by dint of the firm’s efforts, as the strong preference of the pharmaceutical industry would in fact punish IMS for its own success. In addition, the Commission failed to take adequate account of the fact that earlier case law has established that “exceptional circumstances” are required in order to justify compulsory licensing in intellectual property cases. It is clear that no such circumstances are present here. In the final analysis, notwithstanding any short-term stimulus effect upon competition in the industry in question, the likely result of a compulsory licensing order in the closely watched IMS case will be to blunt overall incentives for investment and innovation.

In view of the complexities inherent in the IMS action, Part V will consider the proper role of the essential facilities doctrine in the context of intellectual property licensing in the EC. This Part suggests a legislative, rather than a judicial, approach to reconciling the conflicting demands of competition law, which aims both to facilitate market integration and to prevent market domination, and of intellectual property law, which is meant to foster innovation. While it is well within the power of EC institutions to determine that competition policy ought to trump national intellectual property law in a given case, such action should be taken legislatively rather than judicially. This will foster predictable legal rules that stimulate investment in and creation of intellectual property.

II. THE DEVELOPMENT OF ESSENTIAL FACILITIES JURISPRUDENCE IN THE EUROPEAN COMMUNITY

The theoretical framework of the essential facilities doctrine is Article 82 of the Treaty of Amsterdam (Article 82), which provides that: “Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.” (35) Article 82 further provides that such abuse includes, inter alia, “limiting production, markets or technical development to the prejudice of consumers.” (36) Article 82 represents an exception to the general rule in the EC that it is the privilege of a firm to decide with whom to trade. (37) EC competition authorities consider the following three factors in determining whether there has been a violation of Article 82: “(a) a dominant position, (38) (b) abuse of that dominant position and (c) a resultant effect on trade between Member States.” (39) In some circumstances, one firm’s “refusal to deal” with another would be an example of such an abuse. (40) A special case of “refusal to deal” is the essential facilities doctrine, (41) which originated in the U.S. (42)

The Commission has defined an “essential facility” as “a facility or infrastructure which is essential for reaching customers and/or enabling competitors to carry on their business, and which cannot be replicated by any reasonable means.” (43) Traditionally, the facility “must be complementary to an economic activity in a related but separate market.” (44) Under EC law, “a refusal to grant access to such [essential] facilities amounts to an abuse of a dominant position where such refusal would have an anti-competitive effect and where it could not be objectively justified.” (45)

The essential facilities doctrine is invoked often in cases involving access to raw materials (46) or supplies, (47) as well as access to infrastructural facilities, such as a computerized airline reservation system

Intellectual property is less susceptible to essential facilities analysis for two reasons. First, notions of fairness inherent in intellectual property law, particularly in Europe, suggest that a creator has earned the rights in her work and should not be deprived thereof. (55) Second, intellectual property law is intended to promote investment and innovation, and compulsory licensing would tend to discourage such desirable behavior. (56) While the EC Treaty provides that intellectual property protection is in the first instance a matter for the Member States, (57) the Commission, and, ultimately, the EC courts, nonetheless possess the authority to interpret EC competition law so as to trump national copyright law. (58)

In practice, it is difficult to know when the Commission and the EC courts will deem a facility so indispensable and impossible to duplicate as to constitute an essential facility, and to predict what qualifies as a reasonable business justification for a party’s refusal to license. Scholars have noted that EC case law is ambiguous in this regard. (59) Therefore, any attempt to apply the essential facilities doctrine in the IMS case requires a full analysis of extant essential facilities jurisprudence.

A. The Early Cases Concerning Refusal to Supply: Commercial Solvents and United Brands

The development of the essential facilities doctrine in the EC began in the 1970s with the first two significant cases on Article 82, (60) both of which concerned a dominant firm’s refusal to supply an existing customer. In an interesting parallel to the IMS action, these two early cases involved the actions of U.S. firms that dominated the European market.

In Istituto Chemioterapico Italiano SpA & Commercial Solvents Corp. v. Commission (Commercial Solvents), (61) the ECJ held that a refusal by a dominant firm to continue supplying raw materials to an existing customer, which was also a downstream competitor, violated Article 82, even if the dominant firm planned to use the raw materials itself, where such denial threatened to eliminate competition on the part of the customer. (62) In that case, Commercial Solvents Corporation (CSC), a chemical supplier incorporated in the U.S., refused, after four years of dealings, to continue supplying Laboratorio Chemico Farmaceutico Giorgio Zoja SpA (Zoja), an Italian customer. CSC previously had supplied Zoja with nitropropane and aminobutanol, two chemical raw materials used to manufacture the end product ethambutol, a drug used to treat tuberculosis. (63) CSC acknowledged that its behavior was motivated by the desire to enter the market for downstream products, and maintained that its goal of eliminating competition from its former customer constituted a legitimate justification for its refusal to supply. (64)

The Commission found that CSC had “‘a dominant position in the Common Market for the raw material necessary for the manufacture of ethambutol'” by virtue of its “‘world monopoly in the production and sale'” of the raw materials. (65) Based on this finding, the Commission decided that CSC’s refusal to supply a former customer, without objective justification, (66) constituted an abuse of market position under Article 82 of the EC Treaty in that it would gravely affect competition conditions in the EC. (67) CSC applied to the ECJ for annulment of the decision. (68)

The ECJ confirmed the Commission’s decision, holding it an abuse of dominant position under Article 82 where:

an undertaking which has a dominant position in the market in raw

materials …, with the object of reserving such raw material for

manufacturing its own derivatives, refuses to supply a customer,

which is itself a manufacturer of these derivatives, and therefore

risks eliminating all competition on the part of this

customer…. (69)

This holding is significant in that it imposed upon dominant firms a very broad duty to supply downstream competitors if a refusal to supply would adversely impact market competition. (70) After Commercial Solvents, “there is a general rule that a dominant company may not refuse to supply a competitor if the effect would be to put the competitor out of business, even if it plans to use the products in question itself.” (71)

In another early refusal to supply case, United Brands Co. & United Brands Continentaal B. V. v. Commission (United Brands), (72) the ECJ again established a general duty to supply an existing customer, this time in a case where the parties were not in a competitive relationship. (73) In this action, the U.S.-based distributor of Chiquita bananas, United Brands Co. (UBC), refused to continue supplying bananas to Olesen, a Danish ripener-distributor that was a former customer, because the latter had begun advertising bananas of the competing Dole brand. (74) The Commission found that UBC has abused its dominant position. (75)

The ECJ confirmed the Commission’s decision, holding that, pursuant to Article 82:

an undertaking in a dominant position for the purpose of marketing a

product–which cashes in on the reputation of a brand name known to

and valued by the consumers–cannot stop supplying a long standing

customer who abides by regular commercial practice, if the orders

placed by that customer are in no way out of the ordinary. (76)

According to the ECJ, any action taken by a dominant firm to protect its own commercial interests “must still be proportionate to the threat taking into account the economic strength of the undertakings confronting each other.” (77) The ECJ expressed particular concern that UBC’s termination of supplies would discourage its other customers from distributing competing brands and undermine the independence of small and medium-sized firms in their commercial dealings with dominant companies, thereby profoundly affecting market competition. (78)

Scholars have criticized the ECJ’s judgments in both Commercial Solvents and United Brands for imposing a general duty upon the dominant firms in question to supply competitors and customers, without examining completely whether the withheld items were truly indispensable for the maintenance of market competition. (79) These commentators emphasize that the essential facilities doctrine must be directed toward protecting competition in general, not particular competitors. (80) Dr. Temple Lang explains, however, that because the respective dominant firms in both Commercial Solvents and United Brands refused to supply in a discriminatory manner so as “to handicap or to injure a particular competitor,” the ECJ was more likely in such circumstances to find an abuse “even if the facility is not essential.” (81) Moreover, in both cases the dominant firm had previously supplied the excluded firm, and Professor Bergman suggests that EC competition authorities and courts are particularly likely to find an improper refusal to deal in such circumstances. (82) In any event, according to Dr. Temple Lang, “[a]fter Commercial Solvents and United Brands …, the principle of a general duty of dominant companies to supply was so well-established that it was not necessary later to distinguish essential facility cases from other cases of exclusionary abuse.” (83)

B. The Commission’s First Explicit References to the Essential Facilities Doctrine: The Hothead Harbor Decisions

The first explicit references to the essential facilities doctrine in EC competition law appear in two interim decisions (84) of the Commission, B&I Line PLC v. Sealink Harbours Ltd. & Sealink Stena Ltd. (B&I) (85) and Sea Containers v. Stena Sealink (Sea Containers), (86) both of which involved access to an infrastructural facility, the port of Holyhead Harbor in Wales. (87) In the 1992 B&I action, B&I Line PLC (B&I), a ferry operator, brought a complaint before the Commission against Sealink Harbours Ltd. and Sealink Stena Ltd. (collectively, Sealink), related companies that owned Holyhead Harbor and operated a ferry. Both B&I and Sealink competed in the ferry market for the transport of passengers and cars from Holyhead to Ireland. B&I’s berth was in the mouth of the harbor, which was so narrow that, when a Sealink vessel passed, the B&I ship had to stop loading or unloading and lift the ramp connecting the ship to the dock. Sealink altered its schedule of sailings in such a way that B&I’s loading was interrupted more frequently. This improved Sealink’s schedule, but harmed B&I. (88)

The Commission distinguished between Sealink as a harbor owner on the upstream market and Sealink as a competing ferry operator on the downstream market, and proscribed this dominant harbor owner from discriminating in favor of its own downstream car ferry activities. (89) The Commission deemed Holyhead Harbor an essential facility because it was the only British port serving this market, with no feasible alternatives

A dominant undertaking which both owns or controls and itself uses

an essential facility, i.e. a facility or infrastructure without

access to which competitors cannot provide services to their

customers, and which refuses its competitors access to that facility

or grants access to competitors only on terms less favorable than

those which it gives its own services, thereby placing the

competitors at a competitive disadvantage, infringes Article 86,

if the other conditions of that Article are met. A company in a

dominant position may not discriminate in favor of its own

activities in a related market…. The owner of an essential

facility which uses its power in one market in order to strengthen

its position in another related market, in particular, by granting

its competitor access to that related market on less favorable

terms than those of its own services, infringes Article 86 where

a competitive disadvantage is imposed upon its competitor without

objective justification. (91)

According to Dr. Temple Lang, “[t]his was the first statement by the Commission of a general principle using the phrase ‘essential facility,’ and it was explicitly based, as a footnote to the decision makes clear, on the case law of the Court, beginning with Commercial Solvents.” (92) The Commission imposed interim measures on Sealink that forced it to return to its original schedules, thereby removing the damage to B&I’s service. (93) Ultimately, Sealink withdrew its appeal against the Commission’s decision and finally consented to provide sufficient additional time slots allowing B&I to run a viable ferry service. (94)

In another interim decision just one year later, Sea Containers v. Stena Sealink (Sea Containers), (95) the Commission again required Sealink to permit access to Holyhead port, this time to a competitor that sought to operate a new ferry service from Holyhead. (96) The Commission found that Sealink violated Article 82 by declining to permit access on a reasonable and nondiscriminatory basis to Sea Containers Ltd. (Sea Containers), a company seeking to operate an innovative ferry service between Holyhead and Ireland using high-speed catamarans. (97) The Commission’s decision was restated in language nearly identical to that of its B&I decision. (98) The Commission required a dominant firm to grant access where duplicability of the facility was not “economically or physically realistic.” (99) As it happened, the parties settled the matter, so that the Commission did not need to order interim measures in the action. (100)

Both Holyhead Harbor decisions confirm that, where a firm controls an essential facility on an upstream market, it is under a strict duty not to discriminate in favor of its own downstream operations. Furthermore, commentators have noted that the later Sea Containers decision is distinct in a couple of respects. First, it suggests that Article 82 imposes special procedural obligations on a firm that controls an essential facility, as the Commission criticized Sealink’s failure to “set up any procedures for dealing with its responsibilities as harbour operator to ensure that it carried out its duties to other ferry operators.” (101) Second, the Commission emphasized in its Sea Containers decision that a dominant firm’s responsibility to provide access to an essential facility applies just as stringently in the case of a “new entrant” to the market as to “an already established competitor.” (102)

C. Essential Facilities Cases Dealing with Intellectual Property: Volvo, Magill and Ladbroke

While all of the previous actions relate to goods and services, the Commission and the ECJ have invoked the essential facilities doctrine with respect to intellectual property as well. Application of the doctrine in this context engenders heightened controversy, since the very idea underlying the intellectual property system is to stimulate investment by creating exclusive property rights. (103) Thus, in numerous proceedings, the Commission, the CFI, and the ECJ have struggled to determine whether refusals to license should be treated like other cases involving refusal to deal by a dominant firm, or whether owners of intellectual property merit enhanced protection of their property rights.

In a landmark judgment applying essential facilities analysis to an intellectual property case, AB Volvo v. Erik Veng (UK) Ltd. (Volvo), (104) the ECJ recognized that a refusal to license intellectual property could, under certain circumstances, constitute an abuse of a dominant position, (105) although such conditions were not present in the instant action. (106) The intellectual property right at issue in Volvo was a U.K. registered design for the front wing panels of the company’s Series 200 cars. (107) Volvo refused to license its design rights to Veng, an independent automobile repairer, despite Veng’s willingness to pay a reasonable royalty. Without Volvo’s authorization, Veng then imported imitations of Volvo’s wing panels into the U.K. from other Member States for use in the downstream market for auto repair. Volvo sought to prevent Veng from importing and marketing these parts in the U.K. (108) A British court requested a preliminary ruling from the ECJ that would guide its judgment as to whether Volvo’s refusal amounted to an infringement of Article 82. (109)

The ECJ emphasized at the outset that “the fight of a proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without its consent, products incorporating the design constitutes the very subject-matter of his exclusive right.” (110) Accordingly, the ECJ declared that requiting the proprietor of a protected design to grant to third parties a license for the production and marketing of products incorporating the design, even in return for a reasonable royalty, would deprive the proprietor of its exclusive fight. (111) For this reason, a refusal to grant such a license cannot in itself constitute an abuse of dominant position, (112) despite the fact that it would leave the car manufacturers as monopolists in this market.

While it acknowledged that Volvo legitimately could decline to license its design rights, the ECJ declared that the company could not arbitrarily refuse to supply replacement parts to independent repairers. (113) According to the ECJ, the “exercise” of an exclusive right by the holder of a registered design with respect to car body panels may be prohibited by Article 82 if it involves on the part of a dominant firm “certain abusive conduct such as the arbitrary refusal to supply replacement parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model are still in circulation.” (114) Evidently, the ECJ prohibited such behavior because it redounds to the detriment of consumers, who, unable to obtain repair parts for their older model vehicles at a reasonable price, would have to buy newer model cars. (115) Because the ECJ found no evidence of such abusive conduct by Volvo in this particular case, it held that the firm’s refusal to license design rights to third parties for the front wing panels of its Series 200 automobiles did not amount to an abuse of dominant position under Article 82. (116)

Because the ECJ did not require compulsory licensing in Volvo, it remained unclear after this case whether the ECJ would require a dominant firm that owned an exclusive intellectual property right to grant a license to third parties when the owner, apart from refusing to grant the license, had committed no acts that would demand antitrust scrutiny. (117) In Radio Tells Eireann (RTE) & Independent Television Publications Ltd. (ITP) v. Commission, called “Magill” after the eponymous intervenor, (118) the ECJ made clear that under certain “exceptional circumstances,” a dominant firm’s mere refusal to license its intellectual property to a third party could violate Article 82 (119) and that compulsory licensing is a potential remedy for such abuse. (120)

The Magill case arose when three television stations broadcasting in Ireland and Northern Ireland, Radio Telefis Eireann (RTE) of Ireland, as well as the British Broadcasting Corporation (BBC) and Independent Television Publications Ltd. (ITP), both of the U.K., all refused to license their copyrights in the information contained in their respective television program listings to the Irish publisher Magill TV Guide Ltd. (Magill). (121) Each broadcaster published its own weekly guide to its respective radio and television programs, but declined to permit daily or periodical newspapers to publish complete details of the broadcaster’s programs more than a day or two in advance, thereby precluding the emergence of a single independent and comprehensive weekly program listing for all the stations. (122) Consequently, consumers in Ireland and Northern Ireland were the only EC citizens who had to buy separate weekly guides for each television station in order to obtain information on all programs. (123)

In 1986, Magill published for a brief time a comprehensive weekly television guide that competed with the broadcasters’ guides, and the three broadcasters responded by bringing copyright actions in the Irish and English national courts. (124) The national courts ultimately upheld the broadcasters’ copyrights, ruling that the television program listings at issue, which contained information regarding the title, channel, date, and time of broadcasts, merited copyright protection as literary works and compilations under the United Kingdom Copyright Act 1956 and the Irish Copyright Act 1963. (125) While the copyright case was proceeding in the national courts, Magill itself lodged a complaint with the Commission, alleging that the three broadcasters’ refusals to license their respective copyrights in weekly program listings constituted an abuse of dominant position in violation of Article 82 of the EC Treaty. (126)

In 1988, the Commission decided that each of the three broadcasters had abused its monopoly position in the upstream market for copyrights in television listings by preventing the publication and sale in Ireland and Northern Ireland of a downstream product, a comprehensive weekly television guide. (127) The Commission required the three broadcasters to grant Magill copyright licenses. (128) The broadcasters sought annulment of the Commission decision from the CFI, which instead upheld the decision in 1991. (129) RTE and ITP subsequently appealed the judgment of the CFI to the ECJ, (130) which affirmed the CFI’s holding (131) while declining to endorse its reasoning.

The CFI and the EGJ differed in their approaches to resolving the two opposing interests in Magill: “on the one hand the concern to protect industrial and commercial property rights based on national law and on the other the concern for undistorted competition which it is one of the Community’s tasks to ensure.” (132) The CFI drew upon earlier case law that distinguished between “the ‘existence’ (or ‘specific subject-matter’) of a fight (which traditionally has been held to be outside the reach of Articles 85 and 86) and the ‘exercise’ of that fight (which has been subject to the competition rules).” (133) According to the CFI, although the refusal to license a copyright falls within the specific subject matter of a copyright, and is therefore properly a matter for national law, the exercise of that fight is indeed subject to EC competition rules. (134) Invoking Volvo for the proposition that a dominant firm may be precluded from exercising its intellectual property fights when it engages in certain abusive conduct, (135) the CFI held that such abusive behavior was present here, where the broadcasters used their “copyright in the programme listings … in order to secure a monopoly in the derivative market of weekly television guides,” (136) a product for which there was “specific, constant and regular potential demand” (137) on the part of consumers.

Like the CFI, the ECJ also held that the broadcasters’ refusal to license constituted a violation of Article 82. (138) However, the ECJ declined to base its judgment upon the dubious distinction between the existence and exercise of a copyright, (139) thereby implicitly undercutting the continued relevance of the existence/exercise doctrine in determining whether refusal to license intellectual property constitutes an abuse under Article 82. (140) Instead, the ECJ elected to conduct a highly individualized and fact-based inquiry, pursuant to which the Court will examine closely the circumstances surrounding each refusal to license in order to determine whether Article 82 has been violated. (141) In Magill, the ECJ focused first on whether the broadcasters occupied a dominant position by virtue of their copyright in television program listings, and then on whether the broadcasters had abused this dominant position on the downstream market for comprehensive television guides. (142)

With respect to the question of dominant position, the ECJ confirmed its holding in Volvo (143) that “mere ownership of an intellectual property right cannot confer such a position.” (144) Nevertheless, since each of the broadcasters enjoyed a monopoly over the information contained in its program listings by virtue of its role in planning the television programming, each was “thus in a position to prevent effective competition on the market in weekly television magazines” and therefore “occupied a dominant position.” (145)

With regard to actual abuse, the ECJ rejected the broadcasters’ argument that a company is immune from antitrust laws when it exercises its copyright. (146) At the outset, the ECJ did acknowledge that, pursuant to Volvo, “determination of the conditions and procedures for granting protection of an intellectual property fight is a matter for national rules” in the absence of EC harmonization of laws, and also that “refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position.” (147) Nevertheless, the ECJ declared that “it is also clear from that judgment (paragraph 9) (148) that the exercise of an exclusive fight by the proprietor may, in ‘exceptional circumstances” violate Article 82. (149) Relying on the CFI’s findings, the ECJ conducted a fact-specific inquiry, ultimately holding that three exceptional circumstances rendered the broadcasters’ refusal to license a violation of Article 82. (150)

First, the ECJ held that the broadcasters violated Article 82 by preventing the “appearance of a new product” (151) for which the CFI had found “a specific, constant and regular potential demand on the part of consumers.” (152) The ECJ noted that the broadcasters had refused to provide basic information such as channel, date, time, and program title that constitutes the “indispensable raw material for compiling a weekly television guide, (153) and that “no actual or potential substitute” for such a guide existed. (154) Second, the ECJ determined that the broadcasters proffered no objective business justification, either in terms of the broadcasting market or the market for publishing television listings, for the refusal to license their copyrights in the information, although the ECJ did not discuss this finding in much depth. (155) Third, the broadcasters had “reserved to themselves the secondary market of weekly television guides by excluding all competition on that market.” (156) Thus, Magill established that a dominant firm’s refusal to license intellectual property certainly could constitute an abuse under Article 82, particularly where such refusal prevents a new product from emerging on the market. (157) This is true even where the dominant firm offers as objective justification the fact that it intends to create a competing product. (158)

The Magill judgment is unique not only because it firmly established that a mere refusal to license intellectual property could, in certain circumstances, violate Article 82, but also because it empowered the Commission to impose compulsory licensing as a remedy for a violation of Article 82. The ECJ dismissed the contention, advanced by one of the broadcasters, that only the Parliaments of Ireland and the United Kingdom could revoke or diminish copyrights they had conferred. (159) According to the ECJ, once the Commission found abuse of a dominant position, it was entitled to mandate compulsory licensing where, as here, this remedy “was the only way of bringing the infringement to an end.” (160)

The ECJ’s decision in Magill remains the only one to date in which that court upheld the Commission’s imposition of compulsory licensing upon a dominant firm in order to prevent infringement of EC competition laws. (161) Critics of the judgment have characterized it as a radical one that threatens the security of intellectual property rights, (162) particularly in the computer software, pharmaceutical, and telecommunications sectors. (163) There is considerable disagreement, however, regarding the ramifications of the Magill judgment because some commentators believe that the EC courts will interpret the judgment broadly, (164) while others maintain that they will limit it strictly to its facts. (165) Such disagreement stems in large part from the ECJ’s failure in Magill to articulate a clear legal doctrine stating the circumstances under which a refusal to license intellectual property would violate EC competition law. (166)

It seems that the ECJ’s holding in Magill is based to some degree upon the fact that it concerns the copyright in a form of intellectual property that is truly ancillary to the main business of the copyright owner. The ECJ evidently felt that its enforcement of compulsory licensing for television listings would not impact significantly the production and release of program listings. As explained by one commentator: “Enforcing compulsory licensing for TV listings (even at a negligible fee) does nothing to upset dynamic incentives because the incentive to produce and disseminate TV listings will be the same irrespective of whether the broadcasters are protected from competition in the TV guides market.” (167) Furthermore, some scholars suspect that the ECJ judges believed that the “less creative” form of intellectual property at issue in Magill, namely television listings, merits less protection than other “more worthy” forms of intellectual property. As explained by one commentator, the intellectual property right at issue in Magill, a copyright in television listings, was “a somewhat unmeritorious one,” (168) and “it may well be harder to apply the Magill doctrine to intellectual property rights such as patents and designs which frequently result from a significant creative input.” (169) In fact, because no Member States apart from Ireland and the U.K. granted copyrights in that information, (170) it likely seemed quite reasonable to the ECJ to elevate competition law over the copyright in question. (171) Adoption of this view by the EC courts would permit them to vitiate national intellectual property laws where they deem the intellectual property at issue undeserving of full legal protection. As will be discussed further with respect to the IMS case, the EC should exercise this authority with circumspection. (172)

In the next major EC competition case to raise the issue of compulsory licensing of intellectual property, Tierce Ladbroke SA v. Commission (Ladbroke), (173) the Commission (174) and the CFI interpreted Magill quite narrowly. (175) Ladbroke, a Belgian company that took bets in Belgium on horse races run abroad, initiated an action with the Commission when the firms holding the exclusive rights to televised pictures and audio commentaries on French horse races, Pari Mutuel Urbain Francais (PMU) (176) and Pari Mutual International (PMI), (177) and a firm holding the exclusive rights to market such performing rights in Austria and Germany, Deutscher Sportverlag Kurt Stoof GmbH & Co. (DSV), refused to grant Ladbroke a license to retransmit the sound and pictures of French horse races at its betting offices in Belgium. (178)

Without resolving the question whether PMI and PMU occupied dominant positions on the upstream Belgian market in the sound and pictures of French horse races, (179) the CFI found that PMU’s and PMI’s refusals to license did not constitute abuse of their dominant positions affecting the downstream Belgian betting market. (180) Because the intellectual property holders had not licensed to any other third party in the relevant market, the CFI did not believe that Ladbroke had adduced sufficient evidence of discriminatory or arbitrary refusal to license. (181) The CFI also emphasized that the instant case was distinguishable from Magill in that it did not concern “a product or service which was either essential for the exercise of the activity in question, in that there was no real or potential substitute, or was a new product whose introduction might be prevented, despite specific, constant and regular potential demand on the part of consumers.” (182) Indeed, even without the right to transmit televised broadcasts of horse races, Ladbroke nevertheless enjoyed the largest market share in the Belgian horse races betting services market, proving, according to the CFI, that such services were not essential to a betting agency. (183) Moreover, the CFI stated that such transmission was not indispensable because it was shown after the bets were placed, and therefore did not affect bettors’ selection of betting agencies. (184) Finally, the CFI distinguished Ladbroke from other cases where an abuse of dominant position had been found, including Commercial Solvents, on the grounds that, in those cases, each dominant firm had used its position in the upstream market to restrict competition in the downstream market. Such was not the case in the instant matter, because PMI and PMU were not present in the downstream market. (185)

Professor Korah has noted that the CFI’s judgment in Ladbroke relied upon a very narrow interpretation of Magill. (186) Notably, the CFI refused to find that the act of relaying sounds and images of French horse races to Belgian viewers was itself a new product whose emergence was prevented by the refusal to license, in contradistinction to Magill, where the consolidated television guide represented a new product. Instead, the CFI concluded that such sounds and images of horse racing were merely a service ancillary to the betting market and not indispensable. (187) Likewise, the CFI did not recognize that, notwithstanding the fact that transmissions of horse races would be shown after and not during a horserace, bettors still might be inclined to select a betting agency with the rights to such broadcasts. (188)

D. Oscar Bronner: A Clarification of Magill

One year after Ladbroke, the EGJ’s judgment in Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG (Bronner) (189) clarified the essential facilities doctrine enunciated in Magill and demonstrated that Magill was an exceptional case hinging on its particular facts. (190) According to Dr. Capobianco, a former officer of the Italian Competition Authority, Bronner”can be seen as limiting the application of the [essential facilities doctrine] only to cases where it is physically impossible for any competitor to duplicate the facility and to exclude its applicability where it is simply economically unattractive to replicate it.” (191) Although Bronner did not concern intellectual property, both Advocate General Jacobs and the ECJ expressly extended their opinions to encompass this subject. (192)

The Bronner case concerned the upstream market for newspaper distribution in Austria, and the downstream market for newspaper publishing and sales. Oscar Bronner (Bronner), the publisher of the daily newspaper Der Standard, with a market share of around four percent, (193) sought an order from the ECJ (194) requiring its competitor Mediaprint, a newspaper publisher with a market share of over forty percent, (195) to distribute Der Standard in Austria through Mediaprint’s nationwide early-morning newspaper home-delivery network. (196) Invoking the essential facilities doctrine, Bronner argued that Mediaprint had a duty to grant access to its distribution network because Commercial Solvents and its progeny require a dominant company to supply access to competitors in the downstream market unless the dominant firm offers objective justification for its refusal to supply. (197) Bronner contended that Mediaprint had established “the only economically viable home-delivery scheme existing in Austria on a national scale,” and that it was not economically feasible for Bronner to duplicate this system, due to the limited circulation of its newspaper. (198) Moreover, Bronner asserted that Mediaprint’s refusal to distribute was discriminatory, as Mediaprint did grant a third publisher access to its newspaper distribution system. (199) In response, Mediaprint argued that, pursuant to Magill, a dominant firm cannot be required to contract absent “exceptional circumstances,” and that such circumstances were not present in the instant action, because alternative distribution systems were available to Bronner. (200) What is more, Mediaprint had made a substantial investment in its delivery system, and was not obligated to subsidize competing companies, especially because the requirement to make its service available to all Austrian publishers would exceed the capacity of its system. Finally, Mediaprint asserted an objective justification for its refusal to distribute Bronner’s newspaper, even while it distributed the paper of a third party: Bronner and the third party were not similarly situated, because the latter contracted with Mediaprint not only for home delivery, but also printing and distribution to kiosks. (201)

The ECJ rejected Bronner’s arguments. (202) Citing Magill, the ECJ declared that, in order to establish a violation of Article 82, Bronner had to prove not only that Mediaprint’s denial of access in the home delivery market would eliminate all competition in the related daily newspaper market and that such refusal was “incapable of being objectively justified,” (203) but also “that the service in itself[is] indispensable to carrying on [its] business, inasmuch as there is no actual or potential substitute in existence for that home-delivery scheme.” (204) Under this standard, the ECJ found that Mediaprint’s distribution network did not qualify as an essential facility (205) for three reasons. (206) First, it was undisputed that Bronner could, like other publishers, avail itself of alternative distribution methods, such as mailing, retail shops, and kiosks. Even while acknowledging that these alternatives could be considered less advantageous for the distribution of certain newspapers, the ECJ refused to treat Mediaprint’s distribution network as an essential facility. (207) Second, the ECJ noted that there were no “technical, legal or even economic” obstacles that would make it “impossible, or even reasonably difficult, for any other publisher” to implement, either alone or with other publishers, its own nationwide home-delivery system. (208) According to the Court, in order to establish that the home delivery scheme was indispensable, Bronner could not argue simply that it would be economically impracticable, due to the small circulation of its newspaper, for it to establish an alternative. (209) Instead that firm would have to prove “that it is not economically viable to create a second home-delivery scheme for the distribution of daily newspapers with a circulation comparable to that of the daily newspapers distributed by the existing scheme.” (210) The ECJ thus followed the opinion of Advocate General Jacobs, who stated that access to an essential facility can be justified only in cases in which the “dominant undertaking has a genuine stranglehold on the related market,” for instance “where duplication of the facility is impossible or extremely difficult owing to physical, geographical or legal constraints or is highly undesirable for reasons of public policy.” (211)

Although Professor Bergman has explained that the ECJ’s judgment in Bronner is subject to a couple of different interpretations, (212) it is clear that the ECJ considers the essential facilities doctrine fundamentally as a means to protect market competition on the whole, as opposed to the interests of any one competitor. According to Dr. Capobianco, the ECJ’s judgment in Bronner prevents the essential facilities doctrine from being used as “a low-cost alternative to the more arduous and time consuming process of competing to make better products than one’s rival.” (213)

E. Summary of Essential Facilities Case Law Concerning Intellectual Property

As demonstrated by essential facilities jurisprudence, both the Commission and the EC courts (214) will protect intellectual property rights by holding “inviolate” their “core substance,” which includes the right to prevent unauthorized copying. (215) Under Volvo, a mere refusal to license will not establish abuse of Article 82, absent some further circumstances. (216) The ECJ defined such circumstances in Volvo as (i) the arbitrary refusal to supply

The application of the essential facilities doctrine in intellectual property cases became considerably less clear after Magill, the only case to date in which the ECJ has required compulsory licensing of intellectual property rights. (220) The ECJ declared it would mandate compulsory licensing under certain “exceptional circumstances” in order to prevent infringement of Article 82, (221) but declined to explain what would constitute such exceptional circumstances. (222) Nevertheless, as Advocate General Jacobs stated in Bronner, after Magill:

It is therefore clear that the Commission considers that refusal

of access to an essential facility to a competitor can of itself be

an abuse even in the absence of other factors, such as tying of

sales, discrimination vis-a-vis another independent competitor,

discontinuation of supplies to existing customers or deliberate

action to damage a competitor (although it may be noted that in

many of the cases with which it has dealt such additional factors

are to a greater or lesser extent present). (223)

The ECJ then clarified and narrowed its Magill holding in Bronner, which did not actually concern intellectual property. Advocate General Jacobs emphasized that, absent improper behavior, a dominant firm cannot be required to contract with another unless that dominant firm exerts a stranglehold on the market, effectively rendering market entry by competitors economically impracticable. (224) Thus, application of the essential facilities doctrine was understood to be appropriate only where a dominant firm’s monopoly over a product or facility would lead to a permanent exclusion of competition on a related market. (225)

Professor Bergman posits that the Bronner Court’s narrow reading of Magill represents a significant trend in EC essential facilities law. (226) The ECJ’s judgment in the IMS action, a pending competition case relating to that firm’s copyright in its database structure, (227) will verify whether he is indeed correct. This action represents the most recent legal development in the line of cases examining the tension between intellectual property rights and competition law in the LC, and provides an opportunity to examine the wisdom of applying the essential facilities doctrine in the context of intellectual property.

III. THE LATEST DEVELOPMENTS IN EC ESSENTIAL FACILITIES LAW CONCERNING INTELLECTUAL PROPERTY RIGHTS: THE IMS COPYRIGHT AND COMPETITION ACTIONS

“We believe this is an unprecedented step in European competition

and may violate both intellectual property laws and international

treaties. It will have serious implications for any company whose

market leadership is derived from investment, innovation and

intellectual property.”–Michael Gury, IMS Health Vice President,

speaking of the EC Commission’s interim order, which the President

of the ECJ later suspended, requiring IMS to license its copyright

to competitors NDC and AzyX (quoted in Richard Lee, IMS Will Appeal

European Decision, ADVOCATE (Stamford, CT),July 4, 2001, at A9)

“This is a major victory for competition in the European Union and

sets a helpful precedent for companies trying to compete in other EU

member states under constraints…. [W]e eagerly await a fair and

reasonable licensing agreement from IMS Health so that we can compete

on a fair basis.”–Roland Lederer, NDC Health Spokesman, speaking of

the EC Commission’s interim order, which the President of the ECJ

later suspended, requiring IMS to license its copyright to

competitors NDC and AzyX (quoted in Richard Lee, IMS Will Appeal

European Decision, ADVOCATE (Stamford, CT),July 4, 2001, at A9)

IMS Inc., a U.S. firm based in Westport, Connecticut, (228) describes itself as “‘the world’s leading provider of information solutions to the pharmaceutical and healthcare industries.'” (229) More particularly, IMS tracks sales in the pharmaceutical and health care products industries in over one hundred nations worldwide and supplies firms in these sectors with data on the sales performance of products in terms of sales by pharmacies to patients and on doctors’ prescriptions. (230) IMS purchases the raw sales data from wholesalers, processes it, and then sells it, “along with certain value-added analysis,” to firms in the pharmaceutical and health care sectors. (231) These firms use the data to assess the market share of their products as compared with competitors, and to evaluate the performance of their sales representatives. (232)

In many countries, IMS provides regional sales data in a “predefined segmentation known as a ‘brick structure’,” (233) primarily in order to comply with data protection law (234) and also to create geographical segments with equal sales potential. (235) The Commission has explained the importance of the brick structure as follows:

For the pharmaceutical manufacturers, the brick structure in which

regional sales data are being reported is very important because

they have organised their sales forces and the way the sales

personnel are rewarded according to this structure. The territory of

a salesperson is composed of a number of bricks of the brick

structure. A number of companies define the sales territory of the

sales representative as an aggregation of several [bricks] in that

representative’s working contract. The remuneration of sales

representatives is based on movements in drugs’ market shares and

growth rates per brick.

The data, formatted according to the brick structure, forms the

basis for regional market reports which are delivered in printed

form, on CD-ROM or online. The pharmaceutical companies then process

the data internally or transfer it to other service providers for

it to be analysed. (236)

A. The IMS Copyright Actions

In January 2000, IMS introduced in Germany, through its German subsidiary, (237) a new method of providing regional sales data to its clients, using a copyrighted brick structure composed of 1860 geographical segments (the 1860 brick structure) (238) that had developed from earlier iterations of the brick structure on which IMS had been working since 1969, (239) with cooperation from the pharmaceutical industry. (240) The Commission has noted that each successive brick structure “would be adopted by the pharmaceutical industry as a whole, with very few exceptions, although the companies themselves were under no compulsion to do so.” (241) The Commission has also observed that many German companies in other markets currently use the 1860 brick structure, either to furnish other types of information or to provide related services. For example, several companies that provide data on population, households, revenues, purchasing power, and age groups deliver their information according to the 1860 structure. In addition, many market research and software companies have made their services compatible with the 1860 brick structure. (242)

Until early 1999, IMS was the only provider of regional pharmaceutical sales data in Germany. (243) In February of that year, Pharma Intranet Information AG (PI), a U.S. corporation, (244) entered the German market with a brick structure of 2201 segments. Potential customers rejected this structure, and expressed their strong preference for the presentation of data in the 1860 brick format. (245) Thus, a few months later PI introduced regional sales reports based on a 3000 segment structure, which could be recast into either 2847 or 1860 segments. This formula proved successful, and PI soon secured contracts with a number of customers. (246) In October 1999, AzyX Deutschland GmbH Geopharma Information Services (AzyX), a German subsidiary of a Belgian corporation, (247) also entered the German market for regional sales data with a flexible product that could deliver the data according to a customized structure. However, potential customers nevertheless requested the 1860 brick structure, and AzyX complied. (248)

In early 2000, IMS began to suspect that PI was violating its intellectual property rights in the 1860 brick structure. IMS commenced legal proceedings on May 26, 2000, when it filed a lawsuit against PI in the Frankfurt District Court, called the Landgericht Frankfurt am Main, alleging infringement of IMS’s copyright in the 1860 brick structure as well as unfair competition. (249) On October 12, 2000, the District Court prohibited PI from using the 1860 brick structure and established a potential fine in an amount up to 500,000 Deutsche marks (DM), approximately $241,600, (250) for violation of this order. On October 27, 2000, the District Court issued an interim injunction proscribing PI’s use of alternative brick structures containing 2847 or 3000 segments, or any other brick structure based on the 1860 brick structure, and established a potential fine of up to 500,000 DM for violation of this order. The District Court confirmed this interim injunction on November 16, 2000. PI appealed the judgments of October 27 and November 16 to the Frankfurt Higher Regional Court, called the Oberlandesgericht Frankfurt am Main, but the higher court dismissed PI’s appeals on June 19, 2001. (251) It should be noted that, in upholding IMS’s copyright, the Frankfurt Higher Regional Court expressly rejected the view, propounded by the Commission, that the brick structure represented an essential facility in Germany. (252)

On December 22, 2000, IMS filed in the Frankfurt District Court two new, separate actions for copyright infringement against NDC, which had recently acquired PI, (253) and AzyX. (254) On December 28, 2000, that court granted IMS interim injunctions enjoining NDC and AzyX from using the 1860 or 2847 brick structures or any brick structures derived from the 1860 brick structure. On February 15, 2001, the Frankfurt District Court confirmed the December 28 interim injunction against AzyX. (255) That court also rejected on July 12, 2001 NDC’s appeal against the interim injunction. (256)

The intellectual property proceedings became considerably more complicated in September 2002 as a result of a judgment of the Frankfurt Higher Regional Court. (257) Although that court recognized that the arrangement (but not the contents) of the 1860 brick structure database does merit copyright protection under a provision of German law that transposes Article 3 of the Database Directive, (258) IMS lacks standing to bring an action for infringement of this copyright because it lacks clear title to the 1860 brick structure. (259) The Frankfurt Higher Regional Court also held that the provision of German law that transposes Article 7 of the Database Directive (260) affords sui generis protection for the contents of databases, not the arrangement of databases, and therefore does not apply to an arrangement such as the 1860 brick structure. (261) While leaving open the question of how different IMS’s competitors must make their own brick structures in order to avoid liability for copyright infringement, the court held that PI had indeed infringed in the instant action because it had appropriated IMS’s information via software piracy. (262) Finally, the Frankfurt Higher Regional Court held that IMS was not wrongful in its failure to license to its competitors because IMS cannot grant a license without the consent of its co-authors. (263)

Although the German national courts continue to consider the intellectual property issues presented by IMS, NDC, and AzyX, on August 30, 2001 the Frankfurt District Court referred the competition questions concerning Article 82 of the EC Treaty to the EC courts. (264) The ECJ held an oral hearing in this action on March 6, 2003, (265) and ultimately its judgment will resolve the case on the merits and render moot all other proceedings. (266)

B. The Competition Actions

After IMS initiated its copyright actions in the German courts, both NDC and AzyX requested from IMS licenses to use the 1860 brick structure, but met with refusal. (267) Consequently, on December 19, 2000, contemporaneous with the copyright proceedings, NDC lodged a complaint with the Commission alleging that IMS had infringed Article 82. (268) NDC asserted that IMS’s refusal to grant its competitors a license to use the 1860 brick structure constituted an abuse of its dominant market position. According to NDC, without this license, NDC would be barred from operating in Germany, the largest pharmaceutical market of the EC, and would also be unable to enter contracts for multi-jurisdictional coverage because it would be precluded from providing German reports. (269) Allegedly, IMS’s conduct would foreclose the market to potential new entrants and eliminate all prospects of competition in Germany. (270) NDC requested from the Commission immediate relief in the form of an interim order compelling IMS to grant NDC a license in the 1860 brick structure. (271) IMS countered, inter alia, that pursuant to Volvo, its copyright in the 1860 brick structure, upheld by the German courts, entitled IMS to refuse to license to its competitors. (272)

Finding that IMS’s rivals had established a prima facie case that the 1860 brick structure constitutes an essential facility, (273 the Commission decided on July 3, 2001 to grant interim relief (274) in the form of an order requiring IMS immediately to grant licenses for the 1860 brick structure on reasonable, non-discriminatory terms to all firms currently on the market for German regional sales data services, until conclusion of the legal proceedings. (275) European Commissioner for Competition Mario Monti emphasized the singularity of the Commission’s decision, declaring it a “‘a rare step'” and the market concerned “‘a very peculiar one.'” (276)

Upon IMS’s request, the President of the CFI, in the first such ex parte order in nearly twenty years, (277) on August 10, 2001 provisionally suspended the operation of the Commission’s interim decision. (278) On October 26, 2001, the President of the CFI issued an interim order that overruled the Commission’s order of compulsory licensing, holding that IMS should not be forced to license its intellectual property pending the CFI’s final judgment on the merits of the case. (279) In particular, the President of the CFI questioned whether IMS’s refusal to license truly raised the essential facilities doctrine, since this refusal affected competition on the very same market, as opposed to on a discrete downstream market. (280) Moreover, the President of the CFI emphasized an important factual distinction between the IMS matter and the Magill action: the latter case involved “exceptional circumstances” in view of the fact that the dominant firm had prevented the emergence of a new product for which there was significant consumer demand, while the former did not. (281) Finally, the order of the President of the CFI seems based at least in part on the belief that the Commission had not accorded sufficient respect to German court judgments upholding IMS’s copyright. (282) Subsequently, the President of the ECJ dismissed in its entirety NDC’s appeal against the Order of the President of the CFI of 26 October 2001, such that IMS is currently under no obligation to license the brick structure to its rivals pending final resolution by the CFI. (283) While the CFI considers the IMS competition action, the Commission may or may not choose to exercise its right to issue a final order in the case. (284)

In analyzing the differing perspectives of the Commission and the President of the CFI in the IMS competition action, it is important to remember that all the legal proceedings thus far concern interim measures, and therefore address only whether each party has established its prima facie case. Neither the Commission nor the CFI has issued a final decision or judgment on the merits with respect to compulsory licensing. (285) Nevertheless, it seems clear from their respective rulings that the Commission favors compulsory licensing because of its traditional concern for competition policy, (286) whereas the President of the CFI evinces particular regard for intellectual property rights. A thorough analysis of both of their positions in the instant action thus far leads to the conclusion that the EC courts should not order compulsory licensing in the IMS case. The longterm disincentive to invest in and create intellectual property that will result from a compulsory licensing order will outweigh any short-term stimulus to competition.

IV. A CALL FOR ANALYSIS EX ANTE IN BALANCING COMPETITION POLICY AND INTELLECTUAL PROPERTY RIGHTS IN THE IMS CASE

It appears that the Commission, in ordering compulsory licensing, relied heavily on its finding that the 1860 brick structure had become an industry standard, (287) without access to which NDC and AzyX would be unable to compete, at least in the short run, until the expiration of IMS’s copyright. However, as emphasized by Professor Bergman, “[i]t seems clear that the short-run competition effect and the long-run incentives effect should be weighted against each other from an ex ante perspective.” (288) He defines the critical question as follows: “Would the firm have invested enough if it had anticipated that the essential facilities doctrine were to be applied?” (289) This analysis ex ante is especially necessary in cases involving intellectual property rights, which were conceived as a governmentally sanctioned limited monopoly for the very purpose of stimulating innovation. (290) With respect to the IMS case in particular, a compulsory licensing order would deter investment and innovation.

A. The Short-Term Competition Considerations Underling the Commission Decision of 3 July 2001 Ordering Compulsory Licensing in the IMS Action

At first glance, it may seem unsurprising that the Commission found the arguments of IMS’s rivals compelling, because the firm’s refusal to license its 1860 brick structure clearly results in difficulties for those competitors. However, keeping in mind that the purpose of the essential facilities doctrine is to promote competition for the benefit of consumers, rather than to protect specific competitors, (291) the Commission’s analysis focused on whether IMS had abused its dominant market position (292) to the detriment of consumers. The Commission structured its inquiry by invoking the following criteria for abuse under Article 82 as set forth by the ECJ in Bronner:

–the refusal of access to the facility is likely to eliminate all competition in the relevant market

–such refusal is not capable of being objectively justified

–the facility itself is indispensable to carrying on business, inasmuch as there is no actual or potential substitute in existence for that facility. (293)

Drawing upon a survey of eighty-five pharmaceutical firms accounting for fifty-six percent of total pharmaceutical sales in Germany, (294) the Commission concluded that IMS’s competitors had established a prima facie case of infringement of Article 82 by IMS sufficient to justify an interim order of compulsory licensing. (295)

Beginning with the final factor, the Commission determined that the 1860 brick structure was indispensable and non-substitutable for three reasons. First, the pharmaceutical industry had participated in shaping the 1860 brick structure to suit its own needs, (296) thereby rendering it a “de facto industry standard.” (297) Second, largely as a result of the pharmaceutical industry’s ongoing role in developing the 1860 brick structure, pharmaceutical firms faced significant financial barriers that precluded switching to an alternate brick structure. (298) For example, these firms need to compare current and historical data regarding market shares and sales representatives’ performance, and any alteration in the brick structure would hamper their ability to make valid comparisons. (299) In addition, other products, such as computer software and socio-economic data, have been designed to be compatible with the 1860 brick structure. (300) Finally, any new brick structure would necessitate a change in sales territories, thereby not only disturbing established relationships between doctors and sales representatives, (301) but also requiring modification of the representatives’ contracts, a complicated process subject, under German law, to the approval of elected workers’ councils. (302) Third, aside from the financial obstacles, legal and technical barriers precluded IMS’s competitors from developing a viable alternative brick structure. Legal uncertainty would surround any new brick structure, especially in view of the fact that the German national courts have yet to clarify what they would consider derivatives of the 1860 structure. (303) In addition, the Commission determined that AzyX’s attempts to create an alternate brick structure suggested “a very low ‘margin of creativity’ of around 3-5%,” (304) meaning that viable alternative brick structures simply did not exist. According to the Commission, the 1860 brick structure hewed very closely to the postal code system, the structure upon which many other data were organized and with which they were therefore compatible. (305) In addition, German data protection law hampered the creation of a new brick structure because a party could, with effort, cross-reference the data from the different brick structures so as to deduce sensitive information about individual pharmacies, pharmacists, and prescribing doctors. (306)

In justifying its decision to rely on the opinions of pharmaceutical firms in determining whether the 1860 brick structure was indispensable, the Commission signaled its intent to focus on whether an alternative structure would be commercially viable, as opposed to whether it was possible to create another brick structure. (307) In support of this approach, the Commission cited Ladbroke (308) for the proposition that the CFI considers customers’ interests in reaching a judgment. (309)

With respect to the second Bronner factor, whether the refusal to license was justified, the Commission rejected IMS’s argument that the German court judgments recognizing IMS’s intellectual property fights in the 1860 brick structure entitled IMS to deny licenses to its competitors. (310) The Commission, while recognizing that Volvo stood for the proposition “that a refusal to grant a licence cannot itself constitute an abuse of dominant position,” (311) nonetheless decided that “exceptional circumstances” existed here to bring the instant action within the ambit of Magill, such that “a refusal to grant a license may constitute abusive conduct in itself.” (312)

B. Long-Term Competition Considerations Militating Against Compulsory Licensing in the IMS Action

In ordering compulsory licensing in the IMS action, the Commission clearly recognized that its decision would likely blunt incentives for investment and innovation, and sought to assuage fears regarding the security of intellectual property rights by declaring that compulsory licensing would “remain rare in European competition policy.” (313) The President of the CFI, however, recognized that this hollow declaration by the Commission would do little to reassure the creators of intellectual property that their efforts would be rewarded. While the order of the President of the CFI in this matter was limited to the propriety of interim measures, the only question before him, (314) legal insiders involved in the action have interpreted this interim order as disfavoring compulsory licensing as a remedy for the underlying action on the merits. (315)

An analysis of essential facilities jurisprudence as it applies to the facts of the IMS case demonstrates that compulsory licensing is not a wise policy choice in this action. There are three arguments supporting the conclusion that compulsory licensing’s negative impact on innovation in the long term will outweigh significantly any short-term stimulus to competition. First, as a threshold matter, application of the essential facilities doctrine is inapposite because the doctrine requires two separate markets, a circumstance not present in the instant action. The reason for this basic requirement is that firms undoubtedly would decline to enter the market altogether if they had to share their essential facilities with rivals competing on exactly the same market. Second, even assuming arguendo that application of the essential facilities doctrine were deemed appropriate in the instant action, the Commission misapplied, as a matter of law, essential facilities precedents. The Commission’s reliance upon Bronner is misplaced, because that action did not concern intellectual property, and the Bronner test is so broad as to render all intellectual property rights nugatory. Finally, as a factual matter, the Commission erred in analogizing the IMS case to Magill. The instant action is decidedly distinct from Magill in that IMS expended considerable effort in developing the 1860 brick structure and might not have done so had it not expected to exclude its rivals, whereas the copyright at issue in Magill arguably could be considered undeserved and unnecessary. Indeed, EC law mandates intellectual property protection for databases such as the 1860 brick structure. (316) Moreover, in contrast to Magill, no “exceptional circumstances” are present justifying the implementation of the uncommon remedy of compulsory licensing. (317) Because the IMS action can be distinguished on its facts from Magill, firms that rely heavily upon intellectual property rights are watching the pending ECJ case closely, and ECJ approbation of compulsory licensing in the instant action likely would have a chilling effect upon investment in research and development. (318)

1. As a Threshold Matter, Application of the Essential Facilities Doctrine Is Inapposite in the IMS Case Because the Doctrine Requires Two Separate Markets, a Circumstance Not Present in the Instant Action

Traditionally, both the Commission and the ECJ have applied the essential facilities doctrine only where the alleged abuse of a dominant position affects economic activity in a related but separate market. (319) As the President of the CFI stated in his interim order overturning the Commission’s compulsory licensing order, “[t]he previous case-law where the Community judicature and, before the adoption of [the Commission Decision of 3 July 2001], the Commission have considered refusal to supply by a dominant undertaking in such circumstances to be abusive has always involved two different markets.” (320) The President of the CFI cited, inter alia, Commercial Solvents (two separate markets for the raw material ethambutol and derivatives of the raw material)

represents a substantial departure from the past practice of the

Commission and the European Courts. If confirmed in the final

decision on the merits, this would be the first case where the

Commission had applied the [essential facilities doctrine] in a

case where a fundamental requirement is not present, namely the

existence of two distinct markets: the market for the essential

facility (whose access is refused) and the market where competition

is restricted. (326)

At least one commentator contends that the existence of two markets is not actually required under E.U. law for application of the essential facilities doctrine. According to attorney Frank Fine, who serves as counsel for NDC, although the Commission and the EC Courts “continue[] to use the ‘two market’ language,” they “fail[] to realize that the … paradigm does not fit all essential facility cases, or conversely, that a close reading of [prior] decisions demonstrates that there was never a requirement that two true markets be involved in order to support the application of the essential facilities doctrine.” (327) Mr. Fine criticizes what he perceives as the Commission’s tendency to force its decisions to fit the two market rubric, (328) and advocates “abandonment of the two-market analysis in what are more accurately one-market essential facilities cases.” (329)

The danger of disregarding the two market requirement, however, at least where a competition action involves intellectual property, is that it deprives the owner of the very essence of the intellectual property right, as recognized in Volvo, which is the right to exclude others from using it. (330) According to Dr. Capobianco:

Such a restriction by the Commission of the essence of copyright is

likely to stifle innovation. If a copyright holder is forced to

share his exclusive right with competitors, he is likely to see his

ability to recoup his initial investments compromised because of

prices being pushed to marginal costs by competition. He would

therefore choose not to invest in the first place. (331)

While it could be argued that IMS’s status as the owner of a copyright in a product recognized as the “industry standard” justifies departure from the two market requirement, it should be emphasized that this view would promulgate a flawed system whereby a firm is liable to become a victim of its own success. (332)

It should be noted that the Commission itself did not simply read the two market requirement out of essential facilities case law. Instead, it seemed to suggest that, just as in Magill, there were two markets present in the IMS case. In Magill, the ECJ had treated the dominant firms’ copyright in television program listings as an indispensable upstream input necessary for the downstream market for television guides. (333) Although some commentators have questioned whether two separate markets truly existed in Magill, (334) they acknowledge that this analysis is acceptable if one considers that the intellectual property at issue in that case, namely broadcasters’ copyrights in television program listings, was merely a by-product of television broadcasting, which clearly constitutes a separate market in its own right. (335) Analogizing to Magill, the Commission declared that “[t]he circumstances are similar in [the IMS] case, in that the use of the 1860-brick structure is an indispensable input to allow undertakings to compete in the market for regional sales data services in Germany.” (336) The Commission recognized “an important distinction between the product, which is regional sales data services, and the brick structure in which data used to create these services is formatted.” (337)

The Commission’s argument does not withstand scrutiny, however, because the intellectual property at issue in the IMS case, the 1860 brick structure that organizes the gathering and presentation of market data regarding pharmaceutical products, cannot possibly be marketed separately from the regional sales data services sold by IMS and its competitors. (338) Thus, it appears that the Commission was so struck by what it perceived as the indispensability of the 1860 brick structure (339) that it misinterpreted the facts of the IMS case, which led to the improper application of the essential facilities doctrine in a case concerning only one market.

2. The Commission Made a Legal Error in its Overreliance upon Bronner, a Case That Does Not Concern Intellectual Property

In ordering compulsory licensing in the IMS action, the Commission erred in its overreliance upon Bronner, (340) a case that did not concern intellectual property. Although both Advocate General Jacobs and the ECJ expressly extended their opinions to encompass intellectual property, (341) they did not actually face the conflicting demands of intellectual property and competition policy in reaching their judgments. The Bronner test for abuse under Article 82 invoked by the Commission is far too broad for general application in intellectual property matters. According to the Commission, compulsory licensing is appropriate whenever a facility “is indispensable to carrying out a business, inasmuch as there is no actual or potential substitute in existence for that facility,” (342) “refusal of access is likely to eliminate all competition on the relevant market,” and “such refusal is not capable of being objectively justified.” (343) This approach is flawed because it would essentially eviscerate intellectual property protection for dominant firms that have created nonsubstitutable intellectual property, (344) notwithstanding the fact that EC law encourages rivals to compete on the merits, including by means of research and development. (345)

Courts should be particularly circumspect in applying the essential facilities doctrine so as to compel licensing of intellectual property, because such property is unique both in terms of its creation and the ease with which it can be misappropriated. According to one commentator:

Unlike real property, [intellectual property] rights are only

available if certain hurdles are overcome, normally including both

creation and publication, and they are only available for a

limited period of time. To apply anti-monopoly rules by requiring

reasonable access during this monopoly period would in such cases

annul the grant of the monopoly right. This in turn would remove a

policy tool which encourages production of intellectual property.

If this encouragement is not replaced in some way …, this will

result in a decrease in the rate of production. (346)

Furthermore,

[u]nlike physical property, intellectual property cannot be used

without disclosure or the significant possibility of disclosure.

Once disclosed it is easily misappropriated, and thus its value is

easily destroyed. The owner of a football stadium can lock the

gates to keep out those who will not pay for access, but the

protections for … intellectual property are far less effective

and rarely self-enforcing. Thus, to preserve the incentives for

creation of new knowledge, the legal system gives the creator or

inventor the ability to preserve the exclusivity of that knowledge,

or the exclusivity of its use. (347)

In light of the unique nature of intellectual property, the Commission should have interpreted fulfillment of the Bronner criteria as a necessary, but not a sufficient, condition precedent for imposing compulsory licensing in an intellectual property case. Not every incidence of refusal to license a non-substitutable intellectual property creation should give rise to a compulsory licensing order. Such a draconian remedy should be reserved for cases involving “exceptional circumstances” of the type described in Magill. (348) Because it actually concerns intellectual property, Magill is the most fitting precedent to govern the IMS action.

3. The IMS Action is Distinguishable on Its Facts From Magill, the Only Previous Case in Which the ECJ Has Ordered Compulsory Licensing

As a factual matter, the IMS action is clearly distinguishable from Magill, the only case to date in which the ECJ has upheld the Commission’s imposition of compulsory licensing upon a dominant firm. (349) First, while the holding in Magill seems to rest to some extent on the notion that the copyright at issue in that case was nonmeritorious, (350) the 1860 brick structure is indeed the product of considerable time and effort on the part of IMS, and therefore deserving of legal protection. Second, the IMS action presents no exceptional circumstances of the sort required by Magill in order to justify the imposition of compulsory licensing.

a. IMS’s 1860 Brick Structure Merits Intellectual Property Protection Because It Is the Product of Considerable Time and Effort on the Part of the IMS

In ordering compulsory licensing of the 1860 brick structure, the Commission failed to appreciate fully the considerable effort IMS expended in order to earn its copyright. Although the Commission did not explicitly base its interim order of compulsory licensing upon any finding that the 1860 brick structure is non-meritorious, the Commission’s order frequently analogized the IMS action to Magill, where the ECJ’s judgment upholding the Commission’s imposition of compulsory licensing seemed to rest at least in part on the belief that the intellectual property at issue was non-meritorious. (351) The Commission appears to believe that a database such as the 1860 brick structure is truly non-creative and therefore undeserving of intellectual property protection. As stated by a legal insider involved in the IMS action: “The Commission is inherently suspicious of functional copyrights.” (352) However, the German national courts have recognized that the 1860 brick structure is indeed the product of considerable time and effort. (353)

The Frankfurt District Court, in its November 16, 2000 judgment (354) confirming the interim injunction against PI, (355) cited the following account by IMS of the resources it had expended in developing the 1860 brick structure over a thirty-year period:

[IMS] says that it expended a total of about DM 23.9 million [$11.5

million] on the data bank from the years 1970 through 1999, of which

amount about DM 8.4 million [$4.1 million] were attributable to

development and ongoing reworking of the segment structure. The

personnel costs for for [sic] the development of the segment

structure from the years 1993 through 1999, claims [IMS], amounted

to 230 man days, which corresponds to the value of about DM 160,540

[$77,500]. (356)

While the Commission had also recognized the considerable investment made to develop the 1860 brick structure, (357) it based its compulsory licensing order in large part on its finding that the German pharmaceutical industry itself had “played an extensive role in designing the current structure.” (358)

The Commission erred, however, in deciding that compulsory licensing is appropriate simply because IMS developed the 1860 brick structure with significant input from end users. (359) It is precisely the value of intellectual property to the ultimate user that renders it worthy of protection, and creators routinely gather information through market research or other methods in order to devise the most effective product possible. For example, beta testing of computer software is a common practice. (360) Indeed, the very purpose of the intellectual property system is to stimulate innovation that will satisfy the demands of the market. (361) Moreover, in the context of a recent U.K. merger case involving IMS, U.K. wholesalers and pharmaceutical firms admitted that they would not want to develop such pharmaceutical data services themselves. (362) The pharmaceutical companies noted that “it would not be cost-effective” for them to carry out such services in-house and that they “lacked the expertise necessary to do so.” (363) The firms also described collaboration as unlikely “given the extent of competition between the companies,” whereas “IMS, in contrast, has a reputation for neutrality of information, enhancing its value to the pharmaceutical industry.” (364)

The foregoing explanation of the considerable efforts undertaken by IMS to develop the 1860 brick structure demonstrates that copyright protection is warranted. The intellectual property in question is clearly distinguishable from the copyright in television listings at issue in the Magill action. EC law recognizes the difference, and requires Member States to provide intellectual property protection for databases, (365) while simultaneously rejecting copyrights for television listings. (366) What is more, the ECJ evidently believed in Magill. as stated previously, that its enforcement of compulsory licensing for television listings would not impact significantly the production and release of program listings. Indeed, the broadcasters would have the same incentive to produce and disseminate programs regardless of whether they were protected from competition in the television guide market. (367) In contrast, IMS enjoys no separate market for the brick structure and derives its primary benefit from excluding others from using this system to organize pharmaceutical sales data. (368)

b. The IMS Case Presents No “Exceptional Circumstances” of the Type Described in Magill to Support an Order of Compulsory Licensing

The IMS case is distinguishable from Magill not only in terms of the relative merit of the intellectual property at issue, but also because the former presents no “exceptional circumstances” of the sort required by Magill in order to justify an order of compulsory licensing. (369) In that case, the ECJ found such exceptional circumstances in part because the broadcasters’ refusal to license precluded the emergence of a new, unique product that consumers desired. (370) In contrast, IMS has not prevented the market entry of a new product, and certain commentators have observed that IMS Health appears to be serving the market adequately. (371) Should it prove to be the case that IMS’s copyright in the 1860 brick structure permits it to charge a monopolistic price, this is best addressed via Article 82(a), (372) rather than through a compulsory licensing order. (373)

One factor complicating analysis of the IMS case is that the ECJ’s judgment in Magill did not delineate clearly which situations constitute “exceptional circumstances” sufficient to justify an order of compulsory licensing under EC law. (374) The CFI’s dicta in Tierce Ladbroke SA v. Commission clarifying the Magill holding indicates that a refusal to supply can be abusive even where it does not prevent the emergence of a new product. (375) The President of CFI, in his Order of 26 October 2001 in the IMS action, (376) did not resolve the question whether the notion of “exceptional circumstances” set forth in Magill requires proof that the dominant firm has prevented the emergence of a new product before the issuance of a compulsory licensing order, or simply suggests that the prevention of the appearance of a new product is one factor among many to be considered. (377) Nonetheless, the President of the CFI signaled that he would attach great significance to this criterion, (378) which is entirely appropriate in view of the fact that it was present in Magill. Indeed, the ECJ’s holding in Magill clearly demonstrates that exceptional circumstances of some sort must exist before the Court will require an owner of intellectual property to license its rights to third parties. (379) No such circumstances exist in the IMS action. As set forth above, (380) the Commission erred in interpreting the term “exceptional circumstances” to require no more than that the dominant firm exerts a “stranglehold” on the market. (381) Moreover, while Advocate General Jacobs acknowledged in Bronner that, after Magill, denial of access to an essential facility to a competitor can in itself violate Article 82 even in the absence of egregious conduct such as “tying of sales, discrimination vis-a-vis another independent competitor, discontinuation of supplies to existing customers or deliberate action to damage a competitor,” he nonetheless emphasized that in many cases “such additional factors are to a greater or lesser extent present.” (382)

4. An Approach Ex Ante Recognizes the Negative Effect That Compulsory Licensing Will Have upon Other Firms Aside from the Parties to the Case

As noted above, an approach ex ante to the essential facilities doctrine requires consideration of the following query: “Would the firm have invested enough if it had anticipated that the essential facilities doctrine were to be applied?” (383) This question is difficult to answer in the case of IMS. On the one hand, during the time that IMS was developing the 1860 brick structure, it might have expected that the structure merited copyright protection under German law. (384) On the other hand, IMS presently competes in the U.S., Canada, and Australia, which do not employ any brick structure whatsoever and where copyright protection is therefore unavailable. (385) Moreover, IMS continues to operate in the U.K., even after having agreed to provide “a perpetual, non-exclusive, royalty-free licence” for its brick structure as a result of an investigation by the U.K. Monopolies and Mergers Commission into IMS’s merger with a competitor. (386)

In terms of the competition considerations to be weighed against the implications for investment, it should be noted that while IMS’s competitors certainly will encounter heightened business challenges without access to the 1860 brick structure, at least during the term of IMS’s copyright, market efficiency will not suffer much as a result. As stated in a U.K. merger case involving IMS, the cost IMS charges its customers for its services “is small compared with the turnover of the companies, or the high value of the services to them.” (387) Thus, the ultimate consumers of the pharmaceutical products will not face substantially higher prices in the event that the EC courts permit IMS to maintain the intellectual property rights in the 1860 brick structure recognized by the German courts.

The inquiry does not end here, however, because a comprehensive analysis ex ante must consider the negative impact that a compulsory licensing order will have upon other firms, which may decline to invest in research and innovation in the future if they cannot rely upon intellectual property protection. Professor Bergman has noted that

this blunting of incentives is not necessarily limited to the

affected firm or even the affected industry. A firm in one industry

may, from the application of the doctrine in another industry, draw

the conclusion that the otherwise expected returns from an investment

must be discounted to compensate for the risk that it might have to

provide access to its competitors. (388)

Other commentators have likewise warned that the detrimental effects of compulsory licensing “could extend beyond the asset in question and might affect the incentives of all firms that came to know that requests for such access were often granted.” (389) This danger is especially acute in “new economy” industries such as “computer software and hardware, the internet, mobile telephony, biotechnology and others that are based primarily on the creation of intellectual property and that are undergoing rapid technological change.” (390)

Thus, the challenge facing the EC as it weighs the competing interests of intellectual property and competition law is “to strike the appropriate balance between these two fundamental sets of values, a balance that is at once flexible, to respond to the exigencies of the individual situation, perhaps as yet unforeseen, and rule-based, to ensure that like-cases are treated alike.” (391) The best way to achieve this is through detailed legislative enactments, as discussed further infra.

V. A CALL FOR CLEAR LEGISLATIVE ENACTMENTS TO BALANCE COMPETING INTELLECTUAL PROPERTY AND COMPETITION CONCERNS

Although EC law requires database protection for the 1860 brick structure pursuant to Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the Legal Protection of Databases (Database Directive), (392) the Commission, in ordering compulsory licensing, dealt with this paradox in a cursory fashion, (393) simply noting that EC case law demonstrates that Article 82 of the EC Treaty trumps the Database Directive. (394) While this is certainly true, an order of compulsory licensing that directly contradicts an EC directive calling for intellectual property protection tends to sow confusion, as well as blunt incentives for investment in intellectual property. In order to resolve this dilemma, the EC must, each time it enacts a directive harmonizing intellectual property, address explicitly the ensuing conflict between intellectual property rights and competition considerations. This will permit firms and individuals to know prospectively rather than retrospectively the legal rules governing their actions and to guide their behavior accordingly. In this climate of certainty, investment and innovation will more likely flourish. (395) What is more, democratic representation of the will of the people is best achieved legislatively as opposed to judicially.

Certain EC legislators (396) initially recognized the value of legislative guidance in resolving the inherent tension between intellectual property fights and competition law, as evidenced by the fact that an earlier version of the Database Directive contained “a provision on compulsory licensing which would come into force if the information could not be obtained freely from other sources, which reflected the concerns for a monopolisation of information expressed during the Directive’s drafting.” (397) The final version of the Database Directive does not include this provision, indicating that EC officials could not reach agreement regarding the controversial issue of compulsory licensing, leaving it to the judiciary instead.

A close reading, however, of Recital 47 of the Database Directive does serve to elucidate the intent of the drafters. (398) Recital 47 provides that:

in the interests of competition between suppliers of information

products and services, protection by the sui generis right must not

be afforded in such a way as to facilitate abuses of dominant

position, in particular as regards the creation and distribution of

new products and services which have an intellectual, documentary,

technical, economic or commercial added value

provisions of this Directive are without prejudice to the application

of Community or national competition rules. (399)

This Recital therefore indicates the legislature’s adoption of the ECJ’s view, set forth in Magill just one year before the enactment of the Database Directive, that a refusal to license is more likely to be deemed an abuse of a dominant position when it hinders the “appearance of a new product.” (400)

As noted earlier, however, the Magill holding itself is not clear, (401) and the EC would do well to clarify the intersection of intellectual property fights and competition law in each intellectual property directive that it enacts in order to foster predictability that will stimulate investment in innovation. Specifically, the Database Directive should be amended to include operative language providing that a refusal to license constitutes abuse of a dominant position only when the following three conditions, set forth in Magill, (402) are all met: (1) the dominant firm impedes the emergence of a new product by withholding information for which it is the only source

It is essential that EC legislators address the intersection between intellectual property rights and competition law in order to attract foreign direct investment. (404) U.S. firms in particular are loath to pursue investment opportunities in the face of insecure intellectual property rights, especially in light of the traditional antipathy inherent in U.S. law toward compulsory licensing. (405) Due to several economic and socio-political factors, however, the EC is unlikely to abandon the compulsory licensing remedy in competition cases involving intellectual property, though certain European scholars and practitioners question the wisdom of applying the essential facilities doctrine in such circumstances. (406) As explained by one commentator:

European intellectual property law has … never held intellectual or

industrial property rights in quite the sacrosanct esteem with which

U.S. law has tended to regard them. In a climate where possible

compulsory licensing or obligations to work patents are not uncommon,

antitrust-based restrictions on the freedom of an intellectual

property owner may be relatively easy to tolerate. (407)

Moreover, EC competition authorities, unlike their U.S. counterparts, face the challenge of attaining a single market for products and services (408) in a region where there are many dominant positions and numerous sectors where markets are regional. (409) As explained by Judge Bellamy, “[t]he basic idea behind articles 85 and 86 was that if you are to dismantle barriers between states within a common market, … you cannot risk having those barriers re-erected by private agreements or abuses of monopoly by private parties.” (410)

In addition, EC competition authorities and courts are more inclined than their U.S. counterparts to protect market entrants at the expense of property rights, (411) particularly where the potential entrants are medium-sized and smaller firms. (412) Judge Bellamy has expressed the view that the “broader social compact” in the EC provides: “[I]f we are to have large multi-national firms, adapted to a single market throughout the European Community, and the economies of scale this will bring, then the ‘quid pro quo’ is some protection for the consumer, and for the smaller firms, through the rules on competition.” (413) The ostensible rationale behind this approach is that small and medium-sized enterprises “are potentially the main providers of new employment for the future.” (414) As observed by Professor Korah, the Commission in particular “has shown concern for foreclosure of firms that would like to enter the market, whether or not their possible entry would benefit consumers.” (415) She attributes this in part to the “populist view that small is beautiful and workers are entitled to be their own bosses,” (416) and expresses concern “that the interests of consumers, and the economy as a whole, … has been being subordinated to the interests of smaller traders.” (417)

Professor Korah has expressed satisfaction, however, regarding the gradual change in perspective in the EC, stating that:

The Competition Department of the Commission was staffed for many

years largely by jurists to whom justice between two parties seemed

important, especially in light of some of the Continental laws

protecting existing traders. Their education had not encouraged them

to think at the margin, to look to the effects of a ruling on the

operation of the economy as a whole, nor to ensure that incentives

to efficient performance were provided. The attitude[s] of many

officials however, are becoming far more sensitive to economic

arguments, largely under the influence of the experience in

controlling mergers. The courts, too, have been absorbing economic

theory….

Attention is increasingly being focused on the interest of

consumers and the need to induce dominant firms to invest in

expensive and risky projects by enabling them to reap what they

have sown. (418)

This language supports analysis ex ante, advocating a secure investment climate in order to encourage innovation. This is achieved only through the inclusion, in each directive harmonizing intellectual property protection, of language that establishes clearly when refusal to license constitutes abuse of a dominant position.

VI. CONCLUSION

The legal action among IMS and its rivals NDC and AzyX illustrates the inherent tension between competition law and intellectual property rights. This conflict is especially complex in the EC, where competition authorities not only must balance the need to stimulate investment and innovation, on the one hand, with the need to ensure competition for the benefit of consumers, on the other, but also face the challenge of facilitating a single market. As discussed above, EC competition authorities and courts have invoked the essential facilities doctrine in order to resolve this dilemma.

This Article advocates an approach ex ante to the debate, which entails examining in each case whether the short-term stimulus to competition will outweigh the long-term chilling effect upon investment and innovation. In the context of the IMS action currently pending before the ECJ, it is evident that compulsory licensing would be an unwise policy choice. On the one hand, if the ECJ holds in favor of IMS, it is indeed true that the firm will enjoy a first-mover advantage as the sole market entrant during the term of its copyright, and thereafter will continue to benefit from its position as the longstanding incumbent in the German market for pharmaceutical business information services. However, for the ECJ to require IMS to engage in compulsory licensing of the 1860 brick structure would punish IMS for its own success. Notwithstanding any short-term stimulus effect upon competition in the industry in question, a compulsory licensing order in this closely watched case will blunt overall incentives for investment in research and innovation.

More broadly, consideration of the essential facilities doctrine in the context of the IMS case also highlights the shortcomings of the judicial application of this doctrine. Where, as here, an EC directive specifically mandates intellectual property protection for the creation at issue, a compulsory licensing order that contradicts the directive undoubtedly will sow confusion. Thus, the EC must, each time it enacts a directive harmonizing intellectual property, address explicitly the conflict between intellectual property fights and competition considerations. In particular, the EC Parliament should amend the Database Directive to provide secure intellectual property protection for databases, unless the emergence of a new product would be prohibited thereby.

The reasons for this approach are twofold. First, democratic representation of the will of the people is best achieved legislatively as opposed to judicially. Second, legislative clarification of the intersection between intellectual property fights and competition law will permit firms and individuals to know prospectively rather than retrospectively the legal rules governing their actions and to guide their behavior accordingly. In this climate of certainty, investment and innovation will more likely flourish.

(1) Intellectual property rights include copyright and neighboring rights, such as performance and broadcast rights

(2) Competition law, as it is known in the European Community, is commonly termed antitrust law in the United States.

(3) EC case law defines abusive conduct as that “which is such as to influence the structure of a market … through recourse to methods different from those which condition normal competition” on the basis of performance. Case 85/76, Hoffman-La Roche & Co. AG v. Commission, 1979 E.C.R. 461, 541, [1979] 3 C.M.L.R. 211, 290

(4) EC law defines dominance as “a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.” Case 27/76, United Brands Co. & United Brands Continentaal B.V. v. Commission, 1978 E.C.R. 207, 277, [1978] 1 C.M.L.R. 429, 486-87. See infra note 38 for a fuller description of what constitutes market dominance under EC law.

(5) Sergio Baches Opi, The Application of the Essential Facilities Doctrine to Intellectual Property Licensing in the European Union and the United States: Are Intellectual Property Rights Still Sacrosanct?, 11 FORDHAM INTELL. PROP., MEDIA & ENT. L.J. 409, 412 (2001).

(6) The fifteen Member States of the EC are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. RAY AUGUST, INTERNATIONAL BUSINESS LAW: TEXT, CASES AND READINGS 28 (3d ed. 2000).

(7) The Commission, which is the EC’s executive body, is composed of twenty individuals who are nationals of the Member States. The largest nations–France, Germany, Italy, and Spain–appoint two commissioners each, while the smaller ones appoint one apiece. The commissioners function as members of a supranational body, rather than as national representatives, and share responsibility for the following: (1) conducting investigations to ensure that EC rules are respected, and, if necessary, fining individuals or companies that violate the rules, or even bringing legal proceedings against Member States that fail to respect their obligations

(8) In terms of the goal of EC competition law, “it is beyond any doubt that E.U. officials view European Market integration (i.e., the achievement of a truly unified European market) as its most important objective, if not its raison d’etre.” Emmanuel P. Mastromanolis, Insights from U.S. Antitrust Law on Exclusive and Restricted Territorial Distribution: The Creation of a New Legal Standard for European Union Competition Law, 15 U. PA. J. INT’L BUS. L. 559, 562 (1994). As explained by a former EC competition commissioner, the Commission seeks to prevent companies from “thwart[ing] the emerging internal market through … abuses … which would allow them to keep markets partitioned, block exports and imports and impede new entrants.” Karl Van Miert, The Proposal for a European Competition Agency, 2 COMPETITION POL’Y NEWSL. (Competition Directorate-General of the European Commission), Summer 1996, at 1, 2.

(9) According to Mario Monti, European Commissioner for Competition Policy, “[t]he ultimate goal of the competition rules is simple: to assure that consumers benefit from new and improved products and lower prices.” Mario Monti, Speech 00/315, Competition and Information Technologies, Conference on “Barriers in Cyberspace,” at http:// www.europa.eu.int/ comm/competition/speeches/index_2000.html (Sept. 18, 2000). See also Case C-7/97, Opinion of Advocate General Jacobs Delivered on 28 May 1998, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. 1-7791, 1-7811, [1999] 4 C.M.L.R. 112, 132-33 [hereinafter Opinion of Advocate General Jacobs] (emphasizing that “it is important not to lose sight of the fact that the primary purpose of [the competition law] is to prevent distortion of competition–and in particular to safeguard the interests of consumers–rather than to protect the position of particular competitors”). But see infra notes 411-17 and accompanying text.

(10) Thomas F. Cotter, Intellectual Property and the Essential Facilities Doctrine, 44 ANTITRUST BULL. 211, 227-28 (1999). See also JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY 81-106 (1950) (stating that the most effective type of competition in a capitalist economy is that which arises from “the new commodity, the new technology, the new source of supply, [and] the new type of organization,” as distinguished from competition on the basis of price, quality, and sales force). Cotter emphasizes, however, that most intellectual property rights do not create monopolies, since substitutes exist for most patented inventions, works protected by copyright, and trademarked items. Cotter, supra, at 228

(11) Cotter, supra note 10, at 229.

(12) The EC courts, the European Court of First Instance (CFI) and the European Court of Justice (ECJ), both based in Luxembourg, are distinct from the national courts of the Member States of the European Community. PHILIP RAWORTH, INTRODUCTION TO THE LEGAL SYSTEM OF THE EUROPEAN UNION 81-82 (2001). The CFI, the EC’s trial court, is comprised of fifteen judges appointed by consensus among the Member States. The CFI generally sits in chambers of three to five judges, or occasionally in plenary session, to decide cases brought by private persons against EC institutions as well as employment cases between EC institutions and their employees. AUGUST, supra note 6, at 37. “The CFI is generally the first court to hear competition-related cases, and parties may appeal its decisions to the ECJ.” Mercer H. Harz, Dominance and Duty in the European Union: A Look Through Microsoft Windows at the Essential Facilities Doctrine, 11 EMORY INTL. L. REV. 189, 193 (1997). The right of appeal from the CFI to the ECJ is limited, as it applies to points of law only. EC Treaty, supra note 7, art. 225, para. 1.

Like the CFI, the ECJ is also made up of fifteen judges appointed by consensus among the Member States, and sits in chambers of three to five judges or in plenary session. In addition to hearing appeals from the CFI, it hears the three following types of cases:

[(1)] complaints brought by the Commission or one member state

against another member state for failure of the latter to meet its

obligations under EU law

against an EU institution … for failing to act or for injuries they

may have caused

Council, the Commission, or the Parliament seeking the annulment of

an EU legal measure.

AUGUST, supra note 6, at 37-38. The ECJ is the final arbiter of EC law. Harz, supra, at 192 n.20 (citation omitted). See infra note 58 and accompanying text for a description of the primacy of EC law over the national law of the individual Member States.

In addition to its fifteen judges, the ECJ also consists of eight advocates general, appointed by the Member States acting collectively, whose task is “to provide the Court with an impartial and reasoned submission on the cases before it so as to assist it in giving judgment.” RAWORTH, supra, at 82. Professor Korah describes the role of the advocates general as follows:

Advocates General are full members of the ECJ of equal status with

the judges. Often their opinions provide fuller and more cogent

reasoning, as they do not have to compromise. Independent judges,

who never dissent or write individual opinions, may not be able to

agree on the substance of their collegiate judgment but have to agree

on its words, so much theory gets out, and even the minimum necessary

to arrive at a result may be fudged.

Valentine Korah, Access to Essential Facilities Under the Commerce Act in the Light of Experience in Australia, the European Union and the United States, 31 VICTORIA U. WELLINGTON L. REV. 231, 250 n.69 (2000).

(13) Opinion of Advocate General Jacobs, 1998 E.C.R. at 1-7802, [1999] 4 C.M.L.R. at 124 (emphasis added). See also Mats A. Bergman, The Role of the Essential Facilities Doctrine, 46 ANTITRUST BULL. 403, 403 (2001) (stating that the essential facilities doctrine requires a dominant firm “to supply a ‘critical’ or ‘essential’ intermediate good to its downstream (or, less often, upstream) competitor(s) at a ‘nondiscriminatory’ price” in order to foster downstream competition). The Commission defines the essential facilities doctrine similarly, except that it has invoked the doctrine even where the dominant firm refuses access to a competitor active on the same market. See Commission of the European Communities, Commission Decision of 3 July 2001 (Case COMP D3/38.044-NDC Health/IMS Health), 2002 O.J. (L59) 18, 25 [hereinafter Commission Decision of 3 July 2001] (“[A] company which has a dominant position in the provision of facilities which are essential for the supply of goods or services abuses its dominant position where, without objective justification, it refuses access to those facilities.”). See infra notes 319-39 and accompanying text for a discussion of the two market requirement.

(14) Alan Overd & Bill Bishop, Essential Facilities: The Rising Tide, 19 EUR. COMPETITION L. REV. 183, 183 (1998).

(15) See Derek Ridyard, Essential Facilities and the Obligation to Supply Competitors Under UK and EC Competition Law, 17 EUR. COMPETITION L. REV. 438, 445 (1996) (explaining that intellectual property rights are described as “monopoly” rights because they give the owner an exclusive right to use or sell that property, but not because they automatically confer a dominant market position in commercial or economic terms)

(16) See infra notes 42 and 60 and accompanying text.

(17) Opinion of Advocate General Jacobs, 1998 E.C.R. at I-7811, [1999] 4 C.M.L.R. at 132.

(18) See supra note 12.

(19) See Case C-418/01: Reference for a Preliminary Ruling by the Landgericht Frankfurt am Main by Order of That Court of 12 July 2001 in the Case of IMS Health GmbH & Co. OHG v NDC Health GmbH & Co, 2002 O.J. (C 3) 16

(20) Commission Decision of 3 July 2001, supra note 13, at 18.

(21) The U.S. parent company is NDC Health Corporation, see CFI Order of 26 October 2001, supra note 19, [paragraphs] 10-11

(22) CFI Order of 26 October 2001, supra note 19, [paragraph] 8

(23) Commission Decision of 3 July 2001, supra note 13, at 18-19, 22.

(24) Id. at 25.

(25) Id. at 45.

(26) An interim decision, as it is termed under EC law, is akin to an interlocutory injunction in the U.S. John Temple Lang, Defining Legitimate Competition: Companies’ Duties to Supply Competitors and Access to Essential Facilities, 18 FORDHAM INT’L L.J. 437, 498 (1994). Black’s Law Dictionary defines an interlocutory injunction as an order “issued at any time during the pendency of the litigation for the short-term purpose of preventing irreparable injury to the petitioner prior to the time that the court will be in a position to either grant or deny permanent relief on the merits.” BLACK’S LAW DICTIONARY 784 (6th ed. 1990). See also Commission Decision of 11 June 1992, Case IV/34.174, B&I Line PLC v. Sealink Harbours Ltd. & Sealink Stena Ltd., [1992] 5 C.M.L.R. 255, 263 (noting the Commission’s power to order interim measures “where, inter alia, the conduct complained of has the effect of either creating a situation likely to cause serious and irreparable damage to other undertakings, or creating a situation that is intolerable to the public interest, and it is essential to ensure that, pending the final decision of the Commission, no such situation occurs”) (citation omitted).

(27) Commission Decision of 3 July 2001, supra note 13, at 46-48.

(28) See supra note 12.

(29) CFI Order of 26 October 2001, supra note 19, [paragraph] 149.

(30) ECJ Order of 11 April 2002, supra note 19, at 65.

(31) Case C-418/01: Reference for a Preliminary Ruling by the Landgericht Frankfurt am Main by Order of That Court of 12 July 2001 in the Case of IMS Health GmbH & Co. OHG v NDC Health GmbH & Co, 2002 O.J. (C 3) 16

(32) EU Court Prepares Landmark IP Rights vs Competition Ruling in the IMS Health Case, AFX EUR. FOCUS, Mar. 6, 2003, LEXIS, News Library, European News, Bus. Analysis, Country Info., 8 Legal Texts File.

(33) Telephone Interview with a Legal Insider Involved in the IMS Case (Feb. 27, 2002) [hereinafter Telephone Interview]. This source chose to remain anonymous.

(34) See supra note 13 and accompanying text.

(35) EC Treaty, supra note 7, art. 82. The EC Treaty amended the Treaty on European Union, Feb. 7, 1992, 1992 O.J. (C 224) 1, [1992] 1 C.M.L.R. 719, 31 I.L.M. 247 (1992) [hereinafter TEU]. Before the reform introduced by the EC Treaty, Article 82 was designated Article 86. Thus, this Article occasionally will refer to the present-day Article 82 of the EC Treaty as Article 86 when it quotes sources that predate the EC Treaty.

(36) EC Treaty, supra note 7, art. 82(b). Article 82(b) also precludes a firm in a dominant position from limiting its own output if there is prejudice to consumers, “for example, with a view to raising prices by ensuring that demand exceeds supply.” SIR CHRISTOPHER BELLAMY & GRAHAM CHILD, EUROPEAN COMMUNITY LAW OF COMPETITION (P.M. Roth ed., 5th ed. 2001). While Article 82(b) applies to the first request for a license, Article 82(c) pertains to all subsequent requests, as it bars a dominant firm from “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.” EC Treaty, supra note 7, art. 82(c).

Article 82 does not proscribe the creation or strengthening of a dominant position

(37) Case C-7/97, Opinion of Advocate General Jacobs of 28 May 1998, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791, I-7810, [1999] 4 C.M.L.R. 112, 131 (“The laws of the Member States generally regard freedom of contract as an essential element of free trade.”). See also Bergman, supra note 13, at 413 (noting that “under most circumstances, it remains the privilege of a firm to decide with whom to trade”).

(38) See supra note 4 regarding the EC definition of market dominance. As explained by one commentator, “a dominant position gives an enterprise the ability to extract higher prices for its goods or limit its own or others’ outputs without competing on the merits.” Harz, supra note 12, at 225. The ECJ considers many factors when assessing dominance, including “market share, economic strength (including profitability), and ability to dictate actions of competitors and suppliers.” Id. In practice, however, a market share of at least forty to forty-five percent generally establishes dominance. Christian Ahlborn et al., Competition Policy in the New Economy: Is European Competition Law Up to the Challenge?, 22 EUR. COMPETITION L. REV. 156, 162 & n.34 (2001). See, e.g., Case C-62/86, AKZO Chemie BV v. Commission, 1991 E.C.R. I-3439, I-3453, [1993] 5 C.M.L.R. 215, 279 (“With regard to market shares the Court has held that very large shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant position…. That is the situation where there is a market share of 50%….”) (citing Hoffman-La Roche & Co. AG v. Commission, 1979 E.C.R. 461, 521, [1979] 3 C.M.L.R. 211, 275)

(39) Christopher Stothers, Refusal to Supply as Abuse of a Dominant Position: Essential Facilities in the European Union, 22 EUR. COMPETITION. L. REV. 256, 256 (2001). Because this last criterion relates to jurisdictional issues, id., as opposed to matters of competition policy, it will not be discussed further in this article.

(40) Bergman, supra note 13, at 414.

(41) Id. at 405.

(42) According to Professor Hovencamp, the modern essential facilities doctrine originated with Otter Tail Power & Co. v. United States, 410 U.S. 366, 377-78 (1973) (holding that regulated utility company’s transmission lines constituted a scarce facility). HERBERT HOVENCAMP, FEDERAL ANTITRUST POLICY–THE LAW OF COMPETITION AND ITS PRACTICE [section] 7.7 (1994). Others have stated that the doctrine was first articulated in the United States in the 1912 case United States v. Terminal Railroad Ass’n of St. Louis, 224 U.S. 383, 409-13 (1912) (holding that a combination of a small number of railroad companies that owned and controlled the railroad terminals in St. Louis, an important railroad junction, must provide access to this indispensable facility to other competing railroads of the region). Bergman, supra note 13, at 406.

(43) Commission Notice on the Application of the Competition Rules to Access Agreements in the Telecommunications Sector, 1998 O.J. (C 265) 2, 12. See also Commission Decision 94/19/EC of 21 December 1993, Case IV/34.689, Sea Containers v. Stena Sealink, 1994 O.J. (L15) 8, 16 (defining essential facility as “a facility or infrastructure, without access to which competitors cannot provide services to their customers”)

(44) Bergman, supra note 13, at 409. For a helpful graphic representation and description of the market situation associated with the essential facilities doctrine, see Ridyard, supra note 15, at 439-40.

(45) Ahlborn et al., supra note 38, at 164. Leo Flynn, Referendaire (Legal Administrator) of the ECJ, has defined the essential facilities doctrine as follows: “[A]n undertaking with a dominant position in the market for the provision of facilities which are essential for the supply of goods or services on another market abuses its dominant position if it refuses access to those facilities without objective justification.” Leo Flynn, The Essential Facilities Doctrine in the Community Courts, 6 COM. L. PRAC. 245, 245 (1999). Mats A. Bergman, of the Swedish Competition Authority and The Research Institute of Industrial Economics of Stockholm, has identified the following three criteria for applying the essential facilities doctrine:

[1.] The facility, an infrastructure or infrastructure in combination with services, must be complementary to an economic activity in a related but separate market. Goods and immaterial property may only in exceptional cases be considered essential facilities.

[2.] Competing firms lack a realistic ability to duplicate the facility.

[3.] Access to the facility is necessary in order to compete in the related market. Bergman, supra note 13, at 409 (citations omitted).

(46) Joined Cases 6 & 7/73, Istituto Chemioterapico Italiano SpA & Commercial Solvents Corp. v. Commission, 1974 E.C.R. 223, [1974] 1 C.M.L.R. 309.

(47) Case 27/76, United Brands Co. & United Brands Contintentaal B.V. v. Commission, 1978 E.C.R. 207, [1978] 1 C.M.L.R. 429.

(48) Commission Decision 88/589/EEC of November 4, 1988, Case IV/32.318, London European Airways PLC v. Sabena, Belgian World Airlines, 1988 O.J. (L 317) 47, [1989] 4 C.M.L.R. 662.

(49) Commission Notice on the Application of the Competition Rules to Access Agreements in the Telecommunications Sector, 1998 O.J. (C 265) 2

(50) Commission Decision 94/119/EC of 21 December 1993, Port of Rodby, 1994 O.J. (L55) 52

(51) Joined Cases T-374/94, T-375/94, T-384/94 & T-388/94, European Night Servs. Ltd. v. Commission, 1998 E.C.R. II-3141 (Ct. First Instance).

(52) Bergman, supra note 13, at 405, 412.

(53) Id. at 405 (quoting United States v. Aluminum Co. of Am., 148 F.2d 416, 430 (2d Cir. 1945)).

(54) “Goods and immaterial property may only in exceptional cases be considered essential facilities.” Id. at 409.

(55) See, e.g., Case T-76/89, Indep. Television Publ’ns Ltd. v. Commission, 1991 E.C.R. II-575, II-601, [1991] C.M.L.R. 745, 767-68 (Ct. First Instance) (stating that a copyright’s “essential function” is “to protect the moral rights in the work and ensure a reward for the creative effort”). Throughout most of continental Europe, copyright law protects an author’s moral rights, meaning the right to prohibit others from tampering with a work that enjoys copyright protection. Moral rights continue to exist even after the author has transferred the pecuniary rights in the work. By contrast, the United Kingdom and the United States do not recognize such rights. AUGUST, supra note 6, at 474-75.

(56) See, e.g., Bergman, supra note 13, at 425 (noting that the patent system aims “to stimulate investments by creating exclusive property rights” and that it would therefore prove “inconsistent and detrimental for efficiency to demand that the successful innovator share its patents with others”).

(57) Article 295 of the EC Treaty provides: “This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.” EC Treaty, supra note 7, art. 295. While the EC often will enact a directive, a type of legislation that aims to harmonize the law among Member States (with respect to intellectual property, for example), the Member States retain some choice as to the method, and, sometimes, the extent, of implementation of a directive. See W. R. CORNISH, INTELLECTUAL PROPERTY: PATENTS, COPYRIGHT, TRADE MARKS AND ALLIED RIGHTS 20-21 (3d ed. 1996).

(58) See Harz, supra note 12, at 192 (noting that the ECJ “has the final say in matters of EU law,” which “takes precedence over conflicting national law”) (citations omitted). See also Commission Decision of 3 July 2001, supra note 13, at 45 (stating that the EC Treaty trumps an EC directive harmonizing national intellectual property protection for databases). See infra note 238 for an explanation of this directive.

(59) Ahlborn et al., supra note 38, at 164 (observing that the “essential facility doctrine is in a state of flux”)

(60) Temple Lang, supra note 26, at 445.

(61) Joined Cases 6 & 7/73, 1974 E.C.R. 223, [1974] 1 C.M.L.R. 309 [hereinafter Commercial Solvents].

(62) Commercial Solvents, 1974 E.C.R. at 250-51, [1974] 1 C.M.L.R. at 340-41.

(63) Id. at 226, 245, [1974] 1 C.M.L.R. at 312-13, 336.

(64) Id. at 250, [1974] 1 C.M.L.R. at 340.

(65) Id. at 247, [1974] 1 C.M.L.R. at 337 (quoting Commission Decision 72/457/EEC of 14 December 1972, Case IV/26.911-ZOJA/CSC–ICI, 1972 O.J. (L 299) 51).

(66) The Commission noted that CSC was easily able to satisfy the competitor’s needs as it had spare capacity and did not require all its production for its own use. Id. at 251, [1974] 1 C.M.L.R. at 341. Cf. Benzine en Petroleum Handelsmaatschappij BV v. Commission, 1978 E.C.R. 1513, [1978] 3 C.M.L.R. 174 (the ECJ holding that shortage of an upstream product constitutes an acceptable justification for refusal to supply downstream customers).

(67) Commercial Solvents, 1974 E.C.R. at 235. According to Professor Korah, elimination of Zoja as an independent maker of ethambutol would gravely affect market competition for the following reasons: “Commercial Solvents was the only maker of the raw materials in the world and barriers to entry, consisting of know-how, seem to have been high

(68) Commercial Solvents, 1974 E.C.R. at 227.

(69) Id. at 251, [1974] 1 C.M.L.R. at 340-41.

(70) Temple Lang, supra note 26, at 445.

(71) Id. at 445. In his seminal article concerning essential facilities, Dr. Temple Lang, former Director of the Commission’s Directorate General for Competition, declared: “It is notable that Commercial Solvents is often cited by the Court [the ECJ], the Court of First Instance …, and the Commission, and is clearly regarded as an important case stating a broad principle.” Id.

(72) Case 27/76, 1978 E.C.R. 207, [1978] 1 C.M.L.R. 429 [hereinafter United Brands].

(73) United Brands, 1978 E.C.R. at 216-17

(74) United Brands, 1978 E.C.R. at 210, 290, [1978] 1 C.M.L.R. at 435, 494-95.

(75) Id. at 290, [1978] 1 C.M.L.R. at 494-95. See also Commission Decision 76/353/EEC of 17 December 1975, Case IV/26.699, Chiquita, 1976 O.J. (L 95) 1.

(76) United Brands, 1978 E.C.R. at 292, [1978] 1 C.M.L.R. at 496.

(77) Id. at 293, [1978] 1 C.M.L.R. at 496-97. It is important to note that the ECJ’s judgment was not based solely on UBC’s dominant position, but also on the following combination of facts: UBC had ample banana supplies to satisfy Olesen’s needs

(78) United Brands, 1978 E.C.R. at 293, [1978] 1 C.M.L.R. at 497.

(79) See Mark Furse, The ‘Essential Facilities’ Doctrine in Community Law, 16 EUR. COMPETITION L. REV. 469, 472 (1996) (stating that “it was clear that the supply of bananas by United Brands was not essential, as alternative, reasonable, sources of supply existed”)

(80) See supra note 9 and accompanying text

(81) Temple Lang, supra note 26, at 507. According to Dr. Temple Lang, in cases involving selective refusal of access as a way of discouraging aggressive competition, the European courts pay particular attention to special characteristics of the victim to determine how likely it is that the refusal will cause the firm “to be discouraged from entering the market or competing vigorously, or to be forced out of the market entirely.” Id. In other cases relating to essential facilities, however, EC competition law will not heed the vulnerability of any particular competitor, because its goal is to promote market competition in general, rather than to safeguard a given firm. Id. at 489

(82) Bergman, supra note 13, at 414. Professor Bergman explains that some scholars have suggested that a “standard” refusal to deal case would lie where a dominant firm refused to continue to trade with an existing partner, whereas the essential facilities doctrine would apply only to situations where no trade relationship had existed previously. Id.

(83) Temple Lang, supra note 26, at 445 (citations omitted). See also Capobianco, supra note 36, at 557 (noting that because of the broad duty to supply imposed on dominant firms by the Commercial Solvents case, the ECJ, the CFI, and the Commission “only very recently” referred to the essential facilities doctrine, which “is construed as a special application of the duty to supply competitors”).

(84) See supra note 26 for the definition of an interim decision.

(85) Commission Decision of 11 June 1992, Case IV/34.174, [1992] 5 C.M.L.R. 255 [hereinafter B&I].

(86) Commission Decision 94/19/EC of 21 December 1993, Case IV/34.689, 1994 O.J. (L15) 8 [hereinafter Sea Containers]. While the parties in Sea Containers ultimately settled their dispute, obviating the need for the Commission to order interim measures in this action, see infra text accompanying note 100, “[t]he fact that the Commission chose to adopt and publish a formal decision in a case in which it had rejected the complainant’s request for interim measures can be taken as an indication that, in the Commission’s view, the case represents a significant development of the law.” James S. Venit & John J. Kallaugher, Essential Facilities: A Comparative Law Approach, in 1994 FORDHAM CORP. L. INST., INTERNATIONAL ANTITRUST LAW AND POLICY, 315, 330 n.41 (Barry E. Hawk ed., 1995).

(87) Case C-7/97, Opinion of Advocate General Jacobs of 28 May 1998, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791, I-7808, [1999] 4 C.M.L.R. 112, 129 (“The Commission first referred to the essential facilities doctrine expressly in two interim measures decisions concerning the port of Holyhead….”) (citations omitted)

(88) B&I, [1992] 5 C.M.L.R. at 258-60. It should be noted that a dominant firm could violate Article 82 not only through an outright refusal to trade, but also by offering unfavorable terms of trade. See Bergman, supra note 13, at 415 (noting that the essential facilities doctrine may mandate not only trade between parties, but reasonable terms of trade).

(89) B&I, [1992] 5 C.M.L.R. at 265-66.

(90) Id. at 265. Some commentators have pointed out that the Commission erred by accepting that Liverpool was not an alternative to Holyhead. They emphasize that, although the Liverpool route takes longer than the Holyhead route, the Holyhead passengers must drive approximately eighty miles across North Wales after leaving the main highway, whereas the Liverpool docks are well served by two major highways. N/E/R/A (National Economic Research Associates), Oscar Bronner: Legitimate Refusals to Supply, at 3-4, http://www.nera.com/wwt/newsletter_issues/4154.pdf (January 1999) [hereinafter N/E/R/A]

(91) B&I, [1992] 5 C.M.L.R. at 265-66 (citations omitted).

(92) Temple Lang, supra note 26, at 461 (citation omitted).

(93) B&I, [1992] 5 C.M.L.R. at 271.

(94) Nick Maltby, Restrictions on Port Operators: Sealink/B&I-Holyhead, 14 EUR. COMPETITION L. REV. 223, 225 (1993).

(95) Commission Decision 94/19/EC of 21 December 1993, Case IV/34.689, 1994 O.J. (L15) 8 [hereinafter Sea Containers].

(96) Sea Containers, 1994 O.J. (L15) at 17.

(97) Id. at 16-18.

(98) Id. at 16

(99) Sea Containers, 1994 O.J. (L15) at 16.

(100) Id. at 18. Ultimately, Sea Containers decided not to operate from Holyhead after all. “Instead, since 1996, it has been operating a passenger service to Ireland from Liverpool rather than Holyhead, and as from 1998 it has installed a fast cat vessel on the route of a similar size to the one it had originally planned to operate from Holyhead.” N/E/R/A/, supra note 90, at 3. See also Capobianco, supra note 36, at 557-58 (observing that “the company who should have profited from the decision decided not to operate from Holyhead but from Liverpool, which is much farther but offers passengers better connections to the ground motorway network”). As of this writing, Sea Containers continues servicing this route as advertised on its web site. See Sea Packet Company, at http://www.steampacket.com/SeaCat/flash_seacat.htm (last visited Feb. 6, 2003).

(101) Sea Containers, 1994 O.J. (L15) at 17

(102) Sea Containers, 1994 O.J. (L15) at 17. Dr. Temple Lang observes that requiring access to existing customers, while denying it to new market entrants, would “unjustifiably create a privileged category of competitors without any legal or economic rationale and would deprive consumers of what the new entrants have to offer.” Temple Lang supra note 26, at 495. In addition, “[i]t might easily lead to perverse outcomes” such as denial of access to a new market entrant for fear of conferring “‘squatters’ rights'” on them. Ridyard, supra note 15, at 449. But cf. Phillip Landolt & Johan Ysewyn, Intellectual Property Rights and EC Competition Law, COPYRIGHT WORLD, June/July 2001, at 19, 21 (suggesting that, in the context of intellectual property, an order requiring an intellectual property owner to license to a former customer might be considered less of an incursion on property rights, since the owner had previously consented to the transfer).

(103) See supra note 56 and accompanying text.

(104) Case 238/87, 1988 E.C.R. I-6211, [1989] 4 C.M.L.R. 122 [hereinafter Volvo].

(105) Volvo, 1988 E.C.R. at 6235, [1989] 4 C.M.L.R. at 135-36.

(106) Id. at 6236-37, [1989] 4 C.M.L.R. at 136.

(107) Id. at 6213-14, 6233-34, [1989] 4 C.M.L.R. at 125-26, 134. While the front wings of the 200 series car were registered under the United Kingdom Registered Designs Act 1949, all the other body panels in the 200 series car could be freely manufactured and marketed. Id. at 6213-14, [1989] 4 C.M.L.R. at 125-26.

(108) Id. at 6212-13, [1989] 4 C.M.L.R. at 124-25.

(109) Id. at 6213, 6234, [1989] 4 C.M.L.R. at 125, 134-35.

(110) Id. at 6235, [1989] 4 C.M.L.R. at 135.

(111) Id., [1989] 4 C.M.L.R. at 135.

(112) Id., [1989] 4 C.M.L.R. at 135. See also Case 238/87, Opinion of Advocate General Mischo of 21 June 1988, AB Volvo v. Erik Veng (UK) Ltd., 1988 E.C.R. 6211, 6226, [1989] 4 C.M.L.R. at 128-29 (declaring that “it is apparent from previous decisions of the [ECJ] that the mere possession of an industrial property right does not automatically imply that the holder thereof occupies a dominant position within the meaning of Article 86” if there are “similar goods or goods which may be substituted for” the industrial property at issue).

(113) Volvo, 1988 E.C.R. at 6235, [1989] 4 C.M.L.R. at 135-36.

(114) Id., [1989] 4 C.M.L.R. at 135-36. Later cases established that the Volvo Court’s enumerated examples of situations where a refusal to license could be abusive were intended to be “illustrative” rather than “comprehensive.” See Ian S. Forrester, Magill, ‘A Famous Victor’? Third Party Access to Intellectual Property Rights, in 2 INTERNATIONAL INTELLECTUAL PROPERTY LAW AND POLICY 35-1, 35-11 (Hugh C. Hansen ed., 1998).

(115) Temple Lang, supra note 26, at 449 n.31.

(116) Volvo, 1988 E.C.R. at 6236, [1989] 4 C.M.L.R. at 136.

(117) See Thomas C. Vinje, The Final Word on Magill: The Judgment of the ECJ, 17 EUR. INTELL. PROP. REV. 297, 300 (1995) (stating that “there may previously have been debate about the meaning of Volvo, and specifically whether it stood for the proposition that a refusal to license might in some cases constitute an abuse”). A statement by Professor Korah regarding the ECJ’s judgment in Volvo reflects the vagueness of that judgment: “It seems then that the proprietor of an exclusive right, who is held to enjoy a dominant position, may be required either to license third parties, or to supply them with the protected product on terms that are not ‘unfair,’ whatever that may mean….” KORAH, supra note 3, at 118 (emphasis added).

(118) Joined Cases C-241/91 & C-242/91 P, 1995 E.C.R. I-743, [1995] 4 C.M.L.R. 718 [hereinafter Magill].

(119) Magill, 1995 E.C.R. at I-822 to I-825, [1995] 4 C.M.L.R. at 790-91.

(120) Id. at I-833 to I-834, [1995] 4 C.M.L.R. at 797-98.

(121) Id. at I-811 to I-812, [1995] 4 C.M.L.R. at 782-83

(122) Magill, 1995 E.C.R. at I-811 to I-812, [1995] 4 C.M.L.R. at 782-83.

(123) Joined Cases C-241/91 & C-242/91 P, Opinion of Advocate General Gulmann of 1 June 1994, Radio Telefis Eireann (RTE) & Indep. Television Publ’ns Ltd. v. Commission, 1995 E.C.R. I-743, I-749, [1995] 4 C.M.L.R. 718, 726-27 [hereinafter Opinion of Advocate General Gulmann].

(124) Id. at I-749 to I-750, [1995] 4 C.M.L.R. at 727.

(125) Id. at I-748, [1995] 4 C.M.L.R. at 726

(126) Opinion of Advocate General Gulmann, 1995 E.C.R. at I-750, [1995] 4 C.M.L.R. at 727.

(127) Commission Decision in Magill, 1989 O.J. (L78) at 50.

(128) Id. at 50-51.

(129) See RTE, 1991 E.C.R. at II-523, [1991] 4 C.M.L.R. at 620

(130) RTE and ITP were supported in this action by intervenor Intellectual Property Owners Inc., a U.S.-based trade organization seeking to uphold intellectual property rights. See Magill, 1995 E.C.R. at I-808, [1995] 4 C.M.L.R. at 718

(131) Magill, 1995 E.C.R. at I-825, I-837, [1995] 4 C.M.L.R. at 791, 799.

(132) Joined Cases C-241/91 & C-242/91 P, Opinion of Advocate General Gulmann of 1 June 1994, Radio Telefis Eireann (RTE) & Indep. Television Publ’ns Ltd. v. Commission, 1995 E.C.R. I-743, I-748, [1995] 4 C.M.L.R. 718, 725.

(133) Vinje, supra note 117, at 298. See RTE, 1991 E.C.R. at II-518 to II-522, [1991] 4 C.M.L.R. at 615-19 (invoking prior case law in distinguishing between the existence and exercise of intellectual property rights)

(134) The CFI declared:

[I]n principle the protection of the specific subject-matter of a

copyright entitles the copyright-holder to reserve the exclusive

right to reproduce the protected work….

However, while it is plain that the exercise of the exclusive

right to reproduce a protected work is not itself an abuse, that

does not apply when, in light of the details of each individual case,

it is apparent that that right is exercised in such ways and

circumstances as in fact to pursue an aim manifestly contrary to

the objectives of Article 86.

RTE, 1991 E.C.R. at II-519, [1991] 4 C.M.L.R. at 617

(135) RTE, 1991 E.C.R. at II-520, [1991] 4 C.M.L.R. at 617

(136) RTE, 1991 E.C.R. at II-520, [1991] 4 C.M.L.R. at 618

(137) RTE, 1991 E.C.R. at II-516, [1991] 4 C.M.L.R. at 614

(138) Magill, 1995 E.C.R. at I-822 to I-825, [1995] 4 C.M.L.R. at 790-91.

(139) Finding that Magill had established a violation of Article 82, the ECJ declared it “unnecessary” to examine the existence/exercise distinction. Id. at I-825, [1995] 4 C.M.L.R. at 791.

(140) Vinje, supra note 117, at 301 (declaring that, after the ECJ’s judgment in Magill, “although it may be premature to pronounce the death of the doctrine, the existence/exercise doctrine clearly has little if any continuing relevance in determining whether any particular conduct related to an intellectual property right constitutes an abuse under Article 86”). Indeed, the existence/exercise doctrine has occasioned much scholarly criticism. According to Professor Korah:

In legal theory, it is impossible to draw the line between existence

and exercise, except at the extremes. Analytically, the existence of

a right consists of all the ways in which it may be exercised. In

ruling that an important difference rests on a distinction which

cannot be drawn by logical analysis, the Court created a very

flexible instrument for it to develop the law and reduce the value

of intellectual property rights.

VALENTINE KORAH, AN INTRODUCTORY GUIDE TO EC COMPETITION LAW AND PRACTICE 217-18 (6th ed. 1997). See also Aidan Robertson, The Existence and Exercise of Copyright: Can It Bear the Abuse?, 111 LAW Q. REV. 588, 588 (1995) (describing the distinction between the existence and exercise of an intellectual property right as “unconvincing” and declaring: “Since an intellectual property right is intangible, its only existence lies in its exercise.”).

(141) Vinje, supra note 117, at 301 (describing the “circumstances-based approach” adopted by the ECJ in Magill).

(142) Magill, 1995 E.C.R. at I-822 to I-825, [1995] 4 C.M.L.R. at 789-91. Some scholars have criticized the ECJ’s finding that the copyright in broadcasting information and the market for weekly television constituted two separate markets. See, e.g., Landolt & Ysewyn, supra note 102, at 19-20 (stating that while “it appears to be the only plausible reading” of Magill that the ECJ treated broadcasters’ data about their broadcasts itself as a market and weekly television magazines as a second market, this approach “does seem strained”). See infra notes 333-35 and accompanying text for further discussion of the ECJ’s finding of two markets in Magill.

(143) See supra notes 110-12 and accompanying text.

(144) Magill, 1995 E.C.R. at I-822, [1995] 4 C.M.L.R. at 789.

(145) Id., [1995] 4 C.M.L.R. at 789-90. According to Vinje, it is not entirely clear under Magill whether it is by virtue of the copyright alone that the CFI found the broadcasters dominant. He found the CFI’s “cursory explanation of why the broadcasters held a dominant position” to be “less than fully satisfactory–although it may in part be justified by the fact that the broadcasters actually did not appeal the CFI’s finding of dominance.” Vinje, supra note 117, at 299. Because the CFI did not engage in traditional economic analysis to determine dominance, by examining the broadcasters’ ability to act independently of consumers and competitors, see supra note 4 and accompanying text, it is possible that the Court did indeed base its findings of market dominance on the copyright itself, despite its statements to the contrary. Vinje, supra note 117, at 299. While Vinje deemed this question of limited significance, since he believed it “unlikely that many future cases will arise where the information necessary for competitors to compete will be coextensive with writings subject to copyright,” id., the IMS matter proves to be just such a case. See infra note 338 and accompanying text.

(146) Magill, 1995 E.C.R. at I-822, [1995] 4 C.M.L.R. at 790 (admonishing that the broadcasters and intervenor Intellectual Property Owners Inc. “wrongly presuppose that where the conduct of an undertaking in a dominant position consists of the exercise of a right classified by national law as ‘copyright’, such conduct can never be reviewed in relation to Article 86 of the Treaty”).

(147) Id. at I-823, [1995] 4 C.M.L.R. at 790.

(148) See supra note 114 and accompanying text.

(149) Magill, 1995 E.C.R. at I-823, [1995] 4 C.M.L.R. at 790 (emphasis added).

(150) Id. at I-823 to I-825, [1995] 4 C.M.L.R. at 790-91. See infra note 403 for a discussion of whether the “exceptional circumstances” set forth in Magill are cumulative or alternatives.

(151) Magill, 1995 E.C.R. at I-824, [1995] 4 C.M.L.R. at 791.

(152) Id. at I-823 to I-824, [1995] 4 C.M.L.R. at 791 (citation omitted).

(153) Id. at I-824, [1995] 4 C.M.L.R. at 791. The ECJ’s reference to the intellectual property at issue as “raw material” is reminiscent of its wording in the traditional “refusal to deal” case Commercial Solvents. See supra note 69 and accompanying text.

(154) Magill, 1995 E.C.R. at I-823, [1995] 4 C.M.L.R. at 790.

(155) Id. at I-824, [1995] 4 C.M.L.R. at 791. Vinje has observed that the ECJ did not examine this finding in much detail because the broadcasters had neglected to furnish any evidence to justify their behavior. Vinje, supra note 117, at 300-01. In general, EC case law provides little guidance as to what types of business justifications constitute legitimate defenses in a refusal to supply case. Venit & Kallaugher, supra note 86, at 317 n.6 (“There are few, if any, published cases in which a legitimate business justification for a refusal to supply has been accepted by the Court or the Commission”)

In a small number of actions, the ECJ and Commission have justified refusals to deal. See, e.g., the ECJ judgment in Benzine en Petroleum Handelsmaatschappij BV v. Commission, 1978 E.C.R. 1513, [1978] 3 C.M.L.R. 174 (holding that shortage of an upstream product constitutes an acceptable justification for refusal to supply downstream customers)

(156) Magill, 1995 E.C.R. at I-824, [1995] 4 C.M.L.R. at 791.

(157) See Temple Lang, supra note 26, at 451 n.39 (noting that the Magill case “was dealt with on the basis of the needs of a new entrant into a new market, seeking to offer a new product which did not exist at the relevant time”)

(158) Vinje, supra note 117, at 301. As observed by Vinje, despite its reference to the broadcasters’ interference with the secondary market, the ECJ “clearly regarded the Magill television guide as a product that would compete with the broadcasters’ own guides.” Id.

(159) Magill, 1995 E.C.R. at I-833, [1995] 4 C.M.L.R. at 797.

(160) Id. at I-834, [1995] 4 C.M.L.R. at 797.

(161) A review of EC case law revealed no other such ECJ judgment. See Frank Fine, NDC/IMS: A Logical Application of the Essential Facilities Doctrine, 708 PLI/Pat 735, 748 (2002) (noting that Magill was the only decision in which the Commission ordered compulsory licensing, except for its July 2001 interim decision in IMS, which was later annulled). Magill is also the first case where the ECJ held a refusal to supply a new customer, as opposed to a former customer, to be an abuse of Article 82, see Landolt & Ysewyn, supra note 102, at 20 (“Except in Magill, … the court has never found a refusal to supply a new customer to be an abuse.”), thereby validating the Commission’s approach in Sea Containers. See supra note 102 and accompanying text.

(162) See, e.g., Peter Crowther, Compulsory Licensing of Intellectual Property Rights, 20 EUR. L. REV. 521, 528 (1995) (“The upshot of Magill is that owners of intellectual property rights, controlling ‘indispensable raw materials’, might think twice about launching expensive R & D programmes.”)

(163) Vinje, supra note 117, at 302 (noting that there is “significant scope to apply Magill in areas such as information technology and telecommunications”)

(164) See, e.g., Forrester, supra note 114, at 35-10 (“[T]he impact of the Magill judgment cannot easily be limited to these rare circumstances where a dependent enterprise requires both raw material and a license from a dominant enterprise. Magill is not, I submit, an erroneous aberration….”)

(165) Greaves, supra note 130, at 246-47 (“[T]he formulation of the judgment is so tied up with stressing the ‘exceptional circumstances’ of this case that it is difficult, if not impossible, to imagine another situation where the refusal to license by a copyright owner will be held an abuse of dominant position.”)

(166) Robertson, supra note 140, at 591 (stating that after Magill “[t]he extent to which E.C. law allows intellectual property right owners to exercise their rights has become more uncertain than ever”). Even Vinje, who approves in principle of the “circumstances-based approach” enunciated in Magill, as opposed to an absolute rule that refusals to license intellectual property are per se immune from EC competition law, laments that the ECJ supplied little guidance as to what constitutes “exceptional circumstances.” Vinje, supra note 117, at 301. On the other hand, Vinje theorizes that perhaps the ECJ intended in Magill “to preserve flexibility and not unnecessarily to limit the circumstances under which a refusal to license might constitute an abuse.” Id.

(167) Ridyard, supra note 15, at 446

(168) Wooldridge, supra note 79, at 257.

(169) Id. at 261. See also Case C-7/97, Opinion of Advocate General Jacobs of 28 May 1998, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791, I-7813, [1999] 4 C.M.L.R. 112, 134 (noting that “the provision of copyright protection for programme listings was difficult to justify in terms of rewarding or providing an incentive for creative effort”)

This assessment of the relative worth of intellectual property rights granted by national patent authorities found expression in a case before the U.K. Patents Court, which declined to force a dominant firm to change the terms of its standard licensing agreement for its patented compact disk technology. Philips Elecs. NV v. Ingman Ltd. & Video Duplicating Co. Ltd., 1999 FLEET ST. REP. 112, 135 (Pat. Ct. 1998) (U.K.) [hereinafter Philips]. The Philips Court held Magill inapplicable where the intellectual property at issue was highly deserving of protection. Justice Laddie declared:

[I]t seems to me to be strongly arguable that not all intellectual

property rights are equal. Some are more equal than others…. In

Magill what was being considered was the rights in a subspecies of

copyright. It does not follow inevitably that Magill can be applied

by analogy to a patent case.

Id. at 134-35.

(170) See supra note 125 and accompanying text

(171) KORAH, supra note 3, at 119.

(172) See infra Part V.

(173) Case T-504/93, 1997 E.C.R. II-923, [1997] 5 C.M.L.R. 309 (Ct. First Instance) [hereinafter Ladbroke].

(174) The Commission rejected Ladbroke’s complaint without issuing a formal decision, and did not publish the letter of rejection. Korah, The Ladbroke Saga, supra note 169, at 170.

(175) Ladbroke appealed the judgment of the Court of First Instance to the ECJ, see Case C-300/97 P, 1997 O.J. (C 318) 7, but the appeal was later withdrawn. See 1999 O.J. (C 136) 13.

(176) PMU, a body established by the principal French associations that organize horse races, had exclusive rights to organize off-course betting on horse races in France, and to take bets abroad on races in France as well as bets in France on races abroad. Ladbroke, 1997 E.C.R. at II-930, [1997] 5 C.M.L.R. at 316.

(177) PMI, a subsidiary of PMU, was formed to market outside of France televised pictures and sound commentaries on horse races in France. Id., [1997] 5 C.M.L.R. at 316.

(178) Id. at II-930 to II-932, [1997] 5 C.M.L.R. at 316-17.

(179) Id. at II-962, [1997] 5 C.M.L.R. at 338.

(180) Id. at II-970, [1997] 5 C.M.L.R. at 344.

(181) Id. at II-967 to II-968, [1997] 5 C.M.L.R. at 342-43.

(182) Id. at II-969, [1997] 5 C.M.L.R. at 343 (citing Magill, 1995 E.C.R. at I-823 to I-824, [1995] 4 C.M.L.R. at 790-91). As noted by some commentators, the ECJ left open in Ladbroke the circumstances in which an “arbitrary refusal to supply” may be present. Clearly, the factors present in Magill, such as refusal to supply an “essential facility” necessary to enter into a market, and the refusal to supply preventing the introduction of a new product, along with the concomitant market distortions, would influence the court. Still, the CFI’s dicta in Ladbroke leaves open the possibility that the EC courts would find an abuse even under less “exceptional” circumstances. Landolt & Ysewyn, supra note 102, at 20. As noted by Professor Korah, “there is no clear distinction drawn by the European courts between the ratio decidendi and obiter dicta in a judgment.” Valentine Korah, The Federal Circuit and Antitrust: The Interface Between Intellectual Property and Antitrust: The European Experience, 69 ANTITRUST L.J. 801, 814 (2002).

(183) Ladbroke, 1997 E.C.R. at II- 969, [1997] 5 C.M.L.R. at 343-44.

(184) Id., [1997] 5 C.M.L.R. at 343-44.

(185) Id. at II-970, 5 C.M.L.R. at 344.

(186) See Korah, The Ladbroke Saga, supra note 169, at 174 (noting the “narrow construction of the judgment in Magil given by the CFI” in Ladbroke).

(187) Id. at 173

(188) Korah, The Ladbroke Saga, supra note 169, at 173 (“Is it not for punters to decide what they want and for suppliers to decide what they want to supply, rather than the court?”)

(189) Case C-7/97, 1998 E.C.R. I-7791, [1999] 4 C.M.L.R. 112 [hereinafter Bronner].

(190) See, e.g., Albertina Albors-Llorens, The “Essential Facilities” Doctrine in EC Competition Law, 58 CAMBRIDGE L.J. 490, 492 (1999) (stating that the ECJ in Bronner “elucidated the nature of Magill as an exceptional case … and not one where the Court set out to upset the fragile equilibrium between the existence and the exercise of intellectual property rights”) (citations omitted)

(191) Capobianco, supra note 36, at 559.

(192) See Case C-7/97, Opinion of Advocate General Jacobs Delivered on 28 May 1998, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs-und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791, I-7812 to I-7814, [1999] 4 C.M.L.R. 112, 133-35 [hereinafter Opinion of Advocate General Jacobs]

(193) Bronner, 1998 E.C.R. at I-7820, [1999] 4 C.M.L.R. at 137.

(194) Basing its case upon Austrian competition law, which was modeled quite closely after EC competition law, Bronner initiated its action in the Oberlandesgericht Wien, the Higher Regional Court of Vienna, which is the court of first instance in competition matters in Austria. The national court then referred the matter to the ECJ for a preliminary ruling. Id. at I-7819 to I-7820, I-7822, [1999] 4 C.M.L.R. at 137-39.

(195) At the time of the suit, Mediaprint, the publisher of the two daily newspapers, controlled over forty-six percent of the Austrian daily newspaper market in terms of circulation and forty-two percent in terms of advertising revenues. Id. at I-7820, [1999] 4 C.M.L.R. at 137.

(196) Id. at I-7821, [1999] 4 C.M.L.R. at 137-38.

(197) Id. at I-7826 to I-7827, [1999] 4 C.M.L.R. at 141-42.

(198) Id. at I-7826, [1999] 4 C.M.L.R. at 141. Bronner also rejected alternative means of home delivery, such as postal delivery, as vastly inferior. Id. at I-7821, [1999] 4 C.M.L.R. at 137-38.

(199) Id., [1999] 4 C.M.L.R. at 138.

(200) Id. at I-7827, [1999] 4 C.M.L.R. at 142.

(201) Id. at I-7821, [1999] 4 C.M.L.R. at 138.

(202) Id. at I-7832, [1999] 4 C.M.L.R. at 145-46.

(203) The ECJ did not address what could be an objective justification in this case. Capobianco, supra note 36, at 558.

(204) Bronner, 1998 E.C.R. at I-7831, [1999] 4 C.M.L.R. at 144-45 (emphasis added).

(205) Professor Wooldridge has noted that although the ECJ did not refer expressly to the essential facilities doctrine, perhaps in order to avoid deciding issues not squarely before it, the Court did indeed choose to rely on Magill, which “contained principles similar to the essential facilities doctrine and could form appropriate basis for its decision.” Wooldridge, supra note 79, at 262.

(206) Bronner, 1998 E.C.R. at I-7831 to I-7832, [1999] 4 C.M.L.R. at 144-46.

(207) Id. at I-7831, [1999] 4 C.M.L.R. at 145.

(208) Id., [1999] 4 C.M.L.R. at 145. With regard to what can constitute an “economic obstacle,” Advocate General Jacobs declared, concerning the Bronner case:

I do not rule out the possibility that the cost of duplicating a

facility might alone constitute an insuperable barrier to entry.

That might be so particularly in cases in which the creation of the

facility took place under non-competitive conditions, for example,

partly through public funding. However, the test in my view must be

an objective one: in other words, in order for refusal of access to

amount to an abuse, it must be extremely difficult not merely for

the undertaking demanding access but for any other undertaking to

compete. Thus, if the cost of duplicating the facility alone is a

barrier to entry, it must be such as to deter any prudent

undertaking from entering the market.

Opinion of Advocate General Jacobs, 1998 E.C.R. at I-7813 to I-7814, [1999] 4 C.M.L.R. at 134-35.

(209) Bronner, 1998 E.C.R. at I-7832, [1999] 4 C.M.L.R. at 145.

(210) Id., [1999] 4 C.M.L.R. at 145.

(211) Opinion of Advocate General Jacobs, 1998 E.C.R. at I-7813, [1999] 4 C.M.L.R. at 134. Scholars and jurists recognize the ECJ’s judgment in Bronner as an endorsement of the opinion of Advocate General Jacobs. Flynn, supra note 45, at 247

(212) Professor Bergman has suggested that the ECJ’s judgment in Bronner can either be understood to require “that the entrant would be unable to establish a competing facility even if it were to capture half the market,” or, alternatively, that the entrant would be unable to establish such a facility even if the market “were to increase to twice its current size,” meaning that only one firm is viable. See Bergman, supra note 13, at 427. He has concluded that the first interpretation is likely correct. Bergman, supra note 79, at 61. Thus, according to Professor Bergman, “[t]he implicit assumption underlying the Court’s reasoning seems to be that as long as large-scale entry is theoretically profitable, the ex ante incentives for investment and risk-taking should be given greater weight than the concern for ex post competition.” Bergman, supra note 13, at 432.

(213) Capobianco, supra note 36, at 559-60. See also supra note 9.

(214) In all of the seminal essential facilities judgments discussed thus far in this article, the EC courts have upheld every Commission decision they have had an opportunity to review. As explained by Judge Christopher Bellamy, former Judge of the Court of First Instance of the European Communities and President of the U.K. Competition Commission Appeals Tribunal, senior officials of the Commission reach competition decisions in the first instance, and the grounds for judicial review of these decisions are quite limited. The Honorable Christopher Bellamy, Competing Competition Laws: Do We Need a Global Standard?, 34 NEW ENG. L. REV. 15, 18 (1999). See supra note 7 regarding the grounds upon which the EC courts may review Commission decisions.

(215) Landolt & Ysewyn, supra note 102, at 20.

(216) See supra notes 110-12 and accompanying text.

(217) See supra note 114 and accompanying text.

(218) Landolt & Ysewyn, supra note 102, at 20.

(219) Id.

(220) See supra note 161 and accompanying text.

(221) See supra note 149 and accompanying text.

(222) See supra note 166 and accompanying text.

(223) Opinion of Advocate General Jacobs, 1998 E.C.R. at I-7809, [1999] 4 C.M.L.R. at 130 (emphasis added).

(224) See supra note 211 and accompanying text.

(225) See Opinion of Advocate General Jacobs, 1998 E.C.R. at I-7809, [1999] 4 C.M.L.R. at 130-31 (stating that the test to be applied with respect to essential facilities is “‘whether the handicap resulting from the denial of access is one that can reasonably be expected to make competitors’ activities in the market in question either impossible or permanently, seriously and unavoidably uneconomic'”) (citation omitted).

(226) Bergman, supra note 13, at 404 & n.1.

(227) See infra Part III.

(228) Philip Shishkin, EC Dispute Pits Copyright Protection Against Antitrust, WALL ST. J., Mar. 15, 2001, at A15.

(229) Commission Decision of 3 July 2001, supra note 13, at 18.

(230) Id.

(231) Commission Decision of 3 July 2001, supra note 13, at 20-21

(232) Commission Initiates Formal Procedure, supra note 230.

(233) Commission Decision of 3 July 2001, supra note 13, at 21. The Commission describes the brick structure as “a grid superimposed on a country map, grouping communities of doctors, pharmacies and patients and contain[ing] among others the following data: postal codes of the German post office, information of Federal Statistical Office (political boundaries, number of residents), distribution of physicians and pharmacies, mapping materials (topographic and street maps) and information about the regional organisation of the physicians’ billing associations.” Id. at 20.

(234) In the European Community, personal data must be protected pursuant to Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data, which provides that “Member States shall protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data.” 1995 O.J. (L 281) 31, art. 1. Under German data protection law specifically, each brick must include at least three pharmacies, in order to avoid the identification of sales to individual pharmacies, and the optimal number of pharmacies per brick for this purpose is about four or five. Commission Decision of 3 July 2001, supra note 13, at 20.

(235) Commission Decision of 3 July 2001, supra note 13, at 21.

(236) Id.

(237) CFI Order of 26 October 2001, supra note 19, [paragraph] 5.

(238) IMS claimed intellectual property rights in the 1860 brick structure pursuant to a provision in German copyright law that transposes Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the Legal Protection of Databases, 1996 O.J. (L 77) 20. Commission Decision of 3 July 2001, supra note 13, at 23, 45. This Directive, which harmonizes throughout the EC copyright protection for databases, obliges Member States to provide copyright protection for the arrangement, but not the contents, of original databases. Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the Legal Protection of Databases, 1996 O.J. (L 77) 20, art. 3 [hereinafter Database Directive]. The Directive also requires Member States to adopt a sui generis form of database protection for the contents of databases. Database Directive, supra, art. 7. IMS claimed rights in both the structure and the contents of its database under the Database Directive. Case 11 U 67/2000, Pharma Intranet Information AG v. IMS Health GmbH & Co. oHG, Judgment of the Frankfurt Am Main Higher Regional Court, Sept. 18, 2002, at 5 (English translation on file with author) [hereinafter Judgment of the Frankfurt Higher Regional Court of September 2002]. See infra notes 257-63 and accompanying text for a discussion of IMS’s intellectual property rights under the Database Directive.

(239) CFI Order of 26 October 2001, supra note 19, [paragraphs] 6-7

The first brick structure used in Germany was devised in 1969 and

had 329 brick segments, representing the basic districts and

non-district cities of the then West Germany. This was later

sub-divided into structures containing first 418 and later 922

segments. In 1991, selected cities were subdivided into areas,

creating a structure with 1086 bricks. In 1992, following German

reunification, 244 bricks were added, corresponding precisely to

administrative units in the former East Germany. In 1993, following

the introduction of the 5-digit postcode system in Germany, 119

cities were restructured to create the 1845 structure. Minor changes

were made to this structure in 1995 and 1998, leading to the current

1860 structure. A regional sales data service formatted in this

structure … giving information on sales for the 1860 territories

in Germany[] was launched in January 2000.

Id.

(240) Commission Decision of 3 July 2001, supra note 13, at 27 (stating that the pharmaceutical industry “played an extensive role in designing the current structure,” which was essentially complete around 1993). See infra notes 358-64 and accompanying text regarding the significance of the pharmaceutical industry’s contribution to the 1860 brick structure.

(241) Commission Decision of 3 July 2001, supra note 13, at 21.

(242) Id. at 22.

(243) Commission of the European Communities, Commission Starts Procedure Against IMS Health in Germany, Seeks Interim Measures, IP/01/365, at http://europa.eu.int/rapid/start/cgi/ guesten.ksh (Mar. 14,2001) [hereinafter Commission Starts Procedure Against IMS].

(244) PI, which was founded in 1999 by a former IMS employee, ultimately was acquired in the summer of 2000 by National Data Corporation Health Information Services (NDC), a U.S. corporation based in Atlanta that, along with its German subsidiary NDC Health GmbH & Co. KG (NDC Germany), now succeeds PI as a party to these cases. CFI Order of 26 October 2001, supra note 19, [paragraphs] 10-11

(245) Commission Decision of 3 July 2001, supra note 13, at 21. For a discussion of the reasons for this customer preference, see infra notes 297-306 and accompanying text.

(246) Commission Decision of 3 July 2001, supra note 13, at 21.

(247) See CFI Order of 26 October 2001, supra note 19, [paragraph] 8

(248) Commission Decision of 3 July 2001, supra note 13, at 21.

(249) CFI Order of 26 October 2001, supra note 19, [paragraph] 8

(250) See xe.com Universal Currency Converter Results, at http://www.xe.com/ucc/(last modified June 12, 2002). The Deutsche mark has been supplanted by the euro as of January 1, 2002.

(251) Commission Decision of 3 July 2001, supra note 13, at 22

(252) Battling Over Bricks, ECONOMIST, Aug. 25, 2001, at 45. The German court’s holding conflicts directly with the Commission’s decision. See infra Part IV.A.

(253) See supra note 244.

(254) CFI Order of 26 October 2001, supra note 19, [paragraph] 8

(255) CFI Order of 26 October 2001, supra note 19, [paragraph] 15

(256) CFI Order of 26 October 2001, supra note 19, [paragraphs] 13.

(257) See generally Judgment of the Frankfurt Higher Regional Court of September 2002, supra note 238.

(258) Article 3 of the Database Directive provides as follows:

1. In accordance with this Directive, databases which, by reason of the selection or arrangement of their contents, constitute the author’s own intellectual creation shall be protected as such by copyright. No other criteria shall be applied to determine their eligibility for that protection.

2. The copyright protection of databases provided for by this Directive shall not extend to their contents and shall be without prejudice to any rights subsisting in those contents themselves.

Database Directive, supra note 238, art. 3.

(259) Judgment of the Frankfurt Higher Regional Court of September 2002, supra note 238, at 11-12, 16-17. The court held that IMS was in fact a co-author, rather than the sole author, of the brick structure, and recognized the co-authorship of certain pharmaceutical industry sales agents who participated in the creation of the intellectual property at issue. Id. at 13-15. But see infra note 358.

(260) Article 7 of the Database Directive provides as follows:

Member States shall provide for a right for the maker of a database

which shows that there has been qualitatively and/or quantitatively

a substantial investment in either the obtaining, verification or

presentation of the contents to prevent extraction and/or

re-utilization of the whole or of a substantial part, evaluated

qualitatively and/or quantitatively, of the contents of that

database.

Database Directive, supra note 238, art. 7, para. 1.

(261) Judgment of the Frankfurt Higher Regional Court of September 2002, supra note 238, at 17-18.

(262) Id. at 20-21.

(263) Id. at 21.

(264) Case C-418/01: Reference for a Preliminary Ruling by the Landgericht Frankfurt am Main by Order of That Court of 12 July 2001 in the Case

of IMS Health GmbH & Co. OHG v NDC Health GmbH & Co, 2002 O.J. (C 3) 16

(265) See supra note 32 and accompanying text.

(266) See supra note 33 and accompanying text. A legal insider involved in the competition action noted that the EC courts also must consider the co-authorship issue raised in the pending copyright actions, see supra note 259 and accompanying text, in order to resolve the competition matter. E-mail from a Legal Insider Involved in the IMS Case, to Donna M. Gitter, Assistant Professor of Legal and Ethical Studies, Fordham University Schools of Business (Jan. 13, 2003, 18:15:316 GMT +1)(on file with author). This source also stated that the copyright issues pending before the German national courts ultimately might reach the EC courts as well. E-mail from a Legal Insider Involved in the IMS Case, to Donna M. Gitter, Assistant Professor of Legal and Ethical Studies, Fordham University Schools of Business (Jan. 21, 2003, 18:20:12 GMT +1) (on file with author).

(267) CFI Order of 26 October 2001, supra note 19, [paragraphs] 10, 16

(268) Commission Decision of 3 July 2001, supra note 13, at 19.

(269) Id.

(270) EU Opens Infringement Procedure Against U.S. Firm in Drug Data Collection, ANTITRUST & TRADE REG. DAILY, Mar. 16, 2001 (BNA), WESTIAW, BNA Antitrust & Trade Regulation Daily Database.

(271) Commission Decision of 3 July 2001, supra note 13, at 19.

(272) Id. at 42 (noting that IMS cited Volvo for the proposition that it could refuse to license its copyright to competitors), at 44 (stating that IMS claimed that the German courts had already established that IMS’s legitimate commercial interests outweighed those of its competitors). It should be noted that the Frankfurt Higher Regional Court decided in September 2002 that IMS cannot in fact license its intellectual property without the consent of its co-authors. See supra note 263 and accompanying text. It would seem, however, that those co-authors, certain pharmaceutical industry sales agents, see supra note 259, would desire to license the intellectual property to IMS’s competitors if they remain employed by their same firms.

(273) Commission Decision of 3 July 2001, supra note 13, at 43.

(274) The Commission rarely resorts to interim measures, having done so in only about fifteen instances during the more than twenty years that it has enjoyed the power to do so. Commission Starts Procedure Against IMS, supra note 243.

(275) Commission Decision of 3 July 2001, supra note 13, at 46-48

(276) Commission Imposes Interim Measures on IMS, supra note 275.

(277) Cleary Gottlieb Wins Euro Court Victory Against EC, LAWYER, Nov. 12, 2001, 2001 WL 11473885 [hereinafter Cleary Gottlieb Wins].

(278) CFI Order of 10 August 2001, supra note 247, [paragraphs] 27-29.

(279) CFI Order of 26 October 2001, supra note 19, [paragraphs] 149-50

(280) CFI Order of 26 October 2001, supra note 19, [paragraphs] 80-81

(281) CFI Order of 26 October 2001, supra note 19, [paragraphs] 100-06.

(282) Id. [paragraph] 124 (declaring that since “the Landgericht Frankfurt has recognised that the creative effort underlying the 1860 brick structure is worthy of copyright protection, [IMS] is justified in invoking the genuine risk of devaluation of its copyright”)

(283) ECJ Order of 11 April 2002, supra note 19, at 65

(284) E-mail from a Legal Insider Involved in the IMS Case, to Donna M. Gitter, Assistant Professor of Legal and Ethical Studies, Fordham University Schools of Business (June 18, 2002, 18:21:12 GMT +1) (on file with author).

(285) Neither the Commission nor the President of the CFI, in deciding whether interim measures are appropriate in the IMS action, required the parties to meet the evidentiary standard applicable to a final decision on the merits. The Commission, while acknowledging that the CFI has held that the legal test for prima facie infringement of Article 82 requires showing the “‘probable existence’ of an infringement,” Commission Decision of 3 July 2001, supra note 13, at 23 (citing Case T-23/90, Automobiles Peugeot SA & Peugeot SA v. Commission, 1991 E.C.R. II-653 (Ct. First Instance) [hereinafter Peugeot]), emphasized that, according to the CFI, the requirement of a finding of prima facie infringement “‘cannot be placed on the same footing as the requirement of certainty that a final decision must satisfy.'” Id. (quoting Peugeot, 1991 E.C.R. at 11-671). Likewise, the President of the CFI, while conceding that a judge “should normally treat with circumspection” a Commission decision imposing interim compulsory licensing, CFI Order of 26 October 2001, supra note 19, [paragraph] 91, nonetheless declared it “inappropriate” to require IMS to “establish a strong prima facie case against” the Commission’s decision. Id. [paragraph] 68. Rather, the President of the CFI required IMS simply to demonstrate “the existence of a serious dispute or at least reasonable doubts regarding the validity of the Commission’s interim assessment of the competition rules.” Id. [paragraph] 93 (citations omitted).

(286) See supra notes 8-9 and accompanying text.

(287) See infra note 297 and accompanying text.

(288) Bergman, supra note 13, at 422. Professor Bergman explains the short- and long-run effects of the essential facilities doctrine as follows:

[T]he effect of the doctrine is similar to the effect of a price

regulation of that stage of production–i.e., prices will be reduced,

which is likely to bring price reduction in the related market as

well. There is a short-run positive effect on competition, from which

consumers will benefit. However, the price reduction will decrease

the profit of the monopolist which, in turn, is likely to reduce the

monopolist’s incentives to invest. Therefore, long-run negative

effects from reduced incentives to invest are likely.

Id.

(289) Id.

(290) See supra note 15 and accompanying text.

(291) See supra note 9 and accompanying text.

(292) While declining to reveal the respective parties’ market shares, so as to protect what it deemed “business secrets,” the Commission concluded that IMS enjoyed “quasi-monopoly” status because it had faced no competition whatsoever prior to the market entry of NDC and AzyX. Commission Decision of 3 July 2001, supra note 13, at 25. The order of the President of the CFI that suspended the interim measures imposed by the Commission also referred to IMS as “quasi-monopolistic.” CFI Order of 26 October 2001, supra note 19, [paragraph] 128.

(293) Commission Decision of 3 July 2001, supra note 13, at 26-27.

(294) Id. at 27.

(295) Id.

(296) Id. at 27-28.

(297) Id. at 28.

(298) Id. at 29.

(299) Id. at 29-30.

(300) Id. at 30-32.

(301) Id. at 32-33. The Commission noted that the relationship between doctors and pharmaceutical sales representatives is especially important owing to the German Law on Advertising in the Health Care System, which provides that prescription products can be advertised only to medical professionals, not to consumers themselves. Id. at 33.

(302) Id. at 33. Specifically, pursuant to German employment law, elected workers’ councils must participate in the decision-making process when employees’ working conditions change. Id. Every German workplace with more than five employees has such a workers’ council, or Betriebsrat, that represents the interests of the employees as opposed to those of the employer or the trade union. RICHARD SCHAFFER ET AL., INTERNATIONAL BUSINESS LAW AND ITS ENVIRONMENT 595 (5th ed. 2002).

(303) Commission Decision of 3 July 2001, supra note 13, at 37

(304) Commission Decision of 3 July 2001, supra note 13, at 38.

(305) Id. at 35-36.

(306) Id. at 36-37.

(307) Id. at 35. The Commission quoted the Frankfurt District Court judgment of 16 November 2000, see supra text accompanying note 251, declaring that an alternative brick structure “‘would hardly be marketable.'” Commission Decision of 3 July 2001, supra note 13, at 35.

(308) See supra notes 173-88 and accompanying text.

(309) Commission Decision of 3 July 2001, supra note 13, at 35 n.39. But see supra note 188 and accompanying text (explaining that the CFI did not in fact appear to pay attention to customer preference in Ladbroke).

(310) Commission Decision of 3 July 2001, supra note 13, at 41. IMS’s other arguments in support of its refusal to license, that the proffered licensing fees were too low, id. at 41-42, and that former PI and current NDC officials stole information from IMS, id., appear to have been added as afterthoughts, and the Commission was dismissive of these relatively weak secondary arguments. Id.

(311) Id. at 41

(312) Commission Decision of 3 July 2001, supra note 13, at 41.

(313) Commission Imposes Interim Measures on IMS Health, supra note 275.

(314) See supra note 285 and accompanying text.

(315) Telephone Interview, supra note 33. In particular, this source pointed out that the President of the CFI chose to address an issue that was not squarely before him, and in so doing indicated support for IMS’s position. Id. Specifically, the President of the CFI acknowledged that neither an applicant for interim relief nor the party opposing such measures need establish a “strong” prima facie case

(316) See supra note 238.

(317) See supra note 276 and accompanying text.

(318) Much of the legal and economic literature analyzing the optimal level of intellectual property protection to stimulate innovation is summarized in Nancy T. Gallini & Michael J. Trebilcock, Intellectual Property Rights and Competition Policy: A Framework for Analysis of Economic and Legal Issues, in COMPETITION POLICY AND INTELLECTUAL PROPERTY RIGHTS IN THE KNOWLEDGE-BASED ECONOMY 17, 19-21 (Robert D. Anderson & Nancy T. Gallini eds., 1998). Professor Korah has observed that economists remain, after much debate, unable to answer this complex question. Korah, supra note 182, at 811. In her view, at least with respect to patents, “compulsory licensing from an individual firm required on grounds of competition by a competition authority or civil court, neither of them likely to be expert in either the technology or patent philosophy, should be rare,” in light of the fact that “It]he great benefit of patent law as it has developed is that the market decides how investment is directed” so that “[g]overnments and research institutes do not make these decisions free from market constraints.” Valentine Korah, Patents and Antitrust, 1997 INTELL. PROP. Q. 395, 406-07 (1997).

(319) See supra notes 44-45 and accompanying text.

(320) CFI Order of 26 October 2001, supra note 19, [paragraph] 80. The President of the CFI observed witheringly that the Commission’s interpretation of the essential facilities doctrine so as to negate the two-market requirement was “relatively novel.” Id. [paragraph] 93.

(321) See supra notes 61-71 and accompanying text.

(322) See supra notes 95-102 and accompanying text.

(323) See supra notes 118-71 and accompanying text.

(324) See supra notes 173-88 and accompanying text.

(325) See supra notes 189-213 and accompanying text.

(326) Capobianco, supra note 36, at 555.

(327) Fine, supra note 161, at 743. Cf. Robert Pitofsky et al., The Essential Facilities Doctrine Under U.S. Antitrust Law, 70 ANTITRUST L.J. 443, 458-61 (2002) (enumerating U.S. cases in support of the contention that, under U.S. law, “there is no requirement that a plaintiff alleging anticompetitive denial of access to an essential facility demonstrate the existence of two separate relevant product markets”).

(328) Fine, supra note 161, at 744 (citations omitted) (describing Magill as “the product of a legacy of Commission decisions which have failed to differentiate between two market cases … and cases in which the essential facility in question cannot properly be viewed as a ‘market’ in any economic sense due to an absence of trade in relation to the so-called facility”).

(329) Id. at 748.

(330) See supra note 110 and accompanying text.