A new approach to resolving refusal to license intellectual property rights disputes

Abstract

This article proposes a new approach to resolving the conundrum of a monopolist refusing to license intellectual property rights to a competitor, one of the most complex issues at the interface between intellectual property and competition law. It reviews the approaches adopted by the competition authorities in both the European Union and United States when confronted with this perplexing issue, and argues that the extreme positions they took – either that competition should trump intellectual property rights (IPRs) or that IPRs should trump competition – were mistakenly simplistic. The article proceeds to argue that the preferred approach is to strike an appropriate balance between anticompetitive effects and procompetitive effects of a refusal to license, and accordingly allocative efficiency losses and dynamic efficiency gains. A substantial part of this article is devoted to a proposed framework illustrating how the balance can be struck, emphasizing how the refusal at issue interacts with various circumstantial factors such as market power, network effects, monopoly leveraging, predatory intent, degree of follow-on innovation, and the causal connection between IPR protection and innovation incentives. Reference will be made to precedents from the European Union (Magill, IMS, and Microsoft) and United States (Kodak and Xerox) in explaining how the framework works in practice.