IP rights in software

20 January 2005

Henri Leben

The French Competition Council has given a decision regarding the question of the entitlement of an “essential facility” owner to reasonable remuneration for granting access to that facility. It confirms well established French case law stating that the existence of intellectual property rights does not impact on the assessment of the cost of access. Regarding an essential facility, a cost orientated price is not based on the loss suffered by the owner of the IP rights but on the incremental cost to provide the information irrespective of the potential loss that the company may suffer due to the dissemination of the said information. By contrast, the European Commission recently stated in the Microsoft case that as far as some of Microsoft’s interface information might be protected by IP rights, Microsoft should be entitled to reasonable remuneration, but it did not define what that reasonable remuneration should be.

The French Competition Council held in a new ‘NMPP’ decision of 22 July 2004, that the access charge to an essential facility must be based on the possible loss borne by the facility’s owner in providing the access. In its first NMPP decision back in 22 December 2003, the Competition Council had issued injunctions against NMPP, a press distribution co-operative owned by Hachette, which abused its dominant position by preventing MLP, its sole competitor, from accessing the core section of the “Presse 2000” software. The Council found that Presse 2000 could be regarded as an essential facility and enjoined NMPP to allow MLP direct access to the software core section in “equitable economic conditions”. NMPP was also enjoined to inform the Council within four months of the method set up to grant MLP access to the core section. The 04-D-34 decision of 22 July 2004 assesses the performance of the injunction with regard to the information delivered to the Council by NMPP.

NMPP argued that an essential facility does not automatically involve a cost orientated offer. According to NMPP, the financial condition offered to its competitor should take into account the loss due to the direct access granted to MLP (the opportunity cost). Accordingly, NMPP deemed the access charge should include the value of the IP rights shared with MLP, together with the value of the quality and the reputation of its software among press editors.

The Competition Council held that in an anti-competitive market, an access charge to an essential facility which takes into account the loss suffered by the undertaking granting the access to its competitors does not improve the level of competition. Indeed, the estimation of the loss suffered can be made on an arbitrary basis and allows the dominant undertaking to maintain high price levels.

The Council emphasises that both French and European case law have established that cost orientated access is the only fair and objective reference to determine price in compliance with competition law. The Council stresses that even though the essential facility is not tangible, the access charge must still be based on the incremental cost. The existence of intellectual property rights does not interfere with the assessment of the access charge.

The Council does not indicate what the access charge to be paid should be in order to improve the level of competition. However, it emphasises that the charge must be sufficient to maintain NMPP’s incentive to improve its software.

As a conclusion, the Council held that the injunction cannot be withdrawn as the access charge is not based on equitable economic conditions.

Source: http://www.conseil-concurrence.fr/pdf/avis/04d34.pdf, Language: French