Microsoft, Refusal to License Intellectual Property Rights, and the Incentives Balance Test of the European Commission
Abstract: The incentives balance test was developed by the European Commission for proving abuse of a dominant position according to Article 82 EC, and was first applied in the Microsoft case. It can be used when the owner of an intellectual property right refuses to license this right to other firms. To assess whether there might be an objective justification for this refusal, the different incentives to innovate of the involved parties are balanced against each other. In case that the innovative effects evoked by a license are significantly higher than without access to the intellectual property, the owner of the intellectual property right is obliged to license. In the paper we pursue two objectives. Firstly, we analyze critically from an innovation eco-nomics perspective the economic arguments in the decisions of the Commission and the Court of First Instance as well as in the existing literature concerning the incentives balance test and its application. Secondly, we demonstrate that additional theories and empirical insights from innovation economics, especially from evolutionary innovation economics, can help to de-velop a more differentiated test. This paper helps to find a theoretically and empirically better substantiated test for dealing with the complex tension between intellectual property rights and competition law in the context of Article 82 "refusal to license" cases.
