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Compulsory licensing - at what cost? An international study of what constitutes RAND terms

Höök, Helena (2008)
Department of Law
Abstract
Compulsory licensing is used to prevent the owner of an intellectual property right from refusing to exploit that right in a country or from being the sole provider of a product by forcing him to permit competition from other producers', subject only to their payment of a reasonable royalty or licence fee. When a compulsory license is used to remedy an abuse of competition law, issues of conflict between the rationales behind the intellectual property regulations and the rationales behind competition law arise. Due to a wide legal framework in the shape of international conventions, the European Community courts have had to fend for themselves when finding a good balance. EC legislation is still missing, but possibly forthwith coming. One... (More)
Compulsory licensing is used to prevent the owner of an intellectual property right from refusing to exploit that right in a country or from being the sole provider of a product by forcing him to permit competition from other producers', subject only to their payment of a reasonable royalty or licence fee. When a compulsory license is used to remedy an abuse of competition law, issues of conflict between the rationales behind the intellectual property regulations and the rationales behind competition law arise. Due to a wide legal framework in the shape of international conventions, the European Community courts have had to fend for themselves when finding a good balance. EC legislation is still missing, but possibly forthwith coming. One of the balancing tools is the fee that has to be paid by the beneficiary of a compulsory license. The case law sets, after some reluctance, the standard ''reasonable and non-discriminatory'' terms, RAND. The criteria might seem unexceptionable, but when one comes to turn them into actual numbers, one is left with many critical questions unanswered. Moreover, the factors that are missing reveal important gaps in the economic analysis that lies behind the decision to intervene in these markets. The only European case expanding on the RAND concept is the Microsoft case. The Microsoft Pricing Principles focus, in the absence of historical price, on reflecting the market valuation of comparable technologies, and through inserting the &quot&semicno strategic valuation&quot&semic criterion alongside the usual language of reasonableness and non-discrimination, the Commission has made some steps towards specifying the access-pricing regime more fully. From looking into the motives and means of royalty calculation, license obligations in standard setting, economic considerations as well as IP valuation theory, the result is that in the EC as well as in the U.S, the Courts have tried to resemble a market based royalty. This is done by trying to restore the ''but for'' world or resembling what is an ''arms-length'' price. Due to the fact, that a royalty rate is essentially arbitrary in a freely determined royalty though, it is difficult to find a sensible basis for objective comparison. This fuels the desire to cling to the market norms, going rates and benchmarks and leads us to one of the major problems in trying to establish a price for a transfer, that in most cases the goods or services under consideration are not available in the same quantity and quality in unconnected transactions. Therefore, the identifying of an arm's length price necessarily contains a substantial element of subjective judgement, and therefore so does the RAND terms. (Less)
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author
Höök, Helena
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Konkurrensrätt, EG-rätt, Immaterialrätt
language
English
id
1558511
date added to LUP
2010-03-08 15:55:22
date last changed
2010-03-08 15:55:22
@misc{1558511,
  abstract     = {Compulsory licensing is used to prevent the owner of an intellectual property right from refusing to exploit that right in a country or from being the sole provider of a product by forcing him to permit competition from other producers', subject only to their payment of a reasonable royalty or licence fee. When a compulsory license is used to remedy an abuse of competition law, issues of conflict between the rationales behind the intellectual property regulations and the rationales behind competition law arise. Due to a wide legal framework in the shape of international conventions, the European Community courts have had to fend for themselves when finding a good balance. EC legislation is still missing, but possibly forthwith coming. One of the balancing tools is the fee that has to be paid by the beneficiary of a compulsory license. The case law sets, after some reluctance, the standard ''reasonable and non-discriminatory'' terms, RAND. The criteria might seem unexceptionable, but when one comes to turn them into actual numbers, one is left with many critical questions unanswered. Moreover, the factors that are missing reveal important gaps in the economic analysis that lies behind the decision to intervene in these markets. The only European case expanding on the RAND concept is the Microsoft case. The Microsoft Pricing Principles focus, in the absence of historical price, on reflecting the market valuation of comparable technologies, and through inserting the &quot&semicno strategic valuation&quot&semic criterion alongside the usual language of reasonableness and non-discrimination, the Commission has made some steps towards specifying the access-pricing regime more fully. From looking into the motives and means of royalty calculation, license obligations in standard setting, economic considerations as well as IP valuation theory, the result is that in the EC as well as in the U.S, the Courts have tried to resemble a market based royalty. This is done by trying to restore the ''but for'' world or resembling what is an ''arms-length'' price. Due to the fact, that a royalty rate is essentially arbitrary in a freely determined royalty though, it is difficult to find a sensible basis for objective comparison. This fuels the desire to cling to the market norms, going rates and benchmarks and leads us to one of the major problems in trying to establish a price for a transfer, that in most cases the goods or services under consideration are not available in the same quantity and quality in unconnected transactions. Therefore, the identifying of an arm's length price necessarily contains a substantial element of subjective judgement, and therefore so does the RAND terms.},
  author       = {Höök, Helena},
  keyword      = {Konkurrensrätt,EG-rätt,Immaterialrätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Compulsory licensing - at what cost? An international study of what constitutes RAND terms},
  year         = {2008},
}