The theory of essential facilities. the principle of access to invention in case of abusive refusal to license

• Author: Irina Cucer Lisnic
• Position: PhD Candidate, Faculty of Law, 'Nicolae Titulescu' University of Bucharest (e-mail: lisnic_irina@yahoo.com).
• Pages: 52-74

THE THEORY OF ESSENTIAL FACILITIES. THE

PRINCIPLE OF ACCESS TO INVENTION IN CASE OF

ABUSIVE REFUSAL TO LICENSE

Irina CUCER LISNIC*

Abstract

Essential facilities designate specific inputs which are essential for the production of other

downstream goods.

Inputs are situated upstream and so are eligible for intellectual property protection. In order to

foster competition in the downstream, holders of these inputs should be forced to give access to

potential users, by offering them operating lidcenses. In other words, one must respect the exclusive

right of intellectual property holder to freely exploit his invention or must he be sacrificed in favor of

downstream competition ?

In the present analysis we intend to analyze some of either controverted or less known judicial

aspects related to the theory of essential facilities.

Keywords: compulsory licenses, essential feature, dominance, abuse, input, effective

competition.

1. Generalities *

It has been widely assumed that the

compulsory licenses for the intellectual

property rights, based on art. 102 of the

Treaty establishing the European Union,

stand as an example for the cases of

essential facilities. According to the logic

on which the theory of “essential facilities”

is based, the owner of a facility which

cannot be reproduced by way of the

ordinary process of innovation and

investment and in the abse nce of which the

competition on a market is impossible o r

restricted, must share it with a rival.

Hence, the ter m essential facility

means the entirety of material and non-

material installations owned by a dominant

and non-reproducible enterprise; as a result

the third parties` access to these

* PhD Candidate, Faculty of Law, “Nicolae Titulescu” University of Bucharest (e-mail:

lisnic_irina@yahoo.com).

1

Case United States v. Terminal Railroad Ass'n, 224 U.S. 383 (1912).

installations is indispensable for them to

carry out their activity on the market, and it

concerns the situation when one may obtain

a forced access to an intangible asset owned

by a dominant enterprise.

The theory has its origin in the

American competition case law from the

beginning of the last century when a conflict

of access to railroad infrastructure had to be

resolved

1

. In this case, St. Louis was the

only area with railroad infrastructure which

granted access to the railroad infrastructure

of other areas and the ass ociation with

Terminal Railroad Association of St. Louis

owned a fraction of the operation of the

railroad in St. Louis, as a r esult, it actuall y

controlled the entire access to such

infrastructure, which caused it to be called

to trial in order to be obligated to grant

access to other operators in exchange for

Irina CUCER LISNIC 53

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reasonable and non-discriminatory tariffs.

The USA Supre me Court compelled

Terminal Railroad Associa tion of St. Louis

to grant access in e xchange for reasonable

tariffs on the grounds that the railroad is a

public utility and the association Terminal

Railroad Association of St. Louis acted as a

cartel, with the risk of excluding other users

of the railroad. At that moment, The Court

referred to the competition aspect of the

business and did not introduced the term

essential facility, it being applied

subsequently, the t heory assigning it three

cumulative conditions in order to be

applied: the use thereof is indispensable for

an operator which provides a specific

service, it is impossible or at least difficult

to multiply the infras tructure in this case

and, finally, the functional control exercised

by way of monopo le or a group of

associates acting unitary. The subject

matter was not fighting the monopoles, but

merely the abuse of a dominant position for

vertical integration, which imposed the

intervention of the competition authorities.

In Euro pe, the theory of essential

facilities was applied for the first time in

1992

2

, following a complaint of B&I (an

Irish ferry operator), when the Commission

established that Sealink (a British ferry

operator, which was also the harbour

authority in Holyhead, Wales) abused its

dominant position when it modified its

schedule in such way that this modification

affected the loading and un-loading

operations of B&I, following the reduction

of the available time. In oth er words, the

Commission held that the deed of the owner

of an essential facility to use its p ower on a

market in order to consolidate its position

on a related market is an abuse according to

art. 82 of the EEC Treaty [art. 102 of

TEEU]. This happens when such owner

2

Case Be-I Line v. Stena-Sealink, CJEC, 11 iun. 1992 (IP/92/478).

3

Marie – Anne Frison Roche, Régulation versus concurrence, in Au-delà des codes, Dalloz, Paris, 2011, p. 171-185.

4

CJEC 21 feb. 1973, case Euroemballage-Continental Can c/Comision Europenne, no. 6/72.

grants his competitors access on the relate d

market under conditions that are less

advantageous than his own services,

without any objective justification. T he

Commission ruled by way of decision that

Sealink to adopt a different schedule or

return to the initial one. The Commission

assessed that there is a risk of an

“irreparable prejudice” to be produced due

to increasing the interruptions in the loading

and un-loading procedures as well as the

effects of such on the services offered.

The term essential facility is not

directly connected with the actual

completion and efficient competition. The

actual competition is defined as the

competition exercised on the market,

whereas the efficient competition means the

best potential competition on the market. It

is possible that a non-competition situation,

meaning the absence of actual competition,

to meet the criteria of an efficient

competition. The theory showed

3

that

several markets reserve for the mselves an

efficient competition and the CJEC

4

explicitly says that the purpose of the

competition policies is to preserve on the

market the possibilities of an efficient or

potential competition. This means the

possibility of third enterprises to compete

with the enterprise in the dominant position,

the latter not having the right to compromise

the actual competition and thus having

particular obligations including to allow the

competitors to create an actual competition.

This is why one observed that an enterprise

in a dominant position might attempt an

assault upon the competition even in the

absence of an abusive practice considering

the obligation pointed above, to ensure an

actual competition on the market. In this

context, if the enterprise owns an essential