Today’s judgment, in Microsoft v European Commission, contains valuable lessons for companies that operate in markets where rapid innovation and strong intellectual property (IP) are keys to success.

First, it highlights the fact that divergences remain between Europe and the US when it comes to technology-driven markets. US courts would not accept the theories adopted by the Court of First Instance this morning. This is hardly an ideal regulatory environment for companies in global technology-driven markets. It leads to difficult choices: should dominant companies say yes to a demand for technology from a US rival that has no foundation in US law, but which might be accepted in Europe?

Second, the judgment reminds us that Europe remains more likely to insist that a company hand over its IP to a rival than the US. Today’s decision dilutes the “exceptional circumstances” test that applies to compulsory IP licensing in Europe. The test is no longer whether the IP is indispensable to carry on business. Instead, a leading company must act to maintain sufficient viable competitors on the market. So, the leading companies will need to license their technology to competitors to ensure that there remains an effective competitive structure on the market. Effectively, the Commission is saying that the leading player must handicap itself to enable others to have a chance of winning.

The Commission must now decide whether this is a Microsoft-specific decision or whether it is a precedent of more general application to all dominant companies’ future conduct.

The wider question is whether today’s judgment will lead to more innovation in Europe. It is difficult not to be gloomy about that question when all the companies in the case were from the US. (In addition to Microsoft, the complainants were RealNetworks, Sun, Novell, IBM and Oracle.) It would truly be worrying if Europe is simply a final court of appeal for US-based hi-tech companies – and if there were no European-based companies present at the party.

Dr Philip Marsden is director of The Competition Law Forum and senior research fellow at the British Institute of International and Comparative Law

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