This article examines how US courts have interpreted the essential facilities doctrine in competition law cases. The doctrine generally holds that an entity controlling a facility essential for competition must provide access to competitors on reasonable terms. However, US courts have applied the doctrine very narrowly. To succeed, plaintiffs must show the defendant's denial of access completely eliminates competition, not just provides advantages. Courts also reject claims if competitors can achieve some market share without the facility or can reasonably duplicate it. The author analyzes relevant US case law and concludes courts are reluctant to use the essential facilities doctrine to require sharing intellectual property. A similarly narrow interpretation may be emerging in the EU as well.

1. Vol 25 Issue 10 Oct 2003
A journal concerning the management of technology, copyrights and trade names
European
Intellectual
Property
Review
Intellectual Property and Competition:
Does the Essential Facilities Doctrine
Shed Any New Light?
GregoryV.S. McCurdy
mcnviscj
SWEET & tVIAXWELL
ISSN 0142-0461

3. 472 MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [20031 E.I.P.R.
For years, legal scholars and practitioners on both sides
of the Atlantic have grappled with the complexities that
may arise in applying competition law to commercial
disputes involving intellectual property (“IP”). In a
handful of recent cases, plaintiffs have invoked a novel
competition law and antitrust theory known as the
“essential facilities” doctrine to challenge a defendant’s
exercise of its IP rights. Plaintiffs in these cases typically
contend that the defendant’s refusal to provide access to
certain IP under reasonable terms unlawfully impeded
the plaintiff’s ability to compete in a downstream
market.
The essential facilities doctrine first arose in the
United States in an effort to analyse refusals to deal
involving physical facilities and tangible assets. It has
gradually been adapted for similar purposes in Europe.
But attempts by plaintiffs to extend it to the analysis of
situations involving refusals to license intangible intel
lectual property rights are more recent, and thus far less
successful, at least in the courts. This raises the ques
tion whether the doctrine offers any significant advance
over traditional refusal-to-deal analysis, and specifically
whether the doctrine sheds any new light on the proper
competitive boundaries on refusing to license intangible
property rights like copyrights and patents.
The author is not sure that he can fully answer those
questions here. But the proper foundation for any con
structive discussion is a solid overview of how the doc
trine has, and has not, developed in the courts. Because
the author is a US practitioner, and because during his
time in Europe he has heard many there invoke the US
experience to ascribe a broader scope, and more
“potency”, to the doctrine in the IF context than it has
really achieved, he plans to focus primarily on the US
case law and offer only a limited comparison to the EU
body of decisions.
Greg McC’urdy is an attorney at Microsoft Corporation based in
Seattle, Washinxson, United States, where he manages US and Inter
national commercial and competition law disputes. Mr MoCurdy
graduated from Harvard University and studied law at NYU and
Kings College London. He practiced lass in New York befare joining
Microsoft’s legal department in Paris where he was based from
2000-2002. The views expressed herein are solely those of the author
and de not necessarfy represent the position of Microsoft Corpora-
The first part of this article examines how US courts
have interpreted the essential facilities doctrine in vari
ous contexts, including a limited number of cases in
which plaintiffs have sought, unsuccessfully, to use the
doctrine as a basis for attacking a defendant’s exercise
of its IP rights, This survey shows that, of those courts
that have accepted the essential facilities doctrine, they
have tended to interpret the doctrine narrowly and have
been reluctant to extend it beyond situations in which
the defendant’s control of the facility in question ena
bled it effectively to eliminate competition in the down
stream market. Merely possessing an advantage, even a
considerable one, is not enough, and the ability of a
plaintiff or others to achieve even quite small gains in
market share without access to the facility will normally
be enough to defeat an essential facilities claim. It also
suggests that a defendant’s otherwise lawful invocation
of its intellectual property rights will rarely, if ever, form
the basis of a successful claim.
The second part of the article then discusses, much
more briefly, the development of the essential facilities
doctrine in EU decisions and suggests that a similarly
narrow interpretation of the doctrine may be emerging
in Europe as well.
The Essent& FacWties Doctrine under US
Law
Although the contours of the essential facilities doctrine
are, in the words of one federal appeals court, “still far
from clear”,1 courts that have endorsed the doctrine
generally view it as a specific instance of the broader
category of antitrust claims based on unlawful refusals
to deal. Essential facilities claims typically arise where
an actual or potential monopolist refuses to provide a
competitor access to a facility that is alleged to be
“essential” to competition. Plaintiffs often invoke the
doctrine to support a claim that a vertically integrated
monopolist should be required to share a specific input
with its competitors in a downstream market.2
Thus:
“[t]he essential facility claim is about the duty to deal of
a monopolist who is able to supply an input for itself in a
fashion that is so superior to anything else available that
others cannot succeed unless they can access this firm’s
input as well.”
By controlling an essential facility, a monopolist is
alleged to be able to extend its monopoly “from one
stage of production to another and from one market
into another”.4
As a “recent addition to antitrust jurisprudence”,5
I City ofAnaheim uS Cal Edison Co 955 F. 2d 1373, 1379 (9th
Cir. 1992).
2 Because most essential facilities claims focus on the actions
of a single firm, rather than on an unlawful agreement or combi
nation, such claims usually arise under s.2 of the Sherman Act.
See, e.g., Alaska Airlines, Inc. v United Airlines, Inc., 948 F. 2d
536, 542 (9th Cir. 1991), cert, denied, 503 U.S. 977 (1992).
3 lilA Phillip P. Areeda and Herbert Hovenkamp, Antitrust
Law ¶ 771a, at p.174.
4 MIC’ommunications Corp vAT&To 708 F. 2d 1081, 1132
(7th Cir, 1983), cert, denied, 464 U.S. 891 (1983),
5 TGA Bldg Co v Northwestern Res Co 873 F. Supp. 29, 39
‘rex. 1995).
Intellectual Property and
Competition: Does the
Essential Facilities
Doctrine Shed Any New
Light?
GREGORY V. S. MCCURDY
Microsoft Corporation, Redmond, WA, USA
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5. MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [20031 E.LP.R 473
the essential facilities doctrine has never been expressly
endorsed by the US Supreme Court° and has been
disparaged by leading antitrust scholars. For instance,
Professors Areeda and Hovenkamp (authors of the
leading treatise on US antitrust law) have criticised the
doctrine on the ground that requiring a firm to offer its
competitors access to a key upstream asset generally
does not help consumers, because price and output
generally remain the same while the right to share in the
monopoly reduces the incentive of competitors to
develop competing upstream assetst: “Forcing a firm to
share its inputs with a rival is an exceptionally drastic
antitrust remedy, having the consequences of preserv
ing the monopoly and often of turning the defendant’s
facility into what amounts to a public utility. “
Areeda
and Hovenkamp conclude that: “the ‘essential facility’
doctrine is both harmful and unnecessary and should
be abandoned”.9
Despite this rather tenuous foundation, it is not
uncommon for plaintiffs to raise essential facilities argu
ments in the context of broader challenges to alleged
anti-competitive activity. The leading formulation of
the essential facilities doctrine, first articulated by the
Court of Appeals for the Seventh Circuit in M’I Com
munications, requires the plaintiff to show:
(1) control of the essential facility by a monopo
list;
(2) a competitor’s inability practically or reasonably
to duplicate the essential facility;
(3) the denial of the use of the facility to a com
petitor; and
(4) feasibility of providing the facility)0
Also, courts refuse to recognise essential facilities claims
unless the plaintiff and defendant actually compete in a
downstream market. For instance, in America Online,
Inc v Greatdeals. nez,” a distributor of unsolicited bulk
email messages—commonly known as “spam”
—claimed that AOL’s efforts to block its messages from
reaching AOL subscribers constituted denial of access
to an essential facility (the facility in this case being
AOL’s Internet access nodes).’2 In rejecting this claim,
the court held that “[t]he essential facilities doctrine is
inapplicable where the alleged monopolist and the
6 Us courts often trace the essential facilities doctrine to three
Supreme Court decisions, United States v Terminal RailroadAsso
c,anon 224 U.S. 383 (1912) involved control of a railroad bridge
crossing the Mississippi River at the only point where a bridge
could be built to serve that part,cular region Associated Press e
United States 326 U.S 1 (1945) involved admission and access to
the Associated Press wire ‘ervice from which citl and reg,onal
newspapers could obtain national and international ne s stories.
Otter Tail Power Coo United States 410 U.S. 366 (1973). involved
access to an electrical power transmission line which constituted
a natural monopoly within a traditionally regulated industry
None of these dec,s,ons, hossever, expressly endorses an essen
tal facilities doctrine The first two cases concerned agreements
among competitors held illegal under s. 1 of the Sherman Act.
Otter Tad. uhile involving un,lateral conduct, irnolved a number
of ,ue geris isSues and does not actually endorse the essential
fac,,ues dcctrute a,
7 Areeda and Hmenkornp. 3 abase. 771h. at
cc
s
at
41C1,n.4thosc,atU3f .1c3
C 49F Sorr 2c1S5 EU To
plaintiff do not compete”,’3 and noted that the distrib
utor had “fail[ed] to allege or plead any facts from
which the court could infer that [the distributor] and
AOL are competitors”.’4
Although the MCI articulation of the essential facili
ties doctrine, on its own, could conceivably be inter
preted to encompass a broad range of conduct, US
courts have read the doctrine narrowly. The following
survey of cases examines how courts in the United States
have applied the doctrine in various factual scenarios.
Control of an essential facility
The first element of the MCI test examines whether the
facility to which the plaintiff was denied access is in fact
“essential”. In addressing this issue, courts have held
that a facility will be deemed essential “only if control of
the facility carries with it the power to eliminate com
petition in the downstream market”,’5 or if denial of
access to the facility “inflicts a severe handicap on
potential market entrants”)’ At least one court has
also suggested that, to establish a successful essential
facilities claim, “[t]he power to eliminate competition
must not be momentary, but must be at least relatively
permanent”.’6
In practice, courts generally deem a facility to be
essential only if denial of access to the facility eliminates
even the possibility of competition in the downstream
market, Thus, in MCI and Covad Communications, the
defendants’ refusal to provide plaintiffs with access to
defendants’ local telephone exchanges (i.e. the “local
loop”) made it impossible for plaintiffs to offer tele
communications services to potential customers,
thereby totally excluding plaintiffs from the relevant
downstream markets.’7 Likewise, a defendant’s refusal
13 ibid.
14 ibid. Accord Intergraph Corp v Intel Corp, 195 F. 3d 1346,
1356—1357 (Fed. Cit. 1999) (holding that, under essential facili
ties doctrine: “there must be a market in which plaintiff and
defendant compete, such that a monopolist extends its monop
oly to the downstream market by refusing access to the facility it
controls”).
15 Paladin Associates, Inc v Montana Power Go 328 F. 3d 1145,
1163 (9th Cit. 2003) (citingAlaska Airlines, Inc v UnitedAirlines,
Inc 948 F. 2d 536, 544 (9th Cir, 1991), cert. denied, 503 U.S. 977
(1992)); accord Covad Communications Co v BellSouth Carp 299
F. 3d 1272, 1284 (11th Cir. 2002) (holding that essential facility
is one “without [access to] which a competitor cannot enter or
compete in a market”).
iSa Fishman v Wirtz 807 F. 2d 520, 539 (7th Cir. 1986).
Despite the superficial differences between these two formula
tions (i.e. eliminate competition v severe handicap), in practice
courts often conflate them. See, e.g., Advanced Health-Care Servs
Inc v Giles Mem’l Hasp 846 F. Supp. 488, 498 WD. Va. 1994)
(“Plaintiff must show that this denial [to the facility in question]
inflicted a ‘severe handicap’ that threatened to eliminate com
petition in the market ) (quoting Twin Labs Inc v Weider
Health & Fitness 900 F. 2d 566, 569—570 (2d Cir. 1990)).
16 AlaskaAirlines, 948 F. 2d at 544 nil.
17 See MCI, n.4 above, 1133 (involving provision of long-
distance and related telephone services); Covad Communications,
0.15 above, at i286—l288 (involving provision of DSL internet
access serv,ce’u accord Metranet Services Core u U S. ITaSi Corn—
municatio’,s 329 F. 3d 986. 1010—1013 (9th Cd. 2003) (holding
that the plaintiff adduced sufficient evidence that the defer.
oanrs- pricing policy for access to local loop macic it meoss-ibie
for the plaintiff to compete profitably svrth the defendant in
telecommunications services marker to w,thstand motion for
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6. 474 MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [2003] ELP.R.
to lease its stadium to a competing potential purchaser
of a professional sports franchise was deemed denial to
an essential facility where the sport’s governing body
refused to award the franchise to any party that could
not secure such a lease (a decision based in part on
defendant’s behind-the-scenes lobbying of the govern
ing body).’8
Where, by contrast, access to the facility in question
is not a pre-requisite to participation in the downstream
market, courts generally hold that such facilities are
non-essential—with little regard for the financial hard
ship that defendant’s actions impose on competitors.
Thus, in City ofAnaheim, a utility’s facility for accessing
an inexpensive source of electricity was deemed non
essential even though the utility’s refusal to grant access
to competitors in certain retail markets gave the utility a
substantial competitive advantage in those markets.’9
Similarly, in Alaska Airlines, the court held that the
defendant airlines’ proprietary computerised reserva
tions systems were not essential facilities—despite the
defendants’ ability to use these facilities to extract sub
stantial bookings fees from its competitors—as the sys
tems did not actually give defendants the “power to
eliminate competition in the downstream air transporta
tion market”.2°
Finally, proof that a defendant’s competitors were
able to increase market share without access to the
facility in question—regardless of the impact that denial
to the facility may have had on the plaintiff—will almost
always prove fatal to an essential facilities claim.2’
lnabWty to duphcate
The second element of the MCI test examines whether
competitors could “practically or reasonably. . . dupli
cate the essential facility”.22 As the Ninth Circuit has
noted, this inquiry is really a subset of the first MCI
element, as the inability to duplicate the facility “is
effectively part of the definition of what is an essential
facility in the first place. That is to say, if the facility can
be reasonably or practically duplicated it is highly
unlikely, even impossible, that it will be found to be
essential at all”.23 Nevertheless, most courts address the
first and second elements of the MCI test separately.
Here again, courts tend to construe this element nar
rowly, and the mere fact that duplication of the facility
would be costly or burdensome is usually deemed insuf
ficient to satisfy this element. Rather, plaintiffs tend to
succeed only where duplication of the facility would be
nearly impossible. As the Second Circuit has
observed:
18 See Fishman, n.15a above, at 539—540.
19 See City ofAnaheim, n.j above, at 1380—1381; accord Mid
west Gas Servs, Inc v Indiana Gas Co 317 F. 3d 703, 7 13—714
(7th Cir. 2003) (holding that direct interconnect to the defer,
dant’s gas pipeline was not an essential facility where the plaintiff
could access pipeline through a more expensive, indirect route.
reasoning that “the most economical route is not an essential
facility when other routes are available”).
20 Alaska Airlines, n,16 above, at 544—545 (emphasis added).
21 See, e.g., Twin Labs Ins, n,15a above, at 569—570;Advanced
HeaitlwGarc Servo ins, ni Sa above, at 498,
22 MGI, n,4 above, at 1132.
23 City ofAnahelin, n. I above, at 1380.
“A leading antitrust commentator would limit the analy
sis to ‘facilities that are a natural monopoly, facilities
whose duplication is forbidden by law, and perhaps those
that are publicly subsidized and thus could not practica
bly be built privately.’ Most of the successful essential
facility claims fall within the categories stated by this
commentator. In cases finding liability in other catego
ries, however, the facility in question was more than dom
inant; it was effectively the only one in town.”24
In Laurel Sand ‘ Gravel, Inc v CSX’ Transportation,
Inc,25 the court held that a national railroad’s refusal to
permit the plaintiff, a competing “shortline” railroad, to
use 1,700 feet of track did not support an essential
facilities claim, as the plaintiff could have built alter
native tracks or purchased rail service from the national
railroad.26 The court reached this conclusion despite
evidence that either alternative would have prevented
plaintiff from profitably offering competitive rates to
certain customers. Similarly, in Olympia Equipment
Leasing v Western Union Telephone Co,27 the court held
that defendant’s abrupt demand that its salesforce not
refer competing products to potential customers did not
support an essential facilities claim, as competitors
could simply hire their own salespeople.28 Evidence that
the defendant’s actions ultimately drove the plaintiff out
of business was deemed insufficient to establish an ina
bility to duplicate.
Plaintiffs that have succeeded in satisfying the second
element of the MCI test typically show that duplicating
the facility in question would have been nearly impos
sible. For instance, the courts in both MCI and Covad
Communications noted that neither plaintiff would have
been likely to obtain regulatory approval to duplicate
the type of local loop facilities to which they sought
access. 29
Denial of use of the facility
The third element of the MCI test examines whether
the defendant denied “use of the facility to a com
petitor”.3° Although proof of outright refusal to deal is
normally sufficient, courts have also indicated that
proof that the defendant “fail[ed] to make access to that
facility available to its competitors on fair and reasonable
terms” may also be adequate to support a finding for the
plaintiff.3’
Despite the apparent breadth of the “fair and reason
able terms” formulation, courts generally tend to look
for some evidence of bad faith that amounts to an effec
tive refusal to deal.32 Allegations that plaintiff’s access
24 Twin Labs, n. l5a above, at 569 (citations om,tted).
25 924 F. 2d 539 (4th C,r. 1991), cert. denied, 502 US. 814
(1991),
26 ibid. at 544—545.
27 797 F. 2d 370 (7th Cir, 1986), sew, denied, 480 US. 934
(1987).
28 tbzd. at 376—379
29 See MGI, n.4 above, at 1133; Cot ad Communzeations, n.15
abes.o. a: :285
30 MCI, n4 sOme, at 1133
31 Gonad Comnmovations, n,15 above, at 1287 (emphinzs by the
‘arr (quoting United States v ATdyT 524 F Supç 1336.
1352—1353 (DDC 198i))
32 See, e.g., Fishman, n,I Sn aoove, at 540 (holding that offer of
‘,sce to sports arena “did not show that [defendant] we” willing
t’ deal with [pUnnfl] on non’.diacriminatory terms
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7. MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [2003] ELP.R. 475
to the facility was more expensive andior burdensome
than defendant’s access will normally be insufficient,
For instance, in Advanced Health-Care, the court held
that a hospital’s decision to grant in-hospital office
space and direct patient contact to one medical equip
ment provider (in exchange for a percentage of sales)
and to deny such access to the provider’s competitors
did not amount to a denial of access to hospital
patients.33 And inAlaska Airlines, the court held that the
booking fees charged by the defendant airlines to their
competitors for use of the defendants’ computerised
reservations systems did not constitute a denial of
access, on the ground that—given the plaintiffs’ con
tinued use of these systems—it was clear that “neither
[defendant has] ever set this fee at a level that would
drive their competitors away”.34
Feasibility of providing the facility
The fourth and final element of the MCI test examines
the feasibility of the defendant’s providing access to the
essential facility.35 As in other areas of antitrust liability,
a defendant that offers a legitimate business justification
for its refusal to provide access will normally avoid
liability.36
Laurel Sand illustrates the extent to which courts will
defer to a defendant’s real-world business needs in eval
uating feasibility. In denying an essential facilities claim
based on a railroad’s refusal to allow a competitor to use
of a portion of its tracks, the court stated:
“The feasibility of providing access to the tracks must be
analyzed not in terms of all the possibilities of [defen
dant] as a railroad, but in the context of its normal course
of business. There is no evidence that [defendant] rents
track to subsidiary railroads. Within its existing course of
business, providing rail transportation service, it is not
feasible for [defendant] to rent track to [plaintifi].
[Defendant] has articulated a number of legitimate busi
ness reasons for refusing trackage rights, including alter
ing its relationship to ‘feeder’ lines, upon which it relies
for profitable traffic. As the district court noted, for
[defendant] to rent track, it would alter its relationship to
feeder railroads and transform itself into a ‘toll collec
tor.’ “ar
US Essential Facilities Cases InvoMng P
Relatively few US cases have involved essential facilities
claims based on a company’s handling of its intellectual
property. Of those that exist, most do not directly
33 See n.15a above, at 498.
34 See n.15 above, at 545.
35 See n.4 above, 708 F. 2d at 1133.
36 See, e.g.. City ofAnaheim, 0.1 above, at 1380 (holding that
“the fourth element [of the MCI test] basically raises the familiar
question of whether there is a legitimate business justification tor
the refusal to provide the facihtv”).
37 ni.25 above, at 545 see ado o1d:md Health-Care Seree,
ni3a above, at 498 (holding that the plantiffs proposai that the
deteneant hospital give med,cal dev,ce dealers in-hospta1 Occess
to atients on a rotating basic was not leastn!c gIven the hospc
address whether—and if so under what circum
stances—a company’s handling of its own IP may merit
treating such IP as an essential facility.38
Perhaps the most instructive case in this area to date
is Data General C’orp v Grumman Systems Support
c’orp. °
In this case, Data General (“DG”), which man
ufactured computer systems and offered maintenance
services for these systems, developed a proprietary soft
ware program, dubbed the “MV/ADEX”, that it used
to diagnose and repair customer systems. When DG
learned that Grumman, a third-party provider of com
puter repair services, was using the MV/ADEX without
DG’s permission, DG sought and obtained a prelimi
nary injunction against Grumman prohibiting such use.
In response, Grumman challenged DG’s licensing of
MV!ADEX, contending that the diagnostic program
was an essential facility and that DG’s refusal to license
the program to Grumman was an unlawful effort to
monopolise the market for maintenance and repair of
DG computer systems.
In rejecting Grumman’s essential facilities claim, the
court offered a detailed perspective on the boundaries
of the essential facilities doctrine when used to chal
lenge a rightholder’s handling of its own intellectual
property:
“The bottleneck which DG is alleged to control is the
understanding of its own computer systems. Presumably,
if [Grumman and similar competitors] were provided
with all the schematic information about the system, they
would be able to produce a diagnostic that is as fully
capable as MV!ADEX, It is DG’s position as the manu
facturer that allegedly gives it the capability to produce
the alleged essential facility. The case law has consistently
affirmed that a manufacturer is under no obligation to
pre-disclose or disclose its knowledge about its products
so that competition may arise in the related peripheral
hardware, software, and repair services markets. The
underlying thrust of Grumman’s essential facilities claim
is that if it cannot force DG to share its knowledge, the
essential facilities doctrine requires DG to share the fruits
of its knowledge. As the First Circuit stated in a different
factual context, ‘[t]his view of the essential facilities doc
trine, however, considerably overstates its scope.’ “°
The court went on to conclude that DG’s:
“superior knowledge in the design of DG computers is
insufficient to invoke the essential facilities doctrine; a
better mousetrap is not necessarily an essential
facility. . . If manufacturers of complex and innovative
systems were required to share with competitors the
development of accessories, because they had a possibly
absolute advantage through producing the system, the
incentives of copyright and patent laws would be severely
undermined. Not only would the manufacturer, who is in
the best position to create these accessories, have less
incentive to do so, but also the impetus for competitors to
reverse engineer and produce competing solutions would
be reduced.”4’
38 See. e.g., Teiecemm Thchnical Serrs, Inc v Siemens Robs Corn
rnumcarzens, Inc 66 F. Supp. 2d 1306, 1318-4319 (ND, Ga.
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8. 476 MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [2003] E.LP.R
A sensible reading of the court’s opinion would seem
to suggest that plaintiffs seeking to establish an essential
facilities claim based on a firm’s handling of its own IP
may be required to show that the defendant’s control
over the downstream market in which the plaintiff com
petes extends above and beyond the control that natu
rally flows from the exercise ofthe IP rights themselves.
Such an interpretation finds support in more recent
cases in which plaintiffs sought, unsuccessfully, to rely
on essential facilities arguments to challenge refusals to
license involving v1icrosoft and Intel. In In re Microsoft
Corp Antitrust Litigation,42 the plaintiffs, as part of a
broader set of anti-trust claims, alleged that the “specifi
cations for the Windows operating system” constituted
an essential facility and, accordingly, that Microsoft was
under a duty to disclose information about the specifica
tions to potential competitors. The court granted sum
mary judgment for Microsoft on this claim, observing:
“[T)o require one company to provide its intellectual
property to a competitor would significantly chill innova
tion. [Citations to cases including Data General omitted]
Morevoer, because the software development industry is
dynamic and involves continuous innovation, a require
ment that Microsoft disclose significant information to its
competitors would be unworkable. Who would deter
mine what information is “significant?” At the least, the
determination would have to be subject to judicial scru
tiny by judges who lack the competence—either as direct
decisionmakers or as reviewing authorities—to decide the
technical issues involved. Delay and confusion would be
inevitable, and the software process would be strangu
lated.”43
The court went on to explain that even if it assumed the
essential facilities doctrine was properly applicable to
Windows specifications, the plaintiffs could not succeed
in the absence of showing that Microsoft in fact denied
access. Instead, the plaintiffs had argued that Microsoft
provided only partial or late access to Windows specifi
cations through its acknowledged programs for provid
ing Windows information to independent software
developers, and could in theory have denied access
entirely. The court concluded that even if Microsoft had
used its superior knowledge of its own APIs to obtain a
“first mover advantage” in software applications mar
kets, “the essential facility doctrine has never been
interpreted to deny a person the right to gain temporary
benefits from innovations to its own products”.44
Likewise, in David L. Aidridge Co v Microsoft Corp,”
a producer of disk cache software claimed that Micro
soft’s alleged failure to disclose certain design details
about Windows 95 constituted a refusal to provide
access to an essential facility. In rejecting that claim, the
court held that the plaintiff had failed to prove that
Vindows 95 was an essential facility, or that Microsoft
illegally denied the plaintiff access to Windows 9546
42 — F. Supp. 2d (D. Md., slip op. June 6, 2003) (Motz
J,),
43 ibid. at 2.
44 ibid. at 4.
45 995 F. Supp. 728 (S.D. Thx, 1998).
46 ibid. at 752—756. The court in A.ldridge assumed, for pur
poses of its analysis, that Microsoft held monopoly power in the
worldwide market for personal computer operating systems, but
emphasised that it was .making “no independent finding or hold
ing that Microsoft is a monopolist” (at 752, n.140),
Among other things, the court reasoned that a facility is
“essential” only if it is necessary for the plaintiff’s
“competitive viability,” and observed that plaintiff had
“present[edj no evidence that the entire relevant secon
dary product market for disk cache programs has dis
appeared” .
In the case of Intergraph Corp v Intel Corp,48 Inter
graph, a manufacturer of computer workstations, sued
Intel for patent infringement, which prompted Intel to
terminate Intergraph’s access to advance proprietary
information concerning Intel’s future generations of
CPU microchips (which Intel provided to certain “stra
tegic” customers under non-disclosure agreements,
therefore qualifying such information for trade secret
protection),49 Intergraph claimed that Intel’s actions
deprived it of an essential facility without which it could
not compete.5° The district court accepted Intergraph’s
essential facilities claim and issued a preliminary
injunction requiring Intel to disclose a range of proprie
tary information and other intellectual property.5’
On appeal, the Federal Circuit reversed and vacated
the preliminary injunction.52 The court reasoned that
the essential facilities doctrine provided no basis for
overriding Intergraph’s right to withhold its intellectual
property when Intel did not compete with Intergraph in
the downstream workstation market.53 The court
observed that, under essential facilities doctrine, “there
must be a market in which plaintiff and defendant com
pete, such that a monopolist extends its monopoly to
the downstream market by refusing access to the facility
it controls”.4
In so holding, the court also set forth its views on the
limits of the essential facilities doctrine in cases where a
plaintiff seeks to acquire access to a defendant’s propri
etary information:
“The courts have well understood that the essential
facility theory is not an invitation to demand access to the
property or privileges of another, on pain of antitrust
penalties and compulsion; thus the courts have required
anticompetitive action by a monopolist that is intended to
‘eliminate competition in the downstream market,’ This
understanding is seriously strained by the district court’s
holding that ‘reasonable and timely access to critical busi
ness information that is necessary to compete is an essen
tial facility,’ although the asserted competition is in a
different market. A non-competitor’s asserted need for a
manufacturer’s business information does not convert
the withholding of that information into an antitrust
violation. “s’
The court concluded:
“The notion that [the] withholding of technical informa
tion and samples of pre-release chips violates the Sher
man Act, based on essential facility jurisprudence, is an
47 ibid. at 752 (citing Fishman, n.15 above, at 539, and TGA
Bldg, n.5 above, at 39).
48 195 F. 3d 1346 (Fed. Cir. 1999),
49 ibid. at 1349—1350.
50 ibid. at 1350, 1356—1358.
51 See Intergraph Corp a Intel Carp, 3 F. Supp. 2d 1255 N.D.
Ala, 1998).
52 See Intergraph carp, n,48 above, at 1367.
53 ibid. at 1357—1358.
54 ibid. at 1357.
55 ibid. at 1357 (citations omitted).
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9. MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [2003] E.LP.R 477
unwarranted extension of precedent and can not be sup
ported on the premises presented. The district court
erred in holding that Intel’s superior microprocessor
product and Intergraph’s dependency thereon converted
Intel’s special customer benefits into an ‘essential facility’
under the Sherman Act. The court’s ruling of antitrust
violation can not be sustained on this ground.”
These cases suggest that US courts will generally be
reluctant to accept the essential facilities doctrine as a
valid basis for compelling an intellectual property right-
holder to license its IP to competitors in a downstream
market. With such a limited number of cases to exam
ine, however, it may be premature to say that a US court
will never condemn a refusal to license IP to competitors
under an essential facilities analysis. But case law in the
non-IP area suggests, at a minimum, that it would need
to be impossible, or nearly so, for competitors to attain
any market share in a properly defined relevant market
without such a licence.
In the meantime, however, it seems likely that US
cases examining the proper boundary between antitrust
law and intellectual property rights will continue to
focus more heavily upon the debate between the posi
tions staked out by the respective appellate courts in
Image Technieal Services Inc v Eastman Kodak,57 on the
one hand, and the Federal Circuit in CSU, L.L.C. v
Xerox Corp, on the other. In Kodak, the Ninth Circuit
indicated that a defendant’s exercise of its IP rights will
be presumed to provide a valid business justification for
conduct that has an anticompetitiVe effect, but that this
presumption may be rebutted with evidence that the
defendant’s handling of its IP was in fact a “pre
text[j . . . to mask anticompetitive conduct”.59 In
Xerox, the Federal Circuit expressly rejected such reli
ance on a defendant’s subjective motivation in gauging
the lawfulness of its exercise of IF rights.°° Instead, the
court held:
“In the absence of any indication of illegal tying, fraud on
the Patent and Trademark Office, or sham litigation, the
patent holder may enforce the statutory right to exclude
others from making, using, or selling the claimed inven
tion free from liability under the antitrust laws. We there
fore will not inquire into his subjective motivation for
exerting his statutory rights, even though his refusal to
sell or license his patented invention may have an anti-
competitive effect, so long as that anticompetitive effect is
not illegally extended beyond the statutory patent
grant.”
Thus both Kodak and Xerox endorse that view that the
ownership and exercise of IF rights constitutes a legit
imate business justification that will presumptively
defeat an allegation of anti-competitive conduct based
on a rightholder’S refusal to license its IP to competitors
(although these courts disagree on the type of evidence
that may rebut this presumption). This position strikes
one as having greater analytical force than the essential
facilities doctrine in the IP context, as it compels courts
56 ibid ar 1357—1358
57 125 F. 3a 1195 19th Cir 1997), cr dnzed. 523 U $ 1094
(1998
58 2o3 F 3d 1322 Fed Ci 2002,, er d’nzed 531 U ,14
0 1,
59 See I’ncçs Tetho”ai Sarzs i2 F 3d at 1219—122’
6 Se’i Sc e at13
01 b;J ‘t 1a2’-128
to focus more directly on the real substance of when, if
ever, it is appropriate for antitrust law to place limits on
the exercise of the core right of intellectual property
—specifically, the right to exclude others.
The Essential Facilities Doctrine under EU
Law
Having devoted most of the available space to an over
view of US essential facilities case law, the following
comparison to development of the concept in EU. deci
sions is necessarily truncated. Hopefully, it is useful for
discussion despite its brevity.
Decisions of the European Commission
On the European side, the Commission introduced the
analytical term “essential facilities” into EU competi
tion law only quite recently in a line of decisions during
the 1 990s involving transportation infrastructure. The
Commission first used the full term “essential facility”
explicitly in 1992 in an interim measures decision in
B&I Line plc v Sealink Harbours Ltd and Sealink Stena
Ltd.62 The Commission found that Sealink held a domi
nant position in a market for provision of port services
between the United Kingdom and Ireland by control
ling the only suitable port on the UK side, and abused
it by granting preferential treatment to its own ferries
versus those of its competitors. The Commission stated
Sealink’s violation of Art.86 as follows:
“A dominant undertaking which both owns or controls
and itself uses an essential facility, i.e. a facility or infra
structure without access to which competitors cannot
provide services to their customers, and which refuses
access to that facility or grants access to competitors only
on terms less favorable than those which it gives its own
services, thereby placing the competitors at a competitive
disadvantage, infringes Article 86.”'’
A number of similar decisions followed, including Port
of Rodby,6’ Sea Containers v Stena Sealink,’5 Brussels
Airport,66 and Frankfurt Airport.67
One example on facts that did not involve ports or
airports is La Poste/SWIFT + GUF,85 but even here, the
case involved the conclusion that SWIFT was an
“essential facility” because it was the only operator in
the world of an international network for transfer pay
ment messages, and anyone denied membership would
be completely excluded from the international transfer
market.
Because the Commission’s essential facilities deci
sions in the 1990s occurred in the context oftransporta
tion infrastructure bottlenecks akin to Terminal
Railroad, where access to the facility was clearly an
absolute precondition to entry, they did little to shed
light on whether the concept of “essential” should be
62 Case 137/34.174 [1992] 5 C,ML,R. 255.
63 ibid. at 12 (emphasic addcd.
64 CommissiOn Decision No 94 119 [1994] 03 L55 52
65 Case IV;34.689, [1994] 03 L15i 8; [1995] 4 CM.LR 84
(port owner oneratmg arty reftised a cc s to e fert’
oitrant)
66 i935’ 03. L2l68
67 Commis’O’ Deci,102 98 190 [199I 03, 1,72 11.3 1atr
curt pera’or d med aces .0 tnde?e .dUE. baegaee hand e a,
8 Ca 1V3ft’20 [1997 0’ 3’56 I
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10. 47S MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [20031 E.I.P.R.
given any broader scope in other goods and services
cases or intellectual propertyr cases.69 However, the
Court of First Instance and tite ECJ have also stepped
in, and it is here where the degree of convergence with
the U.S. doctrine becomes nsa st apparent.
Decisions of the ECJ and the Court of First
Instance
In 1997, the Court of First Instance in Tierce Ladbroke
SA v EC Commission,7° faced a case involving a refusal
to license copyrights in whicit the complainant relied
both on the 1995 ECJ decision in Magill,7’ and on
essential facilities arguments. A Belgian betting oper
ator complained of the refusal of a French race course
society to license it to displiy televised coverage of
French horse races in its betting establishments. In a
parallel to the US Intergraph decision, the court
declared that the refusal to license could not be
regarded as anti-competitive in circumstances where
the defendants were not theni selves competing in the
downstream betting market in which Tierce Ladbroke
was operating. More importantly, however, the court
stated that even if this were not a factor, the refusal to
license could not be held to e an abuse within the
meaning of Magill because:
“the televised broadcasting of horse races, although con
stituting an additional, and indeed suitable service for
bettors, it is not in itself indisj’ensable for the exercise of
the bookmakers main activity, namely the taking of bets,
as is evidenced by the fact that the applicant [Tierce
Ladbroke] is present on the Belgian betting market and
occupies a significant position as regard bets on French
races.“72
A few months later, the Court of First Instance fol
lowed its own Tierce Ladbrokc reasoning in European
69 However, it was not lost oroornplamants in refusal to deal
cases that the Commission tended to state the basis for these
decisions in more general tenis, somewhat divorced from
the absolute nature of the factual settings. For example, in the
XXVth Report on Competitiosa Policy (1995), at point 40, the
Commission states: “Where a dominant company owns or con
trols a facility access to which it essential to enable its com
petitors to carry on business, it way not deny them access, and
it must grant access on a non-discriminatory basis.” This can be
read to mean an essential facility controls the ability of all com
petitors to carry on business. Ic. the XXV1th Report en Com
petition Policy (1996), at point 5,the Commission formulated
it this way: “Examples of such illegal behavior include: refusal to
deal as a means of eliminating acomnpetitor by a firm that is the
sole or dominant source of supply of a product or that controls
access to an essential technology or infrastructure . . .“ For a
more complete account of the development of the Commission’s
thinking, see John Temple Laag, “Defining Legitimate Com
petition: Companies’ Duties to Scapply Competitors and Access
to Essential Facilities” Decesnbor 1994) 18 Ferdham Int’l L,J,
437; and John Temple Lang, ‘S4edia, Multimedia and Euro
pean Community Antitrust Law” (April 1998) 21 Fordham In’
LI. 1296.
Cave T-534 03 (997 5 CM.L.R. 349.
1 Cases C- 241 & 242/9] R RTH end ITP Covv:vvdssi’n 119951
I II CR 743 (19951 4 C.M.L& 118.
Night Services v EC commission.73 Faced with claims
that the defendant’s refusal to deal in a non-IP context
violated the essential facilities principle, the Court
declared that, “under the case law on the application of
Article 86”, locomotives and train crews belonging to
the parties to a joint venture could not be considered
“essential” to competition in a downstream market, jus
tifying imposition of a duty of non-discriminatory
access, “unless there are no viable alternatives available
to potential competitors”.
The general analysis applied by the Court of First
Instance in Tierce Ladbroke was confirmed a year later
by the ECJ in Oscar Bronner GmbH & Co KG v Media-
print Zeitungs- und Zeitschriftenuerlag GmbH & Co KG.74
Oscar Bronner was the Austrian publisher of a national
daily newspaper holding between 3.6 and 6 per cent of
the Austrian market. Mediaprint was the much larger
publisher of two national daily newspapers holding a
combined market share of between 42 and 46.8 per cent
of the market. In addition, Mediaprint had established
a nationwide home delivery network designed to get its
papers on readers’ doorsteps early in the morning.
Oscar Bronner sought access to Mediaprint’s distribu
tion system and was refused; it invoked the essential
facilities doctrine in its subsequent court challenge.
In his opinion, Advocate General Jacobs noted that
the ECJ had yet to refer expressly to the essential facili
ties doctrine by name, while it had “come to play an
important role” in the Commission’s practice,75 He
urged the ECJ to reject Oscar Bronner’s claims:
“In the long term it is generally procornpetitive and in the
interests of consumers to allow a company to retain for its
own use facilities that it has developed for the purpose of
its business... . [T]he incentive for a dominant under
taking to invest in efficient facilities would be reduced if its
competitors were, upon request, able to share the benefits.
Thus the mere fact that by retaining a facility for its own
use a dominant undertaking retains an advantage over a
competitor cannot justify requiring access to it.”7°
He went on to recommend that the ECJ order access:
“only in cases in which the dominant undertaking has a
genuine stranglehold on the related market. That might
be the case for example where duplication of the facility
is impossible or extremely difficult owing to physical,
geographical or legal constraints or is highly undesirable
for reasons of public policy. It is not sufficient that the
undertaking’s control over a facility should give it a com
petitive advantage.”77
The Court did not expressly adopt all of the Advocate
General’s reasoning, but it did closely follow the sub
stance of his recommendation. The Court addressed
73 Joined Cases T374—375, 384 & 388/94 [1998] 5 C,M.L.R,
718.
74 Case C—7/97 [1199] 4 C.M.L.R, 112.
75 The Advocate General provides a fasric comprehensive
reveow of prIor ECJ decismons, the Tzerce Ladbreke decujon,
Lemnmass:on iecesvons. Jonas aempee Lnngs 0994 J’ordiaeam sub
messlon, arid US case law.
76 Advocate Geveerai’v Oocvcen
77 CL’ at 65.
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11. MCCURDY: INTELLECTUAL PROPERTY AND COMPETITION: [2003] BIER. 479
the application of its own earlier refusal to deal deci
sions in Commerciil Solvents,78 Telemarketing79 and
Magill to the effect on downstream competition in the
daily newspaper market in the event that Mediaprint
were found to have a dominant position in a market for
home delivery services. First, as to Commercial Solvents
and Telemarketing, the Court stated that while those
cases held:
“the refusal by an undertaking holding a dominant posi
don in a given market to supply an undertaking with
which it was in competition in a neighboring market with
raw materials, and services respectively, which were indis
pensable to carrying on the rival’s business, to constitute
an abuse, it should be noted, first, that the Court did so to
the extent that the conduct in question was likely to elim
inate allcompetition on the part ofthe undertaking.”°
Thus, under this formulation, the competitive effect
must be more than simply to disadvantage downstream
competition—the handicap must be absolute, Likewise,
with respect to Magill, the Court summarised the test as
follows:
“In MAGILL the Court found such exceptional circum
stances in the fact that the refusal in question concerned
a product.. the supply of which was indispensable for
carrying on the business in question.. . the fact that such
refusal prevented the appearance of a new product for
which there was a potential consumer demand, the fact
that it was not justified by objective considerations, and
that it was likely to exclude all competition in the secon
dary market”
Thus, in the Court’s view, “even if” Magill was applic
able outside the intellectual property context, Oscar
Bronner would have to show that the refusal to allow
access to the home delivery scheme would “be likely to
eliminate all competition in the daily newspaper market
on the part of the person requesting the service”, that
the refusal could not be objectively justified, and that
the service be “indispensable” to Oscar Bronner’s daily
newspaper business “with no actual or potential sub
stitute”.
The Court found that Oscar Bronner’s claim could
not succeed given the fact that Oscar Bronner and oth
ers were, in fact, presently competing on the daily news
paper market despite their lack of access to
Mediaprint’s network:
“In the first place, it is undisputed that other methods of
distributing daily newspapers. . even though they may
be less advantageous for the distribution of certain news
papers, exist and are used by the publishers of those daily
newspapers.”
Thus the effect ofthe refusal to supply did not eliminate
or prevent competition entirely, and so for the same
reason access to the facility could not be considered
essential or indispensable.
The Court’s treatment of Magill in the Oscar Bronner
decision certainly seems to cast doubt on whether the
Court is likely to accept an essential facilities argument
as a basis for widening the scope of circumstances when
compulsory licensing of copyrights is allowed on com
petition law grounds. On the one hand, the court was
reluctant to say that the same rules apply in Ii? and non
IP contexts, hedging with its “even if” statement on
applying Magill to Oscar Bronner’s claim. If so, and if
the essential facilities argument becomes recognised as
a valid argument with a somewhat lower standard in
non-IP contexts, then it does not necessarily cross over
into the distinct IP context. On the other hand, when
the court proceeded on its “what if” basis, it seemed to
indicate that Oscar Bronner’s claim failed under
Magill’s exceptional circumstances test for much the
same reason that it failed under the proposed essential
facilities analysis—the plaintiff was able to gain at least
some access to the downstream or related market
despite the refusal to deal. Viewed in this light, the
court could be understood as saying that it does not
matter whether one applies Magiil’s “exceptional cir
cumstances” holding or some version of the essential
facilities doctrine: both mquiries set the hurdle at the
same height, and the plaintiff clearly trips on it if the
defendant’s conduct does not have the effect of elim
inating competition in the relevant downstream mar-
ket,
Conclus!on
If one reads the foregoing decisions ofthe Court of First
Instance and the ECJ, and particularly Oscar Bronner, as
the author does, then it is relatively easy to understand
the author’s view that the treatment of the “essential
facilities” doctrine by the European and US courts is
converging in the direction of a requirement that the
facility in question be virtually indispensable to com
petition in the relevant downstream market, such that a
refusal to deal would cut off any possibility of com
petition.
This narrow scope seems particularly appropriate
when attempts are made to apply the doctrine to the
exercise of intellectual property rights. The author
tends to agree with the words of US commentators who
have stated that the term “essential facility” is “just an
epithet describing the monopolist’s situation: The
monopolist possesses something the plaintiffwants. It is
not an independent tool of analysis, but only a label”.8’
Just as the United States is left at the end of the second
section above considering the relative merits ofthe posi
tions put forward in Xerox and Kodak, so the EU is
better off considering the proper scope of the “excep
tional circumstan es” test set forth in Magill than seek
irg broaden the rca h of the essential facil tics
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12. 480 MCCURDY: INTELLECTUAIPRCPBRTY AND COMPETITION: [2003] EJP.R.
This position, the author weuLd submit, finds support
in the recent decision by the Prsident of the Court of
First Instance in IMS Health inc z BC Cornmission2 In
staying the Commission’s ixiterini order requiring a
copyright holder to license its proprietary data-report
ing system to competitors in the market in which the
defendant was alleged to be doixtinant (rather than in a
related downstream market), the President issued a
decision strongly suggesting that Magill’s “exceptional
circumstances” inquiry provides the proper framework
82 Case T—184’OI [2001] 4 C]4LR. 2.
for analysing competition law challenges to a righthold
er’s refusal to license.83 Because the Commission subse
quently withdrew its order in IMS Health, the question
whether Magill’s “exceptional circumstances” test
—rather than a new test based on some version of the
essential facilities doctrine—provides the proper frame
work for analysis in such cases will need to await further
clarification by the courts.
83 See Areeda and Hovenkamp, n.5 above, at ¶j 94-106. A
procedural challenge to the President of the Court of First
Instance’s stay of the Commission’s interim order was in turn
rejected by the President of the European Court of Justice See
NDC Health Corp v IMS Health mc, Case C—481!01 [2002] 5
CMLR, 1.
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