The Incentives Balance Test

The incentives balance test serves as a examination whether providing exclusive rights to intellectual property may be expected to force innovation or not. This test was supposed to bring a more “economics-based” approach to Article 82 of the Treaty. The question arises whether this test is conceptually appropriate, economically founded, and capable of providing an administrable legal tool. The test is controversial, both from the economic and legal perspective.

The problematic of Intellectual Property rights is really complex and has to be examined carefully case by case. That is the reason why many discussions about accuracy of using this new balancing test were opened.

The aim of the incentives balance test in Microsoft case was to dismiss the claim that the disclosure of interoperability information would have reduced its incentives to innovate.

The implementation of the balancing test in Microsoft case was following:

1) consider the negative impact of the order to supply on Microsoft incentives to innovate,
2) analyze if the possible negative effect is weighted off against the positive impact of the order to supply on the entire industry.

Only when the negative impact on the dominant undertakings´ incentives to innovate can outweigh the positive effects on innovation following on disclosure, Microsoft’s refusal to supply should be considered justified.

The first step consisted of assessing incentives to innovate by comparing 2 situations:

a) Microsoft will be forced to disclosure,
b) Microsoft anti-competitive behavior remains unfettered.

In the “Microsoft decision” the incentives balancing test stops at its first step, without need for further inquiry. The decision was that Microsoft incentives to innovate would be strongly reduced if Microsoft were entitled to continue refusing to supply the requested interoperability information. The latter view also implies that a formal trade-off between positive (for the industry) and negative (for the dominant undertaking) incentives on innovation becomes unnecessary.

The final decision of the Commission, which forced Microsoft to disclosure its information to the other competitors, has been made according to at least two logical reasons. The first reason is that disclosure of interoperability would increase competition in the industry. Second reason is that thanks to the greater competition should be expected more innovations.

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