competition and innovation in digital market: interference ...law.haifa.ac.il/images/ascola/ascola...

Anna Maria Siwierska

Competition and Innovation in Digital Market:

Interference of the Intellectual Property Law and the Competition law

in Tech Giants activities

Intellectual Property Rights and Competition Law have been compared to an unhappy marriage. While the first one ought to foster monopolies, the latter is in principle opposing them. The relation is even more complicated in the area on innovation and technology sector, where exploitation of intellectual property rights strongly affect competition rules.

Introduction

Amazon, Apple, Facebook and Google have replaced oil and gas and telecommunications firms

among the top 10 global companies based on market capitalisation in 2018. This means that Tech 1

Giants have challenged the current approach to doing business and conducting competition policy.

So far, the goal of a private company was maximising profits. The new business models are offering

a different perspective. In the short to medium term they prioritise growth and number of users over

economic gains, even if such actions leeway to incur losses. Instruments wich can lead to obtain

such dominance are different: starting from data usage and computer algorithms ending with

innovative business solutions. All of this factors have common ground - intellectual property rights

protection which can be used to create a competitive advantage not only over real competitors, but

also in some cases over company’s users and clients. What is more, while a scope of business

activities of High Tech is global, most of the legal issues are rarely relate to a single jurisdiction.

Therefore, there is a legitimate concern that with above-mentioned tools, dominant digital

companies have a strong incentive to engage in an anti-competitive behaviour. As a result, there

have been a range of recent investigations, where the European Commission has addressed its

competition rules to the very large tech giants with the US origin. Beginning at the Microsoft case

in 2007, coming through Intel, and recent Google cases, the EU has charged sanctions and fines on

the marquee US tech giants. In the same time the Federal Trade Commission and U.S. Department

Price Waterhouse Coopers, 2018, Global Top 100 Companies by Market Capitalization, 31 March 2018 Update 1

(London). 1

of Justice investigations has been much more muted and gave the different results. It appears that 2

global approach of those companies don’t have an equivalent neither in the IP, nor in the

competition regulation. Moreover, it appears that not only the EU - US scope of activities of the

High Tech companies is difficult. Accordingly, the aim of the paper is to analyse the legal interests

of the players of the High Tech market in the competition law framework, with the special focus on

the interference between intellectual property and competition law. The research will focus on the

analysis of violations of competition resulting from the exploitation of the protection of exclusive

rights to intangible goods. In the competition law perspective there are new threats in every form of

competitive abuse. In cartels it is primarily collusion through algorithms and virtual collusion

through the internet. In antitrust it’s “snow-ball” effects: quasi-natural monopolies, “fight for the 3

market”, creating barriers to entry. In mergers: elimination of potential competitors through

acquisitions; data accumulation effects, thresholds. The objective is to identify which areas of 4

competition regulation interfere with the scope of freedom resulting from the intellectual property

rights and what concepts should be adopted when assessing the behaviour of a dominant company

on the market. Afterwards, the aim is to analyse stakeholders rights and obligations in the

international law perspective, with a special focus on the EU regulations. The paper will answer

following questions: what is the interference between intellectual property rights and competition

law on the High Tech markets? What are the legal rights and obligations of the players in the new

business models constituted by technology development? How is structured the institution’s

(European Commission) approach to the Big Tech companies? What are the recommendations fot

the shape of the future competition policy in terms of the IP protection?

Shanker Singham, European Policy Information Center Competition in the High Technology Sector, available at: 2

https://smartthinking.org.uk/competition-in-the-high-technology-sector/, (last visited June 9, 2020).

Artur Szmigielski, Faworyzowanie własnych produktów lub usług przez dominujące platformy internetowe 3

zintegrowane pionowo jako dyskryminacyjne nadużycie pozycji dominującej, Internetowy Kwartalnik Antymonopolowy i Regulacyjny 2018, nr 8(7), avaliable at: https://ikar.wz.uw.edu.pl/numery/55/29.pdf, (last visited June 9, 2020).

United Nations Conference on Trade and Development, Competition issues in the digital economy, United Nations 4

2019, available at: https://unctad.org/meetings/en/SessionalDocuments/ciclpd54_en.pdf (last visited June 9, 2020).2

https://smartthinking.org.uk/competition-in-the-high-technology-sector/

https://unctad.org/meetings/en/SessionalDocuments/ciclpd54_en.pdf

1. Intellectual Property and Competition law relation

1.1. Global approach to the Intellectual Property law and competition law relation

Intellectual property law and competition law operate in the reality wich is rapidly evolving. New

technologies are changing business models and player’s behaviour. It seems that a lot of

anticompetitive practises arise from the IP privileges. That is why it is appropriate to focus on this

specific relation between competition and IP law and main goals of both areas. The analysis of

antitrust and competition law in general has been of intellectual and operational relevance since the

beginning of both legal systems. The fundamental aim of the Intellectual Property framework have

always been to encourage new technologies and promote creative works. Rules are designed mainly

to create a sustainable economic basis for invention and creation. While the goal of IP is quite 5

similar in the international perspective, goals of competition law vary depend on the system. In the

US competition regulations are have been discussed since 1890, when the Sherman Act has been

passed. In turn, in the European Community - since the early days of the European integration 6

process. On the one hand the US Congress enacted antitrust laws to rein in the power of industrial 7

trusts that had emerged in the late nineteenth century , focussing on promoting and protecting 8

competition. On the other, the Community competition law served two goals of the Single European

Market: the competition goal and the integration goal. However, over the years the approach has

been changing and has shifted towards the competition goal, however the situation is still dynamic. 9

It appears that stakeholders positions on the market also depends on the country of jurisdiction.

Fault lines between different approaches are accompanied with two sided visions of enforcement:

economics-based and legal-based doctrine. Both systems vary from each other in the two main

fields. First of all - in the specific rules regarding market share threshold and regulations concerned

anti competitive effects. But foremost, in the general idea of protecting the competition. In the US

the goal is to prevent big trusts, in the UE competition rules are tied to the European Project and

Wipo magazine, Artificial intelligence and intellectual property: an interview with Francis Gurry, available at: 5

https://www.wipo.int/wipo_magazine/en/2018/05/article_0001.html, (last visited June 6, 2020).

Clifford A. Jones, The Second Devolution of European Competition Law: The Political Economy of Antitrust 6

Enforcement Under a ︎More Economic Approach, ︎ [at:] Dieter Schmidtchen, Max Albert, and Stefan Voigt, The more Economic approach to European Competition law, Mohr Siebeck; 1 edition (December 7, 2007), p. 66.

Christian Kirchner, Goals of Antitrust and Competition Law Revisited, Conference, More economic approach to 7

European competition law, Saarbrucken, Germany 2006 [in:] JAHRBRUCH FUR NEUE POLITISCHE OKONOMIE, More economic approach to European competition law, Mohr Siebeck Tubingen, 2007.

Lina M. Khan, Amazon’s antitrust paradox, The Yale Law Journal 126(3), p. 564–907, 2017.8

Claus Dieter Ehlermann, Differentiation, Flexibility, Closer Co-operation: The New Provisions of the Amsterdam 9

Treaty, European Law Journal 4, no. 3, September 1998, p. 246-270.3

https://www.wipo.int/wipo_magazine/en/2018/05/article_0001.html

Single Market itself. There are also some common features, for example the general rules of 10

measuring the harm to the consumer. Competition authorities were so far exercising the rule of

harm and anticompetitive conduct subject to he so-called Chicago doctrine. Namely, the dominant

approach nowadays is primarily measuring the consumer’s situation on the market in relation to the

form of lower or higher prices - consumer welfare standard. Recent cases has shown, that antitrust 11

organs are applying premises which are not compatible with the high technology markets and their

business models, thereby leading to lenient enforcement. Particularly, current approach under-

appreciates the danger of predatory pricing and across distinct business integration. These factors 12

are important in the framework of platform regulations for two causes. Primarily, the economics of

platform markets establish incentives for an industry to favour growth over profits. In these

circumstances, which are unreasonable in the light of current doctrine, predatory pricing becomes

desirable. Secondly, for platforms integrating across business lines is essential to built a profitable

business and maintain their business model - to serve as critical intermediaries.

1.2. Tensions in the doctrine

The legal doctrine the different concepts describing the relationship between intellectual property

law and competition law have been created. Mainly they describe to what extent competition law

norms will apply in a case concerning intellectual property rights. Thus, they point to what extent an

authorised entity may take actions that are contrary to competition rules. The division of such 13

concepts into formal and material is often encountered. Formal theories describe the behaviour to

which intellectual property rights may apply, regardless of their effect on competition. Material

theories indicate the desirability of applying competition rules, namely whether a given action of an

authorised entity had a negative, neutral or positive effect on competition. Formal theories 14

distinguish two rather extreme ways to define the relation of those areas of law. The theory of

supremacy of competition law assumes that exclusive rights essentially prevent the realisation of

the idea of a competitive market. The anti-competitive impact of intellectual property rights is

Shanker Singham, European Policy Information Center Competition in the High Technology Sector, available at: 10

http://www.epicenternetwork.eu/briefings/competition-in-the-high-technology-sector/, (last visited June 6, 2020).

Lina M. Khan, Amazon’s antitrust paradox, …, p. 564–907, 2017.11

Shanker Singham, European Policy Information Center Competition in the High Technology …12

Marek Kolasiński, Obowiązek współpracy gospodarczej w prawie antymonopolowym, Towarzystwo Naukowe 13

Organizacji i Kierowania, Toruń 2009.

Dawid Miąsik, Ustawa o ochronie konkurencji i konsumentów a prawo własności intelektualnej – czy art. 2 ustawy 14

jest w ogóle potrzebny?, Internetowy Kwartalnik Antymonopolowy i Regulacyjny 2012, nr 1. 4

emphasised here, which is equated to having a dominant position. The theory was used in the case

law of the US Supreme Court in the 1960s. The idea of the supremacy of intellectual property law 15

on the other hand, postulates granting the intellectual property right holder some kind of immunity

before competition law regulations. It rejects the presumption of having a dominant position due to

intellectual property rights. Both these concepts are somehow connected by a more moderate view 16

called „the theory of intellectual property rights”. It distinguishes the sphere of the existence ant the

area of exercising intellectual property rights. Competition law regulations are included in the first

category. Afterwards, during the period of direct treatment of intellectual property rights as market

monopolies, the theory of exclusive scope was created. It assumes that competition law standards

will not apply to the actions of the holder of exclusive rights as long as they fall within the limits of

intellectual property law. Given the multitudes of concepts and the recent technological rise, the 17

existing theory of antitrust and IP standards have been undermined by many scholars. Some of 18

them argue, that The European Union’s legalistic approach created a chilling environment for

innovation in the sector due to its anti-competitive and interventionist measures. There are also 19

critics of the US approach. Khan pointed that the on-going US competition law framework based on

the consumer price approach cannot account for the anticompetitive effects of platform-based

business. Both US and the EU voices are calling for the dire need of the "restoring traditional 20

antitrust and competition policy principles or applying common carrier obligations and duties”. 21

Despite od the doctrine theories, it should be noted that intellectual property and competition law

seams to have similar directed objectives: to increase consumer well-being by stimulate economic

activity. Therefore, it can be presumed that there is no conflict between those disciplines. 22

Intellectual property law promotes technical progress and innovation, competition law protects fair

competition, which is the driving force of the market economy. Both goals resulting in consumer

Marek Kolasiński, Obowiązek współpracy gospodarczej w prawie antymonopolowym, Towarzystwo Naukowe 15

Organizacji i Kierowania, Toruń 2009.


jest w ogóle potrzebny?, Internetowy Kwartalnik Antymonopolowy i Regulacyjny 2012, nr 1.

Ibidem.17


Shanker Singham, European Policy Information Center Competition in the High Technology …19



Karolina Sztobryn, Ochrona programów komputerowych w prawie własności intelektualnej w Unii Europejskiej, 22

Warszawa 2015.5

welfare, higher quality products and a lower price (Stępień, 2008). However, it should be noted that

price does not play such a significant role on the new technology markets as it does in most sectors

of the economy. Here, the most important thing is to provide consumers with the most

technologically advanced product possible. In such situations intellectual property rights are

necessary for competition to occur. In some cases this differentiation can be problematic. On the 23

new technology markets, exclusive right to use a given intangible asset given by the IP protection

strengthens the position of the largest enterprises having access to the largest number of

technological solutions. However, this exclusive right does not prevent competition law

intervention. It should be underlined that intellectual property right can undertake basically all 24

actions that are not prohibited by competition law. Therefore, competition law is interested in the

effects of the authorised entity's activities from the market and competition point of view. As a

result, it seems justified that competition protection authorities may intervene by imposing remedies

to protect the market, for example a compulsory license. After all both of these areas protect a 25

different category of entities. Intellectual property law protects the interests of individual by

securing profits from their creative activities. Competition law, on the other hand, protects the

general interest, which includes an efficient and effective market with fair competition. 26

Karolina Sztobryn, Ochrona programów komputerowych w prawie własności intelektualnej…23



jest w ogóle potrzebny?…

Małgorzata Surdek, Odmowa Microsoftu przekazania konkurentom informacji zapewniających interoperacyjność ich 26

systemów operacyjnych dla serwerów z platformą Windows, [w:] D. Miąsik, T. Skoczny, M. Surdek (red.), Sprawa Microsoft – studium przypadku. Prawo konkurencji na rynkach nowych technologii, Warszawa 2008.

6

2. Old tools in new business reality

2.1. Big Tech business models

The rise of the High Technology sector is strictly connected with the US based international

companies. Described as Big Tech , High Tech or GAFA experienced an enormous rise, which 27 28

crossed the boarders of countries and continents. This term describe the four or five major

technology companies: Facebook, Apple, Google, and Amazon . Some scholars are counting also 29

Microsoft , some are arguing that "Microsoft is not driving the consumer revolution in the minds 30

of the consumers” . In the literature, different definitions are used to designate an area of business 31

that is based on new technologies: the new economy , the digital economy and the market for 32 33

communication and information technologies - ICT market. Regardless of the term used, it is most

often correlated with essentially three markets ︎: computer programs (software), computer equipment ︎

(hardware) ︎, telecommunications networks ︎︎ and e-commerce internet technologies and services

covered issues related to running a business both in terms of B2C, B2B ︎, C2B and C2C ︎ relations. 34

Those markets are using news tools, based on their innovative solutions, mainly data and

algorithms, which raise a number of fundamental IP-related questions. Moreover, Big Tech

companies have lunched new way of doing business: the platform. The European Commission has

defined an online platform as “an undertaking operating in two (or multi) sided markets, which uses

the Internet to enable interactions between two or more distinct but interdependent groups of users

so as to generate value for at least one of the groups” . This form created new possibilities but also 35

Phil Simon, The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business (1 ed.), 27

Motion Publishing, 2011, avaliable at: https://www.philsimon.com/books/the-age-of-the-platform/, (last visited June 9, 2020).

Erick Schonfeld, Eric Schmidt's Gang Of Four: Google, Apple, Amazon, And Facebook, available at: http://28

allthingsd.com/20110531/eric-schmidts-gang-of-four-doesnt-have-room-for-microsoft/ (last visited June 9, 2020).

Phil Simon, The Age of the Platform: How Amazon, Apple, Facebook, and Google…29

Richard Waters, Move over Faangs, make way for Maga, Financial Times 2018, available at: https://www.ft.com/30

content/c817306c-914e-11e8-b639-7680cedcc421 (last visited June 9, 2020).

Peter Kafka, Eric Schmidt's "Gang Of Four" Doesn't Have Room for Microsoft, available at: http://allthingsd.com/31

20110531/eric-schmidts-gang-of-four-doesnt-have-room-for-microsoft/, (last visited June 9, 2020).

Richard A. Posner ︎, Antitrust in the New Economy, John M. Olin Law ︎ Economics Working Paper 2000 ︎ no. 106︎ p. 32

2-11︎, available at: https://chicagounbound.uchicago.edu/law_and_economics/58/, (last visited June 6, 2020).

Bartosz Targański, Ochrona konkurencji w działalności platform handlu elektronicznego, Warszawa 2010.33

Ibidem.34

European Commission, Regulatory environment for platforms, online intermediaries, data and cloud computing and 35

the collaborative economy (Public Consultation), available at:: http://ec.europa.eu/ newsroom/dae/document.cfm?doc_id=10932, (last visited June 9, 2020).

7

https://chicagounbound.uchicago.edu/law_and_economics/58/

http://allthingsd.com/20110531/eric-schmidts-gang-of-four-doesnt-have-room-for-microsoft/


https://www.philsimon.com/books/the-age-of-the-platform/



new difficulties to the global economy. Traditional competitive abuse is associated with price

competition and increasing shares in the same or higher levels of the market. In the digital economy,

the relationship between horizontal dominance and harm to consumers is much more complex. The

mutual relationship between the platform and an entrepreneur is usually shaped so that the platform

is on the upstream market, while the platform-related new product operates on the downstream

market. As a result, on this market, the platform operator competes with users on its platform. This 36

means, that from the one side the company would like to use the platform to promote it’s services,

on the other it should protect products from the anticompetitive behaviour of the biggest player.

Moreover, those markets are characterised by specific conditions: they operate using algorithms

designed to collect and process data. On the economic perspective they have high sunk and low

marginal costs and extreme returns to scale and network externalities. The consequence of these 37

features is the presence of strong economies of scope, which favour the development of those

ecosystems and give operators a strong competitive advantage. On the legal perspective, they are 38

using the instruments of artificial intelligence and new technologies strictly connected with the IP

protection to strengthen their dominant position on the market. The broad use of new technologies 39

established IP concepts – patents, designs, literary and artistic works. This creates for example a 40

problem how to create property rights in an algorithm that is constantly changing, how to protect

the inventor and how to promote further technology grow in the competition friendly environment.

2.2. New subjects of the protection

In the area of the article’s subject especially important is the issue of computer program protection.

Especially, the source code and the associated machine code characteristics requires clarification

mainly because most judgements on the borderline of competition law and IP protection are

discussing the issue of source code. Thus, source code is a record of the program computer using a

specific 'higher order' programming language in human-readable form. However, this form is 41

Lina M. Khan, Amazon’s antitrust paradox, The Yale Law Journal, 126(3):564–907, 2017.36

United Nations Conference on Trade and Development, Competition issues in the digital economy, United Nations 37

2019, available at: https://unctad.org/meetings/en/SessionalDocuments/ciclpd54_en.pdf (last visited June 9, 2020).

Ibidem.38

Wipo magazine, Artificial intelligence and intellectual property: an interview with Francis Gurry, available at: 39

https://www.wipo.int/wipo_magazine/en/2018/05/article_0001.html, (last visited June 6, 2020).

Ibidem.40

K. Siewicz, Exercising user freedoms in the world of free software communities [w:] M. Barczewski, M. Miłosz, R. 41

Warner (red.), When Worlds Collide: Intellectual Property, High Technology and the Law, Warszawa 2008, p. 424.8



illegible for a computer. In consequence, it must be converted into the so called "lower-order

language" which can be read by a computer. It then assumes the zero-one form and is expressed in

electrical signals processed in a computer. On the level of this transformation there is two-fold 42

view in the doctrine. On the one hand it is assumed that this source code transformation is a clear

mechanical process. Therefore, the language is equally original, expressed in a different form. On

the other hand, some authors emphasise that this process deprives the source code of the expression

contained in the structure of a given program. In consequence, the code loose protection under

copyright law. This form of the machine code is available to everyone who has a copy of the 43

program. However, this form it does not provide the required information to create a competitive or

compatible program. Such information can be obtained from source code, which for these reasons is

not published. In the cases related to the Tech Giants the refusal to publish the source code has often

been considered as a restriction of competition. The protection of a source code is connected with a

notion of a computer program - an intangible asset with a specific and multi-level character.

Therefore it is difficult to identify one model of the protection and one clear definition. A computer

program has no definition under international law although it can be found in Spanish or Japanese 44

copyright law. In 1980 the federal court in the US defined it as a piece of work, or copyright. In 45 46

the EU, the largest Directive 2009 ︎2︎︎WE ︎ harmonising protection of computer programs ︎ doesn’t 47

define a computer program. Only recital 7 indicate that for the purposes of this Directive as a

computer program must be considered all "programs in any form”, including programs integrated

with computer hardware. ︎ This concept also includes preparatory design work leading to the

development of the computer program, with the proviso that the nature of the preparatory work is

such that a program can use them at a later stage. Also the doctrine developed the determinations of

the computer program notion. One of the concepts defines it as "a set of instructions intended to be

used directly or indirectly on a computer to achieve a specific result" ︎ and these instructions "may be

Karolina Sztobryn, Ochrona programów komputerowych w prawie własności intelektualnej…, p. 75-76.42

Ibidem.43

Convention on the Grant of European Patents (European Patent Convention), Federal Republic of Germany 11 44

January 1978, ( ︎︎Dz. U. z 200 ︎ r. Nr 79 ︎ poz. 7 ︎7 z pó ︎n. zm.). ︎


A. Nowicka︎ Prawnoautorska ochrona programów komputerowych – regulacja Polska i jej unijny wzorzec w świetle 46

orzecznictwa Trybunału Sprawiedliwości, Ruch Prawniczy ︎ Ekonomiczny i Socjologiczny 2015 ︎ z. 2 ︎ s. 105.

Directive 2009/24/Ec Of The European Parliament And Of The Council of 23 April 2009 on the legal protection of 47

computer programs, OJ L 111, 5.5.2009, p. 16–22.9

expressed by the mathematical or geographical symbols ”. Other voices describes it as "a set of 48

instructions presented in a computer-understandable language" whose implementation aims to

achieve the program specified by the creator purposes ". In general, the definition is essentially the 49

domain of informatics, and for these reasons it is difficult to introduce a clear legal definition. 50

Computer programs are protected as works, but the protection model should be characterised as sui

generis. This means that the general provisions of copyright law apply when the detailed regulations

regarding computer programs do not introduce different solutions. The protection purposes must 51

be characterised by originality and individuality. It should be also established. Namely, presented to

a person other than the author in any form. A computer program is implementing a certain solution

or method. Additional problems in determining the scope of protection of computer programs are 52

caused by their "multi-layered" character: the program consists of a group of elements which are

subject to various protection. It consists text elements (the program saved in the source code,

algorithm) and other non-text elements (structure and program function, so-called inter look and

feel of the program, or any ideas it has to implement program). It is assumed that the text elements 53

are the result of an works of the creators (the ‚programmer’). Therefore they are subject of a

protection as an entrepreneur's secret. Ideas or concepts of the program are not protected. There 54

are still different approaches in case of protection of interfaces, although Directive 2009 ︎2︎EEC

clearly strips them of their protection rights. 55

Tomasz Sieniow, ︎ Włodarczyk W. ︎ Własność intelektualna w społeczeństwie informacyjnym, Warszawa 2009, p. 26.48

Po ︎niak-Niedzielska M. ︎ Szczotka J. ︎ Mozgawa M.︎ Prawo autorskie i prawa pokrewne. Zarys wykładu︎ Bydgoszcz-49

Warszawa-Lublin 2007, p. 149.


Po︎niak-Niedzielska M. ︎ Szczotka J. ︎ Mozgawa M. ︎ Prawo autorskie i prawa pokrewne. Zarys wykładu ︎ Bydgoszcz-51

Warszawa-Lublin 2007, p. 147-149.


J. Barta, R. Markiewicz, Główne problemy prawa komputerowego, Warszawa 1993, p. 31.53


J. Barta, R. Markiewicz, Główne problemy prawa komputerowego, Warszawa 1993, p. 31.55

10

3. IP Instruments of creating the competitive advantage in practice

3.1. General directions of Big Tech activities The emergence of digital markets and their international scope we are facing now have raised a

challenge to adjust the existing competition law rules to the new reality. Determining the

characteristics of new technology markets and instruments used on them is especially important

while assessing the new IP - competition law relation. The idea of intellectual property rights - as

already indicated - is to have the exclusive right to some intangible asset. In turn, competition law

aims to regulate the exercise of market power. Certain intellectual property rights (IPRs) can only

be effective if they help create and defend some material amount of market power. In such

circumstances it can result in obtaining a dominant position, nevertheless it is generally assumed

that the existence of intellectual property rights does not confer automatically the abuse of

competition. As a result, legal monopoly arising from intellectual property rights and a market 56

monopoly is not equal. An entity is a monopolist within the meaning of competition law being

essentially the sole producer and seller of the products in question market. Meanwhile, intellectual

property law advantage does not create separate relevant market. ︎ In this case abuse of a dominant

position can occur exceptionally when the authorised entity exercises its rights to Intellectual

property and tends to (not necessarily achieve) limit competition. There is often a distinction 57

between competition protection cases regarding intellectual property rights in which competition

has actually been restricted using exclusive rights to intangible goods and those where they are

essentially indifferent to the state of competition. This first category covers situations, where the 58

exercise of intellectual property rights had an impact on the assessment of a given entrepreneur’s

behaviour in terms of its compliance with competition rules. In such cases the authorised entity acts

through exclusive rights to competition ︎(the most common example is a license refusal). The second

category includes cases in which the entity does not use exclusive rights to restrict competition ︎,

even if its market power has earlier been acquired thanks to intellectual property rights. This 59

category covers situations when the entity abuses its dominant position however, it does not seek to






Ibidem.59

11

exclude competitors from the market directly using the protection measures granted by intellectual

property law. 60

3.2. Particular instruments: Licence, patent and copyright

As an example of IP Instruments creating the competitive advantage in Big Tech comapnies’

practice are licences, patents and copyright. In the following section three of them will be discussed

with the special focus on computer program issues. Computer program’s protection is based on a

license. It means that any use in a manner that is not compliant with the license, or without a

license, is a violation of the rights of the author. A typical example of the licence is the so-called

„full version" ︎ that is a license for a commercial program ︎ which entitles to use the computer program

without major restrictions ︎(with exceptions provided for in legal regulations ︎ primarily art. ︎ section 1

of Directive 2009 ︎2︎︎E and Art. 7 ︎ paragraph). Currently also other types of licences are getting

popular: licenses for free use of software, sometimes limited in time (so-called shareware),

functionally (so-called demo), or without these restrictions (so-called freeware). Increasingly, the

so-called open source can be met, i.e. a situation where, together with the program, the user receives

free access to the source code and the freedom to further distribute the program as well as modify

it. This is one of the few cases, an exemption, where familiarisation with the program is possible. 61

Even when the license is available, the so-called no decompilation, i.e. restoration of the source

code (but not always in the original version) from the shared machine code (sometimes this process

is also called reverse assembly). It is also worth pointing out that the ban on decompilation also

covers program components that are usually not protected by copyright, i.e. even program ideas.

However, in the art. 6 of Directive 2009/24 / EC and art. 75 clause 2 point 3 of the tax law there are

exceptions to this prohibition. In the doctrine, it is usually assumed that decompilation is possible

for research purposes, to obtain the interoperability (compatibility) of the program, its

competitiveness, or to show a violation of the law. One of the most known cases regarding Big 62

Tech company and licence practise is the Microsoft case. Of the many competition lawsuits brought

against Microsoft, the two most popular are (1) a series of civil lawsuits brought in 1998 by the US

Ibidem.60

A. Ohly, Reverse Engineering: Unfair Competition or Catalyst for Innovation? [in:] M. J. Adelman, R. Brauneis, J. 61

Drexl, R. Nack (red.), Patents and Technological Progress in a Globalized World, Berlin 2009, p. 357.

Karolina Sztobryn, Ochrona programów komputerowych w prawie własności intelektualnej…, p. 75-76.62

12

Department of Justice and 20 states ,where Microsoft's practice of binding Internet Explorer to the 63

Windows operating system was questioned; and (2) proceedings in which the European

Commission questioned Microsoft's practice of binding the Windows Media Player with the

Windows operating system as well as the refusal to provide full interface information necessary to

create products that can properly communicate with computers operating in the system Windows.

Having found a violation of Article 82 of the Treaty establishing the European Community, the EC

imposed a fine of EUR 497 million on Microsoft . The judgments in the Microsoft cases 64

undoubtedly marked the triumph of the European Commission in a battle of Microsoft for several

years. It has gone down in the history of the application of EU competition rules and remains

frequently referred to in the interpretation of both practices of abusing a dominant position - refusal

to grant licenses for certain intellectual property rights and tying, especially in the context of new

technology markets. The aggressive campaign of the European Commission against the Redmond

company still raises a lot of controversy. After all, the Commission demanded the creation of a

"poorer" version of the product (in this case the Windows operating system without the WMP

application) and selling it at the same price and under the same brand as the previously offered

"richer" version. It's hard to see how consumer welfare has been increased here. The more so

because Microsoft's doubts about the substantial lack of market demand for such a poorer version of

the system seem to confirm this. After the settlement, it offers the Windows operating system in two

versions required by the Commission and consumers still most often purchase it in the package

together, among others with the WMP application. In addition, the position of EU bodies in the case

under investigation Microsoft began a second wave of Microsoft's antitrust problems in the

European Union. The decision to refuse to provide information on interoperability meets with more

positive comments. The judgment in Microsoft confirmed the rule that the imposition of the

obligation to license certain intellectual property rights is only exceptional, that is, "exceptional

circumstances" must occur for such refusal to be regarded as an abuse of a dominant position.

However, it was pointed out that the circumstances vary from case to case and the test developed in

Magill and IMS Health cases should not be automatically applied to subsequent refusals.

Although patent law and copyright are often complementary to each other, a computer program will

be excluded from patenting. The first protects the "function of some technological solution" the

United States v. Microsoft, 87 F. Supp. 2d 30 (DDC 2000).63

EC decision of 24 March 2004 in case COMP / C-3 / 37.792, OJ. EC 2007 No. L 32/3.64

13

second protects the way of expression . As the doctrine is indicating, similarly to the effect of an 65

overlap in products markets leading to the tendency for the merged entity to raise prices, overlap

between the licensing activities of the merging entities is tending to higher licensing payments or

creating worse licensing conditions. Surprisingly, there are not many cases where EC is 66

investigating cases where overlap in the technology market would have to let to the divestment or

some IPRs or, at least to long-term commitments as to the terms of licences. As C. Caffarra, P.

Regibeau have revived, EC examined only couple of cases of pure ‚technology market overlap.

They indicated three main reasons of that. Firstly, many IPR holders are also operating on the

product market nad the more obvious route for interrogateing the potential exclusion of downstream

players is checking the vertical foreclosure. Secondly, licensing agreements are guaranteeing longer

protection than IP rights. For example patents last for at most twenty years, while fast technological

process make IP rights obsolete in a few years. Therefore there is little incentive for competition

authorities to embark on a full analysis of horizontal overlap in technology markets. Lastly, there is

an obstacle linked to the definition of ‚potentail entry’. While it is well noted in the product

markets, where potential entrants are those who do not yet operate in the market but have plans to

enter. In such cases the Commission compute market shares for the ‚merchant’ segment of the

market. This approach is difficult to apply in the technology market, because of the presence of

internal supplies.

Another level of interference of the IP rights and competition law is the copyright. New cases are

showing the changing perspective of the area of interference between intellectual property and

competition on the platforms market. In Google vs Oracle case Federal Circuit Court of Appeals 67

rolled that Google’s use of Oracle’s Java application programming interfaces (APIs) violated

copyright law. Google copied Oracle’s Java API code to implement its Android OS. In consequence,

Oracle, which owns the code sued Google for the violation of copyright law. According to the US

law software code falls under copyright laws. As a general rule, it cannot be copied or reproduced

Urszula Nowacka, Gil A., Uwarunkowania prawnoautorskiej ochrony programów komputerowych, Postępy nauki i 65

techniki 2010, Nr 4, p. 5.

C. Caffarra, P. Regibeau, Economic Considerations on Mergers, IPR Licensing and Litigation: a EU Perspective, 66

[at:] Gabriella Muscolo, Marina Tavassi, The Interplay Between Competition Law and Intellectual Property: An International Perspective, Kluwer Law International B.V. 2019

United States Court of Appeals for the Federal Circuit, Oracle Am., Inc. v. Google LLC, 886 F.3d 1179 (Fed. Cir. 67

2018).14

with an exception that it may be reproduced for fair use. However, in the given case Google’s use 68

was illegal. The Federal Circuit found that the code in Android “is the same as the purpose of the

packages in the Java platform,” and further “Google made no alteration to the expressive content or

message of the copyrighted material.” Google’s argumentation was very interesting. Google 69

claimed in its certiorari petition that the Federal Circuit’s ruling must be overturned because

“control over interfaces gives rise to barriers to entry and implicates issues of competition and

innovation that warrant this Court’s review” . The Computer Communications Association of 70

America—a lobbying organization which represents Google, Facebook, Amazon, and other Big

Tech companies—wrote an amicus on the subject. It argued that “allowing the Federal Circuit’s

decisions in this case to stand will lead to the anomalous result of less competition in the software

industry.” Even Microsoft, the company synonymous with software monopolies, opined in 71

Google’s favour by discussing how loose software copyright regimes, “facilitated the entry of new

competitor[s].” R St Institute and Public Knowledge’s brief, filed on January 13, 2020, argued that 72

the court should deny Oracle’s copyright because “interoperability promotes flexibility and

competition.” 73

Another example is recent judgement in the US, Author’s Guild v. Google called the most 74

important precedents for the field of artificial intelligence, and machine learning. The case debates

the legal right for Google to use copyrighted books in its training database in order to train its

Google Book Search algorithm. In 2004, Google started the Google Books Library Project. It was

From Casetext: Smarter Legal Research, Oracle Am., Inc. v. Google LLC, https://casetext.com/case/oracle-am-inc-v-68

google-llc, (last visited June 6, 2020).

United States Court of Appeals for the Federal Circuit, Oracle Am., Inc. v. Google LLC, 886 F.3d 1179 (Fed. Cir. 69

2018).

Google Llc, Petitioner V. Oracle America, Inc. On Petition For A Writ Of Certiorari To The United States Court Of 70

Appeals For The Federal Circuit Petition For A Writ Of Certiorari, available at: https://www.supremecourt.gov/DocketPDF/18/18-956/81532/20190124110509177_Google%20cert%20petition.pdf, (last visited June 6, 2020).

BRIEF AMICUS CURIAE OF THE COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION IN 71

SUPPORT OF PETITIONER, February 25, 2019, available at: https://www.supremecourt.gov/DocketPDF/18/18-956/89477/20190225131614070_37482%20pdf%20Band.pdf, (last visited June 6, 2020).

BRIEF OF MICROSOFT CORPORATION AS AMICUS CURIAE IN SUPPORT OF PETITIONER, available at: 72

h t t p s : / / w w w . s u p r e m e c o u r t . g o v / D o c k e t P D F /18/18-956/89566/20190225161900311_Brief%20of%20Microsoft%20Corporation%20as%20Amicus%20Curiae.pdf, (last visited June 6, 2020).

BRIEF OF THE R STREET INSTITUTE AND PUBLIC KNOWLEDGE AS AMICI CURIAE IN SUPPORT OF 73

T H E P E T I T I O N , a v a i l a b l e a t : h t t p s : / / w w w . s u p r e m e c o u r t . g o v / D o c k e t P D F /18/18-956/89476/20190225131444645_brief-gvo-petition.pdf, (last visited June 6, 2020).

The Authors Guild, Inc., & Ors v Google Inc., No. 1:05-cv-08136 (US District Court, S.D. New York)74

15

https://www.supremecourt.gov/DocketPDF/18/18-956/89566/20190225161900311_Brief%20of%20Microsoft%20Corporation%20as%20Amicus%20Curiae.pdf


https://casetext.com/case/oracle-am-inc-v-google-llc


https://www.supremecourt.gov/DocketPDF/18/18-956/81532/20190124110509177_Google%20cert%20petition.pdf



https://www.supremecourt.gov/DocketPDF/18/18-956/89477/20190225131614070_37482%20pdf%20Band.pdf


https://www.supremecourt.gov/DocketPDF/18/18-956/89476/20190225131444645_brief-gvo-petition.pdf



connected with an effort to scan and make searchable the book collections of several major research

libraries. Google allows internet users to search for content within the books, especially randomised

snippets, without an authorisation from any authors or publishers. In consequence, a group led by

the Authors Guild initiated a major class-action lawsuit against Google for copyright

infringement. The Author’s guild alleged that the development of the Google Book Search 75

database infringed upon the copyright of millions of books. According to the United States 2nd

Circuit Court, training algorithms on copyrighted data is not illegal. In The US Court of Appeals

decision “tests the boundaries of fair use” was defined. Firstly the Court analysed the purpose and

nature of Google’s use. It turns out that a search engine provided a lot of additional benefits. It

“communicates something new and different from the original or expands its utility, thus serving

copyright’s overall objective of contributing to public knowledge.” If the “ultimate goal of

copyright is to expand public knowledge and understanding”, then Google’s Library Project is in

line with that goal. Moreover, Google used only a small part of the original work, which according 76

to the Court is not the copyright violation. The second step was the analyse of the nature of the

copyrighted work. The Court stated that Google’s use “transformatively provides valuable

information about the original, rather than replicating protected expression in a manner that

provides a meaningful substitute”. Thirdly, the Court analysed the size and substantiality of the 77

part of books in relation to the copyrighted work. What was important, Google did not provide the

whole books as a substitute for the original works. Lastly, the effect of the use upon the potential

market for or value of the copyrighted work was analysed. The outcome of the Court’s Analyse was

that Google’s Library Project does not serve as a substitute for the original works. Moreover, 78

company’s digitisation was beneficial in terms of a transformative purpose. According to the Court,

this behaviour is in the scope of “fair use” and provides a lot of benefits such as a valuable research

tool to enlarge public knowledge.

Summary

Technology revolution has changed not only the shape of digital markets, but foremost the

consumer’s and entrepreneurs reality: rights, obligations and business relations. Also the business

model of online platforms cause many conflicts of interest mainly because their attitude to enter

Paul Johns, Thomas Huthwaite, Google writes history: The end of “Authors Guild v. Google”, https://75

www.baldwins.com/news-resources/news/google-writes-history, (last visited June 6, 2020).

Ibidem.76

Ibidem.77

Ibidem.78

16

https://www.baldwins.com/news-resources/news/google-writes-history


new, neighbouring markets during the process of development. This project focuses on the features

specific to digital platforms and their implications for competition law and policy. It identifies the

areas of competition law in which there is need for adaptation, to deal with negative outcomes that

may arise from dominant digital platforms. It also presents some policy options for protecting and

promoting competition in the digital economy. Assessing the platform's role from the perspective of

competition law and intellectual property law requires the analysis of both sides of the platform:

client, entrepreneur and the platform itself. The level of intermediation through online platforms in

transactions consist of strong indirect network effects. In the new economy models it leads to create

dependence of enterprises on internet platforms. As a result they are playing almost the role of

gatekeepers that decide about access to markets and consumers. That is why relations between

platforms and providers are referred to in literature as relationship as frenemy relationship. In the

first period, a trading platform needs suppliers because it is not attractive to users without a

sufficient number of sellers' offers. Later, when the company gains significant market power,

suppliers become more dependent on the functioning of the trading platform. The considerations of

the paper are part of a wider debate on the role of competition policy in the new technologies sector.

The topic is particularly important in the context of the forthcoming changes in EU competition law

(Competition Policy for the Digital Era Report) and the rise of new technologies, artificial

intelligence and machine learning world. National competition authorities in order to face those

challenges are using new tools. The EU regulator brought measures, which should be implemented

and new directions settled by the case law. Dozens of US states are set to launch antitrust and

privacy investigations into high tech companies. That is why we need global solutions that ensure at

least functional interoperability.

17

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