Keywords

++++

1 . Competition - Agreements, decisions and concerted practices - Restriction of competition - Reciprocal representation agreements

between national copyright management societies - Lawfulness - Exclusive rights clause - Not lawful

( EEC Treaty, Art . 85(1 ) )

2 . Competition - Agreements, decisions and concerted practices - Concerted practice - Parallel behaviour - Presumption of concerted action - Limits - Refusal by national copyright management societies to grant a user established in another Member State direct access to their repertoire - Assessment by the national court

( EEC Treaty, Arts 85(1 ) and 177 )

3 . Competition - Dominant position - Abuse - Unfair trading conditions - Royalties applied by one copyright management society appreciably higher than those charged in other Member States - Possible justification

( EEC Treaty, Art . 86 )

Summary

1 . Reciprocal representation contracts between national copyright management societies concerned with musical works whereby the societies give each other the right to grant, within the territory for which they are responsible, the requisite authorizations for any public performance of copyrighted musical works of members of other societies and to subject those authorizations to certain conditions, in conformity with the laws applicable in the territory in question, where those contracts have the dual purpose of making all protected musical works, whatever their origin, subject to the same conditions for all users in the same Member State, in accordance with the prohibition of discrimination laid down in the international conventions on copyright, and to enable copyright management societies to rely, for the protection of their repertoires in another Member State, on the organization established by the copyright management society operating there, without being obliged to add to that organization their own network of contracts with users and their own local monitoring arrangements, are not in themselves restrictive of competition in such a way as to be caught by Article 85(1 ) of the Treaty .

The position might be different if the contracts established exclusive rights whereby the copyright management societies undertook not to allow direct access to their repertoires by users of recorded music established abroad .

2 . Article 85 of the EEC Treaty must be interpreted as prohibiting any concerted practice by national copyright management societies of the Member States having as its object or effect the refusal by each society to grant direct access to its repertoire to users established in another Member State .

It is for the national courts, in accordance with the division of powers under Article 177 of the Treaty, to determine whether any concerted action by such management societies has in fact taken place .

In so doing those courts must bear in mind that mere parallel behaviour may amount to strong evidence of a concerted practice if it leads to conditions of competition which do not correspond to the normal conditions of competition but that concerted action of that kind cannot be presumed where the parallel behaviour can be accounted for by reasons other than the existence of concerted action . In the case of the practices followed by copyright management societies, such a reason might lie in the fact that if direct access were granted to their repertoires, those societies would be obliged to organize their own management and monitoring system in another country .

3 . A national copyright management society holding a dominant position in a substantial part of the common market imposes unfair trading conditions where the royalties which it charges to discotheques are appreciably higher than those charged in other Member States, the rates being compared on a consistent basis . That would not be the case if the copyright management society in question were able to justify such a difference by reference to objective and relevant dissimilarities between copyright management in the Member State concerned and copyright management in the other Member States .

Parties

In Joined Cases 110/88, 241/88 and 242/88

REFERENCE to the Court under Article 177 of the EEC Treaty

in Case 110/88, by the Cour d' appel ( Court of Appeal ), Poitiers, for a preliminary ruling in the proceedings pending before that court between

François Lucazeau, of Epargnes,

and

Société des auteurs, compositeurs et éditeurs de musique ( Sacem ), Neuilly,

and in Cases 241/88 and 242/88, by the tribunal de grande instance ( Regional Court ), Poitiers, for a preliminary ruling in the proceedings pending before that court between

Société des auteurs, compositeurs et éditeurs de musique ( Sacem ), Neuilly,

and

Xavier Debelle, of Poitiers,

and between

Société des auteurs, compositeurs et éditeurs de musique ( Sacem ), Neuilly,

and

Christian Soumagnac, of Poitiers,

on the interpretation of Articles 85 and 86 of the EEC Treaty,

THE COURT

composed of : T . Koopmans, President of Chamber, acting as President, G.F . Mancini, C.N . Kakouris, F.A . Schockweiler, J.C . Moitinho de Almeida, M . Díez de Velasco and M . Zuleeg, Judges,

Advocate General : F.G . Jacobs

Registrar : D . Louterman, Principal Administrator

after considering the observations submitted on behalf of

F . Lucazeau, the appellant in the main proceedings in Case 110/88, and C . Sougmagnac, the defendant in the main proceedings in Case 242/88, by J.C . Fourgoux, of the Paris Bar, and, at the hearing, also by P.F . Ryziger, of the Paris Bar;

Sacem, the plaintiff in the main proceedings in Cases 241/88 and 242/88 and the respondent in the main proceedings in Case 110/88, by O . Carmet, of the Paris Bar;

the Government of the French Republic, by R . De Gouttes, M . Giacomini and E . Belliard, acting as Agents;

the Government of the Italian Republic, by L . Ferrari Bravo, acting as Agent, assisted by I . Braguglia, Avvocato dello Stato;

the Government of the Hellenic Republic, by E.M . Mamouna, G . Crippa and S . Zissimopoulos, acting as Agents;

the Commission of the European Communities, by its Legal Advisers G . Marenco and I . Langermann, acting as Agents;

having regard to the Report for the Hearing and further to the hearing on 8 March 1989,

after hearing the Opinion of the Advocate General delivered at the sitting on 26 May 1989,

gives the following

Judgment

Grounds

1 By judgment of 3 March 1988, which was received at the Court on 5 April 1988, the Cour d' appel, Poitiers, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Articles 85 and 86 of that Treaty, with a view to deciding whether certain trading conditions imposed on users by a national society managing copyright for authors, composers and publishers of music were compatible with those provisions ( Case 110/88 ).

2 By two judgments of 6 June 1988, which were received at the Court on 23 August 1988, the tribunal de grande instance, Poitiers, submitted the same questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty ( Cases 241/88 and 242/88 ).

3 The questions were raised in proceedings between three discothèque operators and the Société des auteurs, compositeurs et éditeurs de musique ( hereinafter referred to as "Sacem "), the society which manages copyright in musical works in France . The three disputes relate in particular to the refusal of the discothèque operators to pay royalties to Sacem for the performance of protected musical works on their premises .

4 The discothèque operators put forward a number of arguments to show that Sacem' s conduct towards them constituted anti-competitive conduct prohibited by the EEC Treaty . They claim first that the rate of royalties demanded by Sacem is arbitrary and unfair and therefore constitutes an abuse of the dominant position held by that society . The level of royalties is appreciably higher than that applied in the other Member States and, moreover, the rates charged to discothèques bear no relation to those charged to other large-scale users of recorded music, such as television and radio stations .

5 They also claim that discothèques use music of Anglo-American origin to a very considerable extent, a fact not taken into account in Sacem' s method of calculating royalties, which is based on the application of a fixed rate of 8.25% to the turnover, including value-added tax, of the discothèque in question . The discothèque operators must pay those very high royalties to obtain access to the whole of Sacem' s repertoire even though only part of it is of any interest to them; Sacem has always refused to grant them access to just part of the repertoire, and they can not make a direct approach to the copyright-management societies in other countries since the latter are bound by "reciprocal representation contracts" with Sacem and accordingly refuse to grant direct access to their repertoires .

6 The cour d' appel, Poitiers, considers that, whilst there is no doubt that Sacem holds a dominant position on French territory, the fact that it demands the payment of a flat-rate royalty does not in itself appear to be an abuse of its dominant position, in so far as the application of that flat rate simplifies collection and ensures that authors and composers are paid . However, the cour d' appel entertains doubts as to whether the rate of 8.25% is justified . Accordingly, it referred two questions to the Court for a preliminary ruling, which were adopted and submitted by the tribunal de grande instance, Poitiers, in the two cases pending before that court :

7 The two questions are as follows :

"1 . Does the imposition by Sacem, an association of authors, composers and publishers of music which occupies a dominant position in a substantial part of the common market and is bound by reciprocal representation contracts with copyright societies in other countries of the EEC, of aggregate royalties on the basis of 8.25% of the gross turnover of a discothèque amount to the direct or indirect imposition on those entering into contracts with it of unfair trading conditions within the meaning of Article 86 of the Treaty of Rome if that rate is manifestly higher than that applied by identical copyright societies in other Member States of the European Economic Community?

2 . Is the establishment, by means of a set of reciprocal representation agreements' , of a de facto monopoly in the countries of the European Economic Community, enabling a copyright-management society pursuing its activities in a Member State to fix under a standard-form contract a comprehensive royalty which must be paid by users before exploiting foreign works, liable to constitute a concerted practice covered by the prohibition in Article 85(1 ) of the Treaty?"

8 Reference is made to the Report for the Hearing for a fuller account of the facts and procedure, the French law on copyright and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

9 It is appropriate to examine first the second question, on the interpretation of Article 85 of the Treaty, before addressing the problem of the application of Article 86 raised in the first question .

The second question ( Article 85 )

10 It is apparent from the considerations set out in the order for reference from the cour d' appel, Poitiers, that the concerted practice within the meaning of Article 85 referred to in the question is a practice engaged in by national copyright-management societies in the various Member States . However, the wording of the question does not clearly indicate whether that practice consists in setting up a network of reciprocal representation agreements or in collectively denying any access to their respective repertoires by users established in other Member States .

11 With regard to the first point, it is apparent from the documents before the Court that a "reciprocal representation contract", as referred to by the national court, must be taken to mean a contract between two national copyright-management societies concerned with musical works whereby the societies give each other the right to grant, within the territory for which they are responsible, the requisite authorizations for any public performance of copyrighted musical works of the other society and to subject those authorizations to certain conditions, in conformity with the laws applicable in the territory in question . Those conditions include in particular the payment of royalties, which are collected for the other society by the society which it has empowered to act as its agent . The contract specifies that each society is to apply, with respect to works in the other society' s repertoire, the same scales, methods and means of collection and distribution of royalties as those which it applies for works in its own repertoire .

12 Under the international copyright conventions, the owners of copyright recognized under the legislation of a contracting State are entitled, in the territory of every other contracting State, to the same protection against the infringement of copyright, and the same remedies for such infringement, as the nationals of the latter State .

13 Consequently, it is apparent that reciprocal representation contracts between copyright-management societies have a twofold purpose : first, they are intended to make all protected musical works, whatever their origin, subject to the same conditions for all users in the same Member State, in accordance with the principle laid down in the international provisions; secondly, they enable copyright-management societies to rely, for the protection of their repertoires in another State, on the organization established by the copyright-management society operating there, without being obliged to add to that organization their own network of contracts with users and their own local monitoring arrangements .

14 It follows from the foregoing considerations that the reciprocal representation contracts in question are contracts for services which are not in themselves restrictive of competition in such a way as to be caught by Article 85(1 ) of the Treaty . The position might be different if the contracts established exclusive rights whereby copyright-management societies undertook not to allow direct access to their repertoires by users of recorded music established abroad; however, it is apparent from the documents before the Court that exclusive-rights clauses of that kind which previously appeared in reciprocal representation contracts were removed at the request of the Commission .

15 The Commission points out, however, that the removal of that exclusive-rights clause from the contracts has not resulted in any change in the conduct of the management societies; they still refuse to grant a licence or to entrust their repertoire abroad to a society other than the one established in the territory in question . That statement raises the second problem raised in the question, namely whether the management societies have in fact retained their exclusive rights by means of a concerted practice .

16 In that connection the Commission and Sacem maintain that the management societies have no interest in using a method different from that of appointing as agent the society established in the territory concerned and that it does not seem realistic in those circumstances to regard the management societies' refusal to allow direct access to their repertoires by foreign users as a concerted practice . The discothèque operators, whilst recognizing that the foreign societies entrust the management of their repertoires to Sacem because it would be too burdensome to set up a system of direct collection of royalties in France, nevertheless consider that the societies have acted in concert in that regard . In support of that view, they refer to the letters which the French users have received from various foreign management societies refusing them access to their repertoires in substantially identical terms .

17 Concerted action by national copyright-management societies with the effect of systematically refusing to grant direct access to their repertoires to foreign users must be regarded as amounting to a concerted practice restrictive of competition and capable of affecting trade between the Member States .

18 As the Court held in its judgment in Case 48/69 Imperial Chemical Industries v Commission (( 1972 )) ECR 619, mere parallel behaviour may amount to strong evidence of a concerted practice if it leads to conditions of competition which do not correspond to the normal conditions of competition . However, concerted action of that kind cannot be presumed where the parallel behaviour can be accounted for by reasons other than the existence of concerted action . Such a reason might be that the copyright-management societies of other Member States would be obliged, in the event of direct access to their repertoires, to organize their own management and monitoring system in another country .

19 The question whether concerted action prohibited by the Treaty has actually been taken can thus only be answered by appraising certain presumptions and evaluating certain documents and other evidence . By virtue of the division of powers under Article 177 of the Treaty, that is a task for the national courts .

20 Accordingly, it must be stated in reply to the second question that Article 85 of the EEC Treaty must be interpreted as prohibiting any concerted practice by national copyright-management societies of the Member States having as its object or effect the refusal by each society to grant direct access to its repertoire to users established in another Member State . It is for the national courts to determine whether any concerted action by such management societies has in fact taken place .

The first question ( Article 86 )

21 The first question seeks to determine what criteria must be applied in order to determine whether an undertaking which holds a dominant position in a substantial part of the common market is imposing unfair trading conditions . The question relates more specifically to the case where the undertaking in question is a national copyright-management society dealing with musical works which also manages the repertoires of national societies of other Member States, following the conclusion of reciprocal representation contracts, and fixes an aggregate rate of royalty based on 8.5% of a discothèque' s turnover, including all taxes .

22 It is appropriate to consider first the criterion to which much importance is attached by the discothèque operators, and which is embodied in the wording of the question, namely the relationship between the rate applied in France and that applied by the copyright-management societies in other Member States .

23 Sacem contends that the methods used in the various Member States to determine the basis of assessment for the rate of royalty are dissimilar, since royalties calculated on the basis of the turnover of a discothèque, as in France, are not comparable with those determined by reference to the floor area of the establishment in question, as in other Member States . If it were possible to neutralize those differences of method by means of a comparative examination based on the same criteria, the conclusion would be that the differences between the Member States in the level of royalties are minor .

24 Those contentions have been contested not only by the discothèque operators but also by the Commission . The latter stated that in conducting an inquiry into royalties charged to French discothèques by Sacem it asked all the copyright-management societies dealing with music in the Community to inform it of the royalties charged to a national discothèque with specific characteristics as regards the number of places, area, opening hours, location cost of entry, cost of the most popular drink and total annual receipts including tax . The Commission concedes that this method of comparison does not take account of the appreciable differences which may exist from one Member State to another regarding the number of people who go to discothèques, which depends on various factors such as climate, social habits and historical traditions . Nevertheless, if a royalty is many times higher than that charged in other Member States then it is clearly inequitable, and that, the Commission says was the finding indicated by its inquiry .

25 When an undertaking holding a dominant position imposes scales of fees for its services which are appreciably higher than those charged in other Member States and where a comparison of the fee levels has been made on a consistent basis, that difference must be regarded as indicative of an abuse of a dominant position . In such a case it is for the undertaking in question to justify the difference by reference to objective dissimilarities between the situation in the Member State concerned and the situation prevailing in all the other Member States .

26 Sacem has claimed that certain circumstances justify that difference . It referred to the high prices charged by discothèques in France, the traditionally high level of protection provided by copyright in France, and the peculiar features of French legislation whereby the playing of recorded musical works is subject not only to a performing right but also to a supplementary mechanical reproduction fee .

27 Circumstances of that kind cannot account for a very appreciable difference between the rates of royalty charged in the various Member States . The high level of prices charged by discothèques in a particular Member State, even if substantiated, may be the result of several factors, one of which might, in turn, be the high level of royalties payable for the use of recorded music . As regards the level of protection assured by national legislation, it must be noted that copyright in musical works includes in general a performing right and a reproduction right, and the fact that a "supplementary reproduction fee" is payable in some Member States, including France, in the event of public discrimination, does not imply that the level of protection is different . As the Court held in its judgment in Case 402/85 Basset v Sacem (( 1987 )) ECR 1747, the supplementary reproduction fee may be seen, disregarding the concepts used by French legislation and practice, as constituting part of the payment for an author' s rights over the public performance of a recorded musical work and therefore fulfils a function equivalent to that of the performing right charged on the same occasion in another Member State .

28 Sacem also contends that the customary methods of collection are different, in that certain copyright-management societies in the Member States tend not to insist on collecting royalties of small amounts from small users spread over the country, such as discothèque operators, dance organizers and café proprietors . The opposite tradition has developed in France, in view of the wish of authors to have their rights fully observed .

29 That argument cannot be accepted . It is apparent from the documents before the Court that one of the most marked differences between the copyright-management societies in the various Member States lies in the level of operating expenses . Where - as appears to be the case here, according to the record of the proceedings before the national court - the staff of a management society is much larger than that of its counterparts in other Member States and, moreover, the proportion of receipts taken up by collection, administration and distribution expenses rather than by payments to copyright holders is considerably higher, the possibility cannot be ruled out that it is precisely the lack of competition on the market in question that accounts for the heavy burden of administration and hence the high level of royalties .

30 It must therefore be concluded that a comparison with the situation in other Member States may provide useful indications regarding the possible abuse of a dominant position by a national copyright-management society . Accordingly, the answer to the question as formulated by the national courts must be in the affirmative .

31 The arguments presented before the Court by the discothèque operators and Sacem related also to other criteria not mentioned in the question submitted by the national court which might serve to establish the unfairness of the rate of royalty . The discothèque operators drew attention to the difference between the rate applied to discothèques and that applied to other large-scale users of recorded music, such as radio and television stations . However, they did not suggest any basis on which a reliable and consistent comparison could be made, and the Commission and the governments which submitted observations did not express any view on that point . Accordingly, the Court is unable to consider that criterion in the present preliminary-ruling proceedings .

32 The cour d' appel, Poitiers, which initially referred the questions to the Court for a preliminary ruling, expressly stated that the fact that a flat-rate royalty was charged should not be taken into account in deciding whether or not the amount of royalty was fair . Accordingly, it is not for the Court to give a ruling on that matter in the present case .

33 By virtue of the foregoing, it must be stated in reply to the first question that Article 86 of the Treaty must be interpreted as meaning that a national copyright-management society holding a dominant position in a substantial part of the common market imposes unfair trading conditions where the royalties which it charges to discothèques are appreciably higher than those charged in other Member States, the rates being made on a consistent basis . That would not be the case if the copyright-management society in question were able to justify such a difference by reference to objective and relevant dissimilarities between copyright management in the Member State concerned and copyright management in the other Member States .

Decision on costs

Costs

47 The costs incurred by the French, Italian, Greek and Spanish Governments and the Commission, which have submitted observations to the Court, are not recoverable . Since these proceedings are, in so far as the parties to the main proceedings are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court .

Operative part

On those grounds,

THE COURT

in reply to the questions submitted to it by the cour d' appel, Poitiers, by judgment of 3 March 1988, and by the tribunal de grande instance, Poitiers, by two judgments of 6 June 1988, hereby rules :

1 . Article 85 of the EEC Treaty must be interpreted as prohibiting any concerted practice by national copyright-management societies of the Member States having as its object or effect the refusal by each society to grant direct access to its repertoire to users established in another Member State . It is for the national courts to determine whether any concerted action by such management societies has in fact taken place .

2 . Article 86 of the Treaty must be interpreted as meaning that a national copyright-management society holding a dominant position in a substantial part of the common market imposes unfair trading conditions where the royalties which it charges to discothèques are appreciably higher than those charged in other Member States, the rates being compared on a consistent basis . That would not be the case if the copyright-management society in question were able to justify such a difference by reference to objective and relevant dissimilarities between copyright management in the Member State concerned and copyright management in the other Member States .

Keywords

++++

1 . Free movement of goods - Industrial and commercial property - Designs and models - Protection - Conditions and procedures - Determination thereof by national law - Protection of components forming part of a unit already protected as such - Whether permissible

( EEC Treaty, Art . 36 )

2 . Competition - Dominant position - Designs and models - Car body panels - Exercise of the right - Abuse - Conditions

( EEC Treaty, Art . 86 )

Summary

1 . In the absence of Community standardization or harmonization of laws, the determination of the conditions and procedures under which the protection of designs and models is granted is a matter for the national rules of each Member State . It is for the national legislature to determine which products may benefit from protection, even where they form part of a unit which is already protected as such .

2 . The right of a proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without his consent, products incorporating the design constitutes the very subject-matter of his exclusive right . It follows that an obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of his exclusive right, and that a refusal to grant such a licence cannot in itself constitute an abuse of a dominant position .

However, the exercise of such an exclusive right by the proprietor of a registered design in respect of car body panels may be prohibited by Article 86 if it involves, on the part of an undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model are still in circulation, provided that such conduct is liable to affect trade between Member States .

Parties

In Case 238/87

REFERENCE to the Court under Article 177 of the EEC Treaty by the High Court of Justice, Chancery Division, Patents Court, London, for a preliminary ruling in the proceedings pending before that court between

AB Volvo

and

Erik Veng ( UK ) Ltd

on the interpretation of Article 86 of the EEC Treaty,

THE COURT

composed of : Lord Mackenzie Stuart, President, G . Bosco, O . Due, and J . C . Moitinho de Almeida ( Presidents of Chambers ), T . Koopmans, U . Everling, K . Bahlmann, Y . Galmot, R . Joliet, T . F . O' Higgins and F . A . Schockweiler, Judges,

Advocate General : J . Mischo

Registrar : D . Louterman, Administrator

after considering the observations submitted on behalf of

AB Volvo, the plaintiff in the main proceedings, by David Vaughan QC, Richard Miller, barrister, and William Richards, solicitor,

Erik Veng ( UK ) Ltd, the defendant in the main proceedings, by Robin Jacob QC and Peter Prescott, solicitor,

the French Government, by Régis de Gouttes, acting as Agent,

the United Kingdom Government, by H . R . L . Purse of the Treasury Solicitor' s Department, acting as Agent,

the Italian Government, represented by Ivo M . Braguglia, avvocato dello Stato,

the Commission, represented by Anthony McClellan and Ida Langermann, acting as Agents,

having regard to the Report for the Hearing and further to the hearing on 18 May 1988,

after hearing the Opinion of the Advocate General delivered at the sitting on 21 June 1988,

gives the following

Judgment

Grounds

1 By an order of 17 July 1987, which was received at the Court on 3 August 1987, the High Court of Justice of England and Wales ( Chancery Division, Patents Court ) referred three questions to the Court under Article 177 of the EEC Treaty for a preliminary ruling on the interpretation of Article 86 of the Treaty with a view to determining whether the refusal by the proprietor of a registered design in respect of body panels for motor vehicles to grant a licence for the import and sale of such panels may, in certain circumstances, be regarded as an abuse of a dominant position within the meaning of the abovementioned article .

2 The questions were raised in proceedings between AB Volvo ( hereinafter referred to as "Volvo ") and Eric Veng ( UK ) Ltd ( hereinafter referred to as "Veng ").

3 Volvo, the proprietor in the United Kingdom of registered design No 968895 for the front wings of Volvo series 200 cars, instituted proceedings against Veng before the High Court of Justice for infringement of its sole and exclusive rights . Veng imports the same body panels, manufactured without authority from Volvo, and markets them in the United Kingdom .

4 In the proceedings before it, the High Court referred the following questions to the Court of Justice for a preliminary ruling :

( 1 ) If a substantial car manufacturer holds registered designs which, under the law of a Member State, confer on it the sole and exclusive right to make and import replacement body panels required to effect repair of the body of a car of its manufacture ( if such body panels are not replaceable by body panels of any other design ), is such a manufacturer, by reason of such sole and exclusive rights, in a dominant position within the meaning of Article 86 of the EEC Treaty with respect to such replacement parts?

( 2 ) Is it prima facie an abuse of such dominant position for such a manufacturer to refuse to licence others to supply such body panels, even where they are willing to pay a reasonable royalty for all articles sold under the licence ( such royalty to represent an award which is just and equitable having regard to the merits of the design and all the surrounding circumstances, and to be determined by arbitration or in such other manner as the national court shall direct )?

( 3 ) Is such an abuse likely to affect trade between Member States within the meaning of Article 86 by reason of the fact that the intending licensee is thereby prevented from importing the body panels from a second Member State?

5 It is apparent from the terms of the order for reference that the national court submitted those questions taking account of the undertaking given by the defendant in the main proceedings to abandon its contention that a comparison of the prices charged by it for the body panels in question and the higher prices charged for the same panels by the plaintiff in the main proceedings constitutes an abuse of a dominant position by the latter .

6 Reference is made to the Report for the Hearing for a fuller account of the facts in the main proceedings, the course of the procedure and the observations submitted to the Court, which are mentioned or referred to hereinafter only in so far as is necessary for the reasoning of the Court .

The second question

7 It must first be observed, as the Court held in its judgment of 14 September 1982 in Case 144/81 Keurkoop v Nancy Kean Gifts (( 1982 )) ECR 2853 with respect to the protection of designs and models, that, as Community law stands at present and in the absence of Community standardization or harmonization of laws, the determination of the conditions and procedures under which protection of designs and models is granted is a matter for national rules . It is thus for the national legislature to determine which products are to benefit from protection, even where they form part of a unit which is already protected as such .

8 It must also be emphasized that the right of the proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without its consent, products incorporating the design constitutes the very subject-matter of his exclusive right . It follows that an obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of his exclusive right, and that a refusal to grant such a licence cannot in itself constitute an abuse of a dominant position .

9 It must however be noted that the exercise of an exclusive right by the proprietor of a registered design in respect of car body panels may be prohibited by Article 86 if it involves, on the part of an undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model are still in circulation, provided that such conduct is liable to affect trade between Member States .

10 In the present case no instance of any such conduct has been mentioned by the national court . Accordingly, and having regard to the answer given to the second question, it is unnecessary to give an answer to the first and third questions .

11 It must therefore be stated in reply to the second question submitted by the national court that the refusal by the proprietor of a registered design in respect of body panels to grant to third parties, even in return for reasonable royalties, a licence for the supply of parts incorporating the design cannot in itself be regarded as an abuse of a dominant position within the meaning of Article 86 .

Decision on costs

Costs

12 The costs incurred by the Government of the Federal Republic of Germany, the French Government, the United Kingdom, the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable . As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .

Operative part

On those grounds,

THE COURT,

in reply to the questions submitted to it by the High Court of Justice of England and Wales, by order of 17 July 1987, hereby rules :

The refusal by the proprietor of a registered design in respect of body panels to grant to third parties, even in return for reasonable royalties, a licence for the supply of parts incorporating the design cannot in itself be regarded as an abuse of a dominant position within the meaning of Article 86 .

Keywords

++++

1. Competition ° Dominant position ° Concept ° Monopoly of broadcasting companies over information relating to weekly programme listings

(EEC Treaty, Art. 86)

2. Competition ° Dominant position ° Copyright ° Weekly listings of television programmes ° Exercise of copyright ° Abuse ° Conditions

(EEC Treaty, Art. 86)

3. Appeal ° Grounds ° Mistaken assessment of the facts ° Inadmissible

(EEC Treaty, Art. 168a; Statute of the Court of Justice of the EEC, Art. 51)

4. Competition ° Dominant position ° Effect on trade between Member States ° Criteria

(EEC Treaty, Art. 86)

5. International agreements ° Agreements concluded by Member States ° Agreements predating the EEC Treaty ° Justification of restrictions on intra-Community trade ° Not permissible ° Agreement ratified by a Member State already bound by the EEC Treaty ° Effects on the powers of the Community ° No effects

(EEC Treaty, Arts 234 and 236)

6. Competition ° Administrative proceedings ° Discontinuance of infringements ° Power of the Commission ° Orders addressed to undertakings

(Regulation No 17 of the Council, Art. 3)

7. Competition ° Administrative proceedings ° Discontinuance of infringements ° Burdens imposed on undertakings ° Proportionality ° Criteria

(Regulation No 17 of the Council, Art. 3)

8. Competition ° Administrative proceedings ° Decision finding that there has been an infringement ° Statement of reasons ° Obligation ° Scope

(EEC Treaty, Art. 190)

Summary

1. Broadcasting companies are in a dominant position within the meaning of Article 86 of the Treaty when, by reason of their de facto monopoly over the information relating to the listings of their programmes, which are received in most households in one Member State and in a substantial portion of households in the adjoining part of another Member State, they are in a position to prevent effective competition on the market in weekly television magazines in the areas concerned.

2. The conduct of an undertaking in a dominant position, consisting of the exercise of a right classified by national law as "copyright", cannot, by virtue of that fact alone, be exempt from review in relation to Article 86 of the Treaty.

In the absence of Community standardization or harmonization of laws, determination of the conditions and procedures for granting protection of an intellectual property right is admittedly a matter for national rules and the exclusive right of reproduction forms part of the author' s rights, with the result that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position.

However, the exercise of an exclusive right by a proprietor may, in exceptional circumstances, involve abusive conduct. Such will be the case when broadcasting companies rely on copyright conferred by national legislation to prevent another undertaking from publishing on a weekly basis information (channel, day, time and title of programmes) together with commentaries and pictures obtained independently of those companies, where, in the first place, that conduct prevents the appearance of a new product, a comprehensive weekly guide to television programmes, which the companies concerned do not offer and for which there is a potential consumer demand, conduct which constitutes an abuse under heading (b) of the second paragraph of Article 86 of the Treaty; where, second, there is no justification for that refusal either in the activity of television broadcasting or in that of publishing television magazines; and where, third, the companies concerned, by their conduct, reserve to themselves the secondary market of weekly television guides by excluding all competition from the market through denial of access to the basic information which is the raw material indispensable for the compilation of such a guide.

3. Pursuant to Article 168a of the Treaty and Article 51 of the Statute of the Court of Justice of the EEC, an appeal may rely only on grounds relating to infringement of rules of law, to the exclusion of any appraisal of the facts.

4. In order to satisfy the condition that trade between Member States must be affected within the meaning of Article 86 of the Treaty, it is not necessary that the conduct in question should in fact have substantially affected that trade. It is sufficient to establish that the conduct is capable of having such an effect. This will be the case where an undertaking excludes all potential competitors on the geographical market consisting of one Member State and part of another Member State and thus modifies the structure of competition on that market, thereby affecting potential commercial exchanges between those Member States.

5. The provisions of an agreement concluded prior to entry into force of the Treaty or prior to a Member State' s accession, to which Article 234 of the Treaty applies, cannot be relied on in intra-Community relations if the rights of non-member countries are not involved. Where an agreement has been ratified by a Member State already bound by the Treaty, it cannot be relied on to limit the powers of the Community, as provided for in the Treaty, since the latter can be amended only in accordance with the procedure laid down in Article 236.

6. Article 3 of Regulation No 17 is to be applied according to the nature of the infringement found and may include an order to do certain acts or things which, unlawfully, have not been done as well as an order to bring an end to certain acts, practices or situations which are contrary to the Treaty.

7. In the context of the application of Article 3 of Regulation No 17, the principle of proportionality means that the burdens imposed on undertakings in order to bring an infringement of competition law to an end must not exceed what is appropriate and necessary to attain the objective sought, namely re-establishment of compliance with the rules infringed.

8. Commission decisions intended to find infringements of competition rules, issue directions and impose pecuniary sanctions must state the reasons on which they are based, in accordance with Article 190 of the Treaty, which requires the Commission to set out the reasons which prompted it to adopt a decision, so that the Court can exercise its power of review and Member States and nationals concerned know the basis on which the Treaty has been applied. The Commission cannot, however, be required to discuss all the matters of fact and law which may have been dealt with during the administrative proceedings.

Parties

In Joined Cases C-241/91 P and C-242/91 P,

Radio Telefis Eireann (RTE), a public authority having its office in Dublin, represented by W. Alexander and G. van der Wal, Advocates, instructed by G.F. McLaughlin, Director of Legal Affairs of Radio Telefis Eireann, and by E. Murphy, Solicitor, with an address for service in Luxembourg at the Chambers of Arendt & Medernach, 8-10 Rue Mathias Hardt (C-241/91 P),

and

Independent Television Publications Ltd (ITP), a company incorporated under English law, having its registered office in London, represented by M. J. Reynolds and R. Strivens, Solicitors, and Alan Tyrrell, QC, with an address for service in Luxembourg at the Chambers of Zeyen, Beghin & Feider, 67 Rue Ermesinde (C-242/91 P),

appellants,

supported by

Intellectual Property Owners Inc. (IPO), having its registered office in Washington, D.C., United States of America, represented by D.R. Barrett and G.I.F. Leigh, Solicitors, with an address for service in Luxembourg at the Chambers of Bonn & Schmitt, 62 Avenue Guillaume,

intervener,

APPEALS against two judgments of the Court of First Instance of the European Communities (Second Chamber) of 10 July 1991 in Case T-69/89 RTE v Commission [1991] ECR II-485 and in Case T-76/89 ITP v Commission [1991] ECR II-575, seeking to have those judgments set aside,

the other party to the proceedings being:

Commission of the European Communities, represented by Julian Currall, of its Legal Service, acting as Agent, and I.S. Forrester, QC, with an address for service in Luxembourg at the office of G. Kremlis, also of the Legal Service, Wagner Centre, Kirchberg,

supported by

Magill TV Guide Ltd, having its registered office in Dublin, represented by Gore & Grimes, Solicitors, and J.D. Cooke, SC, with an address for service in Luxembourg at the Chambers of Louis Schiltz, 83 Boulevard Grande-Duchesse Charlotte,

intervener at first instance,

THE COURT,

composed of: G.C. Rodríguez Iglesias (Rapporteur), President, F.A. Schockweiler and P.J.G. Kapteyn (Presidents of Chambers), G.F. Mancini, C.N. Kakouris, J.C. Moitinho de Almeida and J.L. Murray, Judges,

Advocate General: C. Gulmann,

Registrar: L. Hewlett, Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 1 December 1993, at which Radio Telefis Eireann was represented by W. Alexander and G. van der Wal, Advocates; Independent Television Publications Ltd by A. Tyrrell, QC, R. Strivens, Solicitor, and T. Skinner, Barrister; the Commission by J. Currall, of its Legal Service, and I.S. Forrester, QC; Magill TV Guide Ltd by J.D. Cooke, SC; and Intellectual Property Owners by G.I.F. Leigh, Solicitor, and D. Vaughan, QC,

after hearing the Opinion of the Advocate General at the sitting on 1 June 1994,

gives the following

Judgment

Grounds

1 By application lodged at the Court Registry on 19 September 1991, Radio Telefis Eireann ("RTE"), notified of the judgment of the Court of First Instance in Case T-69/89 RTE v Commission [1991] ECR II-485 ("the RTE judgment") on 10 July 1991, the date of judgment, appealed against that judgment on the ground of non-compliance with Community law.

2 By application lodged at the Court Registry on 19 September 1991, Independent Television Publications Ltd ("ITP"), notified of the judgment of the Court of First Instance of 10 July 1991 in Case T-76/89 ITP v Commission [1991] ECR II-575 ("the ITP judgment") on 12 July 1991, appealed against that judgment on the ground of non-compliance with Community law.

3 By two applications lodged at the Registry on 6 January 1992, Intellectual Property Owners Inc. ("IPO") sought leave to intervene in the two cases in support of the forms of order sought by the appellants. By two orders of 25 March 1992 the Court granted IPO leave to intervene.

4 By an order of the President of the Court of Justice of 21 April 1993, Cases C-241/91 P and C-242/91 P were joined for the purposes of the oral procedure.

5 Since the two cases concern the same subject-matter, it is appropriate for them to be joined for the purposes of the judgment, in accordance with Article 43 of the Rules of Procedure.

6 According to the judgments of the Court of First Instance, most households in Ireland and 30% to 40% of households in Northern Ireland can receive television programmes broadcast by RTE, ITV and BBC.

7 At the material time, no comprehensive weekly television guide was available on the market in Ireland or in Northern Ireland. Each television station published a television guide covering exclusively its own programmes and claimed, under Irish and United Kingdom legislation, copyright protection for its own weekly programme listings in order to prevent their reproduction by third parties.

8 RTE itself published its own weekly television guide, while ITV did so through ITP, a company established for that purpose.

9 ITP, RTE and BBC practised the following policy with regard to the dissemination of programme listings. They provided their programme schedules free of charge, on request, to daily and periodical newspapers, accompanied by a licence for which no charge was made, setting out the conditions under which that information could be reproduced. Daily listings and, if the following day was a public holiday, the listings for two days, could thus be published in the press, subject to certain conditions relating to the format of publication. Publication of "highlights" of the week was also authorized. ITP, RTE and the BBC ensured strict compliance with the licence conditions by instituting legal proceedings, where necessary, against publications which failed to comply with them.

10 Magill TV Guide Ltd ("Magill") attempted to publish a comprehensive weekly television guide but was prevented from doing so by the appellants and the BBC, which obtained injunctions prohibiting publication of weekly television listings.

11 Magill lodged a complaint with the Commission on 4 April 1986 under Article 3 of Regulation No 17 of the Council of 6 February 1962, the First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 87) ("Regulation No 17") seeking a declaration that the appellants and the BBC were abusing their dominant position by refusing to grant licences for the publication of their respective weekly listings. The Commission decided to initiate a proceeding, at the end of which it adopted Decision 89/205/EEC of 21 December 1988 relating to a proceeding under Article 86 of the EEC Treaty (IV/31.851 ° Magill TV Guide/ITP, BBC and RTE) (OJ 1989 L 78, p. 43) ("the decision"), which was the subject-matter of the proceedings before the Court of First Instance.

12 In that decision the Commission found that there had been a breach of Article 86 of the EEC Treaty and ordered the three organizations to put an end to that breach, in particular "by supplying ... third parties on request and on a non-discriminatory basis with their individual advance weekly programme listings and by permitting reproduction of those listings by such parties". It was also provided that, if the three organizations chose to grant reproduction licences, any royalties requested should be reasonable.

13 By order of 11 May 1989 in Joined Cases 76, 77 and 91/89 R RTE and Others v Commission [1989] ECR 1141, the President of the Court of Justice, at the request of the applicants, ordered suspension "of the operation of Article 2 of the ... decision in so far as it obliges the applicants to bring the infringement found by the Commission to an end forthwith by supplying each other and third parties on request and on a non-discriminatory basis with their individual advance weekly programme listings and by permitting reproduction of those listings by such parties".

14 At first instance the two appellants sought annulment of the Commission decision and an order requiring it to pay the costs of the proceedings.

15 The Court of First Instance dismissed the appellants' applications and ordered them to pay the costs.

16 RTE claims that the Court of Justice should:

"1. quash the judgment of the Court of First Instance;

2. annul the decision of the Commission of 21 December 1988;

3. order the Commission and the intervener to pay the costs."

17 ITP requests the Court of Justice to:

"1. quash the judgment of the Court of First Instance dated 10 July 1991 in Case T-76/89 ITP v Commission and itself give final judgment in the matter;

2. declare Commission Decision IV/31.851 of 21 December 1988 (Magill TV Guide/ITP, BBC and RTE) void; and

3. order the Commission and/or the intervener to pay the costs of ITP in the Court of First Instance and the Commission to pay the costs of ITP in this Court."

18 The Commission contends that the Court should dismiss the appeals, order each appellant to bear the costs of the proceedings brought by it and order IPO to bear the costs incurred by the Commission by virtue of IPO' s intervention.

19 In the alternative, in the event that the Court of Justice should hold, contrary to the Commission' s submissions, that the judgments of the Court of First Instance must be quashed on a particular point, the Commission submits that the Court of Justice should none the less confirm the operative parts of the judgments of the Court of First Instance while substituting its own reasoning in accordance with the judgment in Case C-30/91 P Lestelle v Commission [1992] ECR I-3755. The Commission contends that the operative parts of the judgments, which upheld the Commission' s decision, are sound since the conduct complained of in this case was evidently abusive, harmed the interests of consumers, drove Magill' s multi-channel guide out of the market, restricted trade between Member States and was intended (at least by two of the three applicants) to restrict such trade.

20 IPO claims that the Court should set aside the two judgments of the Court of First Instance, annul the decision of the Commission and order the Commission to bear IPO' s costs before the Court of Justice.

21 RTE relies on three pleas in law in support of its appeal. The first is that the Court of First Instance misconstrued the concept of abuse of a dominant position contained in Article 86 of the Treaty. The second is that the Court of First Instance misconstrued the concept of effects on trade between Member States. The third is that the Court of First Instance wrongly refused to take into consideration the Berne Convention of 1886.

22 ITP, in support of its appeal, relies on the first plea raised by RTE, along with two further pleas in law. The first is that the Court of First Instance misconstrued Article 3 of Regulation No 17 by holding that the Commission had the power to require a proprietor of intellectual property rights to grant compulsory licences. The second is that Article 190 of the Treaty was infringed in so far as the Court of First Instance held that the reasoning of the decision satisfied the conditions relating to observance of the rights of the defence.

23 In its two statements in intervention, IPO particularly supports the plea common to both ITP and RTE, namely that the Court of First Instance misconstrued the concept of abuse of a dominant position within the meaning of Article 86 of the Treaty.

The existence of an abuse of a dominant position

24 So far as the existence of a dominant position is concerned, the Court of First Instance held that "ITP enjoyed, as a consequence of its copyright in ITV and Channel 4 programme listings, which had been transferred to it by the television companies broadcasting on those channels, the exclusive right to reproduce and market those listings. It was thus able, at the material time, to secure a monopoly over the publication of its weekly listings in the TV Times, a magazine specializing in the programmes of ITV and Channel 4". Consequently, in the opinion of the Court of First Instance, "the applicant clearly held at that time a dominant position both on the market represented by its weekly listings and on the market for the magazines in which they were published in Ireland and Northern Ireland. Third parties such as Magill who wished to publish a general television magazine were in a situation of economic dependence on the applicant, which was thus in a position to hinder the emergence of any effective competition on the market for information on its weekly programmes" (ITP judgment, paragraph 49). With regard to RTE, the Court of First Instance reached the same conclusion in nearly identical terms (RTE judgment, paragraph 63).

25 So far as the existence of an abuse of that dominant position was concerned, the Court of First Instance considered that it was necessary to interpret Article 86 in the light of copyright in programme listings. It pointed out that, in the absence of harmonization of national rules or Community standardization, determination of the conditions and procedures under which copyright was protected was a matter for national rules (ITP judgment, paragraphs 50 and 51). The relationship between national intellectual property rights and the general rules of Community law was governed expressly by Article 36 of the EEC Treaty, which provided for the possibility of derogating from the rules relating to the free movement of goods on grounds of the protection of industrial or commercial property, subject to the conditions set out in the second sentence of Article 36. Article 36 thus emphasized that the reconciliation between the requirements of the free movement of goods and the respect to which intellectual property rights were entitled had to be achieved in such a way as to protect the legitimate exercise of such rights, which alone was justified within the meaning of that article, and to preclude any improper exercise thereof likely to create artificial partitions within the market or pervert the rules governing competition within the Community. The Court of First Instance took the view that the exercise of intellectual property rights conferred by national legislation had consequently to be restricted as far as was necessary for that reconciliation (ITP judgment, paragraph 52).

26 The Court of First Instance found, in the light of the case-law of the Court of Justice, that it followed from Article 36 of the Treaty that only those restrictions on freedom of competition, free movement of goods or freedom to provide services which were inherent in the protection of the actual substance of the intellectual property right were permitted in Community law. It based its view in particular on the judgment of the Court of Justice in Case 78/70 Deutsche Grammophon v Metro [1971] ECR 487, paragraph 11, in which the Court of Justice held that, although it permitted prohibitions or restrictions on the free movement of products which were justified for the purpose of protecting industrial and commercial property, Article 36 only admitted derogations from that freedom to the extent to which they were justified for the purpose of safeguarding rights which constituted the specific subject-matter of such property (ITP judgment, paragraph 54).

27 The Court of First Instance then observed that in principle the protection of the specific subject-matter of a copyright entitled the copyright-holder to reserve the exclusive right to reproduce the protected work (ITP judgment, paragraph 55).

28 However, the Court of First Instance took the view that, while it was plain that the exercise of the exclusive right to reproduce a protected work was not in itself an abuse, that did not apply when, in the light of the details of each individual case, it was apparent that that right was being exercised in such ways and circumstances as in fact to pursue an aim manifestly contrary to the objectives of Article 86. In that event, the Court of First Instance continued, the copyright was no longer being exercised in a manner which corresponded to its essential function, within the meaning of Article 36 of the Treaty, which was to protect the moral rights in the work and ensure a reward for the creative effort, while respecting the aims of, in particular, Article 86. From this the Court of First Instance concluded that the primacy of Community law, particularly as regards principles as fundamental as those of the free movement of goods and freedom of competition, prevailed over any use of a rule of national intellectual property law in a manner contrary to those principles (ITP judgment, paragraph 56).

29 In the present case, the Court of First Instance noted that the applicants, by reserving the exclusive right to publish their weekly television programme listings, were preventing the emergence on the market of a new product, namely a general television magazine likely to compete with their own magazines. The applicants were thus using their copyright in the programme listings produced as part of the activity of broadcasting in order to secure a monopoly in the derivative market of weekly television guides in Ireland and Northern Ireland. The Court of First Instance also regarded it as significant in that regard that the applicants had authorized, free of charge, the publication of their daily listings and highlights of their weekly programmes in the press in both Ireland and the United Kingdom.

30 The Court of First Instance accordingly took the view that conduct of that type ° characterized by preventing the production and marketing of a new product, for which there was potential consumer demand, on the ancillary market of weekly television guides and thereby excluding all competition from that market solely in order to secure the applicants' respective monopolies ° clearly went beyond what was necessary to fulfil the essential function of the copyright as permitted in Community law. The applicants' refusal to authorize third parties to publish their weekly listings was, in this case, the Court of First Instance ruled, arbitrary in so far as it was not justified by the requirements peculiar to the activity of publishing television magazines. It was thus possible for the applicants to adapt to the conditions of a television magazine market which was open to competition in order to ensure the commercial viability of their weekly publications. The applicants' conduct could not, in those circumstances, be covered in Community law by the protection conferred by their copyright in the programme listings (ITP judgment, paragraph 58).

31 In the light of the foregoing considerations, the Court of First Instance found that, although the programme listings were at the material time protected by copyright as laid down by national law, which still determined the rules governing that protection, the conduct at issue could not qualify for such protection within the framework of the necessary reconciliation between intellectual property rights and the fundamental principles of the Treaty concerning the free movement of goods and freedom of competition. The aim of that conduct was clearly incompatible with the objectives of Article 86 (ITP judgment, paragraph 60).

32 The Court of First Instance accordingly dismissed the plea in law based on breach of Article 86.

33 RTE, supported by IPO, relies on the judgment in Case 238/87 Volvo v Veng [1988] ECR 6211 in arguing that the exercise by an owner of intellectual property rights of his exclusive rights, in particular his refusal to grant a licence, cannot in itself be regarded as an abuse of a dominant position.

34 According to RTE, ITP and IPO, one of the essential rights of the owner of a copyright, without which that right would be deprived of its substance, is the exclusive right of reproduction. That right, which has not been placed in question by the Treaty rules, entitles its holder to be rewarded by the exclusive sale of the products incorporating the protected work and to prevent competition by a third party in respect of those products.

35 ITP denies that the exercise of the exclusive right of reproduction is itself an abuse where it is in pursuit of an aim manifestly contrary to the objectives of Article 86 (ITP judgment, paragraph 56) since copyright owners ordinarily and naturally exercise their copyright in order to restrict competition with their own product by other products made using their copyright material, even on a derived market. That, it continues, is the essence of copyright.

36 IPO considers that copyright is by nature beneficial for competition, pointing out that it attributes exclusive proprietorial rights only to a particular expression of an idea or concept, not to the concept or idea itself.

37 RTE and IPO point out that, in the absence of Community harmonization, the scope of national copyright laws can be defined only by the legislature of each Member State. The definition of that scope cannot be altered by a measure adopted in implementation of Article 86, but only by specific Community legislation.

38 Moreover, according to RTE, the right of first marketing has been considered in the case-law of the Court of Justice as the specific subject-matter of all industrial property rights.

39 RTE contends that the owner of an intellectual property right is under no obligation to offer justification for his refusal to grant a licence, contrary to the view taken by the Court of First Instance. ITP adds that this view of the Court of First Instance is not supported by the case-law of the Court of Justice and that, due to the imprecision of the criteria used, it undermines legal certainty for copyright owners.

40 According to RTE and IPO, a refusal, by the owner of a right, to grant a licence forms part of the specific subject-matter of his exclusive right. RTE considers that this would constitute an abuse only in very particular circumstances and IPO adds that the use of an intellectual property right is justified if it is within the scope of the specific subject-matter of the right in question.

41 IPO and RTE criticize the approach, adopted by the Court of First Instance and the Commission in this case, of seeing copyright as a mere combination of the right of attribution of authorship and the right to compensation for exploitation. IPO claims that this is in marked contrast not only to the laws of the various Member States but also to the Berne Convention and would represent a significant diminution of the protection afforded by copyright. ITP adds that this view overlooks the right of exclusive reproduction and distinguishes between the protection of moral rights and the protection of commercial rights with the result that assignees of the creator ° such as ITP ° cannot avail themselves of moral rights, which are inalienable, and will therefore be unable to exercise the right of exclusive reproduction.

42 RTE submits that consumer demand cannot justify application of Article 86 to the present cases and that it is for the national legislature alone to remedy such a situation, as has been done in the United Kingdom. ITP adds that it is ordinarily the case that a copyright owner who sells his own product made from his copyright material deprives consumers of the opportunity of obtaining it elsewhere.

43 Next, according to IPO, there is no presumption that the holder of an intellectual property right is in a dominant position within the meaning of Article 86 (judgments in Case 40/70 Sirena v EDA and Others [1971] ECR 69 and Case 78/70 Deutsche Grammophon, cited above). Relying in particular on the judgment in Case 322/81 Michelin v Commission [1983] ECR 3461, IPO takes the view that a dominant position presupposes a position of economic strength and for that reason it calls in question the analysis of the Court of First Instance that the appellants were dominant merely because they held copyrights without reference to any analysis whatever of economic power in the marketplace.

44 IPO also criticizes the Commission for having failed to apply the criterion of dominant position based on economic power and having taken the view that the appellants and the BBC held a factual monopoly. In doing so, the Commission takes the view that a factual monopoly is likely to arise wherever there exists a primary market and a secondary market and a third party wishes to avail itself of the products or services on the primary market in order to carry on business on the secondary market. According to IPO, the Commission considers that such a situation will result in a position of economic dependence which is characteristic of the existence of a dominant position.

45 IPO criticizes this conception in so far as it artificially links economic dependence with the intention of a third party, who would always have the possibility of undertaking some other economic venture. For IPO, the concept of "factual monopoly" appears to be an artificial construct whereby the Commission seeks to justify the use of competition law in order to change the specific subject-matter of copyright.

(a) Existence of a dominant position

46 So far as dominant position is concerned, it is to be remembered at the outset that mere ownership of an intellectual property right cannot confer such a position.

47 However, the basic information as to the channel, day, time and title of programmes is the necessary result of programming by television stations, which are thus the only source of such information for an undertaking, like Magill, which wishes to publish it together with commentaries or pictures. By force of circumstance, RTE and ITP, as the agent of ITV, enjoy, along with the BBC, a de facto monopoly over the information used to compile listings for the television programmes received in most households in Ireland and 30% to 40% of households in Northern Ireland. The appellants are thus in a position to prevent effective competition on the market in weekly television magazines. The Court of First Instance was therefore right in confirming the Commission' s assessment that the appellants occupied a dominant position (see the judgment in Case 322/81 Michelin, cited above, paragraph 30).

(b) Existence of abuse

48 With regard to the issue of abuse, the arguments of the appellants and IPO wrongly presuppose that where the conduct of an undertaking in a dominant position consists of the exercise of a right classified by national law as "copyright", such conduct can never be reviewed in relation to Article 86 of the Treaty.

49 Admittedly, in the absence of Community standardization or harmonization of laws, determination of the conditions and procedures for granting protection of an intellectual property right is a matter for national rules. Further, the exclusive right of reproduction forms part of the author' s rights, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position (judgment in Case 238/87 Volvo, cited above, paragraphs 7 and 8).

50 However, it is also clear from that judgment (paragraph 9) that the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct.

51 In the present case, the conduct objected to is the appellants' reliance on copyright conferred by national legislation so as to prevent Magill ° or any other undertaking having the same intention ° from publishing on a weekly basis information (channel, day, time and title of programmes) together with commentaries and pictures obtained independently of the appellants.

52 Among the circumstances taken into account by the Court of First Instance in concluding that such conduct was abusive was, first, the fact that there was, according to the findings of the Court of First Instance, no actual or potential substitute for a weekly television guide offering information on the programmes for the week ahead. On this point, the Court of First Instance confirmed the Commission' s finding that the complete lists of programmes for a 24-hour period ° and for a 48-hour period at weekends and before public holidays ° published in certain daily and Sunday newspapers, and the television sections of certain magazines covering, in addition, "highlights" of the week' s programmes, were only to a limited extent substitutable for advance information to viewers on all the week' s programmes. Only weekly television guides containing comprehensive listings for the week ahead would enable users to decide in advance which programmes they wished to follow and arrange their leisure activities for the week accordingly. The Court of First Instance also established that there was a specific, constant and regular potential demand on the part of consumers (see the RTE judgment, paragraph 62, and the ITP judgment, paragraph 48).

53 Thus the appellants ° who were, by force of circumstance, the only sources of the basic information on programme scheduling which is the indispensable raw material for compiling a weekly television guide ° gave viewers wishing to obtain information on the choice of programmes for the week ahead no choice but to buy the weekly guides for each station and draw from each of them the information they needed to make comparisons.

54 The appellants' refusal to provide basic information by relying on national copyright provisions thus prevented the appearance of a new product, a comprehensive weekly guide to television programmes, which the appellants did not offer and for which there was a potential consumer demand. Such refusal constitutes an abuse under heading (b) of the second paragraph of Article 86 of the Treaty.

55 Second, there was no justification for such refusal either in the activity of television broadcasting or in that of publishing television magazines (RTE judgment, paragraph 73, and ITP judgment, paragraph 58).

56 Third, and finally, as the Court of First Instance also held, the appellants, by their conduct, reserved to themselves the secondary market of weekly television guides by excluding all competition on that market (see the judgment in Joined Cases 6/73 and 7/73 Commercial Solvents v Commission [1974] ECR 223, paragraph 25) since they denied access to the basic information which is the raw material indispensable for the compilation of such a guide.

57 In the light of all those circumstances, the Court of First Instance did not err in law in holding that the appellants' conduct was an abuse of a dominant position within the meaning of Article 86 of the Treaty.

58 It follows that the plea in law alleging misapplication by the Court of First Instance of the concept of abuse of a dominant position must be dismissed as unfounded. It is therefore unnecessary to examine the reasoning of the contested judgments in so far as it is based on Article 36 of the Treaty.

Effects on trade between Member States (second plea in the appeal in Case C-241/91 P)

59 With regard to the effects on trade between Member States, the Court of First Instance first reviewed the case-law of the Court of Justice (paragraph 76 of the RTE judgment) before finding (at paragraph 77) that "the applicant' s conduct modified the structure of competition on the market for television guides in Ireland and Northern Ireland and thus affected potential trade flows between Ireland and the United Kingdom."

60 The reasons given by the Court of First Instance for this conclusion were based on the effects of RTE' s refusal to authorize third parties to publish its weekly listings on the structure of competition in the territory of Ireland and Northern Ireland. These, the Court of First Instance found, excluded all potential competition on the market in question, "thus in effect maintaining the partitioning of the markets ... [of] Ireland and Northern Ireland respectively." It found that the appreciable effect which the policy in question had on potential commercial exchanges between Ireland and the United Kingdom was evidenced by the specific demand for a general television magazine. The Court of First Instance added that "the relevant geographical area, within which a single market in television broadcasting services has already been achieved, likewise represents a single market for information on television programmes, particularly since trade is greatly facilitated by a common language" (paragraph 77).

61 RTE states that Community competition rules are not intended to remedy situations which are purely internal to a Member State and it disputes the finding of the Court of First Instance that RTE had "in effect maintain[ed] the partitioning of the markets represented by Ireland and Northern Ireland respectively." RTE asserts that it has observed one and the same policy in respect of the supply of weekly programme listings and licensing, irrespective of the place of establishment of the undertakings concerned. It denies ever having stopped or hindered the export or import of television guides.

62 RTE also recalls the following facts, which are supported by the findings of the Commission and the Court of First Instance:

(i) outside Ireland, RTE' s programmes are received only in part of Northern Ireland, which represents less than 1.6% of the United Kingdom television market and less than 0.3% of the EEC television market;

(ii) according to the findings of the High Court of Ireland, the RTE signal is received by 30% to 40% of the population of Northern Ireland;

(iii) sales of RTE' s television guide in the United Kingdom are less than 5% of sales in Ireland.

63 RTE adds that it does not have programmes or commercials aimed at or broadcast to Northern Ireland. Its programmes can be received in Northern Ireland only because of "overspill". In Northern Ireland, approximately 100 000 households receive RTE programmes and 5 000 copies of RTE' s television guide are sold.

64 According to RTE, these facts demonstrate the marginal importance of the cross-border sales of weekly guides containing RTE' s programmes.

65 Moreover, following the new licensing policy applied by RTE, it appears that:

(i) sales in Ireland of Radio Times and TV Times, originating in the United Kingdom, have decreased;

(ii) sales in Northern Ireland of the RTE Guide, originating in Ireland, have not increased; in general the inclusion of RTE' s programme listings in a multi-channel guide does not appreciably affect sales figures of such a guide in Northern Ireland;

(iii) no other publishers have availed themselves of the new possibility of publishing comprehensive weekly television guides, including RTE' s programmes, and of selling them across the border.

66 RTE concludes from this information that its licensing policy, condemned by the Commission decision, has had no effect, or no more than an insignificant effect, on commercial exchanges between Ireland and the United Kingdom. In any event, RTE states, the Commission must prove that there is an appreciable effect on trade between Member States (judgment in Case 27/76 United Brands v Commission [1978] ECR 207), and that is something which the Court of First Instance failed to take into account. It points out that the Commission' s arguments on this aspect relate only to sales in Great Britain, to ITP and to the BBC.

67 It is to be noted at the outset that the Court of Justice has consistently held that, pursuant to Article 168a of the Treaty and Article 51 of the Statute of the Court of Justice of the EEC, an appeal may rely only on grounds relating to infringement of rules of law, to the exclusion of any appraisal of the facts (judgment in Case C-53/92 P Hilti v Commission [1994] ECR I-667, paragraph 10). The arguments relied on by RTE must therefore be rejected in so far as they question the appraisal of the facts by the Court of First Instance.

68 Nevertheless, the condition that trade between Member States must be affected is a question of law and, as such, subject to review by the Court of Justice.

69 In order to satisfy the condition that trade between Member States must be affected, it is not necessary that the conduct in question should in fact have substantially affected that trade. It is sufficient to establish that the conduct is capable of having such an effect (judgments in Case 322/81 Michelin v Commission, cited above, paragraph 104, and in Case C-41/90 Hoefner and Elser v Macrotron [1991] ECR I-1979, paragraph 32).

70 In this case, the Court of First Instance found that the applicant had excluded all potential competitors on the geographical market consisting of one Member State (Ireland) and part of another Member State (Northern Ireland) and had thus modified the structure of competition on that market, thereby affecting potential commercial exchanges between Ireland and the United Kingdom. From this the Court of First Instance drew the proper conclusion that the condition that trade between Member States must be affected had been satisfied.

71 It follows that the plea in law alleging misapplication by the Court of First Instance of the concept of trade between Member States being affected must be dismissed.

The Berne Convention (third plea in the appeal in Case C-241/91 P)

72 So far as the Berne Convention ("the Convention") is concerned, RTE had submitted before the Court of First Instance that Article 9(1) thereof conferred an exclusive right of reproduction and that Article 9(2) allowed a signatory State to permit reproduction only in certain special cases, provided that such reproduction did not conflict with normal exploitation of the work and did not unreasonably prejudice the legitimate interests of the author. From this RTE deduced that Article 2 of the contested decision was incompatible with the Convention inasmuch as it conflicted with the normal exploitation of RTE' s copyright in the programme listings and seriously prejudiced its legitimate interests (RTE judgment, paragraph 100).

73 In response to those arguments, the Court of First Instance considered whether the Convention was applicable. Its first finding was that the Community was not a party to it. After reviewing Article 234 of the EEC Treaty and the case-law of the Court of Justice (RTE judgment, paragraph 102), the Court of First Instance pointed out that "In the present case concerning Ireland and the United Kingdom, ... under Article 5 of the Act of Accession, Article 234 of the EEC Treaty applies to agreements or conventions concluded before ... 1 January 1973." From this it deduced that "In intra-Community relations, therefore, the provisions of the Berne Convention, ratified by Ireland and the United Kingdom before 1 January 1973, cannot affect the provisions of the Treaty. ... The argument that Article 2 of the decision is in conflict with Article 9(1) of the Berne Convention must therefore be dismissed, without there even being any need to inquire into its substance." With regard to Article 9(2) of the Convention, the Court of First Instance observed that this provision "was introduced by the Paris revision of 1971, to which the United Kingdom has been a party since 2 January 1990 and which Ireland has not yet ratified." The Court of First Instance then pointed out that an agreement or a convention concluded subsequent to accession without recourse to the procedure set out in Article 236 of the EEC Treaty cannot affect a provision of the Treaty (RTE judgment, paragraph 103).

74 The Court of First Instance accordingly dismissed as unfounded the plea alleging infringement of the Convention (RTE judgment, paragraph 104).

75 RTE claims that Article 9(2) of the Berne Convention, as revised in Paris in 1971, only allows for exceptions from authors' exclusive rights of reproduction to be made by legislation, in special cases, and provided that such reproduction does not prejudice the normal exploitation of the work or cause unreasonable prejudice to the legitimate interests of the author.

76 According to RTE, the Convention does not contain a definition of what comes under its protection but excludes only "miscellaneous news facts having the character of mere facts of press information" (Article 2(8)), an exception which must be interpreted restrictively. It is thus for the national legislature and courts to determine the scope of the Convention at national level.

77 RTE submits that the obligation imposed by the Commission' s decision has not been provided for by legislation which is sufficiently clear in its terms to define the circumstances in which, and the conditions on which, reproduction is to be permitted. The decision itself cannot be regarded as "legislation". Application of competition law does not fulfil the conditions of Article 9(2). A copyright holder must be able to know on the basis of explicit legislation whether or not he may be subject to an obligation of compulsory licensing. A provision such as Article 86 of the Treaty, which merely sets out a general obligation and must be made precise and adapted from case to case, does not fulfil the conditions laid down by Article 9(2) of the Convention. Community legislation alone is capable of providing a proper legislative basis.

78 RTE submits that the Convention is part of the rules of law relating to the application of the Treaty referred to in Article 173 of the EEC Treaty. In support of that proposition, RTE refers to numerous declarations made by the Commission which show that the Convention enjoys broad international support (see the preamble to the Proposal for a Council Decision concerning the accession of the Member States to the Berne Convention for the Protection of Literary and Artistic Works, as revised by the Paris Act of 24 July 1971, and the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention) of 26 October 1961, OJ 1991 C 24, p. 5). According to RTE, the Commission has always regarded the Convention as establishing a minimum level of protection. It refers to the Proposal for a Council Directive on the legal protection of computer programs (OJ 1989 C 91, p. 4, particularly pp. 8 and 10) and Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs (OJ 1991 L 122, p. 42). The amended Commission proposal for a Council Decision concerning the accession of the Member States to the Berne Convention for the Protection of Literary and Artistic Works, as revised by the Paris Act of 24 July 1971, and the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention) of 26 October 1961 (OJ 1992 C 57, p. 13) states (Article 1a):

"In the exercise of its powers concerning copyright and neighbouring rights, the Community shall be guided by the principles and act in accordance with the provisions of the Berne Convention ...".

The Proposal for a Council Directive on the legal protection of databases, adopted on 29 January 1992, provides a legislative basis for compulsory licensing. RTE observes that, in all fields other than competition law, the Community respects the Convention.

79 RTE accordingly takes the view that, although the Community itself is not a party to the Convention, account must be taken of the rules of that Convention within the framework of Community law (judgments in Case 4/73 Nold v Commission [1974] ECR 491, and in Joined Cases 46/87 and 227/88 Hoechst v Commission [1989] ECR 2859).

80 According to RTE, the Community cannot, on the one hand, oblige the Member States to accede to and comply with the Convention and, on the other, adopt measures which do not comply with it.

81 In conclusion, it contends that examination of the scope of Articles 234 and 236 would be relevant only if a conflict between the obligations arising from the Convention and certain provisions of the EEC Treaty had been established.

82 IPO endorses this opinion and contends that harmonization of national intellectual property law can be achieved only by legislative means, namely by a Council measure adopted in accordance with the procedure provided for in Article 100a or Article 235 of the EEC Treaty. An individual decision issued by the Commission on the basis of competition law is not the appropriate way to resolve this issue.

83 It is appropriate to observe at the outset, as the Court of First Instance did, that the Community is not a party to the Convention for the Protection of Literary and Artistic Works.

84 Next, so far as the United Kingdom and Ireland are concerned, it is true that they were already parties to the Convention when they acceded to the Community and that Article 234 of the Treaty therefore applies to that Convention, in accordance with Article 5 of the Act of Accession. It is, however, settled case-law that the provisions of an agreement concluded prior to entry into force of the Treaty or prior to a Member State' s accession cannot be relied on in intra-Community relations if, as in the present case, the rights of non-member countries are not involved (see, in particular, the judgment in Case 286/86 Ministère Public v Deserbais [1988] ECR 4907, paragraph 18).

85 Finally, the Paris Act, which amended Article 9(1) and (2) of the Convention (the provisions relied on by RTE), was ratified by the United Kingdom only after its accession to the Community and has still not been ratified by Ireland.

86 The Court of First Instance was therefore correct to hold that Article 9 of the Convention cannot be relied on to limit the powers of the Community, as provided for in the EEC Treaty, since the Treaty can be amended only in accordance with the procedure laid down in Article 236.

87 It follows that the plea that the Court of First Instance failed to have proper regard to the Convention must be dismissed as unfounded.

The powers conferred on the Commission by Article 3 of Regulation No 17 (second plea in the appeal in Case C-242/91 P)

88 The first limb of ITP' s second plea is that the Court of First Instance misconstrued Article 3 of Regulation No 17 in holding that that provision enabled the Commission to impose compulsory licensing, on conditions approved by it, relating to intellectual property rights conferred by the laws of the Member States. Relying on the judgment in Case 144/81 Keurkoop v Nancy Kean Gifts [1982] ECR 2853, ITP submits that only the Parliaments of Ireland and the United Kingdom may take away or replace the copyrights which they have conferred.

89 The second limb alleges infringement of the principle of proportionality in so far as the Court of First Instance held that the Commission' s decision was not contrary to that principle (ITP judgment, paragraphs 78 to 81). ITP contends that the Court of First Instance should have taken account of a number of considerations: the decision removed not only ITP' s exclusive right of reproduction, but also its right of first marketing, particularly important where, as in this case, the product has a useful life of 10 days; there is no reciprocity between ITP and the competitors (other than the BBC and RTE) to whom it is required to grant licences; many of those competitors, particularly the national newspapers, have turnovers and profits greatly in excess of those of ITP and they also possess valuable copyrights which they protect from reproduction.

90 It is appropriate to observe that Article 3 of Regulation No 17 is to be applied according to the nature of the infringement found and may include an order to do certain acts or things which, unlawfully, have not been done as well as an order to bring an end to certain acts, practices or situations which are contrary to the Treaty (judgment in Joined Cases 6/73 and 7/73 Commercial Solvents, cited above, paragraph 45).

91 In the present case, after finding that the refusal to provide undertakings such as Magill with the basic information contained in television programme listings was an abuse of a dominant position, the Commission was entitled under Article 3, in order to ensure that its decision was effective, to require the appellants to provide that information. As the Court of First Instance rightly found, the imposition of that obligation ° with the possibility of making authorization of publication dependent on certain conditions, including payment of royalties ° was the only way of bringing the infringement to an end.

92 The Court of First Instance was also entitled to dismiss, on the basis of the same findings of fact, the allegation that the principle of proportionality had been infringed.

93 As the Court of First Instance correctly pointed out, in the context of the application of Article 3 of Regulation No 17, the principle of proportionality means that the burdens imposed on undertakings in order to bring an infringement of competition law to an end must not exceed what is appropriate and necessary to attain the objective sought, namely re-establishment of compliance with the rules infringed (ITP judgment, paragraph 80).

94 In holding, at paragraph 81 of the ITP judgment, that, in the light of the above findings, the order addressed to the applicant was an appropriate and necessary measure to bring the infringement to an end, the Court of First Instance did not commit an error of law.

The reasoning (third plea in the appeal in Case C-242/91 P)

95 In its third plea ITP claims that the Court of First Instance failed to comply with Article 190 of the EEC Treaty in finding that the decision was adequately reasoned (ITP judgment, paragraphs 64 and 65) when the Commission did no more than state that the exercise of copyright was outside the scope of the specific subject-matter of this right and went on to conclude that an exercise of copyright consisting simply in refusing to grant a reproduction licence was an abuse of a dominant position.

96 According to ITP, the crucial question whether a mere refusal to grant a licence could constitute an abuse was dealt with by the Commission in a summary fashion. There was no analysis of the special position occupied by owners of copyright in the context of the application of Article 86. ITP maintains that such an approach fails to meet the requirements laid down in the judgment in Case C-269/90 Hauptzollamt Muenchen-Mitte v Technische Universitaet Muenchen [1991] ECR I-5469. ITP maintains that it still does not know what the Commission meant by describing ITP' s use of its copyright as falling outside the scope of the specific subject-matter of the intellectual property right.

97 ITP claims that the inadequacy of the decision' s reasoning was highlighted by the numerous arguments advanced by the Commission in the course of the proceedings before the Court of First Instance. If the Commission could so act and remain within the law, Article 190 would be rendered nugatory. ITP submits that the Court of First Instance adopted its own legal reasoning which bore no relation to the decision.

98 The Court must observe here that, according to settled case-law, Commission decisions intended to find infringements of competition rules, issue directions and impose pecuniary sanctions must state the reasons on which they are based, in accordance with Article 190 of the EEC Treaty, which requires the Commission to set out the reasons which prompted it to adopt a decision, so that the Court can exercise its power of review and Member States and nationals concerned know the basis on which the Treaty has been applied (see the judgment in Case C-137/92 P Commission v BASF and Others [1994] ECR I-2555, paragraph 66).

99 However, the Commission cannot be required to discuss all the matters of fact and law which may have been dealt with during the administrative proceedings (judgment in Case 246/86 Belasco and Others v Commission [1989] ECR 2117, paragraph 55).

100 The Court of First Instance found in particular, at paragraph 64 of the ITP judgment, that "as regards the concept of abuse, the Commission clearly stated in the decision its reasons for finding that the applicant, by using its exclusive right to reproduce the listings as the instrument of a policy contrary to the objectives of Article 86, went beyond what was necessary to ensure the protection of the actual substance of its copyright and committed an abuse within the meaning of Article 86." It accordingly arrived at the view that "Contrary to the applicant' s allegations, the statement of reasons in the contested decision is ... sufficient to allow interested parties to ascertain the main legal and factual criteria on which the Commission based its findings and to enable the Court to carry out its review. It therefore fulfils the conditions relating to the respect of the right to a fair hearing as they have consistently been defined in the case-law."

101 ITP' s criticisms fail to show that those assessments of the Court of First Instance are marred by an error of law.

102 It must be added that, in so far as those criticisms concern the inadequacy of the legal analysis of the situation made by the Commission in its decision, they substantially reproduce the arguments put forward to challenge the description of the appellants' conduct as an abuse of a dominant position, arguments which have already been rejected above in the examination of the first plea in law.

103 The plea of non-compliance with Article 190 of the Treaty must therefore be dismissed.

104 It follows that the appeals must be dismissed in their entirety.

Decision on costs

Costs

105 According to Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for by the successful party. Since the appellants have failed in their submissions, they must each be ordered to pay the costs of their appeal. Pursuant to Article 69(4) of the Rules of Procedure, IPO, which has intervened in support of the appellants, must be ordered to bear its own costs as well as those incurred by the Commission due to IPO' s intervention.

Operative part

On those grounds,

THE COURT

hereby:

1. Dismisses the appeals;

2. Orders Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) to pay the costs of the appeals lodged by them;

3. Orders Intellectual Property Owners Inc. (IPO) to bear its own costs and to pay those incurred by the Commission due to its intervention

JUDGMENT OF THE COURT (Fifth Chamber)
29 April 2004 (1)

(Competition – Article 82 EC – Abuse of a dominant position – Brick structure used to supply regional sales data for pharmaceutical products in a Member State – Copyright – Refusal to grant a licence)

In Case C-418/01,

REFERENCE to the Court under Article 234 EC by the Landgericht Frankfurt am Main (Germany) for a preliminary ruling in the proceedings pending before that court between

IMS Health GmbH & Co. OHG

and

NDC Health GmbH & Co. KG,

on the interpretation of Article 82 EC,

THE COURT (Fifth Chamber),

composed of:  P. Jann (Rapporteur), acting for the President of the Fifth Chamber,  C.W.A. Timmermans and S. von Bahr, Judges,

Advocate General: A. Tizzano,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

–

IMS Health GmbH & Co. OHG, by S. Barthelmess and H.-C. Salger, Rechtsanwälte, and J. Temple Lang, Solicitor,

–

NDC Health GmbH & Co. KG, by G. Janke and T. Lübbig, Rechtsanwälte,

–

the Commission of the European Communities, by A. Whelan and S. Rating, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of IMS Health GmbH & Co. OHG, represented by S. Barthelmess, H.-C. Salger, C. Feddersen and G. Jung-Weiser, Rechtsanwälte, and by J. Temple-Lang, of NDC Health GmbH & Co. KG, represented by G. Janke and T. Lübbig, and the Commission, represented by A. Whelan and S. Rating, at the hearing on 6 March 2003,

after hearing the Opinion of the Advocate General at the sitting on 2 October 2003,

gives the following

Judgment

1By order of 12 July 2001, received at the Court on 22 October 2001, the Landgericht Frankfurt am Main referred for a preliminary ruling under Article 234 EC three questions on the interpretation of Article 82 EC.

2Those questions arose in proceedings between IMS Health GmbH & Co. OHG (‘IMS’) and NDC Health GmbH & Co. KG (‘NDC’) concerning the use by the latter of a brick structure developed by IMS for the provision of German regional sales data on pharmaceutical products.

Factual background

3IMS and NDC are engaged in tracking sales of pharmaceutical and healthcare products.

4IMS provides data on regional sales of pharmaceutical products in Germany to pharmaceutical laboratories formatted according to the brick structure. Since January 2000, it has provided studies based on a brick structure consisting of 1 860 bricks, or a derived structure consisting of 2 847 bricks, each corresponding to a designated geographic area. According to the order for reference, those bricks were created by taking account of various criteria, such as the boundaries of municipalities, postcodes, population density, transport connections and the geographical distribution of pharmacies and doctors’ surgeries.

5Several years ago IMS set up a working group in which undertakings in the pharmaceutical industry, which are clients of IMS, participated. That working group makes suggestions for improving and optimising market segmentation. The extent of the working group’s contribution to the determination of market segmentation is a subject of dispute between IMS and NDC.

6The national court found that IMS not only marketed its brick structures, but also distributed them free of charge to pharmacies and doctors’ surgeries. According to the national court, that practice helped those structures to become the normal industry standard to which its clients adapted their information and distribution systems.

7After leaving his post in 1998, a former manager of IMS created Pharma Intranet Information AG (‘PII’), whose activity also consisted in marketing regional data on pharmaceutical products in Germany formatted on the basis of brick structures. At first, PII tried to market structures consisting of 2 201 bricks. On account of reticence manifested by potential clients, who were accustomed to structures consisting of 1 860 or 2 847 bricks, it decided to use structures of 1 860 or 3 000 bricks, very similar to those used by IMS.

8PII was acquired by NDC.

Procedural background and the questions referred for a preliminary ruling

9On application by IMS the Landgericht Frankfurt am Main granted an interlocutory order, of 27 October 2000, prohibiting PII from using the 3 000 brick structure or any other brick structure derived from the IMS 1 860 brick structure (hereinafter generically referred to as ‘the 1 860 brick structure’). After PII’s acquisition by NDC, the same prohibition was issued in respect of NDC by interlocutory order of 28 December 2000.

10Those orders were both confirmed by a judgment of the Landgericht Frankfurt am Main of 16 November 2000 and then by judgment of the Oberlandesgericht Frankfurt am Main (Germany) of 12 July 2001. The latter based its decision on the finding that the brick structure used by IMS is a database within the meaning of Article 4 of the Urheberrechtsgesetz (copyright law), which may be protected by copyright.

11On 19 December 2000, NDC made a complaint to the Commission of the European Communities, claiming that IMS’s refusal to grant it a licence to use the 1 860 brick structure constituted an infringement of Article 82 EC.

12On 3 July 2001, the Commission adopted an interim measure in the form of Commission Decision 2002/165/EC relating to a proceeding pursuant to Article 82 of the EC Treaty (Case COMP D3/38.044 – NDC Health v IMS Health: Interim measures) (OJ 2002 L 59, p. 18). By Article 1 of that decision, it ordered IMS to grant a licence to use the 1 860 brick structure to all the undertakings present on the market for the provision of German regional sales data. That measure was justified by the existence of ‘exceptional circumstances’. The Commission held that the 1 860 brick structure created by IMS has become the industry standard for the relevant market. Refusal of access to that structure, without any objective justification, was likely to eliminate all competition on the market in question, because, without it, it was impossible to compete on the relevant market (paragraphs 180 and 181 of the grounds of Decision 2002/165).

13By application lodged at the Registry of the Court of First Instance of the European Communities on 6 August 2001, IMS brought an action under Article 230 EC for annulment of Decision 2002/165. By a document lodged on the same day, it requested suspension of operation of that decision, pursuant to Articles 242 and 243 EC, pending a substantive determination by the Court of First Instance.

14By order of 26 October 2001, Case T-184/01 R IMSHealth v Commission [2001] ECR II-3193, the President of the Court of First Instance ordered suspension of operation of Decision 2002/165 pending a substantive determination by the Court of First Instance. The appeal against that order was dismissed, by order of the President of the Court of Justice in Case C-481/01 P(R) NDC Health v IMS Health and Commission [2002] ECR I-3401.

15By Decision 2003/741/EC of 13 August 2003 relating to a proceeding under Article 82 of the EC Treaty (Case COMP D3/38.044 – NDC Health v IMSHealth: Interim measures) (OJ 2003 L 268, p. 69), the Commission withdrew Decision 2002/165. That withdrawal was based on the fact that there was no longer any urgency in imposing interim measures pending the Commission’s decision to close the administrative procedure.

16In the main proceedings at the origin of the present request for a preliminary ruling, IMS pursues its objective of prohibiting NDC from using the 1 860 brick structure.

17The Landgericht Frankfurt am Main takes the view that IMS cannot exercise its right to obtain an injunction prohibiting all unlawful use of its work if it acts in an abusive manner, within the meaning of Article 82 EC, by refusing to grant a licence to NDC on reasonable terms. It therefore decided to stay the proceedings and to refer to the Court the following questions for a preliminary ruling:

‘1.

Is Article 82 EC to be interpreted as meaning that there is abusive conduct by an undertaking with a dominant position on the market where it refuses to grant a licence agreement for the use of a databank protected by copyright to an undertaking which seeks access to the same geographical and product market if the participants on the other side of the market, that is to say potential clients, reject any product which does not make use of the databank protected by copyright because their set-up relies on products manufactured on the basis of that databank?

2.

Is the extent to which an undertaking with a dominant position on the market has involved persons from the other side of the market in the development of the databank protected by copyright relevant to the question of abusive conduct by that undertaking?

3.

Is the material outlay (in particular with regard to costs) in which clients who have hitherto been supplied with the product of the undertaking having a dominant market position would be involved if they were in future to go over to purchasing the product of a competing undertaking which does not make use of the databank protected by copyright relevant to the question of abusive conduct by an undertaking with a dominant position on the market?’

The questions for a preliminary ruling

Preliminary observations

18In light of the procedural context in which the present reference for a preliminary ruling has arisen and the disputes as to the establishment of the facts, it must be recalled that, pursuant to Article 234 EC, which is based on a clear separation of functions between the national courts and the Court of Justice, the latter, when ruling on the interpretation or validity of Community provisions, is empowered to do so only on the basis of the facts which the national court puts before it (see, in particular, Case C-30/93 AC-ATEL Electronics Vertriebs [1994] ECR I-2305, paragraph 16, and Case C-107/98 Teckal [1999] ECR I-8121, paragraph 29).

19In view, in particular, of the fact that the Commission opened a procedure in which it examines the applicability of Article 82 EC to the facts underlying the dispute in the main proceedings, it must also be recalled that where the national courts give a ruling on agreements or practices which may subsequently be the subject of a decision by the Commission, they must avoid taking decisions which conflict with those taken or envisaged by the Commission in the implementation of Articles 81 and 82 EC (Case C-234/89 Delimitis [1991] ECR I-935, paragraph 47).

20It is in the light of those matters that the request for a preliminary ruling must be examined.

21By its first question, the national court asks, essentially, whether the refusal to grant a licence to use a brick structure for the presentation of regional sales data by an undertaking in a dominant position which has an intellectual property right therein to another undertaking which also wishes to provide such data in the same Member State, but which, because potential users are unfavourable to it, cannot develop an alternative brick structure for the presentation of the data that it proposes to offer, constitutes an abuse of a dominant position within the meaning of Article 82 EC.

22As the Advocate General stated in point 29 of his Opinion, that question is based on the premiss, whose validity it is for the national court to ascertain, that the use of the 1 860 brick structure protected by an intellectual property right is indispensable in order to allow a potential competitor to have access to the market in which the undertaking which owns the right occupies a dominant position.

23By its second question, the national court questions the effect that the degree of participation by users may have on the development of a brick structure, protected by an intellectual property right owned by a dominant undertaking, on the determination of whether the refusal by that undertaking to grant a licence to use that structure is abusive. By its third question, the national court is uncertain, in the same context and for the purposes of the same assessment, as to the effect of the outlay, particularly in terms of cost, that potential users have to provide in order to be able to purchase market studies presented on the basis of a structure other than that protected by the intellectual property right.

24As the Advocate General noted in point 32 of his Opinion, those two questions, read in the light of the order for reference, concern the matters underlying the first question, because they seek essentially to clarify the relevant criteria for the determination of whether use of the 1 860 brick structure protected by the intellectual property right is indispensable for enabling a potential competitor to gain access to the market in which the undertaking owning the right occupies a dominant position.

25Accordingly, it is appropriate to answer the second and third questions first.

The second and third questions

Observations of the parties

26According to IMS, the participation of the users in the development of a product or a service protected by an intellectual property right is evidence of competition, because it represents the manufacturer’s efforts to gain a competitive advantage by developing products and services better adapted to the needs of its clients. The outlay, to which clients must agree, where there is a change to a legally developed competing product, is normal since the costs are offset by the advantages of the competing product.

27NDC and the Commission argue that the considerable role played in the design of the 1 860 brick structure by the users has contributed to the creation of a relationship of dependency of the latter on that structure. Referring to the judgment in Case C-7/97 Bronner [1998] ECR I-7791, they submit that the criterion for determining whether that structure is indispensable is whether a competitor can create a viable alternative. In the case in the main proceedings the legal and economic obstacles make such a solution impossible.

Reply of the Court

28It is clear from paragraphs 43 and 44 of Bronner that, in order to determine whether a product or service is indispensable for enabling an undertaking to carry on business in a particular market, it must be determined whether there are products or services which constitute alternative solutions, even if they are less advantageous, and whether there are technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult for any undertaking seeking to operate in the market to create, possibly in cooperation with other operators, the alternative products or services. According to paragraph 46 of Bronner, in order to accept the existence of economic obstacles, it must be established, at the very least, that the creation of those products or services is not economically viable for production on a scale comparable to that of the undertaking which controls the existing product or service.

29It is for the national court to determine, in the light of the evidence submitted to it, whether such is the case in the dispute in the main proceedings. In that regard, as the Advocate General stated in points 83 and 84 of his Opinion, account must be taken of the fact that a high level of participation by the pharmaceutical laboratories in the improvement of the 1 860 brick structure protected by copyright, on the supposition that it is proven, has created a dependency by users in regard to that structure, particularly at a technical level. In such circumstances, it is likely that those laboratories would have to make exceptional organisational and financial efforts in order to acquire the studies on regional sales of pharmaceutical products presented on the basis of a structure other than that protected by the intellectual property right. The supplier of that alternative structure might therefore be obliged to offer terms which are such as to rule out any economic viability of business on a scale comparable to that of the undertaking which controls the protected structure.

30The answer to the second and third questions must, therefore, be that, for the purposes of examining whether the refusal by an undertaking in a dominant position to grant a licence for a brick structure protected by an intellectual property right which it owns is abusive, the degree of participation by users in the development of that structure and the outlay, particularly in terms of cost, on the part of potential users in order to purchase studies on regional sales of pharmaceutical products presented on the basis of an alternative structure are factors which must be taken into consideration in order to determine whether the protected structure is indispensable to the marketing of studies of that kind.

The first question

Observations submitted to the Court

31As to whether and in what circumstances the refusal by an undertaking in a dominant position in a given market, which owns an intellectual property right in a product indispensable for carrying on business in the same market to grant a licence to use that product, may constitute abusive conduct, IMS, NDC and the Commission all refer to the judgment in Joined Cases C-241/91 P and C-242/91 P RTE and ITP v Commission (‘Magill’) [1995] ECR I-743. However, they do not interpret it in the same way and do not draw the same conclusions from it.

32IMS argues that the Magill judgment must be interpreted as meaning that three conditions must be satisfied. The refusal to grant a licence must prevent the emergence of a new product, must be unjustified, and have the effect of reserving a secondary market for the dominant undertaking. In the case in the main proceedings, the first and third conditions are not satisfied because NDC is not trying to introduce a new product into a secondary market, but intends to use the 1 860 brick structure, perfected by IMS, in order to supply an almost identical product on the same market.

33NDC, which claims that it wishes to supply a new product, and the Commission take the view that, according to the Magill judgment, in order for a refusal of a licence to be considered abusive, it is not essential for there to be two distinct markets. NDC submits that it is sufficient that the undertaking in a dominant position in a certain market has a monopoly on an infrastructure which is indispensable in order to compete with it on the market in which it carries on business. In the same way, the Commission submits that it is not necessary for the infrastructure in question to be in a separate market and that it is sufficient that it is at an upstream production stage.

Reply of the Court

34According to settled case-law, the exclusive right of reproduction forms part of the rights of the owner of an intellectual property right, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position (judgment in Case 238/87 Volvo [1988] ECR 6211, paragraph 8, and Magill, paragraph 49).

35Nevertheless, as is clear from that case-law, exercise of an exclusive right by the owner may, in exceptional circumstances, involve abusive conduct (Volvo, paragraph 9, and Magill, paragraph 50).

36The Court held that such exceptional circumstances were present in the case giving rise to the judgment in Magill, in which the conduct of the television channels in a dominant position which gave rise to the complaint consisted in their relying on the copyright conferred by national legislation on the weekly listings of their programmes in order to prevent another undertaking from publishing information on those programmes together with commentaries, on a weekly basis.

37According to the summary of the Magill judgment made by the Court at paragraph 40 of the judgment in Bronner, the exceptional circumstances were constituted by the fact that the refusal in question concerned a product (information on the weekly schedules of certain television channels), the supply of which was indispensable for carrying on the business in question (the publishing of a general television guide), in that, without that information, the person wishing to produce such a guide would find it impossible to publish it and offer it for sale (Magill, paragraph 53), the fact that such refusal prevented the emergence of a new product for which there was a potential consumer demand (paragraph 54), the fact that it was not justified by objective considerations (paragraph 55), and was likely to exclude all competition in the secondary market (paragraph 56).

38It is clear from that case-law that, in order for the refusal by an undertaking which owns a copyright to give access to a product or service indispensable for carrying on a particular business to be treated as abusive, it is sufficient that three cumulative conditions be satisfied, namely, that that refusal is preventing the emergence of a new product for which there is a potential consumer demand, that it is unjustified and such as to exclude any competition on a secondary market.

39In light of the order for reference and the observations submitted to the Court, which reveal a major dispute as regards the interpretation of the third condition, it is appropriate to consider that question first.

The third condition, relating to the likelihood of excluding all competition on a secondary market

40In that regard, it is appropriate to recall the approach followed by the Court in the Bronner judgment, in which it was asked whether the fact that a press undertaking with a very large share of the daily newspaper market in a Member State which operates the only nationwide newspaper home-delivery scheme in that Member State refuses paid access to that scheme by the publisher of a rival newspaper, which by reason of its small circulation is unable either alone or in cooperation with other publishers to set up and operate its own home-delivery scheme under economically reasonable conditions, constitutes abuse of a dominant position.

41The Court, first of all, invited the national court to determine whether the home‑delivery schemes constituted a separate market (Bronner, paragraph 34), on which, in light of the circumstances of the case, the press undertaking held a de facto monopoly position and, thus, a dominant position (paragraph 35). It then invited the national court to determine whether the refusal by the owner of the only nationwide home-delivery scheme in a Member State, which used that scheme to distribute its own daily newspapers, to allow the publisher of a rival daily newspaper access to it deprived that competitor of a means of distribution judged essential for the sale of its newspaper (paragraph 37).

42Therefore, the Court held that it was relevant, in order to assess whether the refusal to grant access to a product or a service indispensable for carrying on a particular business activity was an abuse, to distinguish an upstream market, constituted by the product or service, in that case the market for home delivery of daily newspapers, and a (secondary) downstream market, on which the product or service in question is used for the production of another product or the supply of another service, in that case the market for daily newspapers themselves.

43The fact that the home-delivery service was not marketed separately was not regarded as precluding, from the outset, the possibility of identifying a separate market.

44It appears, therefore, as the Advocate General set out in points 56 to 59 of his Opinion, that, for the purposes of the application of the earlier case-law, it is sufficient that a potential market or even hypothetical market can be identified. Such is the case where the products or services are indispensable in order to carry on a particular business and where there is an actual demand for them on the part of undertakings which seek to carry on the business for which they are indispensable.

45Accordingly, it is determinative that two different stages of production may be identified and that they are interconnected, inasmuch as the upstream product is indispensable for the supply of the downstream product.

46Transposed to the facts of the case in the main proceedings, that approach prompts consideration as to whether the 1 860 brick structure constitutes, upstream, an indispensable factor in the downstream supply of German regional sales data for pharmaceutical products.

47It is for the national court to establish whether that is in fact the position, and, if so be the case, to examine whether the refusal by IMS to grant a licence to use the structure at issue is capable of excluding all competition on the market for the supply of German regional sales data on pharmaceutical products.

The first condition, relating to the emergence of a new product

48As the Advocate General stated in point 62 of his Opinion, that condition relates to the consideration that, in the balancing of the interest in protection of the intellectual property right and the economic freedom of its owner against the interest in protection of free competition, the latter can prevail only where refusal to grant a licence prevents the development of the secondary market to the detriment of consumers.

49Therefore, the refusal by an undertaking in a dominant position to allow access to a product protected by an intellectual property right, where that product is indispensable for operating on a secondary market, may be regarded as abusive only where the undertaking which requested the licence does not intend to limit itself essentially to duplicating the goods or services already offered on the secondary market by the owner of the intellectual property right, but intends to produce new goods or services not offered by the owner of the right and for which there is a potential consumer demand

50It is for the national court to determine whether such is the case in the dispute in the main proceedings.

The second condition, relating to whether the refusal was unjustified

51As to that condition, on whose interpretation no specific observations have been made, it is for the national court to examine, if appropriate, in light of the facts before it, whether the refusal of the request for a licence is justified by objective considerations.

52Accordingly, the answer to the first question must be that the refusal by an undertaking which holds a dominant position and owns an intellectual property right in a brick structure indispensable to the presentation of regional sales data on pharmaceutical products in a Member State to grant a licence to use that structure to another undertaking which also wishes to provide such data in the same Member State, constitutes an abuse of a dominant position within the meaning of Article 82 EC where the following conditions are fulfilled:

–

the undertaking which requested the licence intends to offer, on the market for the supply of the data in question, new products or services not offered by the owner of the intellectual property right and for which there is a potential consumer demand;

–

the refusal is not justified by objective considerations;

–

the refusal is such as to reserve to the owner of the intellectual property right the market for the supply of data on sales of pharmaceutical products in the Member State concerned by eliminating all competition on that market.

Costs

53The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Landgericht Frankfurt am Main by order of 12 July 2001, hereby rules:

1.

For the purposes of examining whether the refusal by an undertaking in a dominant position to grant a licence for a brick structure protected by an intellectual property right which it owns is abusive, the degree of participation by users in the development of that structure and the outlay, particularly in terms of cost, on the part of potential users in order to purchase studies on regional sales of pharmaceutical products presented on the basis of an alternative structure are factors which must be taken into consideration in order to determine whether the protected structure is indispensable to the marketing of studies of that kind.

2.

The refusal by an undertaking which holds a dominant position and owns an intellectual property right in a brick structure indispensable to the presentation of regional sales data on pharmaceutical products in a Member State to grant a licence to use that structure to another undertaking which also wishes to provide such data in the same Member State, constitutes an abuse of a dominant position within the meaning of Article 82 EC where the following conditions are fulfilled:

–

the undertaking which requested the licence intends to offer, on the market for the supply of the data in question, new products or services not offered by the owner of the intellectual property right and for which there is a potential consumer demand;

–        the refusal is not justified by objective considerations;

–        the refusal is such as to reserve to the owner of the intellectual property right the market for the supply of data on sales of pharmaceutical products in the Member State concerned by eliminating all competition on that market.

Judgment

 Background to the dispute

1        Microsoft Corp., a company established in Redmond, Washington (United States), designs, develops and markets a wide variety of software products for different kinds of computing devices. Those software products include, in particular, operating systems for client personal computers (‘client PCs’), operating systems for work group servers and streaming media players. Microsoft also provides technical assistance for its various products.

2        On 15 September 1998, Mr Green, a Vice-President of Sun Microsystems, Inc. (‘Sun’), a company established in Palo Alto, California (United States) which supplies, in particular, servers and server operating systems, wrote to Mr Maritz, a Vice-President of Microsoft, as follows:

‘We are writing to you to request that Microsoft provide [Sun] with the complete information required to allow Sun to provide native support for COM objects on Solaris.

We also request that Microsoft provide [Sun] with the complete information required to allow [Sun] to provide native support for the complete set of Active Directory technologies on Solaris.

We believe it is in the industry’s best interest that applications written to execute on Solaris be able to seamlessly communicate via COM and/or Active Directory with the Windows operating systems and/or with Windows-based software.

We believe that Microsoft should include a reference implementation and such other information as is necessary to insure, without reverse engineering, that COM objects and the complete set of Active Directory technologies will run in full compatible fashion on Solaris. We think it necessary that such information be provided for the full range of COM objects as well as for the full set of Active Directory technologies currently on the market. We also think it necessary that such information be provided in a timely manner and on a continuing basis for COM objects and Active Directory technologies which are to be released to the market in the future.’

3        That letter will be referred to below as ‘the letter of 15 September 1998’.

4        By letter of 6 October 1998, Mr Maritz replied to the letter of 15 September 1998. In his letter, he said:

‘Thank you for your interest in working with Windows. We have some mutual customers using our products, and I think it is great you are interested in opening up your system to interoperate with Windows. Microsoft has always believed in helping software developers, including [its] competitors, build the best possible products and interoperability for [its] platform.

You may not realise that the information you requested on how to interoperate with COM and the Active Directory technologies is already published and available to you and every other software developer in the world via the Microsoft Developer Network (MSDN) Universal product. MSDN contains comprehensive information about the services and interfaces of the Windows platform and is a great source of information for developers interested in writing to or interoperating with Windows. In fact, Sun currently has 32 active licenses for the MSDN Universal subscription. Furthermore, as your company has done in the past, I assume you will be sending a significant number of people to attend our Professional Developers Conference in Denver October 11 – October 15, 1998. This will be another venue to get the technical information you are seeking in order to work with our systems technologies. Some of the 23 Sun employees that attend[ed] last year[’]s conference should be able to provide you with their comments on the quality and depth of information discussed at these Professional Developers Conferences.

You will be pleased to know that there is already a reference implementation of COM on Solaris. This implementation of COM on Solaris is a fully supported binary available from Microsoft. Source code for COM can be licensed from other sources including Software AG. …

Regarding the Active Directory, we have no plans to “port” [it] to Solaris. However, to satisfy our mutual customers there are many methods with varying levels of functionality in order to interoperate with the Active Directory. For example, you can use the standard LDAP to access the Windows NT Server Active Directory from Solaris.

If after attending [the Professional Developers Conference] and reading through all the public MSDN content you should require some additional support, our Developer Relations Group has account managers who strive to help developers who need additional support for Microsoft’s platforms. I have asked Marshall Goldberg, the Lead Program Manager, to make himself available should you need it …’

5        Mr Maritz’s letter of 6 October 1998 will be referred to below as ‘the letter of 6 October 1998’.

6        On 10 December 1998, Sun lodged a complaint with the Commission pursuant to Article 3 of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81 EC] and [82 EC] (OJ, English Special Edition 1959-62, p. 87).

7        Sun’s complaint related to Microsoft’s refusal to give it the information and technology necessary to allow its work group server operating systems to interoperate with the Windows client PC operating system.

8        On 2 August 2000, the Commission sent Microsoft a first statement of objections (‘the first statement of objections’), which related in effect to questions concerning the interoperability of Windows client PC operating systems and other suppliers’ server operating systems (client/server interoperability).

9        Microsoft responded to the first statement of objections on 17 November 2000.

10      In the meantime, in February 2000, the Commission, acting on its own initiative, launched an investigation relating, particularly, to Microsoft’s Windows 2000 generation of client PC and work group server operating systems and to the integration by Microsoft of its Windows Media Player in its Windows client PC operating system. The client PC operating system in the Windows 2000 range was intended for professional use and was called ‘Windows 2000 Professional’, whereas the server operating systems in that range were presented under the three following versions: Windows 2000 Server, Windows 2000 Advanced Server and Windows 2000 Datacenter Server.

11      That investigation concluded on 29 August 2001, when the Commission sent Microsoft a second statement of objections (‘the second statement of objections’), in which it reiterated its previous objections concerning client/server interoperability. The Commission also addressed certain questions relating to interoperability between work group servers (server/server interoperability). In addition, the Commission raised a number of questions concerning the integration of Windows Media Player in the Windows client PC operating system.

12      Microsoft responded to the second statement of objections on 16 November 2001.

13      In December 2001, Microsoft sent the Commission a report containing the results and the analysis of a survey carried out by Mercer Management Consulting (‘Mercer’).

14      Between April and June 2003, the Commission conducted a wide-ranging market enquiry, sending a series of requests for information to a number of companies and associations pursuant to Article 11 of Regulation No 17 (‘the 2003 market enquiry’).

15      On 6 August 2003, the Commission sent Microsoft a third statement of objections, which was, according to the Commission, intended to supplement the two earlier statements of objections and to indicate the remedies it proposed to order (‘the third statement of objections’).

16      By letter of 17 October 2003, Microsoft responded to the third statement of objections.

17      On 31 October 2003, Microsoft sent the Commission a report containing the results and the analysis of two further surveys conducted by Mercer.

18      A hearing was held by the Commission on 12, 13 and 14 November 2003.

19      On 1 December 2003, Microsoft presented supplemental observations on the third statement of objections.

20      On 24 March 2004, the Commission adopted Decision 2007/53/EC relating to a proceeding pursuant to Article 82 [EC] and Article 54 of the EEA Agreement against Microsoft Corp. (Case COMP/C-3.37.792 – Microsoft) (OJ 2007 L 32, p. 23; ‘the contested decision’).

[...] 

290    The central issue to be resolved in this part of the plea therefore is whether, as the Commission claims and Microsoft denies, the conditions on which an undertaking in a dominant position may be required to grant a licence covering its intellectual property rights are satisfied in the present case.

d)     The specific arguments invoked in support of the first part of the plea

 (i) The circumstances by reference to which the abusive conduct must be analysed

 Arguments of the parties

291    Microsoft, supported by CompTIA and ACT, maintains primarily that the first issue must be assessed in the light of the criteria recognised by the Court of Justice in Magill, paragraph 107 above, and reiterated in IMS Health, paragraph 107 above.

292    In support of that argument, Microsoft reiterates, in the first place, that Article 5 of the contested decision implies the compulsory licensing of its communication protocols, which are technologically innovative and are covered by intellectual property rights.

293    In the second place, Microsoft interprets the Commission’s argument as set out at paragraph 302 below as meaning that the Commission considers that it is not required to apply those tests where ‘technological tying’ is involved. In Microsoft’s submission, that argument finds no support in Case T-83/91 Tetra Pak v Commission [1994] ECR II‑755, upheld on appeal in Case C‑333/94 P Tetra Pak v Commission [1996] ECR I‑5951 (‘Tetra Pak II’), on which the Commission relies.

294    In the third place, Microsoft rejects the arguments whereby the Commission seeks to show that the circumstances of the present case can be distinguished from the circumstances of IMS Health, paragraph 107 above.

295    First, IMS Health involved strong network effects and it was precisely because of those effects that the 1 860 brick structure created by IMS Health was considered to be an industry standard. Furthermore, in the contested decision the Commission did not rely on the argument that, by refusing to ‘allow compatibility’, Microsoft was acting contrary to the public-policy objectives defined in Directive 91/250. In any event, vague public policy considerations cannot provide a ground for ordering an undertaking to grant licences. Last, Microsoft claims that Directive 91/250 does not establish any positive obligation to disclose information.

296    Second, Microsoft rejects the Commission’s assertion that Microsoft used its market power on the client PC operating systems market to conquer the work group server operating systems market. Neither the contested decision nor the defence indicates clearly what market power Microsoft is supposed to have used or the way in which that power was exercised.

297    Third, Microsoft contends that the Commission’s assertion that Microsoft disrupted previous levels of supply is wrong both in fact and in law and that it fails to take account of the principles laid down in Bronner, paragraph 112 above. The applicant never provided Sun or any other supplier of competing operating systems with a licence on the specifications of its communication protocols. It licensed a network technology to AT&T in 1994 which allowed the development of a product called ‘Advanced Server for UNIX’ (AS/U)’ and a number of AS/U-based products were created by leading UNIX suppliers, including Sun’s ‘PC NetLink’. Although the applicant and AT&T agreed in 2001 not to extend the licensing agreement to include new technology, the ‘AS/U technology’ and the products based on it remain available. The fact that the applicant thus licensed a specific technology to AT&T more than 10 years ago cannot mean that it is required to license all related technologies, including communication protocols, for the indefinite future.

298    Fourth, Microsoft observes that, at recital 577 to the contested decision, the Commission states that ‘Microsoft’s refusal to supply Sun is part of a broader conduct of not disclosing interoperability information to work group server operating systems vendors’. It contends that the pattern of conduct thus attributed to it corresponds to ‘[the application] on a non-discriminatory basis [of] a policy that virtually all technology companies adopt to protect the fruits of their research and development efforts’ and that such conduct cannot constitute an ‘exceptional circumstance’ within the meaning of Magill and IMS Health, paragraph 107 above.

299    In the alternative, Microsoft, supported by CompTIA and ACT, submits that, should the Court find that no intellectual property right is at stake in the present case, the applicable criteria would be those recognised by the Court of Justice in Bronner, paragraph 112 above, which correspond to the first, second and fourth criteria in IMS Health, paragraph 107 above, as set out at paragraph 116 above.

300    Last, Microsoft, CompTIA and ACT claim that none of the four criteria of IMS Health, paragraph 107 above, and, consequently, none of the three criteria of Bronner, paragraph 112 above, is satisfied in this case.

301    The Commission, supported by SIIA and FSFE, contends primarily that, even if the Court should find that the refusal at issue was justified by the exercise of intellectual property rights and that the contested decision entails compulsory licensing, it would not follow that the present problem must automatically be assessed against the criteria established by the ‘IMS Health case-law’.

302    In that connection, the Commission maintains, in the first place, that the ‘exceptional circumstances’ rule laid down in the case-law cannot apply ‘as such, and without further qualification’ to a refusal to disclose trade secrets that has the effect of ‘technologically tying’ a separate product with a dominant product.

303    In the second place, the Commission claims that IMS Health, paragraph 107 above, does not establish an exhaustive list of exceptional circumstances. In that judgment, as in Magill, paragraph 107 above, the Court of Justice defined the conditions on which a decision ordering compulsory licensing could be adopted, in the light of the specific circumstances of those cases. Thus, in IMS Health, paragraph 107 above, the Court of Justice merely established a list of criteria which it was ‘sufficient’ to satisfy. In reality, in order to determine whether the conduct of an undertaking in a dominant position which refuses to supply constitutes an abuse, the Commission must examine the entire range of factors surrounding that refusal and in particular the economic and regulatory background to it.

304    In the third place, the Commission lists the factors which distinguish the circumstances of the present case from those of IMS Health, paragraph 107 above, and which permit the conclusion that Microsoft’s refusal constitutes an abuse of a dominant position.

305    First, the Commission observes that the contested decision has the particular feature that it deals with a refusal to supply interoperability information in the software industry. The decision aims to permit the development of products that are compatible with Microsoft’s products whereas the precedents cited by Microsoft concern situations in which the ‘protected product’ was to be incorporated in competitors’ products for reasons which went beyond ensuring mere compatibility between two distinct products. Furthermore, those precedents do not concern the specific problems raised in sectors where network effects are pervasive. Unlike the sector concerned in the present case, the economic sectors concerned in those precedents were not ‘sectors where the [legislature] has clearly recognised that compatibility was favourable to society in general’. More particularly, the Commission, referring to recitals 745 to 763 to the contested decision, recalls the importance which the Community legislature ascribed to interoperability, notably in the context of Directive 91/250, and also the position taken by the legislature, namely that disclosure of information for interoperability purposes is beneficial for society as a whole.

306    Second, the Commission invokes the fact that the present issue involves a supplier in a dominant position which uses its market power on a particular market, in this case the client PC operating systems market, to eliminate competition on a neighbouring market, namely the work group server operating systems market, ‘thereby increasing the barriers to entry in its original market and securing an additional monopoly rent’. That situation reinforces the harm to consumers that results from the restriction of the development of new products.

307    Third, the Commission submits that the present issue concerns a supplier in a dominant position which disrupts previous levels of supply (recitals 578 to 584 to the contested decision). Microsoft’s initial policy was to disclose interoperability information, not to retain it, which, among other things, helped Microsoft to introduce its own work group server operating systems on the market and did not discourage it from innovating. However, once its ‘server products’ were sufficiently established on the market, Microsoft changed its strategy and chose to foreclose its competitors by refusing to give them access to that information (recitals 587, 588 and 637 et seq. to the contested decision).

308    The Commission maintains that Microsoft cannot deny having disrupted its previous levels of supply. First of all, the agreement between Microsoft and AT&T, which allowed AT&T to develop AS/U, involved the disclosure not only of interoperability information of the type at issue in the contested decision, but also of additional information. Next, the Commission contends that the fact that the AS/U technology is still available is irrelevant. The Commission refers to recitals 580 to 583 to the contested decision and submits that the disclosures made ‘in the context of AS/U’ are now outdated, as Microsoft modified the relevant protocols in subsequent versions of Windows. Last, the Commission contends that Microsoft’s assertion that the fact that it licensed a specific technology to AT&T more than 10 years ago cannot oblige it to license all related technologies for the indefinite future is irrelevant to the approach taken in the contested decision. The question of the disruption of previous levels of supply is treated in that decision not as an abuse in itself but as one factor relevant to the assessment of Microsoft’s refusal to supply (recital 578 et seq. to the contested decision).

309    In the fourth place, the Commission does not claim that the mere fact that a refusal to license an intellectual property right is part of a general pattern of conduct is in itself an ‘exceptional circumstance’ sufficient to render that refusal abusive. It merely contends that the fact that Sun is not the only competitor to which Microsoft has refused access to the interoperability information is a circumstance relevant to the assessment of the compatibility of Microsoft’s conduct with Article 82 EC.

310    The Commission submits that Microsoft’s alternative argument, that the present case must be examined by reference to the criteria established in Bronner, paragraph 112 above, cannot be upheld. Bronner concerned access to an infrastructure that had required significant investment, and if it should be established that the information at issue in the present case is not protected by intellectual property rights, but consists of purely arbitrary combinations of messages, that judgment would surely not be a ‘relevant point of comparison’.

311    In the alternative, the Commission, supported by SIIA and FSFE, claims that, even on the assumption that the lawfulness of the contested decision, in so far as it relates to the first issue, must be assessed against the criteria recognised by the Court of Justice in IMS Health, paragraph 107 above, those criteria are satisfied in the present case.

 Findings of the Court

312    It must be borne in mind that Microsoft’s argument is that its refusal to supply interoperability information cannot constitute an abuse of a dominant position within the meaning of Article 82 EC because, first, the information is protected by intellectual property rights (or constitutes trade secrets) and, second, the criteria established in the case-law which determine when an undertaking in a dominant position can be required to grant a licence to a third party are not satisfied in this case.

313    It must also be borne in mind that the Commission contends that there is no need to decide whether Microsoft’s conduct constitutes a refusal to license intellectual property rights to a third party, or whether trade secrets merit the same degree of protection as intellectual property rights, since the strict criteria against which such a refusal may be found to constitute an abuse of a dominant position within the meaning of Article 82 EC are in any event satisfied in the present case (see paragraphs 284 to 288 above).

314    While Microsoft and the Commission are thus agreed that the refusal at issue may be assessed under Article 82 EC on the assumption that it constitutes a refusal to license intellectual property rights, they disagree as to the criteria established in the case-law that are applicable in such a situation.

315    Thus, Microsoft relies, primarily, on the criteria laid down in Magill and IMS Health, paragraph 107 above, and, in the alternative, on those laid down in Bronner, paragraph 112 above.

316    The Commission, on the other hand, contends that an ‘automatic’ application of the criteria laid down in IMS Health, paragraph 107 above, would be ‘problematic’ in this case. It maintains that, in order to determine whether such a refusal is abusive, it must take into consideration all the particular circumstances surrounding that refusal, which need not necessarily be the same as those identified in Magill and IMS Health, paragraph 107 above. Thus it explains at recital 558 to the contested decision, that ‘[t]he case-law of the European Courts … suggests that the Commission must analyse the entirety of the circumstances surrounding a specific instance of a refusal to supply and must take its decision [on the basis of] the results of such a comprehensive examination’.

317    At the hearing, the Commission, questioned on this issue by the Court, confirmed that it had considered in the contested decision that Microsoft’s conduct presented three characteristics which allowed it to be characterised as abusive. The first consists in the fact that the information which Microsoft refuses to disclose to its competitors relates to interoperability in the software industry, a matter to which the Community legislature attaches particular importance. The second characteristic lies in the fact that Microsoft uses its extraordinary power on the client PC operating systems market to eliminate competition on the adjacent work group server operating systems market. The third characteristic is that the conduct in question involves disruption of previous levels of supply.

318    The Commission contends that in any event the criteria recognised by the Court of Justice in Magill and IMS Health, paragraph 107 above, are also satisfied in this case.

319    In response to those various arguments, the Court observes that, as the Commission rightly states at recital 547 to the contested decision, although undertakings are, as a rule, free to choose their business partners, in certain circumstances a refusal to supply on the part of a dominant undertaking may constitute an abuse of a dominant position within the meaning of Article 82 EC unless it is objectively justified.

320    The Court of Justice thus considered that a company in a dominant position on the market in raw materials which, with the aim of reserving such raw materials for the purpose of manufacturing its own derivatives, refused to supply a customer which was itself a manufacturer of those derivatives, and was therefore likely to eliminate all competition on the part of that customer, abused its dominant position within the meaning of Article 82 EC (Joined Cases 6/73 and 7/73 Commercial Solvents v Commission [1974] ECR 223; see, concerning a refusal to supply a service, Case 311/84 CBEM [1985] ECR 3261).

321    In Case 238/87 Volvo [1988] ECR 6211, the Court of Justice, on a reference for a preliminary ruling under Article 234 EC, was asked whether the refusal by a car manufacturer which was the proprietor of a design right covering car body panels to license third parties to supply products incorporating the protected design must be considered to be an abuse of a dominant position within the meaning of Article 82 EC. In its judgment, the Court of Justice emphasised that the right of a proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without his consent, products incorporating the design constitutes the very subject-matter of his exclusive right. The Court of Justice concluded (paragraph 8) that ‘an obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of his exclusive right, and that a refusal to grant such a licence cannot in itself constitute an abuse of a dominant position’. The Court of Justice added, however, that ‘the exercise of an exclusive right by the proprietor of a registered design in respect of car body panels [might] be prohibited by Article [82 EC] if it involve[d], on the part of an undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model [were] still in circulation, provided that such conduct [was] liable to affect trade between Member States’ (paragraph 9).

322    In Magill, paragraph 107 above, the Court of Justice, on appeal, had also been called upon to adjudicate on the question of the refusal by a dominant undertaking to license a third party to use an intellectual property right. That case concerned a decision in which the Commission had found that three television companies had abused their dominant position on the market represented by their respective weekly programme listings and the market for the television guides in which those listings were published by relying on their copyright in those listings to prevent third parties from publishing complete weekly guides to the programmes broadcast by the various different television channels. The Commission had therefore ordered those television companies to supply their advance weekly programme listings to each other and to supply them to third parties on request and on a non-discriminatory basis and to permit reproduction of those listings by those third parties. The Commission had also stipulated that any royalties requested by the television companies should they choose to grant reproduction licences should be reasonable.

323    In Magill, paragraph 107 above (paragraph 49), the Court of Justice, referring to Volvo, paragraph 321 above, stated that ‘the exclusive right of reproduction form[ed] part of the author’s rights, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot itself constitute abuse of a dominant position’. Still with reference to Volvo, paragraph 321 above, the Court of Justice explained, however, that ‘the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct’ (paragraph 50).

324    The Court of Justice considered that the following circumstances were relevant for the purpose of establishing that the conduct of the television companies in question was abusive. In the first place, their refusal concerned a product (the television channels’ weekly programme listings) the supply of which was indispensable to the exercise of the activity in question (the publication of a complete weekly television guide) (paragraph 53). In the second place, the refusal prevented the appearance of a new product, a comprehensive weekly guide to television programmes, which the television companies in question did not offer and for which there was a potential consumer demand, which constituted an abuse under Article 82(b) EC (paragraph 54). In the third place, the refusal was not justified (paragraph 55). Finally, in fourth place, the television companies, by their conduct, had reserved to themselves a secondary market, the market for weekly television guides, by excluding all competition on that market (paragraph 56).

325    In Bronner, paragraph 112 above, the Court of Justice, on a reference for a preliminary ruling under Article 234 EC, had been requested to rule on whether the refusal by a press group holding a very large share of the daily newspaper market in Austria, and operating the only nationwide newspaper home-delivery scheme in Austria, to allow the publisher of a rival newspaper to have access to that scheme for appropriate remuneration, or to allow that publisher to purchase certain complementary services from the group, constituted an abuse of a dominant position contrary to Article 82 EC.

326    In its judgment (paragraph 38), the Court of Justice first of all observed that although in Commercial Solvents v Commission and CBEM, paragraph 320 above, it had held that the refusal by an undertaking holding a dominant position on a given market to supply an undertaking with which it was in competition on a neighbouring market with raw materials and services respectively, which were indispensable to carrying on the rival’s business, constituted an abuse, it had done so to the extent that the conduct in question was likely to eliminate all competition on the part of that undertaking.

327    Next, the Court of Justice stated (paragraph 39) that at paragraphs 49 and 50 of Magill, paragraph 107 above, it had held that the refusal by the owner of an intellectual property right to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position, but that the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve an abuse.

328    Last, the Court recited the exceptional circumstances which it had established in Magill, paragraph 107 above, and stated (paragraph 41):

‘[E]ven if that case-law on the exercise of an intellectual property right were applicable to the exercise of any property right whatever, it would still be necessary, for [that] judgment to be effectively relied upon in order to plead the existence of an abuse within the meaning of Article [82 EC] in a situation such as that which forms the subject-matter of the … question, not only that the refusal of the service comprised in home delivery be likely to eliminate all competition in the daily newspaper market on the part of the person requesting the service and that such refusal be incapable of being objectively justified, but also that the service in itself be indispensable to carrying on that person’s business, inasmuch as there is no actual or potential substitute in existence for that home-delivery scheme.’

329    In IMS Health, paragraph 107 above, the Court of Justice again ruled on the conditions in which a refusal by an undertaking holding a dominant position to grant to a third party a licence to use a product protected by an intellectual property right might constitute abusive conduct within the meaning of Article 82 EC.

330    The Court of Justice first of all confirmed (paragraph 34), with reference to Volvo, paragraph 321 above, and Magill, paragraph 107 above, that, according to settled case-law, the exclusive right of reproduction formed part of the rights of the owner of an intellectual property right, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of that position. The Court of Justice also observed (paragraph 35) that it was clear from that case-law that exercise of an exclusive right by the owner might, in exceptional circumstances, involve abusive conduct. Next, after reciting the exceptional circumstances found to exist in Magill, paragraph 107 above, the Court held (paragraph 38) that it followed from that case-law that, in order for the refusal by an undertaking which owns a copyright to give access to a product or service indispensable for carrying on a particular business to be treated as abusive, it was sufficient that three cumulative conditions be satisfied, namely, that that refusal prevents the emergence of a new product for which there is a potential consumer demand, that it is unjustified and that it is such as to exclude any competition on a secondary market.

331    It follows from the case-law cited above that the refusal by an undertaking holding a dominant position to license a third party to use a product covered by an intellectual property right cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC. It is only in exceptional circumstances that the exercise of the exclusive right by the owner of the intellectual property right may give rise to such an abuse.

332    It also follows from that case-law that the following circumstances, in particular, must be considered to be exceptional:

–        in the first place, the refusal relates to a product or service indispensable to the exercise of a particular activity on a neighbouring market;

–        in the second place, the refusal is of such a kind as to exclude any effective competition on that neighbouring market;

–        in the third place, the refusal prevents the appearance of a new product for which there is potential consumer demand.

333    Once it is established that such circumstances are present, the refusal by the holder of a dominant position to grant a licence may infringe Article 82 EC unless the refusal is objectively justified.

334    The Court notes that the circumstance that the refusal prevents the appearance of a new product for which there is potential consumer demand is found only in the case-law on the exercise of an intellectual property right.

335    Finally, it is appropriate to add that, in order that a refusal to give access to a product or service indispensable to the exercise of a particular activity may be considered abusive, it is necessary to distinguish two markets, namely, a market constituted by that product or service and on which the undertaking refusing to supply holds a dominant position and a neighbouring market on which the product or service is used in the manufacture of another product or for the supply of another service. The fact that the indispensable product or service is not marketed separately does not exclude from the outset the possibility of identifying a separate market (see, to that effect, IMS Health, paragraph 107 above, paragraph 43). Thus, the Court of Justice held, at paragraph 44 of IMS Health, paragraph 107 above, that it was sufficient that a potential market or even a hypothetical market could be identified and that such was the case where the products or services were indispensable to the conduct of a particular business activity and where there was an actual demand for them on the part of undertakings which sought to carry on that business. The Court of Justice concluded at the following paragraph of the judgment that it was decisive that two different stages of production were identified and that they were interconnected in that the upstream product was indispensable for supply of the downstream product.

336    In the light of the foregoing factors, the Court considers that it is appropriate, first of all, to decide whether the circumstances identified in Magill and IMS Health, paragraph 107 above, as described at paragraphs 332 and 333 above, are also present in this case. Only if it finds that one or more of those circumstances are absent will the Court proceed to assess the particular circumstances invoked by the Commission (see paragraph 317 above).

 (ii) The indispensable nature of the interoperability information

 Arguments of the parties

337    Microsoft maintains that the interoperability information required by the contested decision is not indispensable to the activity of supplier of work group server operating systems. A particular technology cannot be characterised as indispensable if it is ‘economically viable’ for the competitors of the undertaking in a dominant position to develop and market their products without having access to that technology.

338    Microsoft contends that the contested decision contains an error of law and an error of fact on that point.

339    It submits, in the first place, that the error of law lies in the fact that the Commission used an inappropriate, extraordinary and absolute standard when ‘examining whether competition could exist’. The applicant refers to recitals 176 to 184 to the contested decision and submits that the Commission considers that non-Microsoft server operating systems must be able to communicate with Windows client PC and server operating systems in exactly the same way that Windows server operating systems do: yet the case-law does not require that such ‘optimal access’ to the market be granted.

340    In the reply, Microsoft criticises the fact that the Commission assessed the requisite degree of interoperability by reference to what was necessary to enable its competitors to remain viable on the market. The concept of interoperability used by the Commission at recitals 666 to 687 to the contested decision is unreasonable in that it implies ‘virtual identity’ between Windows server operating systems and competing operating systems. Microsoft refers to the passages from recitals 669 and 679 to the contested decision reproduced at paragraph 126 above and submits that, if such a concept had to be accepted, ‘any technology would be indispensable’. Furthermore, the only justification put forward in the contested decision for the assertion that such a ‘level’ of interoperability is required if competitors are to remain in viable conditions on the market is that access to the specifications at issue might enable competitors to avoid having users ‘log on twice’ (recital 183 to the contested decision). That justification is inadequate, since, first, multiple vendors already provide ‘single sign on’ solutions; second, having to log on twice is plainly an alternative solution (even if it is marginally less advantageous); and, third, the remedy prescribed in Article 5 of the contested decision goes far beyond what is necessary to resolve that minor problem.

341    Also in the reply, and after referring to the arguments set out at paragraphs 125 to 128 above and reiterating that the remedy prescribed in Article 5 of the contested decision will not permit its competitors to develop products that are ‘virtually identical’ to Windows server operating systems, Microsoft claims that the Commission has failed to show a causal link between the ‘non-availability’ of specifications for its communication protocols and the supposed inability of competitors to remain viably on the market.

342    In its observations on the statements in intervention, Microsoft denies that industry and consumers require ‘plug replaceability’ and asserts that such a requirement goes far beyond the ‘test of indispensability’ laid down by the Court of Justice in Bronner, paragraph 112 above, and IMS Health, paragraph 107 above. In particular, the applicant’s competitors ‘do not need Active Directory’, since their server operating systems have their own directory services which can provide work group services to Windows client PC and server operating systems.

343    In the second place, Microsoft contends that the contested decision is vitiated by an error of fact in so far as the Commission fails to take account of the fact that several work group server operating systems are present on the market. Undertakings in Europe continue to maintain different types of computer networks, in that their operating systems are supplied by different distributors.

344    During the administrative procedure, Microsoft submitted reports in which computer scientists describe ‘the ways in which interoperability could be achieved in computing networks’. The responses to the Commission’s requests for information confirm that interoperability between different types of operating systems is common in computer networks in Europe. Thus, 47% of companies which responded to those requests for information stated that they used non-Microsoft server operating systems to supply file and print services to Windows client PC operating systems. Similar proof exists in respect of user and group administration services. Microsoft reiterates that the Mercer reports demonstrate that undertakings do not feel that their choice of servers is constrained by interoperability concerns.

345    Microsoft also asserts that interoperability between non-Microsoft server operating systems and Windows client PC and server operating systems can be achieved by five different methods. Each of those methods constitutes an alternative to disclosure of the communication protocols at issue and allows those different operating systems to ‘work well together’. Admittedly, the ‘perfect substitutability’ that the Commission considers essential cannot be obtained by those various methods, but they do make it possible to achieve the ‘minimum level of interoperability … required for effective competition’.

346    The five methods to which Microsoft refers are as follows: first, the use of standard protocols such as TCP/IP (Transmission Control Protocol/Internet Protocol) and HTTP (Hyper Text Transfer Protocol); second, the addition of a software code to a Windows client PC or server operating system in order to allow that operating system to communicate with a non-Windows server operating system using communication protocols specific to that non-Microsoft operating system; third, the addition of a software code to a non-Microsoft server operating system in order to allow it to communicate with a Windows client PC or server operating system using communication protocols specific to Windows operating systems; fourth, the use of a server operating system as a ‘bridge’ between two different sets of communication protocols; and, fifth, the addition of a ‘block’ of software code to all the client PC and server operating systems in a given network to achieve interoperability by means of communications between the different ‘blocks’ of software code.

347    Microsoft further submits that the evidence which the Commission assembled during the administrative procedure shows that those methods work in practice for Linux and for the other work group server operating systems. Distributors of Linux products have constantly increased market share on the work group server operating systems market without having access to the specifications of Microsoft’s communication protocols. Microsoft refers to sections D and E of a report by Evans, Nichols and Padilla (annex C.11 to the reply) and further submits that Linux products will continue to gain ground on Windows server operating systems. It is generally acknowledged that Linux is a serious competitor to Microsoft and that the 10 largest suppliers of servers costing under USD 25 000 offer work group servers running Linux.

348    CompTIA and ACT put forward arguments which are essentially the same as Microsoft’s.

349    CompTIA criticises, in particular, the fact that the Commission considers that non-Windows work group server operating systems must achieve a level of interoperability with the Windows client PC operating systems that is ‘as good as that achieved by Microsoft itself’.

350    ACT refers to Microsoft’s arguments on this point in its written pleadings and submits that there are several methods of ensuring sufficient interoperability between the operating systems of different suppliers. It also has concerns that the Commission’s interpretation of the indispensability criterion will have negative effects on innovation.

351    The Commission claims that Microsoft’s disclosure of the interoperability information is indispensable if its competitors are to continue to compete on the work group server operating systems market.

352    It contends, in the first place, that Microsoft’s allegation of an error of law rests on a misrepresentation of the Commission’s position and on confusion between different questions analysed in the contested decision. The indispensability criterion entails an examination of the degree of interoperability necessary to remain as a viable competitor on the market and of whether the withheld information is the only economically viable source for achieving that degree of interoperability.

353    The Commission emphasises that the information that Microsoft refuses to disclose is ‘functionally related to the client PC’ and explains that the indispensability of that information derives from the importance for work group server operating systems of interoperability with client PCs (recitals 383 to 386 to the contested decision) and from Microsoft’s quasi-monopoly on the client PC operating systems market.

354    The Commission analysed the indispensability criterion, as defined in the case-law, at recitals 666 to 686 to the contested decision and examined whether there were alternative solutions to disclosure of the relevant information that would enable undertakings to compete viably with Microsoft on the work group server operating systems market.

355    The Commission observes that in Microsoft’s view the mere existence of inefficient interoperability solutions that allow competitors to achieve only de minimis market penetration shows that the indispensability criterion is not satisfied. Such an argument cannot be accepted, as that criterion must be assessed against the aim of preserving an effective competitive structure that benefits consumers. The question is whether the information that Microsoft refuses to disclose is indispensable to any competitor seeking to carry on business on the relevant market ‘as a viable competitive constraint and not as a de minimis player who has effectively left the market for a “niche” position’.

356    In the rejoinder, the Commission makes clear that its position is that a dominant undertaking is not entitled to compromise effective competition on a secondary market by abusively refusing to allow its competitors access to an ‘input’ necessary for their viability. If there is no alternative to the input to which access is refused that could allow competitors to exercise effective competitive pressure on the dominant undertaking on the secondary market, it is then clear that the input is indispensable to the maintenance of effective competition.

357    Also in the rejoinder, the Commission reiterates that there is a whole range of possible degrees of interoperability between Windows PCs and work group server operating systems. The Commission did not fix a priori a given level of interoperability that is indispensable for the maintenance of effective competition on the market, but based its findings on the manifestly unsatisfactory nature of the alternative methods which Microsoft’s competitors had already used and which ‘did not permit the level of interoperability required by customers in an economically viable manner’. The Commission again denies having taken into account a degree of interoperability achieving the ‘virtual identity’ to which the applicant refers, and submits that what is indispensable is not that Microsoft’s competitors be allowed to reproduce the interoperability solutions implemented by Microsoft but that they be able to achieve ‘an equivalent degree of interoperability by their own innovative efforts’. Last, the Commission observes that at recitals 590 to 692 to the contested decision it examines the ‘severe consequences’ which the limited degree of interoperability with Windows client PC operating systems has for competitors and customers. In particular, Microsoft’s conduct has the effect of progressively ousting all its competitors from the work group server operating systems market, even though some of them originally had a significant commercial or technical advantage over Microsoft on that market (recitals 587 and 668 to the contested decision).

358    In the second place, the Commission rejects the allegations of an error of fact.

359    First, it is not demonstrated that the solutions proposed by the computer scientists in the reports produced by Microsoft during the administrative procedure are commercially viable alternatives to disclosure of interoperability information.

360    Second, the argument which Microsoft derives from the responses to the Commission’s requests for information is not relevant in so far as ‘it means that interoperability with smaller players is enough, or that some interoperability already exists’. In reality, Microsoft overlooks the fact that its competitors entered the work group server operating systems market before Microsoft began to distribute products of that type. The fact that the information at issue is indispensable if Microsoft’s competitors are to be able to continue to represent a competitive constraint for Microsoft’s products means that those competitors will be gradually eliminated from the market. That fact that their elimination is not yet complete does not show that the indispensability criterion is not fulfilled, since the essential thing is whether the information is indispensable in order to remain as a viable competitor on the market.

361    Third, by its reference to the five alternative methods of achieving interoperability between the operating systems supplied by different distributors Microsoft does not contest the findings made on that point in the contested decision but merely asserts that those methods are ‘feasible’ and that they allow its own products and its competitors’ products to ‘work well together’.

362    The Commission recalls that it has already examined those methods in the contested decision and, in particular, the question whether reverse engineering might constitute an alternative to disclosure of the interoperability information (recitals 683 to 687 to the contested decision), and it demonstrated that they do not constitute ‘viable substitutes’ to disclosure of the interoperability information at issue.

363    Fourth, the Commission rejects Microsoft’s allegation that the analysis in the contested decision is contradicted by the entry and alleged growth of Linux on the work group server operating systems market.

364    First of all, the figures for Linux ‘[do] not represent the penetration of the market by a single operator but rather the best efforts of a number of competing vendors who build upon Linux (Red Hat, Novell/SuSE, IBM, Sun, etc.)’. The respective market shares of those competing distributors are therefore ‘miniscule’.

365    The Commission proceeds to criticise the findings in section D of the Evans, Nichols and Padilla report in annex C.11 to the reply; it asserts that:

–        as stated, in particular, at recitals 487 to 490 to the contested decision, the data from International Data Corporation (IDC) used by those experts in drafting that report are approximate and are therefore not on their own appropriate for assessing market development;

–        that ‘applies a fortiori as regards quite marginal annual changes relative to the overall size of the market’;

–        there is no proof that Linux’s market share of 6.75% of units sold, which Microsoft calculates using an extrapolation factor concerning all servers, applies to the work group server operating systems market;

–        the two examples of responses to the 2003 market enquiry to which the experts refer in order to demonstrate that it is possible to use, in relation to Linux, interoperability solutions based on reverse engineering are not representative in that the entities concerned are two of only three entities, out of a total of more than 100 which participated in that market enquiry, that ‘made a non-insignificant use of Linux/Samba’;

–        the experts provide no information on how the four other methods which Microsoft claims can ensure interoperability between operating systems supplied by different distributors could have allowed the alleged expansion of Linux on the market during the period covered by the abuse consisting in the refusal to supply.

366    Likewise, the Commission criticises the findings in section E of that report. It claims that:

–        it has already rejected, at recitals 605 to 610 to the contested decision, the arguments which Microsoft bases on IDC’s projections and the results of the third Mercer survey;

–        IDC tends to overestimate its projections of Linux’s market share of the ‘networking’ and ‘file/print’ subcategories;

–        the migration from the Windows NT operating systems to the Linux operating system mentioned in the Meryll Lynch report of 8 March 2004 (annex 7 to annex C.11 to the reply) is likely to be a one-off phenomenon, as Windows NT is ‘an outdated product that is no longer supported by Microsoft’;

–        the Yankee Group report of 25 May 2004 (annex 9 to annex C.11 to the reply) relates to server operating systems in general and not to work group server operating systems, and is therefore largely irrelevant in the present case;

–        the Forrester Research report of 27 May 2004 (annex 10 to annex C.11 to the reply) is not primarily concerned with work group server operating systems and contains findings which contradict Microsoft’s argument, notably the finding that 92% of those questioned will use Active Directory in 2006.

367    SIIA submits essentially the same arguments as the Commission. It maintains that it is essential for competition on the merits in the software industry that work group server operating systems suppliers are able to achieve interoperability with Microsoft’s quasi-monopolistic products ‘on a level playing field’. In order to be able to compete effectively on the market, those suppliers must have access to the interoperability information at issue.

368    SFE rejects the argument which Microsoft bases on the five alternative methods of ensuring interoperability. It claims that, ‘[t]echnically, all these ways describe realistic scenarios’, but that they ‘have a fundamental omission: [a]uthentication’. Microsoft has ‘tightly coupled’ its Windows client PC operating systems with its own ‘[a]uthentication servers’, so that it is simply impossible to separate the authentication task from the other tasks carried out by Windows work group servers.

 Findings of the Court

369    As already pointed out at paragraph 207 above, the Commission adopted a two-stage approach in determining whether the information at issue was indispensable, in that, first of all, it considered what degree of interoperability with the Windows domain architecture non-Microsoft work group server operating systems must achieve in order for its competitors to be able to remain viably on the market and, second, it appraised whether the interoperability that Microsoft refused to disclose was indispensable to the attainment of that degree of interoperability.

370    Microsoft claims that that reasoning is incorrect in law and in fact.

–       The alleged error of law

371    Microsoft’s arguments concerning the Commission’s supposed error of law relate to the first stage of its reasoning.

372    Microsoft takes issue first of all with the degree of interoperability required by the Commission in the present case: it contends, in substance, that the Commission’s position effectively requires that its competitors’ work group server operating systems be able to communicate with Windows client PC and server operating systems in exactly the same way as Windows server operating systems do. The applicant reiterates that that degree of interoperability implies virtual identity between its systems and its competitors’ systems.

373    Those assertions must be rejected.

374    The Court has already defined, at paragraphs 207 to 245 above, the degree of interoperability which the Commission required in the contested decision. The Court observed, in particular, that the Commission had concluded that, in order to be able to compete viably with Windows work group server operating systems, competitors’ operating systems must be able to interoperate with the Windows domain architecture on an equal footing with those Windows systems (see paragraph 230 above). The Court has held that interoperability, as thus envisaged by the Commission, had two indissociable components, client/server interoperability and server/server interoperability and that it implied in particular that a server running a non-Microsoft work group server operating system could act as domain controller within a Windows domain using Active Directory and, consequently, would be able to participate in the multimaster replication mechanism with the other domain controllers (see paragraphs 231 and 233 above).

375    The Court has also already found that, contrary to Microsoft’s contention, by requiring such a degree of interoperability the Commission did not intend that non-Microsoft work group server operating systems should function in every respect as a Windows work group server operating system and, accordingly, that the applicant’s competitors could develop work group server operating systems that were identical, or even ‘virtually identical’, to the applicant’s (see paragraphs 234 to 242 above).

376    Next, Microsoft criticises the fact that the Commission appraised the requisite degree of interoperability according to what in its view was necessary to allow designers of non-Microsoft work group server operating systems to remain viably on the market.

377    It is sufficient to observe, in that regard, that the Court has already confirmed, at paragraph 229 above, the correctness of the approach thus adopted by the Commission.

378    Finally, Microsoft claims that it is not necessary for its competitors’ work group server operating systems to attain the degree of interoperability required by the Commission in order for them to be able to remain viably on the market.

379    It must be emphasised that the Commission’s analysis of that question in the contested decision is based on complex economic assessments and that, accordingly, it is subject to only limited review by the Court (see paragraph 87 above).

380    It follows from the considerations set out below that Microsoft has not demonstrated that the Commission’s analysis is manifestly incorrect.

381    In that regard, it must be observed, in the first place, that Microsoft has not established that the Commission’s finding that ‘interoperability with the client PC operating system is of significant competitive importance in the market for work group server operating systems’ (recital 586 to the contested decision) is manifestly incorrect.

382    On the contrary, a number of factors confirm the correctness of that finding.

383    Thus, as may be seen from the technical explanations of the relevant products at recitals 21 to 59 to the contested decision and also from the explanations given by the parties’ experts at the hearing, it is necessary to bear in mind that, by nature, computer programs do not function in isolation, but are designed to communicate and function with other computer programs and hardware, especially in network environments (see also, at paragraph 157 above, the 10^th recital in the preamble to Directive 91/250).

384    Furthermore, within the computer networks installed in organisations, the need to be able to function together is particularly pressing in the case of client PC operating systems and work group server operating systems. As the Commission emphasises at recital 383 to the contested decision, and as the Court has already observed at paragraph 161 above, file and print services and group and user administration services are intimately connected to the use of client PCs and are provided to users of client PCs as a set of interconnected tasks. As the parties’ expert witnesses explained at the hearing, in computer networks the relationship between work group servers and client PCs is ‘stimulated’ or ‘provoked’ by actions or requests originated by client PC users, such as, in particular, the entry of a name and password, the creation of a file or a request to print a document. The Commission was likewise correct to find, at recital 532 to the contested decision, that ‘[c]lient PCs and work group servers represent nodes in a computer network and are therefore physically linked with each other’. Last, it must be borne in mind that one of the essential functions of work group server operating systems is specifically the administration of client PCs.

385    Furthermore, as stated at recitals 383 to 386 to the contested decision, certain results of the Mercer surveys confirm the importance of the interoperability of work group server operating systems with client PC operating systems. Apart from the results of the second and third Mercer surveys, which are more specifically concerned with Windows client PCs and which will be examined at paragraphs 401 to 412 below, the first Mercer survey shows that the ease with which a product can be integrated in an existing or planned future computer environment is one of the main factors which IT executives take into account when deciding what products to purchase. It follows from a comparison of certain results of that survey with certain results of the third Mercer survey, moreover, that the importance of interoperability with client PC operating systems is more clear-cut for work group server operating systems than for other types of server products (recital 386 to the contested decision).

386    In the second place, the Court considers that the interoperability of work group server operating systems with client PC operating systems is even more important in the case of Windows client PC operating systems.

387    Microsoft’s dominant position on the client PC operating systems market exhibits, as the Commission states at recitals 429 and 472 to the contested decision, ‘extraordinary features’, since, notably, its market shares on that market are more than 90% (recitals 430 to 435 to the contested decision) and since Windows represents the ‘quasi-standard’ for those operating systems.

388    As the Windows operating system is thus present on virtually all client PCs installed within organisations, non-Windows work group server operating systems cannot continue to be marketed if they are incapable of achieving a high degree of interoperability with Windows.

389    In the third place, the Court observes that, according to the contested decision, it is important that non-Windows work group server operating systems can interoperate not only with Windows client PC operating systems but also, more generally, with the Windows domain architecture.

390    More specifically, the Commission considers that, in order to be able to be viably marketed, non-Windows work group server operating systems must be capable of participating in the Windows domain architecture – which consists of an ‘architecture’ of both client/server and server/server interconnections and interactions, closely interlinked (see paragraphs 179 to 189 above) – on an equal footing with Windows work group server operating systems. That means, in particular, that a server running a non-Microsoft work group server operating system is able to act as domain controller within a Windows domain using Active Directory and, consequently, is capable of participating in the multimaster replication mechanism with the other domain controllers.

391    The Court therefore finds that Microsoft has not established that that assessment is manifestly incorrect.

392    In that regard, the Court finds first, that, in light of the very narrow technological and privileged links that Microsoft has established between its Windows client PC and work group server operating systems, and of the fact that Windows is present on virtually all client PCs installed within organisations, the Commission was correct to find, at recital 697 to the contested decision, that Microsoft was able to impose the Windows domain architecture as the ‘de facto standard for work group computing’ (see, to the same effect, recital 779 to the contested decision, where the Commission states, inter alia, that the quasi-monopoly that Microsoft has held on the client PC operating systems market for many years enables it to ‘determine to a large extent and independently of its competitors the set of coherent communications rules that will govern the de facto standard for interoperability in work group networks’).

393    Second, as the Commission states at recital 637 to the contested decision, various sources of evidence, such as Microsoft’s own marketing documents, reports by industry analysts, evidence obtained during the 2003 market enquiry and the Mercer surveys, show that interoperability with the Windows environment is a factor that plays a key role in the uptake of Windows work group server operating systems.

394    Thus, at recitals 638 to 641 to the contested decision, the Commission describes various facts which demonstrate that, for marketing purposes, Microsoft systematically uses interoperability with the Windows environment as a key marketing argument for its work group server operating systems. Those facts are not disputed by Microsoft.

395    Likewise, at recitals 642 to 646 to the contested decision, the Commission refers to certain results of the 2003 market enquiry in order to demonstrate that interoperability with the Windows environment plays a key role in the decisions taken by the organisations questioned on the purchase of work group server operating systems.

396    In the application, Microsoft merely asserts that organisations do not choose server operating systems for reasons linked with their interoperability with Windows operating systems and makes a global reference to certain documents annexed to the application (annex A.12.1 to the application (Matthews, ‘The Commission’s Case on Microsoft’s Interoperability: An Examination of the Survey Evidence’), and annex A.22 to the application (Evans, Nichols and Padilla, ‘The Commission Has Failed to Address Major Flaws in the Design, Conduct, and Analyses of Its Article 11 Inquiries’)). For the reasons set out at paragraphs 94 to 99 above, the Court cannot take those annexes into account.

397    In any event, the Court finds that the abovementioned results of the 2003 market enquiry confirm the correctness of the Commission’s case.

398    Thus, during that enquiry, the Commission requested the entities questioned to indicate whether they had already implemented (or decided to implement) Active Directory in the majority of the Windows domains in their computer network (question 15). It also requested the entities who answered that question in the affirmative, that is to say, 61 entities out of 102, to indicate from a list of factors those which had been important in their decision to implement Active Directory (question 16). Of those 61 entities, 52 (approximately 85.2%) mentioned as being such a factor the fact that ‘Active Directory offers a better integration with Windows workstations – including applications running on the client PC or integrated into the client PC (e.g. Outlook, Office) than competing directory services’ or the fact that ‘Active Directory is required by applications used in [their] organisation’ (question 16). On the other hand, only 17 entities (approximately 27.9%) mentioned one of the following factors as having been important in their decision to implement Active Directory: ‘Active Directory offers a better integration with Web services than competing directory services’; ‘Active Directory is a more mature product than competing directory services’; and ‘Active Directory offers a better compliance and quality of implementation of directory standards than competing directory services’.

399    Likewise, the entities taking part in the 2003 market enquiry were also asked whether they relied primarily on Windows servers to provide file and print services (question 13). If so, they were to state whether certain interoperability factors set out in that question had been important in their decision to make use of such servers. Of the 77 entities who answered that question, 58 (approximately 75.3%) mentioned at least one of the factors in question.

400    In footnote 101 to the application and also in footnote 68 to the reply, Microsoft suggests, while merely making a general reference to the arguments in certain annexes (annex A.22 to the application and section A of annex C.13 to the reply (Evans, Nichols and Padilla, ‘Response to the Commission’s Annex B.6 Regarding Its Article 11 Inquiries’)), that a number of the questions put by the Commission in connection with the 2003 market enquiry were ‘flawed’ or ‘biased’. The Court considers that that argument cannot be accepted. Apart from the fact that such a global reference to annexes cannot be accepted, for the reasons stated at paragraphs 94 to 99 above, the Court finds that Microsoft’s argument is intrinsically contradictory in that, in the parts of its pleadings to which the footnotes concerned relate, the applicant specifically relies, in support of its own case, on certain results of the 2003 market enquiry.

401    Contrary to Microsoft’s contention, moreover, the results of the second and third Mercer surveys lead to the same conclusions as the 2003 market enquiry as regards the importance for consumers of interoperability with Windows operating systems.

402    Thus, in its second survey, Mercer, citing the same interoperability-related factors as those set out in question 13 of the 2003 market enquiry (see paragraph 399 above), asked a number of IT executives whose organisations mainly used Windows operating systems to supply file and print services to indicate whether one or more of those factors had played a key role in the decision to adopt those operating systems, giving those factors a mark on a scale of 1 (low importance) to 5 (high importance). Of the 134 IT executives concerned, 99 (or approximately 73.9%) stated that at least one of those factors had played such a role. Furthermore, it is significant that 91 IT executives (or approximately 67.9%) awarded a mark of 4 out of 5 to at least one of those factors.

403    In the same survey, the IT executives questioned had also been invited to evaluate the role played by 21 different factors in their purchasing decisions concerning operating systems for the execution of file and print services, giving those factors a mark on a scale of 0 (no importance) to 5 (high importance). The factor ‘interoperability with (Windows) work stations’ received an average mark of 3.78 and was placed in fourth position, behind the factors ‘reliability/availability’ (average mark 4.01), ‘available functions and availability of help (internal or external’ (average mark 3.93) and ‘security’ (average mark 3.80).

404    The results of the second Mercer survey also show that when the IT executives concerned were asked to evaluate the role played by 18 factors in their decisions concerning the acquisition of directory services, they gave the factor ‘interoperability with (Windows) work stations’ an average mark of 3.94 (first position).

405    In the third Mercer survey, the IT executives were asked to evaluate the role played by 13 different factors in their decisions concerning the acquisition of work group server operating systems by giving those factors a mark on a scale from 0 (no importance) to 5 (high importance). In response to that request, the factor ‘interoperability with Windows work stations’ received an average mark of 4.25. While it is true that that factor was only placed in second position, between ‘reliability/availability of the server operating system’ (average mark 4.47) and ‘integrated security in the server operating system’ (average mark 4.04), the fact remains that the results which it obtained show that to a very large extent the decisions of purchasers of work group server operating systems are dictated by considerations to do with interoperability with Windows client PCs.

406    It is true that in the third Mercer survey the IT executives were also invited to evaluate the relative importance of each of the 13 factors referred to in the preceding paragraph and that, on that basis, the gap between ‘reliability/availability of the server operating system’ (in first place, with 34%) and ‘interoperability with Windows work stations’ (in second place, with 9%) is much wider. However, those results must be qualified, because, as the Commission explains at recitals 643 and 659 to the contested decision, interoperability is a factor which influences other factors that purchasers take into consideration when choosing a work group server operating system. Thus, purchasers may believe that a non-Microsoft work group server operating system has disadvantages in relation to security or processing speed, whereas, in reality, those disadvantages are attributable to a lack of interoperability with Windows operating systems (see the two examples given by the Commission in footnote 786 to the contested decision). Those purchasers thus have a tendency to underestimate the importance of interoperability with Windows.

407    The results of the third Mercer survey are also important in so far as they show that Microsoft’s manifest and increasing lead over its competitors on the work group server operating systems market (see the examination of the circumstance relating to the elimination of competition at paragraphs 479 to 620 below) is to be explained not so much by the merits of its products as by its interoperability advantage.

408    Furthermore, the IT executives concerned were requested not only to evaluate the relative importance of 13 different factors in their decisions concerning the acquisition of work group server operating systems (see paragraph 406 above), but also to evaluate, for each of those factors, the respective performances of Linux, NetWare, UNIX and Windows operating systems.

409    In fact, for ‘reliability/availability of the server operating system’, which had been considered the most important factor (with 34%) by the IT executives questioned, Windows obtained the lowest average mark (3.63). UNIX systems came first by a significant margin (average mark 4.55), followed by Linux (average mark 4.10) and NetWare (average mark 4.01).

410    Likewise, Windows obtained the lowest average mark for its performance for ‘integrated security in the server operating system’ (average mark 3.14), far behind UNIX (average mark 4.09), NetWare (average mark 3.82) and Linux (average mark 3.73), although that factor plays a very important role in the organisations’ decisions concerning the acquisition of work group server operating systems (see paragraph 405 above). Those results are all the more revealing since, as stated at paragraph 406 above, purchasers have a tendency to believe that problems are security-related when, in reality, they are the consequence of a lack of interoperability with Windows systems.

411    On the other hand, it is striking to note that, as regards performances relating to ‘interoperability with Windows work stations’, Windows was awarded the highest average mark (average mark 4.87) of all the average marks given to the different server operating systems concerned for each of the 13 factors used by Mercer. It is in relation to that factor, moreover, that the gap between Microsoft and its competitors’ operating systems is widest, since NetWare obtained an average mark of 3.78, Linux an average mark of 3.43 and UNIX an average mark of 3.29.

412    On the same subject, the Court notes that, as the Commission quite correctly states at recital 662 to the contested decision, if the average marks given to Linux, NetWare, UNIX and Windows for each of the 13 factors concerned with the percentage of ‘relative influence’ attributed to those factors are weighted, and if the weighted marks are added up, it is UNIX that gets the highest result, followed, first, by Windows and then, with close results that are not significantly lower than Windows’ results, by Linux and NetWare.

413    Third, the Court observes that, at recital 183 to the contested decision, the Commission asserts that ‘[w]hen a [non-Windows] work group server is added to a Windows work group network, the degree of interoperability with the Windows domain architecture that such a work group server is able to achieve will have an impact on the efficiency with which that work group server delivers its services to the users of the network’.

414    The Court considers that the correctness of this assertion is confirmed by the contested decision in a number of respects. The decision refers to a series of problems which Microsoft’s competitors’ work group server operating systems encounter because they cannot interoperate with the Windows domain architecture to the same degree as can Windows work group server operating systems.

415    A first example given by the Commission is the fact that, if a work group server does not interoperate sufficiently with the ‘security architecture’ of the Windows work group network, the user might be required to log on twice if he wishes to have access to both ‘Windows-based resources’ and ‘resources offered by … work group servers [using competing operating systems]’ (recital 183 to the contested decision). In its pleadings, Microsoft does not deny that that problem exists, but merely attempts to minimise it (see paragraph 340 above). Indeed, the Court takes note of the fact that at the hearing, one of Microsoft’s expert witnesses himself underlined the risks that multiple user names and passwords created for network security and the disadvantages, in terms of efficiency and productivity, due to the fact that users had to enter several user names and passwords.

416    Another example is set out at recital 196 to the contested decision, where the Commission reproduces a statement made by Microsoft in its response of 16 November 2001 to the second statement of objections, namely that ‘more policy-based [user group] management is possible if a Windows 2000 Professional client is attached to a Windows 2000 server running Active Directory than if it is running in standalone mode or is part of a non-Windows 2000 domain or realm’.

417    At recital 240 to the contested decision, the Commission states that, more than a year after the launch of Windows 2000, Microsoft had still not fully disclosed the updated CIFS/SMB specification to its competitors. In footnote 319, the Commission correctly states that even if Microsoft had disclosed the updated specification, that would not have been sufficient to ensure ‘proper administration of the file service’.

418    It is also appropriate to cite the factors which the Commission quite correctly identifies concerning the ADSI interface developed by Microsoft to enable software writers to access the LDAP protocol which supports Active Directory (recitals 243 to 250 to the contested decision). In particular, the Court notes the limitations of the ‘ADSI provider’ developed by Novell (recital 250 to the contested decision).

419    At recitals 251 to 266 to the contested decision, the Commission explains that Microsoft introduced a ‘proprietary’ extension to the Kerberos standard protocol and that the work group server operating systems which run the ‘unextended’ version of that security protocol encounter authorisation problems when they work in a Windows environment (see also footnote 786 to the contested decision). It should be borne in mind that the Kerberos protocol, as modified by Microsoft, offers advantages as regards, in particular, faster connection and efficiency (see recital 152 to the contested decision and paragraph 170 above).

420    At recitals 283 to 287 to the contested decision, the Commission correctly explains that the ‘directory synchronisation tools’ to which Microsoft refers allow the directory services in its competitors’ systems to achieve only limited synchronisation with Active Directory. It emphasises, in particular, that those tools ‘only synchronise a limited part of the information contained in a directory’ and that they ‘do not suppress the need to manage the users, permissions, group memberships and security policies separately for the Windows work group servers and the non-Microsoft work group servers’ (recital 285 to the contested decision).

421    It follows from all of the foregoing considerations that Microsoft has not established that the Commission made a manifest error when it considered that non-Microsoft work group server operating systems must be capable of interoperating with the Windows domain architecture on an equal footing with Windows work group server operating systems if they were to be marketed viably on the market.

422    The Court also concludes from those considerations that the absence of such interoperability with the Windows domain architecture has the effect of reinforcing Microsoft’s competitive position on the work group server operating systems market, particularly because it induces consumers to use its work group server operating system in preference to its competitors’, although its competitors’ operating systems offer features to which consumers attach great importance.

–       The alleged error of fact

423    The arguments which Microsoft derives from the Commission’s alleged error of fact are of two types.

424    In the first place, Microsoft claims that the Commission’s case is contradicted, first, by the fact that several work group server operating systems are present on the market and by the heterogeneous nature of computer networks within undertakings in Europe and, second, by the fact that, even though they do not have access to the interoperability information at issue, distributors of Linux products have recently entered the market and have consistently gained market share.

425    The Court considers that the first of those arguments is not sufficient to call in question the validity of the Commission’s argument.

426    First of all, contrary to Microsoft’s contention, interoperability considerations play a key role in decisions concerning the acquisition of work group server operating systems (see paragraphs 381 to 412 above).

427    Also, the third Mercer survey shows that ‘interoperability with Windows work posts’ is the factor in respect of which the gap between Microsoft’s work group server operating system and its competitors’ systems is the widest (see paragraph 411 above).

428    Next, as will be explained in greater detail at paragraphs 569 to 582 below, Microsoft’s competitors, with the exception of distributors of Linux products, had been present on the work group server operating systems market for several years before Microsoft began to develop and market such systems. While it is true that on the date of adoption of the contested decision those competitors were still present on the market, the fact remains that their market share fell significantly as Microsoft’s share increased rapidly, notwithstanding the fact that some of them, particularly Novell, had a considerable technological advantage over Microsoft. The fact that competition is eliminated gradually and not immediately does not contradict the Commission’s argument that the information at issue is indispensable.

429    In fact, as the Commission stated in answer to one of the written questions put by the Court, the fact that Microsoft’s competitors were able to continue to sell work group server operating systems during the years immediately preceding the adoption of the contested decision is explained in part by the fact that at that time there was still, within organisations, a not insignificant basis of client PCs using a Windows operating system belonging to a range of products predating the Windows 2000 range (see recitals 441 to 444 to the contested decision). For example, the table at recital 446 to the contested decision shows that in 2001 the Windows 98, Windows Millennium Edition (Windows Me) and Windows NT client PC operating systems were still being licensed in significant numbers. It is precisely with the Windows 2000 operating systems that interoperability problems arose in a particularly acute manner for Microsoft’s competitors (see paragraphs 571 to 573 below). At the same time, there was also a non-negligible installed base of work group servers using Windows NT operating systems, which caused fewer interoperability problems than the systems which succeeded them. It must be borne in mind, in that regard, that organisations modify their work group server networks only once in a period of several years, and do so only incrementally (see recital 590 to the contested decision).

430    The second argument referred to at paragraph 424 above, based on the entry and growth of Linux products on the work group server operating systems market, must also be rejected.

431    First of all, as the Commission explains at recitals 487 and 488 to the contested decision, and as the Court will explain at paragraphs 502 and 553 below, the IDC data on which Microsoft relies to describe the evolution of the position of Linux products on the market present certain flaws. Those data come from a database which IDC established by identifying eight main categories of tasks (or ‘workloads’) carried out within organisations and distinguishing a number of ‘sub-categories’ within those main categories. The two tasks most closely related to the work group tasks referred to by the contested decision, namely file and print sharing and user and user group administration, are those known, respectively, as ‘file/print sharing’ and ‘networking’ (recital 486 to the contested decision). However, the tasks within those two sub-categories are not a perfect match for the services which constitute the work group server operating systems market. What is more, a number of those tasks can be performed with a much lower level of interoperability between client PCs and servers than the work group tasks identified by the Commission and are therefore more likely than the latter tasks to be carried out by non-Microsoft operating systems.

432    Next, account must be taken of the fact that the growth of Linux products on the work group server operating systems market was only modest during the years immediately preceding the adoption of the contested decision. When those Linux products were used in conjunction with Samba software (developed with the use of reverse engineering) they could attain a certain degree of interoperability with Windows operating systems. However, that degree of interoperability was significantly reduced following the launch of the Windows 2000 generation. Thus, in October 2003 – that is to say, several months after Microsoft had already begun to market the Windows 2003 server operating system, which had succeeded the Windows 2000 server system – the degree of interoperability that Linux products had managed to achieve enabled them to act only as member servers within a domain using Active Directory (see recitals 296 and 297 to the contested decision).

433    Finally, as will be explained in greater detail at paragraphs 595 to 605 below, the projected growth of Linux products on the work group server operating systems market is lower than Microsoft claims and will come about to the detriment not of Microsoft’s systems but, in particular, of Novell’s systems and the systems of distributors of UNIX products.

434    In the second place, Microsoft claims that the Commission failed to take account of the fact that several methods other than the disclosure of the information at issue ensure sufficient interoperability between different suppliers’ operating systems.

435    On that point, it is sufficient to observe that Microsoft itself has recognised, both in its written pleadings and in answer to a question put to it at the hearing, that none of its recommended methods or solutions made it possible to achieve the high degree of interoperability which the Commission correctly required in the present case.

436    It follows from all of the foregoing considerations that Microsoft has not demonstrated that the circumstance that the interoperability information was indispensable was not present in this case.

 (iii) Elimination of competition

 Arguments of the parties

437    Microsoft submits that the refusal at issue is not such as to exclude all competition on a secondary market, namely, in this case, the work group server operating systems market.

438    In support of that assertion, Microsoft claims, in the first place, that the Commission applied a test that was wrong in law.

439    Microsoft observes that, at recital 589 to the contested decision, the Commission refers to a mere ‘risk’ of elimination of competition on the market. In cases dealing with compulsory licensing of intellectual property rights, on the other hand, the Court has always ascertained whether the refusal in question was ‘likely to eliminate all competition’ and required, in that regard, ‘something close to certainty’. The Commission therefore ought to have applied a stricter test, namely the test of a ‘high probability’ of eliminating effective competition. Contrary to the Commission’s contention, the words ‘risk’, ‘possibility’ and ‘likelihood’ do not mean the same thing.

440    Microsoft further submits that the reference in the contested decision to Commercial Solvents v Commission and CBEM, paragraph 320 above, is irrelevant. Those cases did not involve a refusal to license intellectual property rights. In each of those cases, moreover, the prospect of eliminating competition was immediate and real, as there were no alternative sources of supply.

441    In the second place, Microsoft claims that the Commission’s argument that competition on the server operating systems market could be eliminated owing to its refusal to disclose its communication protocols to its competitors is contradicted by market conditions. The applicant reiterates, first, that it is commonplace for undertakings in Europe to have heterogeneous computer environments composed of Windows client PC and server operating systems and non-Microsoft server operating systems and, second, that the Mercer reports show that enterprise customers base their decisions relating to the purchase of operating systems on a range of criteria such as reliability, scalability and applications compatibility and do not consider the criterion of interoperability with Windows client PC operating systems to be a determinative criterion.

442    Microsoft also observes that, six years after the alleged refusal to supply, there were still numerous competitors on the work group server operating systems market, including IBM, Novell, Red Hat and Sun, and a number of suppliers of Linux products. The applicant reiterates that Linux is a recent entrant to the market and has grown rapidly and that it is an incontrovertible fact that Linux products, either on their own or together with Samba products or with Novell’s Nterprise server software, compete directly with Windows server operating systems in performing a wide range of tasks, including the provision of work group services to Windows client PC operating systems. Furthermore, IDC, which describes itself as the premier global market intelligence and advisory group in the information technology and telecommunications industries, estimated that there was no risk of competition being eliminated. IDC’s projections indicate that over the period 2003 to 2008 Microsoft’s share of the market for work group server operating systems used on servers costing under USD 25 000 will remain virtually stable, whereas Linux’s share will double.

443    In the third place, Microsoft criticises the Commission’s ‘artificially narrow’ definition of the second product market.

444    Microsoft contends that ‘[c]ompetition with Windows server operating systems is even more vigorous’ if the definition also covers tasks other than the provision of file and print services and user and group administration services that Windows server operating systems can perform.

445    Microsoft observes that the Commission does not deny that the basic version of its Windows Server 2003 operating system enables a wide range of tasks to be performed, many of which are outside the second product market as defined in the contested decision. According to the Commission’s approach, the same Windows server operating system is inside the relevant market when it provides file and print services to Windows client PC operating systems and is outside the market when it provides proxy services or firewall services to those same operating systems.

446    Microsoft maintains that the Commission is not entitled to rely on the fact that its Windows Server 2003 operating system is marketed in different versions at different prices to support its assertion that the basic version of that system is in a different market from the other versions of the same system. The ‘more expensive’ versions of that system provide the same work group services as the basic version.

447    In the reply, Microsoft expands somewhat on its complaint relating to the incorrect definition of the second product market. It states, first of all, that on the market for server operating systems in general it has a market share of around 30%. Next, it asserts that ‘[n]o one in the industry uses the term “work group server” in the way the Commission has used it to define [that product market]’ and that when ‘industry observers’ occasionally do refer to ‘work group servers’ they generally include servers that perform a wide range of tasks, including ‘Web, database and application serving’. Last, it claims that none of the major server vendors on the market sells work group servers that are limited to performing the tasks identified by the Commission.

448    Microsoft also rejects the explanations which the Commission sets out in the defence to justify its definition of the market. First of all, Microsoft states that ‘[v]endors do not charge different people different prices for the same server operating system edition depending on how they will use it’. Next, it denies that the server operating systems considered by the Commission to be ‘work group server operating systems’ are ‘optimised’ to provide work group services: the IDC data on which the Commission relied when calculating market share show that, with the sole exception of Novell’s NetWare, ‘[those] operating systems spend far more time devoted to non-work group tasks than to work group [tasks]’. Last, the applicant asserts that ‘[t]he cost of modification in many cases would be zero [and] in the other cases … would be negligible’.

449    Furthermore, Microsoft refers generally to two reports by Evans, Nichols and Padilla, in annex A.23 to the application and annex C.12 to the reply.

450    In the fourth place, Microsoft, in the reply, criticises the methodology used by the Commission to calculate the market share of operators on the second product market, which consists in taking into account only the time which server operating systems spend in performing work group tasks and only sales of server operating systems costing under USD 25 000. That leads to the absurd consequence that ‘a copy of an operating system is counted as [being] both inside and outside the market, depending on the tasks it is performing at any given time’ and provides no ‘relevant information about dominance’.

451    CompTIA claims, first of all, that the Commission applied the wrong legal standard when ascertaining whether Microsoft’s refusal involved a mere ‘risk of elimination of all effective competition’ when it ought to have examined whether that refusal gave rise to the likelihood that all competition would be eliminated from the secondary market. Next, CompTIA asserts that the evidence in the file does not demonstrate that that refusal was likely to have such a consequence. It emphasises, in particular, the ‘growing success’ of Linux.

452    ACT emphasises the very close link between the indispensability criterion and the ‘elimination of competition’ criterion. It claims, in particular, that the contested decision is contradictory in so far as, on the one hand, it recognises that up to 40% of the work group server operating systems market is held by competitors who are able to provide substitute products without having had access to the interoperability information and, on the other, it states that competition on that market is impossible without such access because the information is indispensable.

453    ACT also disputes the Commission’s argument that there is no need to take into account competition by de minimis players. It also criticises the fact that the Commission relies on a mere ‘risk’ of elimination of competition, and emphasises that Linux’s position on the market continues to grow.

454    The Commission asserts that the applicant’s refusal creates a risk that all effective competition on the secondary market for work group server operating systems will be eliminated.

455    In the first place, the evidence analysed at recitals 585 to 692 to the contested decision clearly shows that there is a ‘high likelihood’ that that risk will be ‘realised in the near future’. The Commission refers to recital 700 to the contested decision and submits that if Microsoft’s conduct remains unfettered, there is a serious risk that its competitors’ products will be confined to a ‘niche’ existence or will not be profitable at all.

456    The Commission contends that the Commercial Solvents v Commission and CBEM cases, paragraph 320 above, provide valuable guidance for the purpose of assessing Microsoft’s conduct in the light of Article 82 EC, even though those cases did not involve a refusal to license intellectual property rights. In that context, the expressions ‘risk’, ‘possibility’ and ‘likelihood’ used by the Court of Justice in its case-law on abusive refusals to supply have the same meaning.

457    The Commission submits that most of Microsoft’s arguments are based on the incorrect premiss that the Commission must establish that competition has already been eliminated or, at least, that its elimination is imminent. The Commission demonstrated in the contested decision that ‘the degree of interoperability that can be achieved on the basis of Microsoft’s disclosures is insufficient to enable competitors to stay viably on the market’ (footnote 712 to the contested decision). Microsoft has not adduced evidence that that conclusion is vitiated by a manifest error of assessment.

458    In the second place, the Commission deals with the arguments which Microsoft bases on the facts observed on the market.

459    It states, first of all, that ‘the risk of elimination of all competition was already present in 1998, as it is present today’: the only difference is that ‘now [that] elimination of competition is more imminent than it was in 1998’.

460    Next, the Commission disputes the conclusions that Microsoft draws from the Mercer reports. In the Commission’s view these reports demonstrate that customers choose Windows as a work group server operating system because of Microsoft’s ‘unfair interoperability advantage’, in spite of the fact that Windows is ‘lagging behind’ other products on a number of features that customers consider important.

461    The argument which Microsoft bases on the growth of Linux products is refuted as wholly unsupported; the Commission refers to recitals 506 and 632 to the contested decision, in which it is clearly shown that ‘the past growth of Linux has been de minimis’. The last two Mercer surveys demonstrate that Linux has only a very low market share, in the order of 5%, on the work group server operating systems market.

462    The Commission contends that the IDC projections are exaggerated and based on imperfect data (see paragraphs 365 and 366 above). In reality, the IDC data suggest that Microsoft rapidly acquired a dominant position on the relevant market, that it is continuing to increase its market share and that it is facing an increasingly fragmented fringe of niche players.

463    In the third place, the Commission rejects Microsoft’s criticism of its definition of the second product market.

464    In reaching that definition, the Commission first of all identified a ‘list of core work group services, which closely correspond to a specific customer need’. Those core services are the key services that customers take into account when purchasing a work group server operating system. The Commission based its analysis on a variety of evidence, including the information gathered in the 2003 market enquiry (recitals 349 to 352 to the contested decision), ‘statistical correlation’ between the use of a given operating system for one of the core work group services and its use for the other core services (recital 353 to the contested decision) and Microsoft’s description and pricing of its products (recitals 359 to 382 to the contested decision).

465    The Commission contends that work group server operating systems are ‘optimised’ to provide work group services and that the way in which they provide those services plays a decisive role in the decision to purchase such systems. The fact that work group servers are sometimes used to run an application does not have the effect of ‘temporarily’ excluding them from the market or of ‘temporarily’ including in the market enterprise servers which are ‘optimised’ to run enterprise applications.

466    In response to Microsoft’s argument that its Windows work group server operating systems may be used to provide proxy services or firewall services, the Commission refers to recital 58 to the contested decision and states that those tasks are implemented by specialised ‘edge servers’. Those servers cannot therefore exercise a competitive constraint on Microsoft on the work group server operating systems market.

467    In the rejoinder, the Commission claims, first of all, that the terminology which it uses to designate the product market is irrelevant to whether it correctly defined that market. Furthermore, the expression ‘work group server operating system’ is indeed used in the industry to designate the ‘type of products at stake in the [contested] decision’.

468    Next, the Commission rejects Microsoft’s criticisms of the explanations set out in the defence (see paragraph 448 above).

469    First, contrary to Microsoft’s contention, both it and its competitors ‘do … charge customers different prices for the same server operating system depending on how they will use it’. Prices vary according to the number of client PCs which have access to the server concerned. Furthermore, server operating systems vendors offer a number of different editions – at different prices – of systems forming part of the same ‘family’. More generally, the Commission observes that ‘Windows server operating systems are licensed by Microsoft to customers and [that] there is in principle no reason why Microsoft should not be able to discriminate depending on use’.

470    Second, the Commission submits that Microsoft’s assertion that work group server operating systems ‘spend far more time devoted to non-work group tasks than to work group [tasks]’ is based on IDC data processed according to an inappropriate method.

471    Third, in response to Microsoft’s assertion that ‘the cost of modification in many cases would be zero’, the Commission refers to recitals 334 to 341 and 388 to 400 to the contested decision, which show that there is no supply side substitutability for either client PC operating systems or work group server operating systems.

472    Still in the rejoinder, moreover, the Commission emphasises that Microsoft does not deny that interoperability with client PCs – and, more especially, with Windows client PCs – is particularly important for the performance of work group tasks by a server operating system. Microsoft’s refusal to disclose interoperability information significantly harms its competitors’ capacity to meet consumer expectations concerning the performance of those tasks and thus alters the conditions of competition for servers sold for those tasks by comparison with those sold for different tasks. In the Commission’s submission, ‘[that] remains true even assuming … that, for each of both Microsoft and its rivals, the various editions of its server operating systems currently on the market are all equally suited … for the performance of both work group server tasks and certain other “low-end” tasks (non-mission critical applications such as e-mail, etc.)’.

473    The Commission further submits that, ‘[a]s for the supply side, it is obvious that, if one accepts for present purposes (i) the demand-side requirements of customers as regards work group services (undisputed by Microsoft) and (ii) Microsoft’s own hypothesis that the various editions of each vendor’s respective server operating systems have identical capacities as regards work group tasks, then the very same distorted market forces which force the exit of Microsoft’s competitors from the sale of server operating systems for work group tasks will prevent supply-side substitution through (re)entry on the basis of the “high-end” editions of the same operating system “families”’.

474    Last, the Commission refers to annex B.11 to the defence and annex D.12 to the rejoinder, in which it comments on the observations set out in annex A.23 to the application and annex C.12 to the reply.

475    In the fourth place, the Commission rejects Microsoft’s criticisms of the method which it used to calculate market share. First of all, for the purpose of its assessment, there is no need for Microsoft to have already acquired a dominant position on the relevant secondary market by means of its abusive conduct: what matters is that there is a risk of elimination of competition on that market. Next, the Commission’s method ‘gives a sufficiently reliable picture of the imbalance of forces on the market for work group server operating systems’. The Commission did not consider only the time allocated to different tasks by a given server, but examined, in respect of the undertakings which participated in the 2003 market enquiry and responded to the second and third Mercer surveys, what proportion of the work group tasks was performed by servers from different suppliers. Neither that market enquiry nor those surveys indicate that Microsoft held a market share of less than 60% for any one of those work group tasks.

476    The Commission further contends that ‘applying the “filters” identified by Microsoft makes it possible to use [the IDC] data as a rough proxy for the sale of the editions of various vendors identified as being work group server operating systems’. It maintains that, ‘to the extent that Microsoft’s own exclusionary behaviour has the effect of partitioning sales of server operating systems purchased primarily for work group tasks from those primarily purchased for other tasks, a “workload” filter permits one to form an impression of Microsoft’s relative strength in sales primarily for the former tasks’. In any event, even if only the ‘[USD] 25 000 filter’ were applied, without any distinction based on workload, Windows’ share would be 65% by volume and 61% by relevant turnover (recital 491 of the contested decision).

477    SIIA claims that, owing to the indispensability of the interoperability information, the refusal at issue is by nature such as to eliminate competition on the work group server operating systems market. In particular, Microsoft’s market share on that market rose significantly and rapidly at the time when it placed its Windows 2000 Server operating system on the market. SIIA also contends that the arguments which Microsoft bases on the alleged growth in Linux products on the market are unfounded.

478    FSFE asserts that Linux products do not exert a competitive threat on the work group server operating systems market.

 Findings of the Court

479    The Court will examine in the following order the four categories of arguments which Microsoft puts forward in support of its contention that the circumstance relating to the elimination of competition is not present in this case: first, the definition of the relevant product market; second, the method used to calculate market shares; third, the applicable criterion; and, fourth, the assessment of the market data and the competitive situation.

–       The definition of the relevant product market

480    Microsoft’s arguments in respect of the definition of the relevant product market concern the second of the three markets identified by the Commission in the contested decision (see paragraphs 23 and 25 to 27 above), namely, the work group server operating systems market. The Commission describes those systems as being designed and marketed to deliver collectively file and print sharing services and group and user services to a relatively small number of client PCs linked together in a small or medium-sized network (recitals 53 and 345 to the contested decision).

481    Microsoft contends, in effect, that the Commission defined that second market too restrictively by including only server operating systems used to supply the services mentioned in the preceding paragraph, namely what are known as ‘work group’ services. Microsoft’s objective in challenging the Commission’s definition of the market is essentially to establish that the evolution of the market is different from that described at recitals 590 to 636 to the contested decision and does not represent the elimination of all competition.

482    The Court notes at the outset that in so far as the definition of the product market involves complex economic assessments on the part of the Commission, it is subject to only limited review by the Community judicature (see, to that effect, Case T‑342/99 Airtours v Commission [2002] ECR II‑2585, paragraph 26). However, this does not prevent the Community judicature from examining the Commission’s assessment of economic data. It is required to decide whether the Commission based its assessment on accurate, reliable and coherent evidence which contains all the relevant data that must be taken into consideration in appraising a complex situation and whether it is capable of substantiating the conclusions drawn from it (see, to that effect, Commission v Tetra Laval, paragraph 89 above, paragraph 39).

483    The Court notes, moreover, that Microsoft on the one hand repeats arguments which it already submitted during the administrative procedure and which the Commission expressly rejected in the contested decision, but fails to indicate in what way the Commission’s findings are incorrect, and, on the other, makes a general reference to two reports in annex A.23 to the application and annex C.12 to the reply. For the reasons set out at paragraphs 94 to 99 above, those reports will be taken into account by the Court only to the extent to which they support or complement pleas or arguments expressly set out by Microsoft in the body of its pleadings.

484    In arriving at the contested definition of the product market, the Commission took into account the demand-side substitutability and the supply-side substitutability of the products. It must be borne in mind that, as stated in the Commission Notice on the definition of the relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5), point 7, ‘[a] relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use’. As indicated at point 20 of that notice, moreover, supply-side substitutability may also be taken into account when defining markets in those situations in which its effects are equivalent to those of demand substitution in terms of effectiveness and immediacy. That means that suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.

485    The Court would point out straight away that the definition of the second market is not based on the idea that there is a separate category of server operating systems exclusively implementing file and print services and user and group administration services. Quite to the contrary, at a number of points in the contested decision the Commission expressly acknowledges that work group server operating systems may also be used to carry out other tasks, and, in particular, may run ‘non-mission critical’ applications (see, in particular, recitals 59, 355, 356 and 379 to the contested decision). At recital 59 to the contested decision, the Commission states that ‘non-mission critical’ applications are those whose failure ‘would impact the activity of some users [but] would not impact the overall activity of the organisation’. In that regard, the Commission refers, more specifically, to the running of internal email services. As will be explained in greater detail below, the Commission’s definition is based in fact on the finding that the capacity of work group server operating systems to supply collectively file and print services and also user and group administration services constitutes, without prejudice to the other tasks which they are capable of performing, an essential feature of those systems, and that those systems are primarily designed, marketed, purchased and used to provide those services.

486    As regards, in the first place, demand-side substitutability, the Commission concludes at recital 387 to the contested decision that ‘there are no products that … exercise sufficient competitive pressure on work group server operating systems such that they should be included in the same relevant product market’.

487    In arriving at that conclusion, the Commission established, first, that it followed from the information gathered in the 2003 market enquiry that work group servers performed a distinct set of linked tasks which were demanded by consumers (recitals 348 to 358 to the contested decision).

488    The Court considers that that finding is confirmed by the evidence in the file and that Microsoft has raised no argument which disproves it.

489    In its request for information of 4 June 2003, the Commission asked the organisations concerned whether within those organisations a particular type of server was used to supply file and print services and group and user administrative services (first part of question 1). Of the 85 organisations which answered that question, 70 (approximately 82.3%) said that that was so.

490    The Commission also asked the organisations whether they considered that those services constituted a ‘set of server tasks that “go together”’ (second part of question 1). Of the 83 organisations which answered that question, 51 (61.4%) endorsed that proposition.

491    Those results are explained, in particular, by the fact that those services constitute the basic services which client PC users use in their daily activities. Entity I 06, for example, explains its positive answer to both parts of question 1 by describing servers that supply work group services as ‘infrastructure servers’ and those services as ‘standard desktop services’. It states that ‘[e]ach user shall be identified/authenticated; he/she will create/modify files, print them, exchange/share them’. Likewise, other organisations refer to the servers as being ‘infrastructure server providers’ (see response of entities I 13 and I 30).

492    It is also significant that, as the Commission observes at recital 352 to the contested decision, several organisations explained their positive response to both parts of question 1 by the need to have a ‘single sign-on identification’ for users accessing the resources of the network or a single point of administration of the network (see, inter alia, the responses of entities I 30, I 46-16, I 46-37 and Inditex). Other organisations mention cost considerations, stating, in particular, that the use of the same operating system to supply work group services allows a reduction in administration costs (see, inter alia, the responses of entity I 49-19 and Inditex).

493    It is true that in the description of ‘work group tasks’ in its request for information of 4 June 2003 the Commission also included ‘support for internal email and collaboration services and other “non-mission critical” applications’ and that a number of the organisations questioned approved the inclusion of those services in that description. It is also true that, in answer to question 2 in the same request for information, 62 organisations out of 85 (approximately 72.9%) stated that they appreciated the flexibility offered by a work group server operating system which, in addition to file and print services and user and group administration services, was able to supply ‘non-mission critical’ services.

494    However, it cannot be inferred from those findings alone that the Commission defined the second product market too narrowly.

495    First, those findings must be qualified. Thus, in their response to question 1 of the request for information of 4 June 2003, a number of the organisations questioned stated that in their operations internal email or collaboration services were performed on specialist servers and they distinguished those services from the other work group services mentioned by the Commission (see, in particular, the responses of entities I 09‑1, I 11, I 22, I 37, I 53, I 46-13, I 46‑15, I 59 and I 72, and also those of Danish Crown, Spardat and Stork Food & Dairy Systems). For example, while entity I 37 considered that the work group tasks defined by the Commission constituted a set of linked server tasks, it stated that ‘file/print [services] [went] together’, whereas ‘internal email [services] [belonged to] a different set of servers’. Likewise, entity I 46‑15 stated that it had ‘a server that provided file and print services and workstation management only’.

496    Second, as the Commission observes at recitals 353 and 354 to the contested decision, and as it reiterates in its answer to one of the written questions put by the Court, the 2003 market enquiry also shows that when organisations use a given operating system to supply file or print services, they generally use the same operating system to supply user and group administration services. The Court notes that Microsoft does not dispute the findings in footnotes 436 and 438 to the contested decision relating to the ‘correlation coefficients’ calculated by the Commission on the basis of the responses to question 5 of its request for information of 16 April 2003. The Commission explains in those footnotes that the ‘correlation coefficient’ between the workload share of a NetWare system (or a Windows system) for one of the work group services (namely file sharing, printing and user and group administration) and the workload share of the same system for another of the same services is particularly high. On the other hand, the ‘correlation coefficient’ is much lower between the workload share of a NetWare system (or a Windows system) for one of the work group services and the workload share of the same system for a different type of service, in particular internal email services or other applications which are ‘non-mission critical’. The Commission adds that the same conclusions may be deduced from results of the second and third Mercer surveys. In other words, it is apparent from that evidence, which Microsoft does not dispute, that it is much more usual to combine, on the same server, the work group services identified by the Commission than one of those services and a service of another type.

497    Consequently, while it is true that users attach a certain importance to the possibility of using work group server operating systems to perform certain ‘non-mission critical’ tasks in addition to work group services, that does not at all affect the conclusion that there is a separate demand for server operating systems that supply work group services. Since it is settled that it is the three categories of services thus considered that determine the choice of demand, it is immaterial that the server operating systems belonging to the relevant market are capable of performing certain additional tasks.

498    Furthermore, as indicated at recitals 357, 358 and 628 to the contested decision, the customer statements produced by Microsoft during the administrative procedure confirm the correctness of the Commission’s analysis.

499    Those statements show that while, admittedly, as Microsoft emphasises at a number of points in its pleadings, organisations often have ‘heterogeneous’ computer networks (that is to say, networks in which server and client PC operating systems from different suppliers are used), they nevertheless use different types of servers to perform different types of tasks. More particularly, it is clear from those statements that work group services as defined by the Commission are generally supplied by other types of servers than those performing ‘mission critical’ services. Thus, it appears from those organisations’ descriptions of their computer environment that work group services are normally supplied by entry-level servers running a Windows or NetWare system, while ‘mission critical’ applications run on more expensive and larger UNIX servers or on mainframes.

500    For example, a large chemical and pharmaceutical group states that the ‘business-critical’ applications which it uses to pay its staff salaries and for internal banking transactions run on mainframes, while other ‘business-critical’ applications used, inter alia, for the administrative and technical management of certain of its divisions are supplied by UNIX servers. On the other hand, within that group ‘non-business-critical’ tasks, in particular file and print services and user and group administration services, are performed by separate servers which mainly run Windows operating systems. Likewise, a large airline explains that the applications which it uses especially for flight planning and reservation services are supplied by UNIX servers, whereas ‘non-mission critical’ applications are supplied by Windows servers. A further relevant example is provided by a banking group, which states that it uses UNIX servers for essential financial applications, Solaris servers for other financial applications and applications which it develops in-house, and Windows NT servers to support ‘infrastructure functionality such as domain services (especially login and permissioning) and file and print services’.

501    The Court notes that, as indicated particularly at recitals 58 and 346 to the contested decision, low-end servers are not all used to supply work group services. Some of those servers are installed at the ‘edge’ of networks and are intended to perform specialist tasks, such as Web serving, Web caching and firewall tasks.

502    Last, Microsoft’s argument to the effect that the IDC data show that, with the single exception of Novell’s NetWare system, the operating systems which the Commission describes as ‘work group server operating systems’ spend much less time performing work group tasks than performing other tasks cannot be upheld. That argument is based on IDC data which establish that only 24% of sales of servers, across all price ranges, running a Windows operating system correspond to ‘file’, ‘print’ and ‘network administration’ tasks (see footnote 93 to the reply). However, as may be seen from recitals 487 and 488 to the contested decision, and as the Court will explain in greater detail at paragraph 553 below, the method which IDC uses to calculate market shares has a number of flaws. In any event, even if the tasks mentioned above were to be considered to correspond to the work group services referred to in the contested decision, the percentage calculated on the basis of IDC’s data would represent only Microsoft’s share of sales of server operating systems, in all versions, which relate to the work group server operating systems market. Contrary to Microsoft’s assertion, the percentage in question is not limited to work group server operating systems.

503    Second, the Commission found, relying in particular on Microsoft’s own description of its products, that the server operating systems were ‘optimised’ for the tasks which they were to perform (recitals 359 to 368 to the contested decision).

504    The Court considers that the evidence in the file confirms the correctness of that finding.

505    Thus, information published by Microsoft on its Internet site shows that the server operating systems in the Windows 2000 range are marketed in three different versions, namely, Windows 2000 Server, Windows 2000 Advanced Server and Windows 2000 Datacenter Server, and that each of those versions is intended to meet a specific task-based user demand.

506    Microsoft describes Windows 2000 Server as the ‘entry-level’ version of its Windows 2000 server operating systems and as ‘the right solution for work group file, print and communication servers’ (recital 361 to the contested decision). Windows 2000 Server ‘scales from 1 to 4 processors and up to 4 gigabytes’ (recital 364 to the contested decision).

507    Windows 2000 Advanced Server is presented by Microsoft as ‘the right operating system for essential business and e-commerce applications that handle heavier workloads and high-priority processes’ (recital 362 to the contested decision). Windows Advanced Server not only contains all the functionalities offered by Windows 2000 Server but also offers ‘additional scalability and reliability features, such as clustering, designed to keep … business-critical applications up and running in the most demanding scenarios’ (recital 362 to the contested decision). Microsoft also states that Windows 2000 Advanced Server ‘scales from 1 to 8 processors and up to 64 gigabytes’ (recital 364 to the contested decision).

508    Last, Microsoft presents Windows 2000 Datacenter Server as offering ‘maximum reliability and availability’ and as constituting ‘the right operating system for running mission-critical databases [and] enterprise resource planning software’ (recital 363 to the contested decision). Windows 2000 Datacenter Server ‘is designed for enterprises that need very reliable high-end drivers and software’ and ‘scales from 1 to 32 processors and up to 64 gigabytes’ (recitals 363 and 364 to the contested decision).

509    Microsoft gives a similar presentation of the different versions of the range of server operating systems that replaced the Windows 2000 range, namely Windows Server 2003 Standard Edition, Windows Server 2003 Enterprise Edition, Windows Server 2003 Datacenter Edition and Windows Server 2003 Web Edition.

510    Thus, it describes Windows Server 2003 Standard Edition as ‘the ideal multipurpose network operating system for the everyday needs of organisations of all sizes, but especially small businesses and work groups’ and as permitting ‘intelligent file and printer sharing, secure Internet connectivity, centralised desktop policy management and Web solutions that connect employees, partners, and customers’ (recital 365 to the contested decision).

511    Windows Server 2003 Enterprise Edition, according to Microsoft’s description, offers, in addition to the functionalities present in Windows Server 2003 Standard Edition, ‘reliability features needed for business-critical applications’ (recital 366 to the contested decision).

512    Windows Server 2003 Datacenter Edition, according to Microsoft, ‘is built for mission critical applications that demand the highest levels of scalability, availability, and reliability’ (recital 366 to the contested decision).

513    Last, Windows Server 2003 Web Edition is described by Microsoft as being ‘designed for building and hosting Web applications, pages, and services’ and as being ‘designed specifically for dedicated Web serving needs’ (recital 367 to the contested decision). Microsoft emphasises that that system ‘can be used solely to deploy Web pages, Web sites, Web applications, and Web services’ (recital 367 to the contested decision).

514    That publicity material shows that Microsoft itself presents the different versions of its server operating systems as being designed to meet distinct task-based user demands. It is also apparent from that publicity material that the different versions are not designed to run on the same hardware.

515    The Court also notes that the products of other operating system suppliers are also ‘optimised’ for work group services. That is so particularly for the products of Red Hat, whose ‘Red Hat Enterprise Linux ES’ and ‘Red Hat Enterprise Linux AS’ operating systems are clearly designed to meet distinct user demands. Thus, as the Commission states at footnote 463 to the contested decision, on Red Hat’s website its ‘Red Hat Enterprise Linux ES’ system is described as being ‘ideally suited for network, file, print, mail, Web, and custom or packaged business applications’. On the other hand, its ‘Red Hat Enterprise Linux AS’ system is presented as being targeted at ‘high-end and mission-critical systems’ and as ‘the ultimate solution for large departmental and datacenter servers’. That is consistent with the finding that operating systems running on high-end servers are designed to perform ‘mission critical’ tasks and must therefore be more reliable and have more functionalities than work group server operating systems (recitals 57 and 346 to the contested decision).

516    Third, the Commission relied on ‘Microsoft’s pricing strategy’ and, in particular, on the fact that it charged different prices for different versions of its server operating systems (recitals 369 to 382 to the contested decision).

517    First of all, it is clear from the information set out at recitals 370 to 373 to the contested decision, and not disputed by Microsoft, that there are significant price differentials between the different versions of its server operating systems, both in the Windows 2000 Server range and in the Windows 2003 Server range.

518    Thus, based on 25 ‘Client Access Licences’ (‘CALs’), the selling price of Windows 2000 Advanced Server is 2.22 times the price of Windows 2000 Server, while Windows 2000 Datacenter Server costs 5.55 times the price of Windows 2000 Server (based on 25 CALs).

519    Likewise, based on 25 CALs, the selling price of Windows Server 2003 Enterprise Edition is 2.22 times the price of Windows Server 2003 Standard Edition. The selling price of Windows Server 2003 Datacenter Edition is 5.55 times the price of Windows Server 2003 Standard Edition (based on 25 CALs). Windows Server 2003 Web Edition, which can be used only to perform certain specific tasks (see paragraph 513 above), is sold at a much lower price than Windows Server 2003 Standard Edition.

520    Next, contrary to what Microsoft appears to suggest (see paragraph 446 above), the Commission does not infer from the sole fact that Microsoft charges different prices for the different versions of its server operating systems that those versions belong to separate product markets. From the aspect of demand-side substitutability, the Commission takes into account not only those price differentials but also, and primarily, the fact that each of the different versions is designed to meet a specific user demand.

521    Nor is Microsoft entitled to rely on the fact that the ‘more expensive’ versions of its Windows Server 2003 range, namely Windows Server 2003 Enterprise Edition and Windows Server 2003 Datacenter Edition, allow the same work group tasks to be performed as Windows Server 2003 Standard Edition. Even though that may be true, the fact remains that the first two systems are intended to meet demands which are different from the third system and that it is unlikely that a user interested only in work group services will purchase a much more costly system than Windows Server 2003 Standard Edition for that purpose.

522    As the Commission correctly observes at recital 376 to the contested decision, Microsoft itself shares that opinion when, in its own marketing material, it states, with reference to the systems in the Windows 2000 Server range:

‘[T]he three offerings in the family – Windows 2000 Server, [Windows 2000] Advanced Server, and [Windows 2000] Datacenter Server – allow you to tailor your investment to provide the level of system availability that’s appropriate for your various business operations, without overbuying for operations that don’t require maximum uptime.’

523    In the same context, Microsoft cannot rely on the fact that the Windows Server 2003 Standard Edition operating system also allows tasks other than work group tasks to be performed. That argument ignores the fact that Microsoft charges different prices for that operating system depending on whether it is intended to be used to supply work group services or other types of services. As explained at recitals 84 and 380 to the contested decision, the prices charged by Microsoft for the Windows Server 2003 Standard Edition operating system include a fee for each server on which it is installed and a fee (CAL) for each client PC to which that server supplies work group services. By contrast, the user does not need to purchase a CAL if he wishes to use that operating system to perform ‘unauthenticated’ tasks, such as firewall, proxy or cache serving. Those findings show, moreover, that Microsoft’s assertion that ‘[v]endors do not charge different people different prices for the same server operating system edition depending on how they will use it’ is incorrect.

524    Fourth, and last, the Commission observed that server operating systems other than work group server operating systems did not need to interoperate as fully with the client PCs in an organisation as work group server operating systems (recitals 384 and 383 to 386 to the contested decision).

525    In that regard, it is sufficient to point out that it has already been found at paragraph 385 above that the Commission was correct to make such an appraisal. In any event, its appraisal is not disputed by Microsoft.

526    It follows from the foregoing considerations that Microsoft has not established that the Commission’s finding that there are no products that, from the demand-side perspective, exercise sufficient competitive pressure on work group server operating systems to justify their inclusion in the same relevant product market (recital 387 to the contested decision) was manifestly incorrect.

527    In the second place, the question of supply-side substitutability is analysed by the Commission at recitals 388 to 400 to the contested decision.

528    The Commission considers that ‘other operating system vendors, including in particular vendors of server operating systems, would not be able to switch their production and distribution assets to work group server operating systems without incurring significant additional costs and risks and within a time framework sufficiently short so as to consider that supply-side considerations are relevant in this case’ (recital 399 to the contested decision). More specifically, the Commission rejects the argument developed by Microsoft in its response of 16 November 2001 to the second statement of objections, that there is a ‘virtually instantaneous supply-side substitution’, in that it is sufficient to ‘disable’ the ‘more complex functionalities’ in higher-end server operating systems in order to obtain a product comparable to a work group server operating system.

529    It is clear to the Court that, in the body of its pleadings, Microsoft puts forward no specific argument capable of calling in question the analysis carried out by the Commission in the recitals to the contested decision referred to above. In the reply, it merely makes the general assertion that ‘[t]he cost of modification in many cases would be zero’ and ‘in the other cases … would be negligible’, without even indicating whether it thereby intends to contest the Commission’s finding that there was no supply-side substitutability.

530    In those circumstances, the Court finds that Microsoft has not established that the Commission manifestly erred when it concluded that there was no supply-side substitutability in this case.

531    The Court concludes from the foregoing that the Commission was correct to define the second product market as the work group server operating systems market.

532    That conclusion is not called in question by Microsoft’s assertion that ‘[n]o one in the industry uses the term “work group server” in the way the Commission has used it to define [the relevant product market]’. First, as the Commission quite correctly states, the terminology which it uses to designate the market makes no difference whatsoever to whether it defined the market correctly. Second, Microsoft’s assertion in any event has no basis in fact, since the file shows that the expressions ‘work group server’ and ‘work group server operating system’ are used in the industry to designate the type of products covered by the contested decision. Thus, in its complaint of 10 December 1998, Sun expressly states that the complaint relates to Microsoft’s conduct ‘in the work group server operating systems sector’. Likewise, it must be borne in mind that in its marketing material Microsoft itself presents its Windows 2000 Server as ‘the right solution for work group file, print and communication servers’ (see paragraph 506 above).

–       The method used in calculating market shares

533    Microsoft takes issue with the Commission for having used an inappropriate method to calculate the market shares of the various operators on the second product market. It maintains, in particular, that that method provides no ‘relevant information about dominance’.

534    The Court finds that, for the reasons given below, Microsoft has not demonstrated that the method used by the Commission is vitiated by any manifest error of assessment.

535    At recitals 473 to 490 to the contested decision, the Commission explains its method in detail.

536    The Commission states, first of all, that it uses two categories of ‘proxies’ to assess the position of the various operators on the market, namely, first, estimates of new sales by IDC based on price-band proxies and workload shares for various tasks and, second, estimates of market shares based on the results of the 2003 market enquiry and the second and third Mercer surveys (recital 473 to the contested decision).

537    It must be pointed out at the outset that the statement in the preceding paragraph shows that Microsoft’s assertion that the Commission, when calculating market shares, took into account only the time spent by the server operating systems in performing work group tasks and sales of server operating systems costing under USD 25 000 is clearly incorrect. Microsoft fails to mention that the Commission also took into consideration data from sources other than IDC. As will be shown at paragraph 556 below, the market shares established on the basis of the latter data correspond globally to those determined on the basis of the IDC data.

538    Next, the Commission states that market shares must be estimated on the number of units of the product shipped and the turnover generated by sales of software and hardware together (recitals 474 to 477 to the contested decision).

539    Last, the Commission contends that the IDC data must be adjusted by means of two ‘filters’ (recitals 478 to 489 to the contested decision). First, it takes account only of servers costing less than USD 25 000 (or EUR 25 000, since, as stated in footnote 6 to the contested decision, at the material time EUR 1 corresponded roughly to USD 1). Second, it took into consideration only certain of the categories of tasks defined by IDC.

540    Microsoft’s complaint is directed against the use of those two filters.

541    As regards the first filter, in the body of the reply Microsoft merely contests, quite generally, its relevance. In annex C.12 to the reply, it expands somewhat on its argument, first, by claiming that the 2003 market enquiry – some of the results of which were used by the Commission to justify the application of that filter – concerns ‘the behaviour of a particular group of customers’ and, second, by criticising the fact that the Commission takes account of the selling price of servers and not the selling price of operating systems. On that last point, the applicant submits that the same work group server operating system can run on servers of very different prices, and in particular on servers costing more than USD 25 000.

542    Those arguments cannot be accepted.

543    First of all, the entities questioned by the Commission in connection with the 2003 market enquiry do not represent a ‘particular group of customers’. As stated at recital 8 to the contested decision, those entities are companies selected at random by the Commission, established in different Member States, of different sizes and from different activity sectors.

544    Next, as the Commission stated in answer to one of the written questions put by the Court, the price limit of USD 25 000 (or EUR 25 000) applies to the ‘total cost of the system (that is to say, hardware and software)’. The Court finds that the Commission was correct to take account of the selling price of hardware and software to evaluate the market shares of the operators on the work group server operating systems market. As stated at recitals 69 and 474 to the contested decision, some vendors (including Sun and most UNIX vendors) develop and sell server operating systems bundled with the hardware. The Court takes account, moreover, of the fact that during the administrative procedure Microsoft itself recommended the approach thus adopted by the Commission (see recital 476 to the contested decision).

545    Last, the Court finds that the Commission was quite correct to apply a maximum price of USD 25 000 (or EUR 25 000), which corresponds to the maximum selling price of servers in the first of the three categories of servers according to which IDC divides the market for the purposes of its analyses (recital 480 to the contested decision). In effect, the results of the 2003 market enquiry show that work group server operating systems generally run on relatively cheap servers, unlike ‘mission critical’ applications, which are run on high-level servers.

546    Thus, in connection with that enquiry, the Commission asked the organisations concerned to state what price they were prepared to pay for a work group server (question 3 of the request for information of 4 June 2003). Of the 85 organisations which answered that question, 83 (approximately 97.6%) stated that they would not pay more than EUR 25 000.

547    Likewise, in its request for information of 16 April 2003, the Commission asked the organisations a number of questions concerning their past and planned purchases of servers intended to supply file and print services (questions 8 and 9). It appears from the answers to those questions that, of the 8 236 servers purchased for that purpose by those organisations, 8 001 (approximately 97.1%) cost less than EUR 25 000 and that, of the 2 695 planned purchases of such servers, 2 683 (approximately 99.6%) cost less than EUR 25 000 (recital 479 to the contested decision).

548    As regards the second filter, Microsoft merely observes in the body of its reply that the application of that filter leads to the absurd consequence that ‘a copy of an operating system is counted as [being] both inside and outside the market, depending on the tasks it is performing at any given time’. In annex C.12 to the reply the applicant adds that ‘a large part of the (artificially) excluded sales almost certainly represent sales of [server operating systems] editions that are within the Commission’s candidate market [namely, the work group server operating systems market]’.

549    Those arguments cannot be upheld either.

550    The Court finds not only that the Commission was quite correct to use that second filter, but also that Microsoft greatly exaggerates the consequences of its being used.

551    It is important to bear in mind why the Commission considered it necessary to use that filter. As stated at recital 482 to the contested decision, the Commission’s reason for doing so was that not all the operating systems running on servers costing under USD 25 000 (or EUR 25 000) supply work group services. In particular, some of those systems are devoted exclusively to specific tasks outside, or at the edge of, work group networks, such as Web services or firewall services. That is the case, for example, of Windows Server 2003 Web Edition, which according to its licence conditions cannot be used to supply work group services and which normally runs on servers costing below USD 25 000 (or EUR 25 000).

552    The Commission therefore correctly concluded that it was necessary to qualify the IDC data on sales of computers costing below USD 25 000 (or EUR 25 000) by also taking into account the various types of tasks performed by those servers (recital 483 to the contested decision). To that end, the Commission used the IDC data in a database called ‘IDC Server Workloads 2003 Model’. Those data were obtained from consumers whom IDC requested to specify the tasks (or ‘workloads’) carried out by the servers which they used in their organisation. As already stated at paragraph 431 above, IDC identified eight main categories of tasks and distinguished a number of sub-categories within those categories. The Commission used the sub-categories ‘file/print sharing’ and ‘networking’, which were the ones that most closely corresponded to the ‘file and print’ and ‘group and user administration’ services referred to in the contested decision (recital 486 to the contested decision).

553    Admittedly, the tasks in those two sub-categories do not correspond exactly with the services constituting the work group server operating systems market. The Commission was however fully aware of that as may be seen from the examples which it gives at recitals 487 and 488 to the contested decision and which show, in particular, that certain tasks performed on high-end servers may be placed in one or other of those sub-categories although they clearly do not represent work group tasks.

554    However, it was precisely the combination of the two filters of which Microsoft complains that allowed that problem of consistency between the tasks defined by IDC and those identified by the Commission to be reduced.

555    In any event, it is clear that the market shares obtained if only the first filter is applied are not significantly different from those obtained when both filters are used together. Thus, Microsoft’s market share for 2002, when calculated on the basis of all servers sold for below USD 25 000, is 64.9% by units shipped and 61% by turnover (recital 491 to the contested decision). When, for the same servers, only the sub-categories ‘file/print sharing’ and ‘networking’ are taken into consideration, Microsoft’s market shares are as follows: 66.4% by units shipped (65.7% by turnover) for the first sub-category and 66.7% by units shipped (65.2% by turnover) for the second (recital 493 to the contested decision).

556    More generally, as noted at recital 473 to the contested decision, the percentages obtained using the IDC data, when both filters are applied together, correspond globally with those obtained on the basis of the 2003 market enquiry and the second and third Mercer surveys (see, for example, recitals 495, 497 and 498 to the contested decision). It must be emphasised in that context that each time the Commission erred on the side of caution. Thus, in Microsoft’s case, it took the lowest market share, ‘at least 60%’ (recital 499 to the contested decision).

557    The Court concludes that Microsoft has not demonstrated that the method which the Commission used when calculating market shares is vitiated by a manifest error of assessment or, consequently, that the estimates of market shares given at recitals 491 to 513 to the contested decision must be considered manifestly incorrect.

558    Nor did the Commission base its finding that Microsoft held a dominant position on the work group server operating systems market solely on its market shares on that market. It also took into account the fact that there were barriers to entry to that market (recitals 515 to 525 to the contested decision), owing in particular to the presence of network effects and obstacles to interoperability, and also the close commercial and technological links between that market and the client PC operating systems market (recitals 526 to 540 to the contested decision).

559    Last, as regards the abusive refusal to supply, it must be borne in mind that in the contested decision the Commission takes issue with Microsoft for having used, by leveraging, its quasi-monopoly on the client PC operating systems market to influence the work group server operating systems market (recitals 533, 538, 539, 764 to 778, 1063, 1065 and 1069). In other words, Microsoft’s abusive conduct has its origin in its dominant position on the first product market (recitals 567 and 787 to the contested decision). Even if the Commission were wrongly to have considered that Microsoft was in a dominant position on the second market (see, in particular, recitals 491 to 541, 781 and 788 to the contested decision) that could not therefore of itself suffice to support a finding that the Commission was wrong to conclude that there had been an abuse of a dominant position by Microsoft.

–       The applicable criterion

560    In the contested decision, the Commission considered whether the refusal at issue gave rise to a ‘risk’ of the elimination of competition on the work group server operating systems market (recitals 585, 589, 610, 622, 626, 631, 636, 653, 691, 692, 712, 725, 781, 992 and 1070 to the contested decision). Microsoft contends that that criterion is not sufficiently strict, since according to the case-law on the exercise of an intellectual property right the Commission must demonstrate that the refusal to license an intellectual property right to a third party is ‘likely to eliminate all competition’, or, in other words, that there is a ‘high probability’ that the conduct in question will have such a result.

561    The Court finds that Microsoft’s complaint is purely one of terminology and is wholly irrelevant. The expressions ‘risk of elimination of competition’ and ‘likely to eliminate competition’ are used without distinction by the Community judicature to reflect the same idea, namely that Article 82 EC does not apply only from the time when there is no more, or practically no more, competition on the market. If the Commission were required to wait until competitors were eliminated from the market, or until their elimination was sufficiently imminent, before being able to take action under Article 82 EC, that would clearly run counter to the objective of that provision, which is to maintain undistorted competition in the common market and, in particular, to safeguard the competition that still exists on the relevant market.

562    In this case, the Commission had all the more reason to apply Article 82 EC before the elimination of competition on the work group server operating systems market had become a reality because that market is characterised by significant network effects and because the elimination of competition would therefore be difficult to reverse (see recitals 515 to 522 and 533 to the contested decision).

563    Nor is it necessary to demonstrate that all competition on the market would be eliminated. What matters, for the purpose of establishing an infringement of Article 82 EC, is that the refusal at issue is liable to, or is likely to, eliminate all effective competition on the market. It must be made clear that the fact that the competitors of the dominant undertaking retain a marginal presence in certain niches on the market cannot suffice to substantiate the existence of such competition.

564    Last, it must be borne in mind that it is for the Commission to establish that the refusal to supply gives rise to a risk of the elimination of all effective competition. As already stated at paragraph 482 above, the Commission must base its assessment on accurate, reliable and coherent evidence which comprises all the relevant data that must be taken into consideration in order to assess a complex situation and which are capable of substantiating the conclusions drawn from them.

–       The assessment of the market data and the competitive situation

565    In the contested decision, the Commission analyses together the circumstance that interoperability is indispensable and the fact that the refusal is likely to eliminate competition (recitals 585 to 692 to the contested decision). Its analysis has four parts. In the first place, the Commission examines the evolution of the work group server operating systems market (recitals 590 to 636 to the contested decision). In the second place, it establishes that interoperability is a factor which plays a determining role in the use of Windows work group server operating systems (recitals 637 to 665 to the contested decision). In the third place, it states that there are no substitutes for disclosure by Microsoft of the interoperability information (recitals 666 to 687 to the contested decision). In the fourth place, it makes a number of observations about the CPLC (recitals 688 to 691 to the contested decision).

566    The arguments which Microsoft puts forward in support of the present complaint relate essentially to the first part of the Commission’s analysis. Microsoft claims, in effect, that the market data contradict the Commission’s argument that competition on the work group server operating systems market is at risk of being eliminated as a consequence of the refusal at issue.

567    In the first part of its analysis, the Commission began by examining the evolution of the market shares of Microsoft and its competitors on the second product market. It established, essentially, that Microsoft’s market share had experienced rapid and significant growth and that it continued to increase to the detriment of Novell in particular. The Commission then noted that the market share of UNIX vendors was weak. Last, it considered that Linux products had only a very small presence on the market, that they had made no headway on the market during the years immediately preceding the adoption of the contested decision and that certain forecasts concerning their future growth were not capable of calling in question its finding that effective competition would be eliminated on the market.

568    The Court considers that those different findings are confirmed by the evidence in the file and that they are not called in question by Microsoft’s arguments.

569    First, the file shows that initially Microsoft supplied only client PC operating systems and that it was a relatively late entrant to the server operating systems market (see, in particular, paragraph 47 of the response of 17 November 2000 to the first statement of objections). It was only in the early 1990s that Microsoft began to develop a server operating system – it marketed its first system, ‘Windows NT 3.5 Server’, in July 1992 – and it was only with ‘Windows NT 4.0’, released in July 1996, that it first encountered real commercial success (see, in particular, paragraph 50 of the response of 17 November 2000 to the first statement of objections and paragraphs 50 and 56 of the application).

570    It is apparent from the IDC data, as reproduced at recital 591 to the contested decision, that Microsoft’s market share, by units shipped, on the market for operating systems for servers costing under USD 25 000 grew from 25.4% (24.5% by turnover) in 1996 to 64.9% (61% by turnover) in 2002, a leap of almost 40% in just six years.

571    It also follows from the IDC data mentioned at recital 592 to the contested decision that Microsoft’s market share increased continuously following the launch of the Windows 2000 generation of operating systems. As the Commission rightly observes at a number of places in the contested decision (see, for example, recitals 578 to 584, 588 and 613 to the contested decision), it was specifically with the Windows 2000 range of operating systems that the problems of interoperability arose in a particularly acute fashion for Microsoft’s competitors.

572    Thus, for example, the ‘NDS for NT’ software, which had been developed by Novell by reverse engineering, made interoperability possible between Microsoft’s competitors’ work group server operating systems and the Windows domain architecture (in this instance Windows NT). NDS for NT could be installed on a Windows NT domain controller and enabled clients to use Novell’s NDS (Novell Directory Service) (later called eDirectory) to administer the different aspects of Windows NT domains. Because Microsoft failed to communicate certain information to Novell, however, NDS for NT does not work with the Windows 2000 Server operating system (see recital 301 to the contested decision).

573    Another example is AS/U, which AT&T had been able to develop in the 1990s by using certain Windows source code which Microsoft had agreed to disclose to it under a licence. AS/U enabled a server running UNIX to work as main domain controller in a Windows NT domain (see recital 211 to the contested decision). Likewise, Sun, on the basis of the AS/U source code licensed to it by AT&T, had developed a product comparable to AS/U, ‘PC NetLink’, which, when installed on a Solaris server, enabled that server to ‘provide transparent Windows NT file, print, directory, and security services to Windows 3.X/95/98/NT clients’ (and to do so ‘natively’, that is to say, without users having to install additional software on their client PCs) and to act as a primary domain controller (or backup domain controller) in a Windows NT domain (see recital 213 to the contested decision). In 2001 Microsoft and AT&T decided not to extend their licence agreement to certain new server operating system technologies. Thus, Microsoft did not supply AT&T with the source code relating to the systems which replaced Windows NT 4.0. Consequently, PC NetLink was no longer capable of working except with Windows NT client PCs – in particular, it did not work with Windows 2000 – and gradually lost its attraction.

574    In the same context, it is appropriate to mention the various changes which followed the migration from Windows NT technology to Windows 2000 technology and Active Directory (see paragraphs 167 to 171 above).

575    Second, it is apparent from the file that, alongside the evolution of Microsoft’s position as described above, Novell experienced a continuous decline on the work group server operating systems market and in just a few years became a secondary player. At the time when Microsoft entered the server operating systems market, the leading product for the supply of work group services was Novell’s NetWare (see paragraph 56 of the application), which had been present on that market since the mid-1980s.

576    Thus, the IDC data mentioned at recital 593 to the contested decision show that, when the ‘file/print sharing’ sub-category and servers costing under USD 25 000 are taken into account, NetWare’s market share fell from 33.3% in 2000 to 23.6% in 2002 by units shipped and from 31.5% in 2000 to 22.4% in 2002 by turnover.

577    Novell’s decline is confirmed both by the statements of market analysts and by Microsoft itself (see recital 596 to the contested decision).

578    Similarly, in the report containing the analysis of the results of its third survey, Mercer expressly states that numerous organisations have reduced their use of NetWare. Mercer observes, in particular, that ‘when asked about their usage of each of the server operating systems for work group server functions over the last five years, organisations that have reduced their usage of NetWare outnumber those that have increased their usage of NetWare by a nearly 7:1 ratio’ (page 25 and table 16 of the report).

579    Furthermore, as the Commission correctly observes at recitals 594 and 595 to the contested decision, certain results of the 2003 market enquiry and certain customer statements produced by Microsoft during the administrative procedure clearly show a tendency within organisations to replace NetWare by Windows 2000 Server. On the other hand, there are only very few examples of ‘migration’ from Windows to NetWare (see recitals 594 and 632 to the contested decision).

580    Third, the evidence in the file shows that Microsoft’s other competitors were able to maintain only a very marginal position on the work group server operating systems market.

581    Thus, first of all, the IDC data mentioned at recital 508 to the contested decision show that the market share of UNIX vendors (including Sun) represented, when the ‘file/print sharing’ subcategory and servers costing under USD 25 000 were taken into account, only 4.6% by units shipped and 7.4% by turnover. For the ‘network administration’ sub-category, the corresponding figures were 6.4% by units sold and 10.8% by turnover.

582    The results of the 2003 market enquiry and the customer statements produced by Microsoft show that UNIX systems are effectively used not to perform work group tasks but to run ‘mission-critical’ Web supply and firewall applications and also, to a lesser extent, to run internal email services (see recitals 509 to 511 to the contested decision).

583    Next, the IDC data, the results of the 2003 market enquiry and Microsoft’s customer statements show that, contrary to Microsoft’s assertions, Linux products also had only a marginal presence on the work group server operating systems market at the time of adoption of the contested decision.

584    Thus, the IDC data reproduced at recital 599 to the contested decision show that the combined market share of vendors of Linux products, by units shipped, fell, for the ‘file/print sharing’ subcategory and servers costing under USD 25 000, from 5.1% in 2000 to 4.8% in 2002. When measured by turnover, that combined market share remained at 3.9% over that period.

585    Admittedly, for the ‘network administration’ sub-category and servers costing under USD 25 000, the combined share of vendors of Linux products, by units shipped, rose, according to the IDC data mentioned in footnote 728 to the contested decision (see also recital 505 to the contested decision), from 10.1% in 2000 to 13.4% in 2002 (and from 8% to 10.8% over the same period, by turnover). However, that increase has to be qualified in light of the fact that, as the Commission observes at recital 488 to the contested decision and in the above footnote to the contested decision, that sub-category includes services which are not work group services within the meaning of the contested decision. IDC describes that sub-category as ‘includ[ing] the following networking applications: directory, security/authentication, network data/file transfer, communication, and system data/file transfer’ (recital 488 to the contested decision). Such a description is likely to lead the users questioned by IDC to include in that sub-category certain tasks which do not belong there (and do not belong in the relevant product market) and which are generally performed by Linux or UNIX systems. For example, that description might be interpreted as covering ‘network edge tasks’, such as firewall (which might be considered to relate to ‘security’) and routing (which might be considered to relate to ‘system data/file transfer’). As stated, in particular, at recitals 58, 346, 482, 600 and 601 to the contested decision, however, tasks of that type are generally performed by Linux on high-end servers. Accordingly, the IDC data relating to the ‘network administration’ sub-category overestimate Linux sales on the work group server operating systems market.

586    It is true that, at recital 487 to the contested decision, the Commission observes that the IDC data on the ‘file/print sharing’ sub-category are also less than perfect, notably in that, because high-end servers which perform ‘mission critical’ applications may be used to print certain documents (for example invoices), the users questioned may form the view that those servers perform tasks belonging to that sub-category when it is clear that they are not work group servers. However, the application of the EUR 25 000 (or USD 25 000) filter allows such inaccuracy to be reduced (see recital 489 to the contested decision, where the Commission observes that mainframes that print invoices will generally cost more than that amount). The IDC data are therefore more flawed with respect to the ‘network administration’ sub-category than with respect to the ‘file/print sharing’ sub-category.

587    The results of the 2003 market enquiry contain no flaws of the type referred to in the preceding paragraph. Those results confirm that Linux had only a marginal presence on the work group server operating systems market. Thus, in its request for information of 16 April 2003, the Commission requested the organisations concerned whether they used Linux servers in conjunction with Samba software to perform work group tasks (question 25). Of the 102 organisations which participated in that enquiry, only 19 used Linux servers for work group tasks, and in most cases did so to a very limited extent (recital 506 to the contested decision). Thus, out of a total of more than 1 200 000 client PCs covered by the 2003 market enquiry, fewer than 70 000 (less than 5.8%) were served by Linux/Samba servers for file and print tasks (recitals 506 and 599 to the contested decision).

588    Likewise, as the Commission submits in the defence (paragraph 140), the second Mercer survey reveals, for Linux products, a combined market share of 4.8% for file and print tasks and 5.2% for group and user administration tasks (the third Mercer survey reveals, for the same products, a market share of 5.4% for file and print services and 4.5% for group and user administration tasks).

589    In reality, the results of the 2003 market enquiry show that, like UNIX, Linux products are generally used to perform tasks other than work group tasks, namely, to provide Web and firewall services and to run ‘mission-critical’ applications (see recitals 600 and 601 to the contested decision, where the Commission comments on the responses to questions 5 and 6 of the request for information of 16 April 2003).

590    That finding is confirmed, moreover, by the customer statements submitted by Microsoft during the administrative procedure, as the Commission correctly observes at recital 602 to the contested decision.

591    Furthermore, the presence of vendors of Linux products on the work group operating systems market, apart from the fact it is by no means comparable to the market presence which Microsoft managed to acquire in just a few years, was achieved not at Microsoft’s expense but at the expense of Novell and UNIX vendors. As the Commission stated in the rejoinder (paragraph 104), among the entities questioned by Mercer whose use of Linux for work group server tasks had increased over the previous five years, 67% had decreased their use of NetWare or UNIX, while only 14% had decreased their use of Windows. As the Commission correctly states at recital 632 to the contested decision, moreover, the 2003 market enquiry revealed only two instances of migration from Windows to Linux for work group server tasks.

592    Microsoft’s assertions to the contrary in annex C.11 to the reply are scarcely credible, having regard particularly to the consistent increase in its market share on the relevant product market throughout the period covered by the abusive refusal in question.

593    The above factors confirm that Microsoft’s refusal has the consequence that its competitors’ products are confined to marginal positions or even made unprofitable. The fact that there may be marginal competition between operators on the market cannot therefore invalidate the Commission’s argument that all effective competition was at risk of being eliminated on that market.

594    In light of the factors referred to at paragraphs 583 to 593 above, the Court considers that the Commission was correct to find, at recital 603 to the contested decision, that Linux vendors did not represent a significant threat to Microsoft on the work group server operating systems market.

595    Microsoft also claims that the presence of Linux products on the work group server operating systems market will continue to increase in the future. It expands on that argument in annex A.19 to the application and in annex C.11 to the reply. The Commission provides a detailed response to that argument in annex B.10 to the defence and in annex D.11 to the rejoinder.

596    In support of that argument, Microsoft refers, first of all, to certain results of the third Mercer survey.

597    In that survey, Mercer asked the IT executives whose organisations already used Linux operating systems for work group tasks whether they planned to increase that use within the next five years. Table 19 in the Mercer report, in which the results of that survey are analysed, shows that of the 70 IT executives concerned by that question, 53 responded in the affirmative.

598    The Court finds that the Commission was correct to conclude, at recital 605 to the contested decision, that that factor was not conclusive. On the one hand, those 53 IT executives represented only approximately 17.9% of the 296 IT executives who participated in the third Mercer survey (226 of those executives stated that their organisation did not use Linux systems to supply work group services). On the other hand, the 53 IT executives in question did not quantify their intended increase in use of Linux systems to perform work group tasks, nor did they specify whether that increase would be at the expense of Windows.

599    Furthermore, table 18 in the same Mercer report shows that 58 IT executives considered that Linux would not even become ‘viable’ for the performance of work group tasks within the next five years.

600    It is true that the same table shows that 60% of the IT executives questioned stated that their organisation planned to adopt Linux systems within the next five years to supply work group services. However, as the Commission correctly observes at recital 606 to the contested decision, those executives were not invited to quantify their takeup of Linux nor to say whether it would be at the expense of Windows.

601    Next, Microsoft relies on certain projections by IDC which establish that Linux’s market share will double between 2003 and 2008.

602    The Court observes that the IDC data contain a number of flaws, as its sub-categories include tasks which do not belong to the work group server operating systems market covered by the contested decision. IDC’s growth projections must therefore be qualified.

603    Furthermore, as the Commission correctly observes at recital 609 to the contested decision, the limited growth that Linux is forecast to achieve on the market, according to those projections, would be at the expense, not of Windows, but of competing systems and, more particularly, of NetWare. The Court observes, in that context, that in April 2003 Novell announced that from 2005 its NetWare 7.0 operating system would be sold in two different versions, one based on the traditional NetWare platform and the other on the Linux operating system (see recital 95 to the contested decision).

604    Last, in annex A.19 to the application and annex C.11 to the reply, Microsoft refers to the opinion expressed by certain ‘industry observers’. It refers, more expressly, to certain passages in a report of 8 March 2004 by Merrill Lynch (annex 7 to annex C.11 to the reply) which contains the results of a survey carried out by Merril Lynch among 50 IT executives. The applicant observes that half of those executives proposed to increase their use of Linux systems in their organisation and that, of that half, 34% envisaged doing so in order to replace Windows NT for file and print tasks.

605    That argument is not convincing. All that it means is that 17% of the IT executives questioned intended to replace Windows NT by Linux systems for the tasks referred to in the preceding paragraph, whereas it says nothing about the extent to which Windows would be thus replaced. In reality, in light of the fact that at the time of the Merril Lynch survey Windows NT technology was already ‘outdated’ (see recital 583 to the contested decision), it is highly probable that the installed base of Windows NT servers was relatively small and, accordingly, that the ‘migration’ referred to above would be on only a small scale. It should also be borne in mind that non-Microsoft server operating systems could achieve a higher degree of interoperability with the Windows NT generation of systems than with subsequent generations of Windows produced by Microsoft. As the Commission emphasises in its assessment of the circumstance relating to the indispensability of the information at issue (see paragraph 366 above), the ‘migration’ referred to in the Merril Lynch report is likely to be a one-off phenomenon and cannot therefore affect the Commission’s findings in respect of the risk of the elimination of competition.

606    Continuing with the first part of its analysis (the part relating to the evolution of the work group server operating systems market), the Commission then established that Windows 2000, and in particular Active Directory, were ‘quickly gaining traction in the market’ (recitals 613 to 618 and 781 to the contested decision). The Commission further observed that, ‘[owing] to Microsoft’s disruption of interoperability-related disclosures, interoperability with … Windows 2000 features is significantly more difficult for non-Microsoft work group servers than used to be the case with the analogous technologies in Windows NT’, before concluding that ‘the uptake [of the new features of the Windows domain specific to Windows 2000] contributes to the lock-in of the customers that embrace them in a homogeneous Windows solution for work group networks’ (recital 613 to the contested decision).

607    The Court finds that a number of documents in the file substantiate the correctness of those findings.

608    Thus, in a bulletin published in November 2001, IDC stated that ‘[f]or the vast majority of users, the question is not if, but when, they will implement directory services to support Windows 2000 Server and future Windows server operating systems’ and that ‘for Windows 2000 users, the directory of choice is overwhelmingly going to be Active Directory’ (recital 614 to the contested decision).

609    Likewise, as the Commission notes at recital 616 to the contested decision, an Evans Data Corporation survey conducted in 2002 shows that, when asked about the directory services for which their applications were designed, 50.3% of the in-house developers concerned mentioned Active Directory.

610    Certain results of the 2003 market enquiry also confirm the impressive interest caused by Active Directory. Thus, in its request for information of 16 April 2003, the Commission asked the entities concerned whether they had already implemented (or decided to implement) Active Directory in the majority of the Windows domains in their computer network (question 15). Of the 102 entities covered by the survey, 61 answered that question in the affirmative.

611    The interest in Active Directory is also apparent from certain results of the second Mercer survey, as the Commission notes at recital 618 to the contested decision.

612    It was stated at paragraphs 571 to 574 above, moreover, that the interoperability that work group server operating systems can achieve with products of the Windows 2000 generation is much lower than they were able to achieve with systems of the previous generation.

613    Last, the Commission concluded the first part of its analysis by rejecting three categories of arguments that Microsoft had put forward during the administrative procedure to dispute the risk of elimination of competition identified by the Commission. Microsoft had referred to certain statements made by its competitors, relied on the fact that the computer networks within undertakings were heterogeneous and claimed that replacement solutions for Windows existed.

614    In its pleadings, Microsoft referred to the customer statements which it had produced during the administrative procedure and reiterated its argument that networks within undertakings are heterogeneous.

615    On that point, it is sufficient to observe that it has already been found at paragraphs 498 to 500 above that those statements confirmed that, so far as work group servers were concerned, those customers’ computer networks consisted primarily of Windows systems.

616    In its pleadings, Microsoft also relies on the fact that professional customers adopt their purchasing decisions in respect of server operating systems according to a set of criteria and that the question of interoperability with Windows client PC operating systems is not a determining factor in that regard. As already demonstrated at paragraph 426 above, that assertion is incorrect.

617    Furthermore, Microsoft’s argument that, six years after the alleged refusal to supply, there were still numerous competitors on the work group server operating systems market (see paragraph 442 above) must be rejected for the reasons set out at paragraph 429 above.

618    It follows from all of the foregoing that the Commission did not make a manifest error of assessment when it concluded that the evolution of the market revealed a risk that competition would be eliminated on the work group server operating systems market.

619    The Commission had even more reason to conclude that there was a risk that competition would be eliminated on that market because the market has certain features which are likely to discourage organisations which have already taken up Windows for their work group servers from migrating to competing operating systems in the future. Thus, as the Commission correctly states at recital 523 to the contested decision, it follows from certain results of the third Mercer survey that the fact of having an ‘established record as proven technology’ is seen as a significant factor by the large majority of IT executives questioned. At the time of the adoption of the contested decision, Microsoft, at a conservative estimate, held a market share of at least 60% on the work group server operating systems market (recital 499 to the contested decision). Likewise, certain results of that survey also establish that the factor ‘available skill-sets and cost/availability of support (in-house or external)’ is important for the majority of the IT executives questioned. As the Commission quite correctly states at recital 520 to the contested decision, ‘[that] means that the easier it is to find technicians skilled in using a given work group server operating system, the more customers are inclined to purchase that work group server operating system’ and, ‘[i]n turn, however, the more popular a work group server operating system is among customers, the easier it is for technicians (and the more willing are technicians) to acquire skills related to that product’. Microsoft’s very high market share on the work group server operating system market has the consequence that a very large number of technicians possess skills which are specific to Windows operating systems.

620    The Court therefore concludes that the circumstance that the refusal at issue entailed the risk of elimination of competition is present in this case.

 (iv) The new product

 Arguments of the parties

621    Microsoft cites paragraphs 48 and 49 of IMS Health, paragraph 107 above, and maintains that it has not been established that its refusal prevented the appearance of a new product for which there is unsatisfied consumer demand.

622    The applicant already markets server operating systems which implement the communication protocols in question and its competitors market their own server operating systems, which use communication protocols which they have selected to provide work group services.

623    Microsoft refers to recital 669 to the contested decision and claims that the contested decision seeks to allow its competitors to make their products behave in exactly the same way as Windows server operating systems and that it is the Commission’s intention that the applicant’s communication protocols should be used by its competitors to create server operating systems that compete directly with the applicant’s products by mimicking their functionality.

624    Microsoft also claims that the contested decision fails to identify any new product that its competitors would develop using the applicant’s communication protocols and to demonstrate that there is any demand for such a product. The Commission merely claims that Microsoft’s competitors ‘could use the disclosures to [develop] the advanced features of their own products’ (recital 695 to the contested decision).

625    Microsoft observes that neither the letter of 15 September 1998 nor Sun’s complaint of 10 December 1998 gives the slightest indication that Sun intended to use ‘Microsoft’s technology’ to create anything other than a work group server operating system.

626    Microsoft disputes the Commission’s assertion that in order to be described as new, it is sufficient for a product to contain substantial elements contributed by the licensee’s own efforts. It maintains that the ‘[a]ddition of a feature taken from a competitor’s products can hardly be viewed as the creation of a new product’.

627    Microsoft also challenges the Commission’s claim that the applicant’s refusal is a ‘refusal to allow follow-on innovation’ (see paragraph 632 below). It disputes the accuracy of the statements set out at recital 696 to the contested decision and submits that Novell never used AS/U and that sales of work group server operating systems supplied by Sun and ‘several other vendors’ who had been licensed to use AS/U were always modest. In reality, the compulsory licensing ordered in the contested decision is likely to reduce innovation, because the applicant will have less incentive to develop a specific technology if it is required to make that technology available to its competitors.

628    Last, Microsoft denies that the refusal at issue harms consumers. The Mercer report on which the Commission relies (see paragraph 635 below) relates to products currently on the market and is therefore irrelevant to the question whether the refusal to supply prevented the emergence of new products for which there is unmet consumer demand. Much more significantly, none of the Mercer reports shows that Microsoft ‘lags behind’ its competitors. More specifically, the Commission fails to mention that Windows server operating systems scored higher than NetWare and Linux systems in 10 out of 13 categories and higher than UNIX systems in 9 out of 13 categories; and throughout the administrative procedure no customer claimed that it had been forced to use Windows server operating systems as a result of the applicant’s alleged refusal to disclose interoperability information to its competitors.

629    CompTIA submits that the Commission has not shown in the contested decision that Microsoft’s refusal had prevented the appearance of a new product.

630    The Commission rejects Microsoft’s assertion that its refusal did not prevent the appearance of a new product for which there is unmet consumer demand.

631    The Commission submits that, in the first place, it follows from paragraph 49 of IMS Health, paragraph 107 above, that a ‘new product’ is a product which does not limit itself essentially to duplicating the products already offered on the market by the owner of the copyright. It is sufficient, therefore, that the product concerned contains substantial elements that result from the licensee’s own efforts. As Microsoft is required to disclose only the specifications and not the implementation of its interfaces, its competitors will not limit themselves to duplicating its products and, indeed, will not be able to do so. Competitors will use the interoperability information to constantly market improved products and ‘offer … added value over their own and Microsoft’s previous offerings’, instead of being eliminated from the market as a consequence of Microsoft’s refusal to disclose that information (recital 695 to the contested decision). Nor will any feature of Microsoft’s products, and in particular any portion of its software code, be integrated in other work group server operating systems.

632    In the second place, the Commission did not confine itself in the contested decision to a mere analysis of the ‘new product’ criterion as defined in IMS Health, paragraph 107 above. It examined that criterion by reference to the prohibition laid down in Article 82(b) EC of abuses of a dominant position that limit technical development to the prejudice of consumers. The Commission thus took particular care to ascertain that Microsoft’s refusal was a ‘refusal to allow follow-on innovation’, that is to say, the development of new products, and not a mere refusal to allow copying.

633    In support of those assertions, the Commission claims, first, that it examined the conduct which Microsoft’s competitors had adopted in the past when Microsoft supplied interoperability information to them or inadvertently allowed them to employ ‘workarounds’ (recital 696 to the contested decision). In response to Microsoft’s criticisms of that point, the Commission explains that, as Novell was not a ‘UNIX vendor’, it was not interested in ‘UNIX-based implementations’ such as AS/U. However, Sun and other UNIX vendors offered innovative products which could have met demand from those consumers if Microsoft had not refused to supply interoperability information.

634    Second, the Commission observes that, at recital 698 to the contested decision, it noted that numerous different implementations of the same specification were possible.

635    Third, the Commission cites recital 699 to the contested decision and asserts that it follows from the results of the third Mercer survey that, in spite of the fact that ‘Microsoft lags behind its competitors’ on several features considered important by server operating systems consumers, those consumers content themselves with Microsoft’s products ‘because of the interoperability barrier to adopting alternatives’. Microsoft scores higher than its competitors only because interoperability with Windows is a factor taken into account and because less important factors are given the same weight as important factors. In response to Microsoft’s argument that no customer has complained about having to adopt a Windows operating system because of its refusal to supply, the Commission refers to recitals 702 to 708 to the contested decision.

636    Fourth, the Commission observes that Microsoft’s competitors undertake research and development, but that they need access to Microsoft’s protocols to enable organisations using Windows work group servers and PCs to take advantage of their innovation without being penalised by the lack of interoperability. It states that ‘[a]s such, the refusal does not directly impair competitors’ ability to innovate, but rather the consumer’s ability to benefit from such innovation, as well as the competitors’ ability to earn a return on their innovation – and hence in the longer term their incentives to innovate’.

637    Last, the Commission asserts that Microsoft’s arguments concerning its own incentives to innovate are not relevant to the assessment of the consequences which the abusive practice has for its competitors’ incentives to innovate.

638    In the third place, the Commission claims that Microsoft’s argument that the ‘new product’ criterion is not satisfied in this case is based on a misinterpretation of the case-law.

639    First, that criterion does not require a concrete demonstration that the licensee’s product will attract customers who do not buy the products offered by the existing dominant supplier. In IMS Health, paragraph 107 above, the Court of Justice focused on product differentiation which could affect consumer choices or, in other words, whether there was ‘potential demand’ for the new product. The ‘new product’ criterion emphatically does not apply solely to restrictions on production. In the rejoinder, the Commission asserts that the proposed new products will clearly respond to potential demand and that they will build upon operating systems currently marketed by Microsoft’s competitors, which have features that consumers value, often more highly than the corresponding features of Microsoft’s work group server operating systems.

640    Second, Microsoft cannot rely on the fact that the contested decision focuses on its competitors’ ability to adapt their own ‘existing products’. The relevant question is whether those competitors will essentially confine themselves to reproducing the existing products developed by the holder of the intellectual property right. Microsoft’s competitors’ products will implement the same set of protocols as Windows work group server operating systems do but will differ widely in terms of performance, security and functionality.

641    Third, the Commission asserts that the case-law does not preclude the possibility that the licensee’s future products will compete with the products of the owner of the intellectual property right, as may be seen from the facts of Magill and IMS Health, paragraph 107 above.

642    SIIA claims that the refusal at issue prevents the emergence of ‘new and innovative non-Microsoft work group server operating systems meeting the interoperability needs of customers’. If they have the interoperability information, Microsoft’s competitors will be able to offer not only ‘enhanced functional capabilities’ but also, and most importantly, interoperable products. SIIA also observes that there would be no competitive advantage for Microsoft’s competitors in merely ‘duplicating Microsoft’s products’ and that, moreover, they would be unable to do so if they had access to the information covered by the contested decision.

 Findings of the Court

643    It must be emphasised that the fact that the applicant’s conduct prevents the appearance of a new product on the market falls to be considered under Article 82(b) EC, which prohibits abusive practices which consist in ‘limiting production, markets or technical developments to the … prejudice of consumers’.

644    Thus, at paragraph 54 of Magill, paragraph 107 above, the Court of Justice held that the refusal by the broadcasting companies concerned had to be characterised as abusive within the meaning of that provision because it prevented the appearance of a new product which the broadcasting companies did not offer and for which there was a potential consumer demand.

645    It is apparent from the decision at issue in that case that the Commission had, more specifically, considered that by their refusal, the broadcasting companies limited production or markets to the prejudice of consumers (see the first paragraph of recital 23 to Commission Decision 89/205/EEC of 21 December 1988 relating to a proceedings under Article [82 EC] (IV/31.851, Magill TV Guide/ITP, BBC and RTE) (OJ 1989 L 78, p. 43). The Commission had found that that refusal prevented publishers from producing and publishing a weekly television guide for consumers in Ireland and Northern Ireland, a type of guide not then available on that geographic market. Although each of the broadcasting companies concerned published a weekly television guide, each guide was devoted to that particular broadcaster’s own programmes. In finding an abuse of a dominant position by those broadcasting companies, the Commission had emphasised the harm which the absence of a general weekly television guide on the market in Ireland and in Northern Ireland caused to consumers, who, if they wished to know what programmes were being offered in the coming week, had no alternative to buying the weekly guides of each channel and themselves extracting the relevant information in order to make comparisons.

646    In IMS Health, paragraph 107 above, the Court of Justice, when assessing the circumstance relating to the appearance of a new product, also placed that circumstance in the context of the damage to the interests of consumers. Thus, at paragraph 48 of that judgment, the Court emphasised, with reference to the Opinion of Advocate General Tizzano in that case ([2004] ECR I‑5042), that that circumstance related to the consideration that, in the balancing of the interest in protection of the intellectual property right and the economic freedom of its owner against the interest in protection of free competition, the latter can prevail only where refusal to grant a licence prevents the development of the secondary market, to the detriment of consumers.

647    The circumstance relating to the appearance of a new product, as envisaged in Magill and IMS Health, paragraph 107 above, cannot be the only parameter which determines whether a refusal to license an intellectual property right is capable of causing prejudice to consumers within the meaning of Article 82(b) EC. As that provision states, such prejudice may arise where there is a limitation not only of production or markets, but also of technical development.

648    It was on that last hypothesis that the Commission based its finding in the contested decision. Thus, the Commission considered that Microsoft’s refusal to supply the relevant information limited technical development to the prejudice of consumers within the meaning of Article 82(b) EC (recitals 693 to 701 and 782 to the contested decision) and it rejected Microsoft’s assertion that it had not been demonstrated that its refusal caused prejudice to consumers (recitals 702 to 708 to the contested decision).

649    The Court finds that the Commission’s findings at the recitals referred to in the preceding paragraph are not manifestly incorrect.

650    Thus, in the first place, the Commission was correct to observe, at recital 694 to the contested decision, that ‘[owing] to the lack of interoperability that competing work group server operating system products can achieve with the Windows domain architecture, an increasing number of consumers are locked into a homogeneous Windows solution at the level of work group server operating systems’.

651    It must be borne in mind that it has already been stated at paragraphs 371 to 422 above that Microsoft’s refusal prevented its competitors from developing work group server operating systems capable of attaining a sufficient degree of interoperability with the Windows domain architecture, with the consequence that consumers’ purchasing decisions in respect of work group server operating systems were channelled towards Microsoft’s products. The Court has also already observed, at paragraphs 606 to 611 above, that it was apparent from a number of documents in the file that the technologies of the Windows 2000 range, in particular Active Directory, were increasingly being taken up by organisations. As interoperability problems arise more acutely with work group server operating systems in that range of products than with those of the preceding generation (see paragraphs 571 to 574 above and recitals 578 to 584, 588 and 613 to the contested decision), the increasing uptake of those systems merely reinforces the ‘lock-in’ effect referred to in the preceding paragraph.

652    The limitation thus placed on consumer choice is all the more damaging to consumers because, as already observed at paragraphs 407 to 412 above, they consider that non-Microsoft work group server operating systems are better than Windows work group server operating systems with respect to a series of features to which they attach great importance, such as ‘reliability/availability of the … system’ and ‘security included with the server operating system’.

653    In the second place, the Commission was correct to consider that the artificial advantage in terms of interoperability that Microsoft retained by its refusal discouraged its competitors from developing and marketing work group server operating systems with innovative features, to the prejudice, notably, of consumers (see, to that effect, recital 694 to the contested decision). That refusal has the consequence that those competitors are placed at a disadvantage by comparison with Microsoft so far as the merits of their products are concerned, particularly with regard to parameters such as security, reliability, ease of use or operating performance speed (recital 699 to the contested decision).

654    The Commission’s finding that ‘[i]f Microsoft’s competitors had access to the interoperability information that Microsoft refuses to supply, they could use the disclosures to make the advanced features of their own products available in the framework of the web of interoperability relationships that underpin the Windows domain architecture’ (recital 695 to the contested decision) is corroborated by the conduct which those competitors had adopted in the past, when they had access to certain information concerning Microsoft’s products. The two examples which the Commission gives at recital 696 to the contested decision, ‘PC NetLink’ and ‘NDS for NT’, speak volumes in that regard. PC NetLink is software developed by Sun on the basis of AS/U, which had been developed by AT&T using source code which Microsoft had licensed to it in the 1990s (recitals 211 to 213 to the contested decision). A document submitted by Microsoft during the administrative procedure shows that the innovative features and added value that PC NetLink brought to Windows work group networks was used as a selling point for that product (footnote 840 to the contested decision). Likewise, in its marketing material, Novell highlighted the new features which NDS for NT – software which it had developed using reverse engineering – brought to the Windows domain architecture (in this instance Windows NT) (footnote 841 to the contested decision).

655    The Commission was careful to emphasise, in that context, that there was ‘ample scope for differentiation and innovation beyond the design of interface specifications’ (recital 698 to the contested decision). In other words, the same specification can be implemented in numerous different and innovative ways by software designers.

656    Thus, the contested decision rests on the concept that, once the obstacle represented for Microsoft’s competitors by the insufficient degree of interoperability with the Windows domain architecture has been removed, those competitors will be able to offer work group server operating systems which, far from merely reproducing the Windows systems already on the market, will be distinguished from those systems with respect to parameters which consumers consider important (see, to that effect, recital 699 to the contested decision).

657    It must be borne in mind, in that regard, that Microsoft’s competitors would not be able to clone or reproduce its products solely by having access to the interoperability information covered by the contested decision. Apart from the fact that Microsoft itself acknowledges in its pleadings that the remedy prescribed by Article 5 of the contested decision would not allow such a result to be achieved (see paragraph 241 above), it is appropriate to repeat that the information at issue does not extend to implementation details or to other features of Microsoft’s source code (see paragraphs 194 to 206 above). The Court also notes that the protocols whose specifications Microsoft is required to disclose in application of the contested decision represent only a minimum part of the entire set of protocols implemented in Windows work group server operating systems.

658    Nor would Microsoft’s competitors have any interest in merely reproducing Windows work group server operating systems. Once they are able to use the information communicated to them to develop systems that are sufficiently interoperable with the Windows domain architecture, they will have no other choice, if they wish to take advantage of a competitive advantage over Microsoft and maintain a profitable presence on the market, than to differentiate their products from Microsoft’s products with respect to certain parameters and certain features. It must be borne in mind that, as the Commission explains at recitals 719 to 721 to the contested decision, the implementation of specifications is a difficult task which requires significant investment in money and time.

659    Last, Microsoft’s argument that it will have less incentive to develop a given technology if it is required to make that technology available to its competitors (see paragraph 627 above) is of no relevance to the examination of the circumstance relating to the new product, where the issue to be decided is the impact of the refusal to supply on the incentive for Microsoft’s competitors to innovate and not on Microsoft’s incentives to innovate. That is an issue which will be decided when the Court examines the circumstance relating to the absence of objective justification.

660    In the third place, the Commission is also correct to reject as unfounded Microsoft’s assertion during the administrative procedure that it was not demonstrated that its refusal caused prejudice to consumers (recitals 702 to 708 to the contested decision).

661    First of all, as has already been observed at paragraphs 407 to 412 above, the results of the third Mercer survey show that, contrary to Microsoft’s contention, consumers consider non-Microsoft work group server operating systems to be better than Windows work group server operating systems on a number of features to which they attach great importance.

662    Next, Microsoft cannot rely on the fact that consumers never claimed at any time during the administrative procedure that they had been forced to adopt a Windows work group server operating system as a consequence of its refusal to disclose interoperability information to its competitors. In that connection, it is sufficient to point out that Microsoft does not dispute the Commission’s findings at recitals 705 and 706 to the contested decision. Thus, at recital 705 to the contested decision, the Commission observes that it is developers of complementary software required to interoperate with Microsoft’s systems who ‘depend on the interface information’ and that ‘[c]ustomers will not always exactly know what is disclosed by Microsoft to other work group operating system vendors and what is not’. At recital 706 to the contested decision, the Commission states ‘[w]hen confronted with a “choice” between putting up with interoperability problems that render their business processes cumbersome, inefficient and costly, and embracing a homogeneous Windows solution for their work group network, customers will tend to opt for the latter proposition’ and that ‘[o]nce they have standardised on Windows, they are unlikely to report interoperability problems between their client PCs and the work group servers’.

663    Furthermore, Microsoft’s own statements concerning the disclosures made under the United States settlement show that those disclosures had the consequence of offering greater choice to consumers (see recital 703 to the contested decision).

664    Last, it must be borne in mind that it is settled case-law that Article 82 EC covers not only practices which may prejudice consumers directly but also those which indirectly prejudice them by impairing an effective competitive structure (Case 85/76 Hoffmann‑La Roche v Commission [1979] ECR 461, paragraph 125, and Irish Sugar v Commission, paragraph 229 above, paragraph 232). In this case, Microsoft impaired the effective competitive structure on the work group server operating systems market by acquiring a significant market share on that market.

665    The Court concludes from all of the foregoing considerations that the Commission’s finding to the effect that Microsoft’s refusal limits technical development to the prejudice of consumers within the meaning of Article 82(b) EC is not manifestly incorrect. The Court therefore finds that the circumstance relating to the appearance of a new product is present in this case.

 (v) The absence of objective justification

 Arguments of the parties

666    In the first place, Microsoft claims that the refusal to supply the information was objectively justified by the intellectual property rights which it holds over the ‘technology’ concerned. It has made significant investment in designing its communication protocols and the commercial success which its products have achieved represents the just reward. It is generally accepted, moreover, that an undertaking’s refusal to communicate a specific technology to its competitors may be justified by the fact that it does not wish them to use that technology to compete with it.

667    In the reply, Microsoft relies on the fact that the technology which it is required to disclose to its competitors is secret, that it is of great value for licensees and that it contains significant innovation.

668    In its answer to one of the written questions put by the Court, the applicant adds that it had an objective justification for not licensing the technology ‘given the prejudice to incentives to innovate that would have resulted if Sun (or others) had used that technology to build a “functional equivalent” that would compete against Microsoft’s products on the same market’.

669    In the second place, Microsoft claims that the Commission rejected its arguments on the basis of a new test, which is legally defective and marks a radical departure from the tests defined in the case-law. At recital 783 to the contested decision, the Commission considered that a refusal to communicate information protected by intellectual property rights constituted an infringement of Article 82 EC if, all things considered, the positive impact on the level of innovation in the whole industry outweighed the negative impact of the dominant undertaking’s incentives to innovate.

670    Microsoft contends that the application of such a ‘balancing test’ will have the consequence that dominant undertakings will have less incentive to invest in research and development, because they will have to share the fruits of their efforts with their competitors. Intellectual property rights give the holder an incentive to continue to innovate and they also encourage competing undertakings to undertake their own innovative activities in order to avoid being ‘left behind’. Nor does the Commission make any attempt to ‘quantify’ the negative impact that the compulsory licensing required by the contested decision will have on the applicant’s competitors, who will wait to see what technology they can obtain under a licence rather than take the trouble to create their own technology.

671    Microsoft also criticises the vagueness and the unforeseeable consequences of that test; it observes, in particular, that the Commission provides no guidance which would enable undertakings in a dominant position to assess whether ‘preserving [their] incentives to innovate can justify a decision to retain [their] intellectual property for [their] own use’. More generally, the contested decision gives no indication of the way in which that test was applied in the present case or of how it should be applied in the future.

672    In the third place, Microsoft disputes the relevance of the Commission’s references to the United States settlement and the settlement with Sun (see paragraph 687 below).

673    Under the United States settlement, the applicant is required to license communication protocols implemented in Windows client PC operating systems for the sole purpose of being implemented in server software. Under the contested decision, on the other hand, it is required to license its ‘server/server’ communication protocols so that they can be implemented in directly competing server operating systems. The applicant’s obligations under the United States settlement are limited to a five-year period, moreover, and an undertaking has a greater incentive to continue to develop technology when, after a fixed period, it will again have exclusive use of the improvements to that technology.

674    The settlement with Sun provides for a reciprocal commitment to share technology and intellectual property rights on negotiated terms, for a period of six years only. Under the contested decision, on the other hand, the applicant cannot choose its licensees and will be granted no licence in return; royalties and other licensing terms will be subjected to regulation by the Commission; and the applicant’s licensing obligations ‘extend indefinitely into the future’.

675    CompTIA emphasises, first of all, the importance of innovation for competition in the IT and communications industry and the need to have a ‘robust system of [intellectual property rights] protection’. It submits, in particular, that those intellectual property rights encourage companies to improve existing products and to bring new products to the market.

676    Next, CompTIA, with reference to recital 783 to the contested decision, claims that the Commission applied a new balancing test in this case and submits that that test is inconsistent with the case-law.

677    The Commission, in the first place, asserts that it properly took into consideration the justification put forward by Microsoft.

678    First of all, Microsoft acknowledged in the application that it had relied on a single justification, namely the fact that it held intellectual property rights in the ‘technology’ concerned. Such justification cannot be accepted, particularly since in Magill, paragraph 107 above, where there was no doubt whatsoever that the effect of the contested decision for the companies concerned was the compulsory licensing of copyright, the Court of Justice held that the refusal was not objectively justified. The Commission is supported on that point by SIIA.

679    Next, the Commission explains that it took Microsoft’s argument to mean that the facts of the case, and in particular ‘the likely impact [which] an order to supply [would have] on [its] incentives to innovate’, were so exceptional that the Commission could not apply the existing precedents.

680    It was for Microsoft to prove that its abusive conduct was objectively justified. More particularly, the applicant was at the very least required to show that the obligation imposed on it to disclose the interoperability information would have a negative impact on its incentives to innovate and also that there was a risk that that negative impact would outweigh ‘the set of factors identified by the Commission which would otherwise make the behaviour abusive’. However, the only arguments which Microsoft put forward were purely theoretical and wholly unsubstantiated.

681    The Commission also contends that Microsoft cannot justify its refusal by the fact that the technology concerned is secret and valuable and that it contains significant innovations. Furthermore, that justification was not presented in the application.

682    In the second place, the Commission denies having applied a new evaluation test in this case.

683    First, the Commission rejects Microsoft’s assertion that an undertaking is justified in refusing to supply a given technology to its competitors where it wishes to prevent them from using that technology to compete with it. That argument might be interpreted as meaning that even if the first three criteria established by the Court of Justice in Magill and IMS Health, paragraph 107 above, are satisfied, a refusal to license is lawful if competitors intend to use the licence to compete with the dominant undertaking. That argument is manifestly incorrect. Again, that assertion might be interpreted as meaning that the principles laid down in Magill, paragraph 107 above, do not apply where the intellectual property right concerned covers technology. Apart from the fact that Microsoft fails to explain what it means by ‘technology’ in this context, it would be extremely difficult to draw a distinction between ‘technological’ intellectual property rights and ‘non-technological’ intellectual property rights. Nor is it certain that the interoperability information at issue constitutes such technology, in particular if it represents what is a purely arbitrary convention without any innovative character.

684    Second, the Commission disputes Microsoft’s assertion that because of the contested decision its competitors will no longer have any incentive to create their own technology. Microsoft fails to address the finding at recital 697 to the contested decision that, in view of Microsoft’s quasi-monopoly on the client PC operating systems market, its competitors are not in a position to develop viable alternatives to its communication protocols.

685    Third, the Commission observes that Microsoft merely refers to its incentives to innovate in protocol design and ignores other aspects of its products. The Commission refers to recital 724 to the contested decision and submits that such an approach is incorrect.

686    Fourth, the Commission contends that Microsoft glosses over the fact that the information at issue is information necessary for interoperability within the meaning of Directive 91/250. It is clear from Article 6 of that directive that the Community legislature considers that the disclosure of interoperability information is beneficial for innovation.

687    In the third place, the Commission refers to certain statements made by Microsoft during the administrative procedure and after the adoption of the contested decision. Thus, at the administrative hearing, Microsoft stated, in response to a question from the Commission’s services, that it had not noticed that the United States settlement had had any negative impact on its incentives to innovate. Likewise, at a joint press conference with Sun following the settlement concluded with that undertaking, Microsoft stated that both companies would continue to compete and innovate and that ‘the impact of the settlement [would] not be less innovation, but more innovation’. The Commission contends that the argument which Microsoft bases on the fact that the United States settlement provides for reciprocal commitments is irrelevant and notes that when Sun concluded that settlement it already had a policy of disclosing the relevant protocols to the entire industry.

 Findings of the Court

688    The Court notes, as a preliminary point, that although the burden of proof of the existence of the circumstances that constitute an infringement of Article 82 EC is borne by the Commission, it is for the dominant undertaking concerned, and not for the Commission, before the end of the administrative procedure, to raise any plea of objective justification and to support it with arguments and evidence. It then falls to the Commission, where it proposes to make a finding of an abuse of a dominant position, to show that the arguments and evidence relied on by the undertaking cannot prevail and, accordingly, that the justification put forward cannot be accepted.

689    In the present case, as the Commission found at recital 709 to the contested decision and as Microsoft expressly confirmed in the application, Microsoft relied as justification for its conduct solely on the fact that the technology concerned was covered by intellectual property rights. It made clear that if it were required to grant third parties access to that technology, that ‘would … eliminate future incentives to invest in the creation of more intellectual property’ (recital 709 to the contested decision). In the reply, the applicant also relied on that fact that the technology was secret and valuable and that it contained important innovations.

690    The Court considers that, even on the assumption that it is correct, the fact that the communication protocols covered by the contested decision, or the specifications for those protocols, are covered by intellectual property rights cannot constitute objective justification within the meaning of Magill and IMS Health, paragraph 107 above. Microsoft’s argument is inconsistent with the raison d’être of the exception which that case-law thus recognises in favour of free competition, since if the mere fact of holding intellectual property rights could in itself constitute objective justification for the refusal to grant a licence, the exception established by the case-law could never apply. In other words, a refusal to license an intellectual property right could never be considered to constitute an infringement of Article 82 EC even though in Magill and IMS Health, paragraph 107 above, the Court of Justice specifically stated the contrary.

691    It must be borne in mind that, as stated at paragraphs 321, 323, 327 and 330 above, the Community judicature considers that the fact that the holder of an intellectual property right can exploit that right solely for his own benefit constitutes the very substance of his exclusive right. Accordingly, a simple refusal, even on the part of an undertaking in a dominant position, to grant a licence to a third party cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC. It is only when it is accompanied by exceptional circumstances such as those hitherto envisaged in the case-law that such a refusal can be characterised as abusive and that, accordingly, it is permissible, in the public interest in maintaining effective competition on the market, to encroach upon the exclusive right of the holder of the intellectual property right by requiring him to grant licences to third parties seeking to enter or remain on that market. It must be borne in mind that it has been established above that such exceptional circumstances were present in this case.

692    The argument which Microsoft puts forward in the reply, namely that the technology concerned is secret and of great value to the licensees and contains important innovations, cannot succeed either.

693    First, the fact that the technology concerned is secret is the consequence of a unilateral business decision on Microsoft’s part. Furthermore, Microsoft cannot rely on the argument that the interoperability information is secret as a ground for not being required to disclose it unless the exceptional circumstances identified by the Court of Justice in Magill and IMS Health, paragraph 107 above, are present, and at the same time justify its refusal by what it alleges to be the secret nature of the information. Last, there is no reason why secret technology should enjoy a higher level of protection than, for example, technology which has necessarily been disclosed to the public by its inventor in a patent-application procedure.

694    Second, from the moment at which it is established that – as in this case – the interoperability information is indispensable, that information is necessarily of great value to the competitors who wish to have access to it.

695    Third, it is inherent in the fact that the undertaking concerned holds an intellectual property right that the subject-matter of that right is innovative or original. There can be no patent without an invention and no copyright without an original work.

696    The Court further observes that in the contested decision the Commission did not simply reject Microsoft’s assertion that the fact that the technology concerned was covered by intellectual property rights justified its refusal to disclose the relevant information. The Commission also examined the applicant’s argument that if it were required to give third parties access to that technology there would be a negative impact on its incentives to innovate (recitals 709 and 712 to the contested decision).

697    The Court finds that, as the Commission correctly submits, Microsoft, which bore the initial burden of proof (see paragraph 688 above), did not sufficiently establish that if it were required to disclose the interoperability information that would have a significant negative impact on its incentives to innovate.

698    Microsoft merely put forward vague, general and theoretical arguments on that point. Thus, as the Commission observes at recital 709 to the contested decision, in its response of 17 October 2003 to the third statement of objections Microsoft merely stated that ‘[d]isclosure would … eliminate future incentives to invest in the creation of more intellectual property’, without specifying the technologies or products to which it thus referred.

699    In certain passages in the response referred to in the preceding paragraph, Microsoft envisages a negative impact on its incentives to innovate by reference to its operating systems in general, namely both those for client PCs and those for servers.

700    In that regard, it is sufficient to note that, at recitals 713 to 729 to the contested decision, the Commission quite correctly refuted Microsoft’s arguments relating to the fear that its products would be cloned. It must be borne in mind, in particular, that the remedy prescribed in Article 5 of the contested decision does not, and is not designed to, allows Microsoft’s competitors to copy its products (see paragraphs 198 to 206, 240 to 242 and 656 to 658 above).

701    It follows that it has not been demonstrated that the disclosure of the information to which that remedy relates will significantly reduce – still less eliminate – Microsoft’s incentives to innovate.

702    In that context, the Court observes that, as the Commission correctly finds at recitals 730 to 734 to the contested decision, it is normal practice for operators in the industry to disclose to third parties the information which will facilitate interoperability with their products and Microsoft itself had followed that practice until it was sufficiently established on the work group server operating systems market. Such disclosure allows the operators concerned to make their own products more attractive and therefore more valuable. In fact, none of the parties has claimed in the present case that such disclosure had had any negative impact on those operators’ incentives to innovate.

703    The Court further considers that if the disclosures made under the United States settlement and the MCPP as regards server-to-client protocols had no negative impact on Microsoft’s incentives to innovate (recital 728 to the contested decision), there is no obvious reason to believe that the consequences should be any different in the case of disclosure relating to server/server protocols.

704    Last, the Court finds that Microsoft’s assertion that in the contested decision the Commission applied a new evaluation test when rejecting the objective justification which Microsoft had submitted is based on a misreading of that decision.

705    That assertion is based on a single sentence in recital 783 to the contested decision, which is in a part of that decision containing the findings of the Commission’s analysis, at recitals 560 to 778, of the refusal at issue.

706    That sentence reads as follows:

‘[A] detailed examination of the scope of the disclosure at stake leads to the conclusion that, on balance, the possible negative impact of an order to supply on Microsoft’s incentives to innovate is outweighed by its positive impact on the level of innovation of the whole industry (including Microsoft)’.

707    However, that sentence must be read in conjunction with the one coming immediately afterwards in the same recital, which states that ‘… the need to protect Microsoft’s incentives to innovate cannot constitute an objective justification that would offset the exceptional circumstances identified’.

708    It must also be compared with recital 712 to the contested decision, where the Commission sets out the following considerations:

‘It has been established above … that Microsoft’s refusal to supply [creates a risk of elimination of] competition in the relevant market for work group server operating systems, that this is due to the fact that the refused input is indispensable to carry on business in that market and that Microsoft’s refusal has a negative impact on technical development to the prejudice of consumers. In view of these exceptional circumstances, Microsoft’s refusal cannot be objectively justified merely by the fact that it constitutes a refusal to license intellectual property. It is therefore necessary to assess whether Microsoft’s arguments regarding its incentives to innovate outweigh these exceptional circumstances.’

709    In other words, in accordance with the principles laid down in the case-law (see paragraphs 331 to 333 above), the Commission, after establishing that the exceptional circumstances identified by the Court of Justice in Magill and IMS Health, paragraph 107 above, were present in this case, then proceeded to consider whether the justification put forward by Microsoft, on the basis of the alleged impact on its incentives to innovate, might prevail over those exceptional circumstances, including the circumstance that the refusal at issue limited technical development to the prejudice of consumers within the meaning of Article 82(b) EC.

710    The Commission came to a negative conclusion but not by balancing the negative impact which the imposition of a requirement to supply the information at issue might have on Microsoft’s incentives to innovate against the positive impact of that obligation on innovation in the industry as a whole, but after refuting Microsoft’s arguments relating to the fear that its products might be cloned (recitals 713 to 729 to the contested decision), establishing that the disclosure of interoperability was widespread in the industry concerned (recitals 730 to 735 to the contested decision) and showing that IBM’s commitment to the Commission in 1984 was not substantially different from what Microsoft was ordered to do in the contested decision (recitals 736 to 742 to the contested decision) and that its approach was consistent with Directive 91/250 (recitals 743 to 763 to the contested decision).

711    It follows from all of the foregoing considerations that Microsoft has not demonstrated the existence of any objective justification for its refusal to disclose the interoperability at issue.

712    As the exceptional circumstances identified by the Court of Justice in Magill and IMS Health, paragraph 107 above, were also present in this case, the first part of the plea must be rejected as wholly unfounded.

2.     Second part: Sun did not request Microsoft to supply the technology which the Commission orders it to disclose

a)     Arguments of the parties

713    In the first place, Microsoft claims that Sun did not request access to interoperability information within the meaning of the contested decision.

714    The applicant refers to a passage in Sun’s complaint and maintains that the request contained in the letter of 15 September 1998 did not relate to the ‘full and complete specifications’ for its communication protocols but to detailed information about the internal features of its Windows server operating systems.

715    Accordingly, even on the assumption that the letter of 6 October 1998 might be interpreted as containing a refusal, quod non, it cannot be claimed that Microsoft refused to supply Sun with the technology which, according to the contested decision, it did not disclose.

716    In addition, the ‘breadth of Sun’s request could not have put Microsoft on notice that Sun was seeking a licence [in respect of its] communication protocols’.

717    The applicant further observes that Sun’s complaint contains no reference to communication protocols.

718    Last, in the letter of 15 September 1998, Sun expressed the belief that ‘Microsoft should include a reference implementation and such other information as is necessary to insure, without reverse engineering, that COM objects and the compete set of Active Directory technologies will run in fully compatible fashion on Solaris’. Microsoft claims that access to such ‘technology’ would have enabled Sun to mimic virtually all the functionalities of Windows server operating systems; and, furthermore, Sun’s request related to ‘technology still under development’, as Windows 2000 Server and Active Directory were not marketed until December 1999.

719    In the second place, Microsoft contends that Sun’s request did not meet with a ‘flat refusal’ in the letter of 6 October 1998: the applicant invited Sun to discuss ‘ways in which the two firms might improve interoperability between their respective products for the benefit of mutual customers’. That letter also mentioned various ways in which Sun might ‘achieve interoperability’. The applicant cites recital 565 to the contested decision and asserts that the Commission cannot maintain that the technologies concerned were so complex that Sun could not be expected to know what technology it needed: Sun is a highly specialised distributor of server operating systems and in any event it was Sun’s responsibility to clarify its request.

720    Microsoft claims, moreover, that Sun did not take up its invitation and observes, in particular, that Sun failed to attend a meeting which had been arranged in order to discuss the interoperability of their products.

721    Last, Microsoft contends that there is no contradiction between its position that it is unclear whether it would have refused to disclose the specifications of its communication protocols if Sun or ‘anyone else’ had asked it to do so and the fact that it seeks annulment of the contested decision. There is a significant difference between a ‘negotiated cross-licensing agreement with another leading operating system vendor’ and a ‘duty to supply the entire world with proprietary technology under mandate from the public authority’.

722    In the third place, Microsoft maintains that Sun did not request it to license its intellectual property rights so that Sun could develop work group server operating systems in the EEA. Microsoft was therefore under no obligation, when it replied to the letter of 15 September 1998, to have regard to its special responsibility under Article 82 EC not to hinder effective and undistorted competition.

723    In that context, Microsoft points out that Sun is a United States company and that the letter of 15 September 1998 was sent from Sun’s headquarters in the United States to the United States headquarters of Microsoft, which is also a United States company. In the absence of any connection with the EEA, and as the letter did not mention that the technology concerned was necessary for the development and distribution of work group server operating systems on the territory of the EEA, Microsoft had no reason to consider that Sun wished to obtain a licence for the EEA.

724    The Commission rejects Microsoft’s arguments in their entirety.

725    In the first place, the Commission contends that Sun’s request in the letter of 15 September 1998, ‘although broader in certain respects than the scope of the [contested] decision’, was sufficiently clear for Microsoft to understand (i) that Sun sought access to interoperability information and (ii) that some of that information pertained to certain features of Windows work group networks (the ‘Active Directory domain’) which were indispensable if Sun were to be able to exert viable competition on the work group server operating systems market.

726    The Commission contends that Microsoft misrepresents Sun’s request when it claims that the request related to source code and not interface information. In its request, Sun sought a means of enabling its products to ‘seamlessly communicate’ with the Windows environment and in the letter of 6 October 1998 Mr Maritz clearly stated that he understood that request as relating to interoperability information. Furthermore, Sun made clear in its complaint that it wished to have access to ‘interface information’.

727    The Commission refers to recitals 713 to 722 to the contested decision and further submits that access to interoperability information will not allow Microsoft’s competitors to ‘clone’ or ‘mimic’ the functionalities of Windows work group server operating systems.

728    The fact that Sun did not use the expression ‘communication protocol’ is irrelevant, since a request for access to the information necessary to interconnect and interact with Windows and a request for access to protocol specifications are ‘one and the same thing’.

729    The Commission also observes that in the letter of 6 October 1998 Microsoft did not mention the fact that Sun’s request related to ‘technology still under development’. In any event, such an argument cannot be accepted, because when Sun sent the letter of 15 September 1998 to Microsoft it was already one year since the first beta version of Windows 2000 Server had been released.

730    In the second place, the Commission contends that Microsoft cannot deny having refused Sun’s request.

731    First, Microsoft’s position is inconsistent with its claim that Article 5 of the contested decision should be annulled.

732    Second, the Commission refers to recitals 194 to 198 to the contested decision and claims that Microsoft explicitly confirmed to the Commission that it refused to give access to certain interoperability information. As stated at recitals 573 to 577 to the contested decision, that refusal forms part of a general pattern of conduct. Likewise, during the interlocutory proceedings, Microsoft stated that the refusal was part of its ‘business model’.

733    Third, the Commission is not convinced that Microsoft would have supplied the requested information to Sun if Sun had responded more positively to Microsoft’s alleged ‘offer’ to discuss interoperability. The Commission refers to certain statements by Microsoft managers set out at recitals 576 and 778 to the contested decision. The Commission finds it unlikely that Mr Goldberg, the Microsoft employee referred to in the letter of 6 October 1998, was authorised to take decisions concerning such matters. Mr Terranova, of Sun, met Mr Goldberg on 25 November 1998 and Microsoft does not explain how the fact that Mr Terranova had to cancel a further meeting due to take place on 8 March 1999 prevented discussions on interoperability. Last, the Commission observes that the agenda of that last meeting, as suggested by Mr Goldberg, did not contain the slightest reference to the relevant technologies, such as Active Directory.

734    In the third place, the Commission considers it irrelevant that Sun did not specifically refer to the EEA in the letter of 15 September 1998. First, as the relevant geographic market was worldwide, the EEA was necessarily covered by the request in that letter and, second, Sun lodged a complaint with the Commission on 10 December 1998.

b)     Findings of the Court

735    By its argument in support of the second part of its single plea, Microsoft seeks to establish that the Commission had no valid ground on which to find, in the contested decision, that Microsoft had abused its dominant position by refusing to disclose the interoperability information, since it cannot in fact be accused of any real refusal. In support of that argument, Microsoft relies, in substance, on the exchange of letters between it and Sun in the latter part of 1998. Its argument comes under three main heads. In the first place, Microsoft claims that Sun’s request in the letter of 15 September 1998 did not relate to interoperability information as referred to in the contested decision. In the second place, it denies in any event having refused that request in the letter of 6 October 1998. In the third place, Microsoft maintains that in the letter of 15 September 1998 Sun did not seek a licence covering intellectual property rights which Microsoft held in the EEA.

736    Each of those heads must be examined separately.

 The scope of Sun’s request

737    First of all, it is appropriate to recall the precise content of the letter of 15 September 1998 and the Commission’s analysis of that letter in the contested decision.

738    In that letter, Sun identifies the information which it seeks from Microsoft, as follows:

–        first, the complete information required to allow it to provide native support for COM objects on Solaris;

–        second, the complete information required to allow Sun to provide native support for the complete set of Active Directory technologies on Solaris.

739    In the letter, Sun specified the extent of the information requested and also the objective of its request, indicating that:

–        applications written to execute on Solaris should be able to seamlessly communicate via COM and/or Active Directory with the Windows operating systems and/or with Windows-based software;

–        Microsoft should include a reference implementation and such other information as was necessary to ensure, without reverse engineering, that COM objects and the complete set of Active Directory technologies would run in fully compatible fashion on Solaris;

–        the information should be provided for the full range of COM objects as well as for the full set of Active Directory technologies currently on the market;

–        the information should be provided in a timely manner and on a continuing basis for COM objects and Active Directory technologies which would be released on the market in the future.

740    At recital 186 to the contested decision, the Commission interprets the second part of Sun’s request in the letter of 15 September 1998 (see the second indent of paragraph 738 above) as meaning the ‘ability for Solaris to act as fully compatible domain controller in Windows 2000 work group networks or as a member server (in particular as a file and print server) fully compatible with the Active Directory domain infrastructure (security, directory service)’. Furthermore, the fact that Sun’s request covers both client/server interoperability and server/server interoperability is consistent with the fact that the ‘Windows domain architecture’ closely connects both types of interoperability. In other words, ‘Sun’s request encompassed the specifications for the protocols used by Windows work group servers in order to provide file, print and group and user administration services to Windows work group networks’, which include ‘both direct interconnection and interaction between a Windows work group server and a Windows client PC, as well as interconnection and interaction between a Windows work group server and a Windows client PC that is indirect and passes through another Windows work group server’ (recital 187 to the contested decision).

741    At recital 188 to the contested decision, the Commission examines the first part of Sun’s request (see the first indent of paragraph 738 above). The Commission observes that COM/DCOM is a technology which ‘is relevant to the delivery of file, print and group and user administration in Windows’ and considers that there is an overlap between that part of Sun’s request and the second part of its request, concerning Active Directory. At the following recital, the Commission states, however, that ‘the only part of Sun’s request for information concerning the COM technology that is relevant to the refusal to supply considered in [the contested decision] is what is encompassed in Sun’s request for compatibility with Active Directory’. That observation must be compared with the Commission’s statement at recital 566 to the contested decision that, first, ‘the only refusal at stake in [the contested decision] is a refusal to provide a full specification of the protocols underlying the Windows domain architecture, which organises the way through which Windows work group servers deliver work group server services to Windows client PCs’ and, second, ‘[t]he fact that Microsoft has also turned down Sun’s request for information that would facilitate cross-platform portability of COM does not form part of the conduct treated in [the contested decision] as a refusal to supply’.

742    The Commission further observes, at recital 190 to the contested decision, that it is implicit in Sun’s request that Sun is seeking access to specification in order to be able to implement them in its products.

743    At recitals 199 to 207 to the contested decision, the Commission sets out a series of considerations in order to demonstrate that the information to which Sun requests access in the letter of 15 September 1998 is connected with interoperability. First, it rejects Microsoft’s assertion in its response of 17 October 2003 to the third statement of objections that Sun wished Microsoft to create a version of Active Directory that could be used on Solaris. Second, the Commission rejects Microsoft’s argument, also put forward during the administrative procedure, that Sun’s request concerned ‘the internal make-up of Windows server operating systems’ and therefore went beyond interoperability information. On that last point, the Commission observes that in the letter of 15 September 1998 Sun expressly states that it is its intention to achieve ‘seamless communication’ between the Solaris environment and the Windows environment (recital 207 to the contested decision). The Commission also observes that the letter of 6 October 1998 shows that Microsoft had fully understood that Sun wished to have access to information on interoperability with ‘certain features of Windows’ (recital 207 to the contested decision).

744    Next, in the light of those various factors, the Court finds, first, that while, as the Commission itself recognises in the defence, the scope of the request in the letter of 15 September 1998 was wider in certain regards than that of the contested decision, the fact remains that in that letter Sun qualified the scope of its request by stating that all that it wanted was that its products should be able to ‘seamlessly communicate’ with the Windows environment. Likewise, Sun also stated in its letter that the information requested should ‘insure, without reverse engineering, that COM objects and the complete set of Active Directory technologies will run in fully compatible fashion on Solaris’. In other words, it is clear from the wording of the letter of 15 September 1998 that Sun was seeking access to information and that the information should allow it to achieve interoperability between its products and the Windows environment.

745    It is also apparent from the wording of the letter of 15 September 1998 that Sun wished to be able to achieve a high level of interoperability between its products and the Windows domain architecture. In the letter of 6 October 1998, when Mr Maritz indicates that Microsoft has no plans to ‘“port” the Active Directory to Solaris’ and that there are ‘varying levels of functionality [designed to allow other operating systems] to interoperate with the Active Directory’, he clearly draws a distinction between the high level of interoperability that can be achieved when the elements of one operating system are ‘ported’ to another operating system and the lower or ‘varying’ levels that can be achieved by using the other methods suggested in that letter.

746    Second, Microsoft cannot reasonably rely on the fact that Sun did not use the expression ‘communication protocols’ in its complaint. As stated at recital 49 to the contested decision, and as the Commission correctly observes in its pleadings, a ‘protocol’ represents a set of rules of interconnection and interaction between various pieces of software in a network (see also paragraphs 196 and 197 above). As stated at paragraph 740 above, it was precisely about such rules that Sun wished to obtain information. Microsoft’s argument is all the less acceptable because it is purely formalistic. In the letter of 6 October 1998, Mr Maritz makes a number of references to interoperability between Microsoft’s products and those of Sun or other software vendors. Microsoft had thus fully understood the scope of Sun’s request, in spite of the fact that there is no formal reference to ‘communication protocols’ in the letter of 15 September 1998.

747    Third, Microsoft’s assertion that access to the technology would have enabled Sun to ‘mimic’ virtually all the functionalities of the Windows server operating systems cannot be upheld. It is clear from the preceding considerations that Sun sought access to the information necessary to be able to achieve interoperability between its products and the Windows domain architecture. As stated at recitals 34, 570 and 571 to the contested decision, and as already stated at paragraphs 199 to 206 above, such a result may be achieved by communicating only the specifications of certain protocols, that is to say, without disclosing implementation details. In so far as Microsoft’s assertion is based on the fact that Sun indicates in the letter of 15 September 1998 that Microsoft should communicate a ‘reference implementation’, the Court finds that even if Sun had thereby intended to request communication of details of Microsoft’s source code, Sun’s qualification of the scope of its request (see paragraph 744 above) meant that Microsoft could not conclude that Sun’s request did not also relate to the protocol specifications referred to by the contested decision, while the conduct penalised by that decision is limited, as stated at recital 569 to the contested decision, to Microsoft’s refusal to communicate those specifications.

748    Fourth, Microsoft cannot effectively claim that the request in Sun’s letter of 15 September 1998 concerned ‘technology still under development’. That assertion is wholly irrelevant to the question whether that request concerned interoperability information as referred to in the contested decision. Nor does it take account of the fact that, as stated at recitals 398 and 790 to the contested decision, Microsoft had already released the first beta version of Windows 2000 server on 23 September 1997, almost one year before the date of Sun’s letter.

749    The Court concludes from all of the foregoing considerations that, contrary to Microsoft’s assertion, Sun’s request in the letter of 15 September 1998 clearly concerned the interoperability information referred to in the contested decision and forming the subject-matter of the remedy prescribed in Article 5 of that decision.

 The scope of the letter of 6 October 1998

750    The second head of Microsoft’s argument in support of the second part of the plea, namely the head relating to the letter of 6 October 1998, cannot be accepted either.

751    When the wording of that letter, examined in the light of the context in which it was written, the identity of its author, the extent of his knowledge of the technologies concerned and the approach adopted by Microsoft up to the time of the adoption of the contested decision, is taken into account, it must be concluded that the Commission was correct, in the contested decision, to interpret that letter as containing a refusal to disclose to Sun the information which it had requested.

752    It must be borne in mind, first of all, that, as stated in the first part of the plea, Microsoft’s arguments concerning the refusal to supply and authorise the use of the interoperability information rely largely on the degree of interoperability that must be achieved between its own and its competitors’ products. Throughout the administrative procedure and in these proceedings, Microsoft contended that it was sufficient that the various operating systems should be capable of exchanging information or of reciprocally supplying services, or, in other words, that they could ‘work properly’ together. Microsoft maintains that the information and methods already available on the market allow such a result to be achieved, so that it cannot be required to disclose additional information, in particular the information relating to the communications that come within the ‘blue bubble’. The applicant claims, in particular, that the Commission requires a degree of interoperability that goes far beyond what is envisaged by Directive 91/250 and which does not correspond to the way in which undertakings organise their computer networks in practice. It maintains that it is the Commission’s intention that operating systems that compete with Microsoft’s systems should function in all respects like a Windows server operating system, which would require Microsoft to communicate to its competitors much more than information on the interfaces of its products and would interfere with its intellectual property rights and reduce its incentives to innovate.

753    As the Court has already found at paragraphs 207 to 245 above, the way in which Microsoft interprets the degree of interoperability required by the Commission and, accordingly, the scope of the information referred to by the contested decision is incorrect.

754    It is necessary to take those factors into account when assessing the way in which the Commission interpreted the letter of 6 October 1998 and the arguments which Microsoft has put forward on that point.

755    As demonstrated at paragraph 746 above, Microsoft had fully grasped the scope of Sun’s request in the letter of 15 September 1998 and, in particular, had understood that Sun sought to obtain the information necessary for its products to be able to ‘seamlessly communicate’ with the Windows environment or, in other words, to establish a high level of interoperability between its products and that environment.

756    Furthermore, the purpose of the letter of 15 September 1998 was clearly to obtain access to information belonging to Microsoft that was not already in the public domain or available by means of the licences offered on the market.

757    The response in the letter of 6 October 1998 contains the following six points:

–        first, Mr Maritz thanks Mr Green for the letter of 15 September 1998 and informs him that Microsoft has always been willing to help its competitors to ‘build the best possible products and interoperability for [its] platform’;

–        second, he draws Mr Green’s attention to the fact that information about the services and interfaces of the ‘Windows platform’ is already available through the ‘MSDN’ product;

–        third, he invites Sun to attend a conference organised by Microsoft to be held in Denver on 11-15 October 1998;

–        fourth, he refers to a reference implementation of COM on Solaris that already exists and informs Mr Green that source code for COM can be licensed, notably from Software AG;

–        fifth, he states that Microsoft has no plans to ‘port’ the Active Directory to Solaris, but mentions the existence of a number of methods, with varying levels of interoperability, of interoperating with Active Directory, including use of the standard LDAP protocol;

–        sixth, he invites Sun, should it need ‘additional support’, to contact the ‘account managers’ of the ‘Developer Relations Group’, who are there to ‘help developers who need additional support for Microsoft’s platforms’, naming Mr Goldberg as the person to contact for that purpose.

758    The Court notes, in the first place, that in the letter of 6 October 1998 Mr Maritz wholly fails to answer the specific requests made by Sun in the letter of 15 September 1998 and merely refers Sun to sources of information and methods which were already in the public domain or available under licence. As Mr Maritz was clearly aware of the significance of the specific requests stated by Mr Green, such a reference cannot be interpreted as anything other than a refusal to communicate the information requested.

759    The fact that Mr Maritz states in the letter of 6 October 1998 that Microsoft has no plans to ‘port’ Active Directory to Solaris confirms the correctness of that interpretation, since it shows that Mr Maritz was fully aware that Microsoft’s competitors, including Sun, aspired to achieve a higher level of interoperability than they could achieve by using the methods mentioned in that letter (see paragraph 745 above).

760    That point is established all the more clearly because, in the case, first of all, of MSDN, Microsoft does not dispute in the present part of the plea the Commission’s analysis in the contested decision that that mechanism does not allow Microsoft’s competitors to achieve a sufficient degree of interoperability with Windows client PC operating systems (recital 563 to the contested decision, which refers to Section 4.1.3 and, in particular, to recitals 209 and 210 to the contested decision).

761    As regards, next, the possibility that Sun could use a freely-available COM reference implementation, which Microsoft also mentions in the letter of 6 October 1998, Microsoft has also not maintained in the present part of the plea that the Commission had erred in considering, in the contested decision, that that product did not constitute a sufficient solution (recital 563 to the contested decision, which refers to Section 4.1.3 and, in particular, to recitals 218 to 230 to the contested decision; see also recitals 288 to 291 to the contested decision).

762    As regards, last, the possibility for Sun to use the LDAP protocol, which is also expressly mentioned in the letter of 6 October 1998, Microsoft has not maintained in the present part of the plea, and did not demonstrate in the preceding part of the plea, that the Commission had erred in concluding, particularly at recitals 194 and 195 and 243 to 250 to the contested decision, that that protocol was not sufficient to achieve a suitable level of interoperability with Active Directory.

763    In the second place, Microsoft cannot rely on Mr Maritz’s offer of additional support from Mr Goldberg to substantiate its claim that that letter does not contain a refusal. The additional support mentioned in the final paragraph of that letter relates only to the information and methods mentioned in the second and third paragraphs of the letter. In essence, Microsoft thereby proposes to assist Sun only in the same way as the ‘account managers’ of the ‘Developer Relations Group’ assist any developer requiring support in connection with ‘Microsoft’s platforms’.

764    Nor can Microsoft usefully rely on the minute it prepared summarising the exchanges between itself and Sun in order to maintain that Sun had no intention of acting on Mr Goldberg’s proposals. At no point in that minute, as the Commission correctly observed at recital 193 to the contested decision, is there any mention of a formal proposal by Microsoft to supply the information which Sun requested, that is to say, information going beyond that which was publicly available.

765    It should be added, in the third place, that in the contested decision the Commission had all the more reason to interpret the letter of 6 October 1998 as containing a refusal to give access to the interoperability information requested by Sun because, during the administrative procedure, Microsoft expressly recognised that it had not disclosed some of the information requested and that it continued to refuse to do so (see recitals 194 to 198 to the contested decision). Although at the hearing Microsoft questioned the exhaustive nature of one of the citations set out at recital 195 to the contested decision, it did not deny having stated during the administrative procedure that the replication among different copies of Active Directory was ‘proprietary’.

766    Microsoft’s argument that the letter of 6 October 1998 does not constitute a refusal must therefore be rejected as unfounded.

767    It is appropriate, moreover, to analyse the letter of 6 October 1998 in the more general context described in the contested decision. In the decision, the Commission did not rely on that letter alone, but, as may be seen from recitals 194 to 198 and 573 to 577 to the contested decision in particular, it considered that the conduct which it evidenced formed part of a general pattern of conduct on Microsoft’s part.

768    At recital 573 to the contested decision, which refers specifically to recital 194 to the contested decision, the Commission stated, in particular, that a number of Microsoft’s competitors had confirmed that they did not obtain sufficient interoperability information and that some of them had also claimed that Microsoft had refused to provide information that they had requested, or had failed to answer their requests.

769    At recital 576 to the contested decision, moreover, the Commission reproduced excerpts from testimony given to the United States courts by a manager of the Windows Source Licensing Program, which, according to the Commission, indicates that Microsoft places restrictions on licence agreements concerning technologies necessary for interoperability with the Windows domain architecture.

770    Microsoft did not specifically deny those matters before the Court.

771    Furthermore, the Court observes that, at recital 778 to the contested decision, the Commission, in refuting Microsoft’s denials of the existence of a refusal, given Microsoft’s claim that it never had any reason to exclude competitors by leveraging, cited an extract from a speech given by Mr Gates, President of Microsoft, in February 1997 to members of Microsoft’s sales force. That extract confirms the existence of a pattern of general conduct designed to restrict the communication of interoperability information, containing as it does, the following declaration:

‘What we are trying to do is use our server control to do new protocols and lock out Sun and Oracle specifically … Now, I don’t know if we’ll get to that or not, but that’s what we are trying to do.’

 The geographic scope of the request contained in the letter of 15 September 1998

772    The third head of the argument which Microsoft develops in support of the second part of its single plea is based on the fact that in the letter of 15 September 1998 Sun did not expressly request a licence over Microsoft’s intellectual property rights in the EEA in order to develop work group server operating systems in the EEA. Microsoft concludes that when it responded to Sun it was under no obligation to have regard to its particular responsibility not to hinder effective and undistorted competition.

773    Those arguments are purely formal and must be rejected.

774    In the letter of 15 September 1998, Sun did not, admittedly, expressly request Microsoft to grant it a licence over intellectual property rights held in the EEA. However, there was no need for Sun to assess in its request whether the information to which it sought access was protected by intellectual property rights and whether the use of that information needed to be licensed by Microsoft. It is clear, moreover, that Sun wished Microsoft to supply the information at issue so that it would be able to implement that information in its own work group server operating systems. Furthermore, as the relevant geographic market for those systems is worldwide (see recital 427 to the contested decision), the territory of the EEA was necessarily covered by Sun’s request, which was drafted in general terms. Last, as the Commission observes in its pleadings, as Sun had lodged a complaint pursuant to Article 3 of Regulation No 17 a few weeks later, Microsoft could in any event no longer fail to be aware that the EEA was also concerned.

775    It follows that the Commission was correct to find at recital 787 to the contested decision that when Microsoft had responded to the letter of 15 September 1998 it had not taken sufficiently into account its special responsibility not to hinder effective and undistorted competition in the common market. The Commission was also correct to state, at the same recital, that that particular responsibility derived from Microsoft’s ‘quasi-monopoly’ on the client PC operating systems market. As is apparent from the considerations set out at paragraph 740 above, the refusal at issue concerned ‘interface specifications that organise a network of Windows work group servers and client PCs and that, as such, are not attributable to one of the two [types of product] at stake (client PCs or work group servers), but rather represent a rule of compatibility between those two products’ (recital 787 to the contested decision).

776    It follows from all of the foregoing considerations that the second part of the single plea put forward by Microsoft in connection with the refusal to supply and authorise the use of the interoperability information must be rejected as unfounded.

D.   Refusal to supply and margin squeeze

(a)   Objective necessity of the input

(b)   Elimination of effective competition

(c)   Consumer harm

(d)   Efficiencies

JUDGMENT OF THE COURT (Fifth Chamber)

16 July 2015 (*)

(Competition — Article 102 TFEU — Undertaking holding a patent essential to a standard which has given a commitment, to the standardisation body, to grant third parties a licence for that patent on fair, reasonable and non-discriminatory terms (‘FRAND terms’) — Abuse of a dominant position — Actions for infringement — Action seeking a prohibitory injunction — Action seeking the recall of products — Action seeking the rendering of accounts — Action for damages — Obligations of the proprietor of a patent which is essential to a standard)

In Case C‑170/13,

REQUEST for a preliminary ruling under Article 267 TFEU from the Landgericht Düsseldorf (Germany), made by decision of 21 March 2013, received at the Court on 5 April 2013, in the proceedings

Huawei Technologies Co. Ltd

v

ZTE Corp.,

ZTE Deutschland GmbH,

THE COURT (Fifth Chamber),

composed of T. von Danwitz, President of the Chamber, C. Vajda, A. Rosas, E. Juhász and D. Šváby (Rapporteur), Judges,

Advocate General: M. Wathelet,

Registrar: K. Malacek, Administrator,

having regard to the written procedure and further to the hearing on 11 September 2014,

after considering the observations submitted on behalf of:

–        Huawei Technologies Co. Ltd, by C. Harmsen, S. Barthelmess and J. Witting, Rechtsanwälte, D. Geradin, avocat, and M. Dolmans, advocaat,

–        ZTE Corp. and ZTE Deutschland GmbH, by M. Fähndrich, Rechtsanwalt,

–        the Netherlands Government, by M. Bulterman, C. Schillemans and B. Koopman, acting as Agents,

–        the Portuguese Government, by L. Inez Fernandes and S. Oliveira Pais, acting as Agents,

–        the Finnish Government, by J. Heliskoski, acting as Agent,

–        the European Commission, by F.W. Bulst, A. Dawes and F. Ronkes Agerbeek, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 20 November 2014,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of Article 102 TFEU.

2        The request has been made in proceedings between Huawei Technologies Co. Ltd (‘Huawei Technologies’), on the one hand, and ZTE Corp. and ZTE Deutschland GmbH (‘ZTE’), on the other hand, concerning an alleged infringement of a patent which is essential to a standard established by a standardisation body (‘standard-essential patent’ or ‘SEP’).

 Legal context

 International law

3        The Convention on the Grant of European Patents (‘EPC’), which was signed in Munich on 5 October 1973 and entered into force on 7 October 1977, in the version applicable to the facts in the main proceedings, establishes, as Article 1 states, a ‘system of law, common to the Contracting States, for the grant of patents for invention’.

4        Apart from common rules relating to the grant of a European patent, a European patent remains governed by the national law of each of the Contracting States for which it has been granted. In that regard, Article 2(2) of the EPC states:

‘The European patent shall, in each of the Contracting States for which it is granted, have the effect of and be subject to the same conditions as a national patent granted by that State …’

5        With regard to the rights conferred on the proprietor of a European patent, Article 64(1) and (3) of that convention provides:

‘(1)      A European patent shall … confer on its proprietor from the date of publication of the mention of its grant, in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State.

…

(3)      Any infringement of a European patent shall be dealt with by national law.’

 EU law

6        Recitals 10, 12 and 32 of the preamble to Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual-property rights (OJ 2004 L 157, p. 45) state the following:

‘(10) The objective of this Directive is to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the Internal Market.

…

(12)      This Directive should not affect the application of the rules of competition, and in particular Articles 81 and 82 of the Treaty. The measures provided for in this Directive should not be used to restrict competition unduly in a manner contrary to the Treaty.

…

(32)      This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union [(“the Charter”)]. In particular, this Directive seeks to ensure full respect for intellectual property, in accordance with Article 17(2) of th[e] Charter.’

7        Article 9 of that directive, entitled ‘Provisional and precautionary measures’, states, in paragraph 1:

‘Member States shall ensure that the judicial authorities may, at the request of the applicant:

(a)      issue against the alleged infringer an interlocutory injunction intended to prevent any imminent infringement of an intellectual-property right …

…’

8        Article 10 of that directive, entitled ‘Corrective measures’, provides, in paragraph 1:

‘Without prejudice to any damages due to the rightholder by reason of the infringement, and without compensation of any sort, Member States shall ensure that the competent judicial authorities may order, at the request of the applicant, that appropriate measures be taken with regard to goods that they have found to be infringing an intellectual-property right and, in appropriate cases, with regard to materials and implements principally used in the creation or manufacture of those goods. Such measures shall include:

(a)      recall from the channels of commerce;

(b)      definitive removal from the channels of commerce; or

(c)      destruction.’

 German law

9        Under the heading ‘Performance in good faith’, Paragraph 242 of the German Civil Code (Bürgerliches Gesetzbuch) lays down that an obligor has a duty to perform the obligation in accordance with the requirements of good faith, with due regard for customary practice.

10      Paragraph 139(1) of the Law on Patents (Patentgesetz, BGBl. 1981 I, p. 1), as amended most recently by Paragraph 13 of the Law of 24 November 2011 (BGBl. 2011 I, p. 2302), states:

‘The injured party may, where there is a risk of recurrence, bring an action for an injunction against any person who uses a patented invention in breach of Paragraphs 9 to 13. The injured party shall also have that right if an infringement is liable to be committed for the first time.’

11      Paragraphs 19 and 20 of the Law against Restrictions of Competition (Gesetz gegen Wettbewerbsbeschränkungen) of 26 June 2013 (BGBl. 2013 I, p. 1750) prohibit the abuse by one or more undertakings of a dominant position on a market.

 The ETSI rules

12      The European Telecommunications Standards Institute (‘ETSI’) is a body the objective of which, according to Clause 3.1 of Annex 6 to the ETSI Rules of Procedure, which annex is entitled ‘ETSI Intellectual-Property Rights Policy’, is to create standards which meet the technical objectives of the European telecommunications sector and to reduce the risk to ETSI, its members and others applying ETSI standards, that investment in the preparation, adoption and application of standards could be wasted as a result of an essential intellectual-property right for those standards being unavailable. To that end, Annex 6 seeks a balance between the needs of standardisation for public use in the field of telecommunications and the rights of the owners of intellectual-property rights.

13      Clause 3.2 of that annex provides that owners of intellectual-property rights should be adequately and fairly rewarded for the use of their intellectual-property rights.

14      Under Clause 4.1 of Annex 6, each of the members of ETSI is required to use reasonable endeavours, in particular during the development of a standard in the establishment of which it participates, to inform ETSI of that member’s intellectual-property rights which are essential to that standard, in a timely fashion.

15      Clause 6.1 of Annex 6 to the ETSI Rules of Procedure provides that, when an intellectual-property right essential to a standard is brought to the attention of ETSI, the Director-General of ETSI must immediately request the owner of that right to give, within three months, an irrevocable undertaking that it is prepared to grant licences on fair, reasonable and non-discriminatory terms (‘FRAND terms’) in relation to that right.

16      Under Clause 6.3 of that annex, for so long as such an undertaking has not been given, ETSI is to assess whether work on the relevant parts of the standard should be suspended.

17      Clause 8.1 of Annex 6 provides that, if the owner of the intellectual-property rights refuses to give that undertaking, ETSI is to seek an alternative technology and, if no such technology exists, to stop work on the adoption of the standard in question.

18      Under Clause 14 of Annex 6 to the ETSI Rules of Procedure, any violation of the provisions of that annex by a member of ETSI is deemed to be a breach of that member’s obligations to ETSI.

19      Clause 15.6 of that annex provides that an intellectual-property right is regarded as essential where, in particular, it is not possible on technical grounds to make equipment which complies with the standard without infringing the intellectual-property right (‘essential patent’).

20      However, ETSI does not check whether the intellectual-property right, the use of which an ETSI member has brought to its attention as being necessary, is valid or essential. Nor does Annex 6 define the concept of a ‘licence on FRAND terms’.

 The dispute in the main proceedings and the questions referred for a preliminary ruling

21      Huawei Technologies, a multinational company active in the telecommunications sector, is the proprietor of, inter alia, the European patent registered under the reference EP 2 090 050 B 1, bearing the title ‘Method and apparatus of establishing a synchronisation signal in a communication system’, granted by the Federal Republic of Germany, a Contracting State of the EPC (‘patent EP 2 090 050 B 1’).

22      That patent was notified to ETSI on 4 March 2009 by Huawei Technologies as a patent essential to the ‘Long Term Evolution’ standard. At the same time, Huawei Technologies undertook to grant licences to third parties on FRAND terms.

23      The referring court states, in the order for reference, that that patent is essential to that standard, which means that anyone using the ‘Long Term Evolution’ standard inevitably uses the teaching of that patent.

24      Between November 2010 and the end of March 2011, Huawei Technologies and ZTE Corp., a company belonging to a multinational group active in the telecommunications sector and which markets, in Germany, products equipped with software linked to that standard, engaged in discussions concerning, inter alia, the infringement of patent EP 2 090 050 B 1 and the possibility of concluding a licence on FRAND terms in relation to those products.

25      Huawei Technologies indicated the amount which it considered to be a reasonable royalty. For its part, ZTE Corp. sought a cross-licensing agreement. However, no offer relating to a licensing agreement was finalised.

26      None the less, ZTE markets products that operate on the basis of the ‘Long Term Evolution’ standard, thus using patent EP 2 090 050 B 1, without paying a royalty to Huawei Technologies or exhaustively rendering an account to Huawei Technologies in respect of past acts of use.

27      On 28 April 2011, on the basis of Article 64 of the EPC and Paragraph 139 et seq. of the German Law on Patents, as amended most recently by Paragraph 13 of the Law of 24 November 2011, Huawei Technologies brought an action for infringement against ZTE before the referring court, seeking an injunction prohibiting the infringement, the rendering of accounts, the recall of products and an award of damages.

28      That court considers that the decision on the substance in the main proceedings turns on whether the action brought by Huawei Technologies constitutes an abuse of that company’s dominant position. It thus observes that it might be possible to rely on the mandatory nature of the grant of the licence in order to dismiss the action for a prohibitory injunction — in particular, on the basis of Article 102 TFEU — if, by its action, Huawei Technologies were to be regarded as abusing its dominant position. According to the referring court, the existence of that dominant position is not in dispute.

29      The referring court states, however, that different approaches may be taken in order to determine the point at which the proprietor of an SEP infringes Article 102 TFEU as a result of bringing an action for a prohibitory injunction.

30      In this connection, the referring court observes that, on the basis of Article 102 TFEU, Paragraph 20(1) of the Law of 26 June 2013 against Restrictions of Competition and Paragraph 242 of the Civil Code, the Bundesgerichtshof (Federal Court of Justice, Germany) held, in its judgment of 6 May 2009 in Orange Book (KZR 39/06), that, where the proprietor of a patent seeks a prohibitory injunction against a defendant which has a claim to a licence for that patent, the proprietor of the patent abuses its dominant position only in certain circumstances.

31      First, the defendant must have made the applicant an unconditional offer to conclude a licensing agreement not limited exclusively to cases of infringement, it being understood that the defendant must consider itself bound by that offer and that the applicant is obliged to accept it where its refusal would unfairly impede the defendant or infringe the principle of non-discrimination.

32      Secondly, where the defendant uses the teachings of the patent before the applicant accepts such an offer, it must comply with the obligations that will be incumbent on it, for use of the patent, under the future licensing agreement, namely to account for acts of use and to pay the sums resulting therefrom.

33      In the light of the fact that ZTE’s offers to conclude an agreement could not be regarded as ‘unconditional’, inasmuch as they related only to the products giving rise to the infringement, and that ZTE did not pay Huawei Technologies the amount of the royalty that it had itself calculated or provide to Huawei Technologies an exhaustive account of past acts of use, the referring court observes that it ought to preclude ZTE from being able validly to rely on the compulsory nature of the grant of the licence and, accordingly, ought to uphold Huawei Technologies’ action for a prohibitory injunction.

34      However, the referring court notes that, in the press releases No IP/12/1448 and MEMO/12/1021 of 21 December 2012, concerning a Statement of Objections sent to Samsung and relating to patent-infringement proceedings brought by Samsung in the field of mobile telephony, the European Commission appears to regard the bringing of an action for a prohibitory injunction as unlawful, under Article 102 TFEU, where that action relates to an SEP, the proprietor of that SEP has indicated to a standardisation body that it is prepared to grant licences on FRAND terms and the infringer is itself willing to negotiate such a licence. Accordingly, it may be irrelevant that the parties in question cannot agree on the content of certain clauses in the licensing agreement or, in particular, on the amount of the royalty to be paid.

35      In the present case, if those criteria alone are to be applied by the referring court, the latter court observes that it ought to dismiss Huawei Technologies’ action for a prohibitory injunction as constituting an abuse within the meaning of Article 102 TFEU, since it is common ground that the parties in the main proceedings were willing to negotiate.

36      The referring court takes the view that, in the case in the main proceedings, the fact that the infringer was willing to negotiate and the proprietor of patent EP 2 090 050 B 1 was prepared to grant licences to third parties ought not be sufficient to constitute an abuse of a dominant position.

37      The referring court takes the view that, in assessing whether the conduct of the proprietor of an SEP is abusive, an appropriate and fair balance has to be struck in relation to all the legitimate interests of the parties, which, it must be recognised, have equivalent bargaining power.

38      Thus, the referring court considers that the positions of the proprietor of an SEP and of the infringer ought not to make it possible for them to obtain excessively high royalties (a ‘hold-up’ situation) or excessively low royalties (a ‘reverse hold-up’ situation), respectively. For that reason, but also on the grounds of equality of treatment between the beneficiaries of licences for, and the infringers in relation to, a given product, the proprietor of the SEP ought to be able to bring an action for a prohibitory injunction. Indeed, the exercise of a statutory right cannot, in itself, constitute an abuse of a dominant position, for characterisation as such requires other criteria to be satisfied. For that reason, it is not satisfactory to adopt, as a criterion of such an abuse, the notion of the infringer’s ‘willingness to negotiate’, since this may give rise to numerous interpretations and provide the infringer with too wide a freedom of action. In any event, if such a notion is to be held to be relevant, certain qualitative and time requirements must be imposed in order to ensure that the applicant for the licence is acting in good faith. Accordingly, a properly formulated, acceptable, ‘unconditional’ request for a licence, containing all the provisions normally found in a licensing agreement, ought to be required to be submitted before the patent concerned is used. As regards, in particular, requests for a licence from operators which have already placed products using an SEP on the market, those operators must immediately comply with the obligations to render an account of use of that SEP and to pay the corresponding royalty. In addition, the referring court considers that an infringer ought, initially, to be able to provide security instead of paying the royalty directly to the proprietor of the SEP in question. The possibility of the applicant for a licence leaving the determination of a fair royalty amount to the proprietor must also be envisaged.

39      In those circumstances, the Landgericht Düsseldorf decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)      Does the proprietor of [an SEP] which informs a standardisation body that it is willing to grant any third party a licence on [FRAND] terms abuse its dominant market position if it brings an action for an injunction against a patent infringer even though the infringer has declared that it is willing to negotiate concerning such a licence?

or

Is an abuse of the dominant market position to be presumed only where the infringer has submitted to the proprietor of the [SEP] an acceptable, unconditional offer to conclude a licensing agreement which the patentee cannot refuse without unfairly impeding the infringer or breaching the prohibition of discrimination, and the infringer fulfils its contractual obligations for acts of use already performed in anticipation of the licence to be granted?

(2)      If abuse of a dominant market position is already to be presumed as a consequence of the infringer’s willingness to negotiate:

Does Article 102 TFEU lay down particular qualitative and/or time requirements in relation to the willingness to negotiate? In particular, can willingness to negotiate be presumed where the patent infringer has merely stated (orally) in a general way that it is prepared to enter into negotiations, or must the infringer already have entered into negotiations by, for example, submitting specific conditions upon which it is prepared to conclude a licensing agreement?

(3)      If the submission of an acceptable, unconditional offer to conclude a licensing agreement is a prerequisite for abuse of a dominant market position:

Does Article 102 TFEU lay down particular qualitative and/or time requirements in relation to that offer? Must the offer contain all the provisions which are normally included in licensing agreements in the field of technology in question? In particular, may the offer be made subject to the condition that the [SEP] is actually used and/or is shown to be valid?

(4)      If the fulfilment of the infringer’s obligations arising from the licence that is to be granted is a prerequisite for the abuse of a dominant market position:

Does Article 102 TFEU lay down particular requirements with regard to those acts of fulfilment? Is the infringer particularly required to render an account for past acts of use and/or to pay royalties? May an obligation to pay royalties be discharged, if necessary, by depositing a security?

(5)      Do the conditions under which the abuse of a dominant position by the proprietor of a[n SEP] is to be presumed apply also to an action on the ground of other claims (for rendering of accounts, recall of products, damages) arising from a patent infringement?’

 Consideration of the questions referred

40      A preliminary point to note is that the present request for a preliminary ruling has arisen in the context of an action concerning infringement of a patent between two operators in the telecommunications sector, which are holders of numerous patents essential to the ‘Long Term Evolution’ standard established by ETSI, which standard is composed of more than 4 700 SEPs, in respect of which those operators have undertaken to grant licences to third parties on FRAND terms.

41      In the context of that dispute, the referring court raises the question whether the action for infringement seeking an injunction prohibiting that infringement, the rendering of accounts, the recall of products and damages, brought by the proprietor of an SEP — in this case, Huawei Technologies — against the alleged infringer of that SEP — ZTE, which requested the conclusion of a licensing agreement — is to be characterised as an ‘abuse of a dominant position’, within the meaning of Article 102 TFEU, and, accordingly, whether the action must be dismissed.

42      For the purpose of providing an answer to the referring court and in assessing the lawfulness of such an action for infringement brought by the proprietor of an SEP against an infringer with which no licensing agreement has been concluded, the Court must strike a balance between maintaining free competition — in respect of which primary law and, in particular, Article 102 TFEU prohibit abuses of a dominant position — and the requirement to safeguard that proprietor’s intellectual-property rights and its right to effective judicial protection, guaranteed by Article 17(2) and Article 47 of the Charter, respectively.

43      As the referring court states in the order for reference, the existence of a dominant position has not been contested before it by the parties to the dispute in the main proceedings. Given that the questions posed by the referring court relate only to the existence of an abuse, the analysis must be confined to the latter criterion.

 Questions 1 to 4, and Question 5 in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products

44      By Questions 1 to 4, and Question 5 in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products, which questions it is appropriate to examine together, the referring court asks, essentially, in what circumstances the bringing of an action for infringement, by an undertaking in a dominant position and holding an SEP, which has given an undertaking to the standardisation body to grant licences to third parties on FRAND terms, seeking an injunction prohibiting the infringement of that SEP or seeking the recall of products for the manufacture of which the SEP has been used, is to be regarded as constituting an abuse contrary to Article 102 TFEU.

45      First of all, it must be recalled that the concept of an abuse of a dominant position within the meaning of Article 102 TFEU is an objective concept relating to the conduct of a dominant undertaking which, on a market where the degree of competition is already weakened precisely because of the presence of the undertaking concerned, through recourse to methods different from those governing normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition (judgments in Hoffmann-La Roche v Commission, 85/76, EU:C:1979:36, paragraph 91; AKZO v Commission, C‑62/86, EU:C:1991:286, paragraph 69; and Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 17).

46      It is, in this connection, settled case-law that the exercise of an exclusive right linked to an intellectual-property right — in the case in the main proceedings, namely the right to bring an action for infringement — forms part of the rights of the proprietor of an intellectual-property right, with the result that the exercise of such a right, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute an abuse of a dominant position (see, to that effect, judgments in Volvo, 238/87, EU:C:1988:477, paragraph 8; RTE and ITP v Commission, C‑241/91 P and C‑242/91 P, EU:C:1995:98, paragraph 49; and IMS Health, C‑418/01, EU:C:2004:257, paragraph 34).

47      However, it is also settled case-law that the exercise of an exclusive right linked to an intellectual-property right by the proprietor may, in exceptional circumstances, involve abusive conduct for the purposes of Article 102 TFEU (see, to that effect, judgments in Volvo, 238/87, EU:C:1988:477, paragraph 9; RTE and ITP v Commission, C‑241/91 P and C‑242/91 P, EU:C:1995:98, paragraph 50; and IMS Health, C‑418/01, EU:C:2004:257, paragraph 35).

48      Nevertheless, it must be pointed out, as the Advocate General has observed in point 70 of his Opinion, that the particular circumstances of the case in the main proceedings distinguish that case from the cases which gave rise to the case-law cited in paragraphs 46 and 47 of the present judgment.

49      It is characterised, first, as the referring court has observed, by the fact that the patent at issue is essential to a standard established by a standardisation body, rendering its use indispensable to all competitors which envisage manufacturing products that comply with the standard to which it is linked.

50      That feature distinguishes SEPs from patents that are not essential to a standard and which normally allow third parties to manufacture competing products without recourse to the patent concerned and without compromising the essential functions of the product in question.

51      Secondly, the case in the main proceedings may be distinguished by the fact, as is apparent from paragraphs 15 to 17 and 22 of the present judgment, that the patent at issue obtained SEP status only in return for the proprietor’s irrevocable undertaking, given to the standardisation body in question, that it is prepared to grant licences on FRAND terms.

52      Although the proprietor of the essential patent at issue has the right to bring an action for a prohibitory injunction or for the recall of products, the fact that that patent has obtained SEP status means that its proprietor can prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question.

53      In those circumstances, and having regard to the fact that an undertaking to grant licences on FRAND terms creates legitimate expectations on the part of third parties that the proprietor of the SEP will in fact grant licences on such terms, a refusal by the proprietor of the SEP to grant a licence on those terms may, in principle, constitute an abuse within the meaning of Article 102 TFEU.

54      It follows that, having regard to the legitimate expectations created, the abusive nature of such a refusal may, in principle, be raised in defence to actions for a prohibitory injunction or for the recall of products. However, under Article 102 TFEU, the proprietor of the patent is obliged only to grant a licence on FRAND terms. In the case in the main proceedings, the parties are not in agreement as to what is required by FRAND terms in the circumstances of that case.

55      In such a situation, in order to prevent an action for a prohibitory injunction or for the recall of products from being regarded as abusive, the proprietor of an SEP must comply with conditions which seek to ensure a fair balance between the interests concerned.

56      In this connection, due account must be taken of the specific legal and factual circumstances in the case (see, to that effect, judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 26 and the case-law cited).

57      Thus, the need to enforce intellectual-property rights, covered by, inter alia, Directive 2004/48, which — in accordance with Article 17(2) of the Charter — provides for a range of legal remedies aimed at ensuring a high level of protection for intellectual-property rights in the internal market, and the right to effective judicial protection guaranteed by Article 47 of the Charter, comprising various elements, including the right of access to a tribunal, must be taken into consideration (see, to that effect, judgment in Otis and Others, C‑199/11, EU:C:2012:684, paragraph 48).

58      This need for a high level of protection for intellectual-property rights means that, in principle, the proprietor may not be deprived of the right to have recourse to legal proceedings to ensure effective enforcement of his exclusive rights, and that, in principle, the user of those rights, if he is not the proprietor, is required to obtain a licence prior to any use.

59      Thus, although the irrevocable undertaking to grant licences on FRAND terms given to the standardisation body by the proprietor of an SEP cannot negate the substance of the rights guaranteed to that proprietor by Article 17(2) and Article 47 of the Charter, it does, none the less, justify the imposition on that proprietor of an obligation to comply with specific requirements when bringing actions against alleged infringers for a prohibitory injunction or for the recall of products.

60      Accordingly, the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer.

61      Prior to such proceedings, it is thus for the proprietor of the SEP in question, first, to alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed.

62      As the Advocate General has observed in point 81 of his Opinion, in view of the large number of SEPs composing a standard such as that at issue in the main proceedings, it is not certain that the infringer of one of those SEPs will necessarily be aware that it is using the teaching of an SEP that is both valid and essential to a standard.

63      Secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, it is for the proprietor of the SEP to present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated.

64      As the Advocate General has observed in point 86 of his Opinion, where the proprietor of an SEP has given an undertaking to the standardisation body to grant licences on FRAND terms, it can be expected that it will make such an offer. Furthermore, in the absence of a public standard licensing agreement, and where licensing agreements already concluded with other competitors are not made public, the proprietor of the SEP is better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer.

65      By contrast, it is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.

66      Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.

67      Furthermore, where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.

68      In addition, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay.

69      Lastly, having regard, first, to the fact that a standardisation body such as that which developed the standard at issue in the main proceedings does not check whether patents are valid or essential to the standard in which they are included during the standardisation procedure, and, secondly, to the right to effective judicial protection guaranteed by Article 47 of the Charter, an alleged infringer cannot be criticised either for challenging, in parallel to the negotiations relating to the grant of licences, the validity of those patents and/or the essential nature of those patents to the standard in which they are included and/or their actual use, or for reserving the right to do so in the future.

70      It is for the referring court to determine whether the abovementioned criteria are satisfied in the present case, in so far as they are relevant, in the circumstances, for the purpose of resolving the dispute in the main proceedings.

71      It follows from all the foregoing considerations that the answer to Questions 1 to 4, and to Question 5 in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products, is that Article 102 TFEU must be interpreted as meaning that the proprietor of an SEP, which has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, does not abuse its dominant position, within the meaning of Article 102 TFEU, by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as:

–        prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and

–        where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.

 Question 5, in so far as that question concerns legal proceedings brought with a view to obtaining the rendering of accounts or an award of damages

72      By Question 5, in so far as that question concerns legal proceedings brought with a view to obtaining the rendering of accounts or an award of damages, the referring court asks, in essence, whether Article 102 TFEU must be interpreted as prohibiting an undertaking in a dominant position and holding an SEP, which has given an undertaking to the standardisation body to grant licences for that patent on FRAND terms, from bringing an action for infringement against the alleged infringer of its SEP and seeking the rendering of accounts in relation to past acts of use of that SEP or an award of damages in respect of those acts of use.

73      As is apparent from paragraphs 52 and 53 above, the exercise by the proprietor of the SEP of its intellectual-property rights, by bringing actions for a prohibitory injunction or for the recall of products, may be characterised, in circumstances such as those in the main proceedings, as an abuse, where those proceedings are liable to prevent products complying with the standard in question manufactured by competitors from appearing or remaining on the market.

74      In the present case, according to the description set out in the order for reference, the actions for infringement brought by the proprietor of an SEP, seeking the rendering of accounts in relation to past acts of use of that SEP or an award of damages in respect of those acts of use, do not have a direct impact on products complying with the standard in question manufactured by competitors appearing or remaining on the market.

75      Consequently, in circumstances such as those in the main proceedings, such actions cannot be regarded as an abuse under Article 102 TFEU.

76      In the light of the foregoing considerations, the answer to Question 5, in so far as that question concerns legal proceedings brought with a view to obtaining the rendering of accounts or an award of damages, is that Article 102 TFEU must be interpreted as not prohibiting, in circumstances such as those in the main proceedings, an undertaking in a dominant position and holding an SEP, which has given an undertaking to the standardisation body to grant licences for that SEP on FRAND terms, from bringing an action for infringement against the alleged infringer of its SEP and seeking the rendering of accounts in relation to past acts of use of that SEP or an award of damages in respect of those acts of use.

 Costs

77      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fifth Chamber) hereby rules:

1.      Article 102 TFEU must be interpreted as meaning that the proprietor of a patent essential to a standard established by a standardisation body, which has given an irrevocable undertaking to that body to grant a licence to third parties on fair, reasonable and non-discriminatory (‘FRAND’) terms, does not abuse its dominant position, within the meaning of that article, by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as:

–        prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and

–        where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.

2.      Article 102 TFEU must be interpreted as not prohibiting, in circumstances such as those in the main proceedings, an undertaking in a dominant position and holding a patent essential to a standard established by a standardisation body, which has given an undertaking to the standardisation body to grant licences for that patent on FRAND terms, from bringing an action for infringement against the alleged infringer of its patent and seeking the rendering of accounts in relation to past acts of use of that patent or an award of damages in respect of those acts of use.

[Signatures]