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The Warsaw Voice » Law » January 16, 2008
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Software Development and Antitrust Law
January 16, 2008   
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Over the last few years there has been a sea change in relations between antitrust law and software producers. No longer can IT companies deflect antitrust concerns by sheltering behind intellectual property (IP) rights. Last year brought two developments in this area: the resolution of the landmark Microsoft case and a uniquely Polish take on the same problem.

On Sept. 17, 2007 the European Court of First Instance upheld the European Commission's decision in the Microsoft case imposing the highest ever fine of 497 million euros for the bundling of Windows with Media Player and refusing to supply interoperability protocols to a competitor. The U.S. Justice Department was openly critical of the decision, saying it may chill competition and innovation. Only three months earlier, the Chairman of the Polish Office for Competition and Consumer Protection issued a similar decision concerning the provision of management software for Polish medical clinics.

In 2004, a provider of software for medical clinics, Klif, filed an antitrust complaint against its competitor, Kamsoft, and the National Health Fund (NFZ). Klif accused them of entering into an agreement designed to limit alternative producers' access to the market in management software for medical clinics. Klif argued that they eliminated it from the market by not providing data needed for the interoperability of software systems.

The management software used by clinics was operated on a client-to-host basis, with the NFZ acting as host and the medical clinics as clients. The server software for the NFZ was provided by Kamsoft and ComputerLand, each servicing one half of NFZ branches. The competition authority deduced from this that Kamsoft had a market share of 50 percent, which deprived it of the advantage of any exemptions from antitrust rules.

The authority found that the NFZ and Kamsoft restricted competition by giving clinics strong incentives to choose Kamsoft's program and by hindering the interoperability of Kamsoft's server software with competitors' client software. Kamsoft's client software was provided free of charge to clinics, which were persuaded to use it on an exclusive basis due to incompatibility problems with competitors' products.

Lying at the heart of the matter was the failure to allow alternative software providers access to information regarding the format of the transmitted data. The NFZ published the information too late for Kamsoft's competitors to adapt their client programs. Kamsoft, as the producer of the server application, was in possession of the data long beforehand.

In the Microsoft case, the European Commission formulated the concept of a leveraging infringement, where a firm takes advantage of its dominance in one market to extend that position to adjacent markets. Similarly, the Polish authority held that Kamsoft's privileged position in the server software market allowed it to undertake activities strengthening its market share in the secondary client software market.

Both decisions additionally concern the issue of interoperability of software. They maintain that circumstances may exist where IP right holders are under obligation to give their competitors access to their intellectual property. Competition authorities argue that the need to ensure interoperability with the dominant firm's server software, as a prerequisite for competition in the secondary client software market, overrides IP rights.

From a competition-law point of view, Kamsoft was permitted to define certain technical requirements that the client software had to meet to enable compatibility of the data exchanged between the NFZ and the clinics. It was also entitled to implement these requirements to its client software, so that full interoperability between its own products was ensured. What Kamsoft could not, however, in the competition authority's opinion do, was to prevent competitors from applying the developed standards for data, by failing to provide these standards in a timely fashion. On the one hand, as the authority argues, this lack of interoperability drove competitors out of the market. On the other hand, however, one has to ask if IT companies would have any incentive in the future to develop innovative programs if they knew that antitrust rules could force them to share the results of their work with their competitors.

In the escalating battle between the broad protection afforded by IP rights and the limitations imposed by antitrust rules both the EU and Polish competition authorities scored a victory last year. Unless the current year brings any new developments, software developers will have to bear in mind that a difficult balancing act is needed to establish the limits between the rightful exploitation of IP rights and their abuse in breach of antitrust laws.

Paweł Wanasz
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