Seminar: Yannis Katsoulacos, Athens University of Economics and Business, Greece.

Title: Optimal Legal Standards for Refusals to License IP: An Welfare Based Analysis.

Abstract:

We adopt a welfare-based, in contrast to a decision-theoretic, approach to the choice of legal standards for refusals to license IPs. We show that if the presumption of legality is not strong, the Commission’s prior in the Microsoft interoperability information case, Decision Theoretic considerations are not helpful for deciding which type of standard is superior. Indeed, a “low false-acquittals” rule, such as the
Microsoft rule, may well be equally effective to a “low false-convictions” rule, such as the “exceptional circumstances” rule, in reducing the
costs of decision errors – contrary to what is suggested by Ahlborn, Evans and Padilla (2005). In this sense we agree with the analysis on this issue of Ritter (2005). However, we show that the latter rule may still be
welfare superior to the former rule due to its welfare improving
deterrence effects. We also show that, when the presumption of legality is strong, both these rules are likely to be
welfare inferior to
Per Se Legality (the standard chosen in
Xerox)
, even though the “exceptional circumstances” test may be superior in decision error terms.