Essential facilities doctrine

The essential facilities theory, inspired by the essential facilities doctrine of US law, refers to a form of abuse of a dominant position consisting in refusing access to a resource indispensable for carrying on a competing activity in a neighbouring market. It is applied on the basis of Article 102 TFEU and Article L. 420-2 of the French Commercial Code. Originally developed in relation to physical infrastructure, it has been extended to intellectual property rights, where it may lead to an obligation to license.

Conditions for compulsory access

The EU courts make the characterisation subject to strict cumulative conditions.

• the resource is indispensable, in the absence of any actual or potential economically viable substitute,
• the refusal is likely to eliminate all competition in the neighbouring market,
• the refusal is not objectively justified,
• where the resource is protected by an intellectual property right, the refusal prevents the emergence of a new product for which there is potential demand, or limits technical development to the prejudice of consumers.

Application to intellectual property rights

Extending the theory to exclusive rights is delicate, since a refusal to license lies at the very core of the right. Case law accepts it only exceptionally, for rights protecting a de facto market standard, such as television programme listings, a data structure adopted by an entire industry or information necessary for software interoperability. The new product condition reflects the requirement that the party seeking access must not merely reproduce the holder’s offering.

Effects and interaction with other mechanisms

Where the conditions are met, the competition authority or the court may order access on reasonable and non-discriminatory terms, which amounts to a licence imposed by competition law. The mechanism differs from the compulsory licence under the French Intellectual Property Code, which is governed by its own cases and procedure, and from the regime of standard essential patents, governed by the holder’s FRAND licensing commitment. It may be invoked before the Autorité de la concurrence, before the European Commission or, by way of defence, in an infringement action.

Key points

The essential facilities theory makes it possible to impose access to an indispensable resource, including one protected by an intellectual property right, but only in exceptional circumstances. The indispensability of the resource and the elimination of all competition are the most difficult conditions to establish. Before invoking the theory, the absence of any viable alternative should be demonstrated and the new product that access would make it possible to develop should be specified. Holders should document the objective justification for their refusal.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats handles FRAND licences, standard essential patents and contracts bearing on patents, in advisory work as well as in litigation.

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