Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, May 19, 2008

The Stochastic Relationship Between Patents and Antitrust

Posted by D. Daniel Sokol

Alan Devlin of Latham & Watkins has an interesting article on The Stochastic Relationship Between Patents and Antitrust.

ABSTRACT: This article develops a novel theory by which to construe the interaction between the patent and antitrust laws. The rules of these respective disciplines are often portrayed as conflicting in means, yet harmonious in purpose. Although the intellectual property and antitrust laws have ostensibly divergent views on the role of competition, their interaction is typically limited to one of constraint. More specifically, antitrust rules have been (poorly) designed to limit the exclusivity inherent in a patent grant to the claimed invention alone. This article, however, articulates a new vision for the role of antitrust: it posits that competition rules operate as a stochastic regulator of exclusionary patent rights. The Sherman Act constrains patentees' efforts to positively transform the probabilistic nature of their intellectual property rights through contract. Yet, because the empirical calculation of optimal innovation rates is an elusive, if not Sisyphean, task, the normative desirability of the foregoing fact is abstruse. Nevertheless, policymakers' inability to pinpoint precisely the ex post rewards required to trigger ideal levels of ex ante investment need not bind our hands to inaction. If contemporary rates of innovation are deemed acceptable (even if not necessarily perfect), there may be ways to trigger equivalent levels of ex ante investment with lower social cost. In this regard, it is clear that currently enacted competition rules significantly accentuate the uncertainty surrounding patents' apotropaic effect. Concluding that contracts securing otherwise stochastic rights may be highly desirable, the article calls for the incorporation of this concern into contemporary rules, with modest substantive effect, and further advocates a qualified antitrust immunity for "gold-plated" patents if and when they are introduced.

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