Antitrust & Competition Policy Blog

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

Monday, April 8, 2013

Robin Cooper Feldman on Patent Assertion Entities

Posted by Robin Cooper Feldman [1]

This comment begins from the perspective that at least some behavior in modern intellectual property monetization is problematic. There may be differing opinions on which of the behavior is
problematic or how much of the behavior is problematic. (The piece from which this comment is adapted describes a variety of modern monetization behaviors that I find troubling.) To the extent one agrees with the perspective that at least some of the behavior has the potential to create dysfunction in markets or damage innovation, can antitrust law respond effectively? I believe those doctrines can be effective vehicles to address some behaviors, if they are adapted to take into account the shape of emerging intellectual property markets.

One might imagine that the answer to many of the modern intellectual property shenanigans would lie in the notion of preventing parties from abusing the court system. After all, the heart of some of these schemes involves threatening or bringing less than meritorious lawsuits to damage or harass competitors. Antitrust actions based on abusive use of the legal system, however, are unlikely to provide a fruitful path unless the Supreme Court is willing to significantly adjust the
legal precedents in this arena.[2]

The problem begins with the Noerr-Pennington doctrine, which protects the rights of citizens to petition the government without fear of antitrust liability.[3] The doctrine originally developed to protect attempts to persuade the legislative branch to adopt a law, or the executive branch to enforce a law, in a way that would have an anticompetitive effect.[4] Over time, the doctrine has expanded to protect the right to petition the courts.[5]

There is an exception to the Noerr-Pennington doctrine for sham litigations. The sham litigation doctrine attempts to prevent parties from using the governmental process itself as an anticompetitive weapon.[6]  The problem for intellectual property cases involves the elements that must be established to demonstrate sham litigation. Specifically, in the 1993 Professional Real Estate case, the Supreme Court held that in order to show that legal actions constitute sham litigation, those actions must be both 1) objectively baseless, in the sense that no reasonable litigant could realistically expect success on the merits, and 2) subjectively baseless such that the lawsuit conceals an attempt to use administrative or judicial processes to interfere with a competitor.[7]

A court is allowed to examine the subjective portion of the evidence only if the court first concludes that no reasonable litigant could have expected to succeed.[8] Given the uncertainties in intellectual property law, litigants can almost always establish some possibility that one might succeed—at least enough to avoid a finding that the filing was entirely baseless.

Even without the sham litigation doctrine, however, antitrust may provide other avenues. Private or public antitrust authorities may be able to bring actions based on anticompetitive actions other than filing lawsuits. Effective antitrust enforcement in this area will require a shift in the way that we define relevant markets.[9] For example, antitrust authorities examine three different kinds of
markets—markets for goods, technology markets, and innovation markets.[10] In examining markets for goods, authorities will consider the particular goods and their substitutes. Technology markets relate to circumstances in which intellectual property is marketed separate from any underlying products in which it is used. To analyze technology markets, courts will look at particular intellectual property and its close substitutes. Finally, innovation markets consist of the research and development directed at particular new or improved goods. Here, authorities are watching to ensure that existing producers do not strangle potentially competitive technologies in their infancy.

Understanding the full extent of some of the modern intellectual property schemes, however, requires an analysis of a different type of market. One must look at the market for monetization of
patents or for monetization of copyrights as their own markets, in order to properly analyze the impact of certain modern behaviors.[11] One cannot possibly understand the impact of behavior by mass aggregators, for example, without thinking of the market for patent monetization as a

In particular, in looking for potential anticompetitive effects of patent monetization, one must look on three different levels. First, one must consider ways in which a patent monetization entity with market power in a particular intellectual property market may be using, obtaining or maintaining that power in an anticompetitive manner. Second, as described above, one must worry about ways in which patent monetization activities could have anticompetitive effects in the market for patent monetization itself.

Finally, one has to worry about behavior in the market for patent monetization that could affect the underlying individual Intellectual Property markets, even in the absence of actual power in any of those individual markets.[12] In other words, in the modern world of patent monetization, one may not need to have power in a particular IP market to affect prices in that market. It is an odd circumstance, but entirely possible in this new market.            

Consider the following: one no longer needs to have a basket of automobile patents big enough to constitute market power in the auto market in order to affect the auto market. Perhaps all one would need is a small number of patents in that market and a reputation for tough tactics. If one happens to have a large grab bag of assorted patents, so much the better.  (After 50 patents, most licensing targets will cease to examine the patents on their individual merits.)

For example, suppose I have a patent related to the banking industry. My claim that this banking patent actually applies to your automobile production may be pretty farfetched. If I have
enough farfetched claims to cause trouble for you, however, and I am threatening to throw them at you one after another, and I have a reputation for playing hardball, that may be enough for you to pay what I ask. It may also be enough for every other automobile manufacturer to pay what I ask, as well.
Under those circumstances, it is possible that I could affect the market for automobiles without having much to speak of in the way of automobile patents.

Most important, none of these levels of antitrust analysis is possible unless public or private antitrust actors have the information necessary to identify and trace anticompetitive behavior.  Under current circumstances, intellectual property rights holders are able to use the magnified power from their rights to bargain for invisibility and silence. This problem highlights the final limitation in depending on antitrust action to cabin the inappropriate use of intellectual property. Antitrust analysis is concerned with market prices. It is not designed to address concerns over actions in which intellectual property rights are being used for purposes such as hiding embarrassing or illegal conduct, avoiding obligations, or pressuring others into surrendering rights. These are not necessarily market power concerns, and yet the behaviors still may be damaging to society.

[1] Professor of Law & Director of the Institute for Innovation Law, UC Hastings Law. This comment is
adapted from Intellectual Property Wrongs, forthcoming 2013 Stanford Journal of Law, Business & Finance.

[2]See Feldman, supra note 19, at 166-169 (providing a detailed description of problems with the doctrines in sham litigation and antitrust as they intersect with patent law).

[3] Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).

[4]See id.; see also United Mine Workers v. Pennington, 381 U.S. 657 (1965).

[5]See Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 510 (1972).

[6]See City of Columbia v. Omni Outdoor Advertising, 499 U.S. 380 (1991).

[7]See i Prof’l Real Estate Investors v. Columbia Pictures Indus., 508 U.S. 49, 60-61; see (1993); also id. at 58 (characterizing the Cal. Motor Transport Court’s discussion of the difficulty in evaluating whether a claim is baseless as endorsing an objective standard); Cal. Motor Transport v. Trucking Unlimited, 404 U.S. at 513.

[8] See Prof’l Real Estate v. Columbia, 508 U.S. at 60 (“First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.”).

[9]See Feldman, Giants Among Us, supra note 39, at 35-37 (discussing at length the changes necessary for effective antitrust analysis under these circumstances).

[10] U.S. Dept. of Justice and Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of
Intellectual Property, 8-11 (1995), available at [hereinafter 'Antitrust Licensing'].

[11]See Feldman, Giants Among Us, supra note 39, at 35-37 (describing at length the necessity for analyzing monetization markets.)

[12] This discussion in this paragraph and the hypothetical in the following paragraph were first presented in Robin Feldman, Comments on Notice of Roundtable on Proposed Requirements for
Recordation of Real-Party-in-Interest Information Throughout Application Pendency and Patent Term, U.S. Patent & Trademark Office, Jan. 24, 2012, available at

| Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Robin Cooper Feldman on Patent Assertion Entities:


Post a comment