Tuesday, July 16, 2013
The business model of patent assertion entities in IT: unilateral restraints of competition or business as usual?
Posted by D. Daniel Sokol
ABSTRACT: This article aims to determine whether the business models of patent assertion entities (PAE) can qualify as restraints of competition under European competition law, and under which circumstance. To do so, the article highlights the main characteristics of the PAE business model and articulates a theory of harm compatible with the competition law of the European Union (EU). The article will consider the framework of the Treaty on the Functioning of the European Union, 2008 O.J. C-115/47 (TFEU), particularly Article 102 TFEU as regards unilateral restraints of competition. The framework of Article 101 TFEU on concerted practices remains relevant, but will not be the main focus of this article. In sum, a general theory of harm can be articulated as regards PAE activities. Assertions by PAEs take advantage of the hold-up value of a technology, ie PAEs extract revenues based on the prospect of an infringement suit. By doing so, PAEs hinder dynamic competition by reducing incentives to innovate. They also inhibit static competition by increasing prices and potentially removing products from the market. As such, European competition law is applicable within the framework described in this article.