Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Wednesday, October 15, 2014

Do More Patents Mean Less Entry?

Henri De Belsunce, Max Planck Institute for Innovation and Competition asks Do More Patents Mean Less Entry?

ABSTRACT: This paper investigates the entry decision of a firm into a market that is protected by a patent. It shows how entrants use the possibility to study existing prior art before taking their entry decision. Studying prior art reduces the information asymmetry that arises due to the fact that patent strengths are private information. The paper analyses the incumbent’s incentives to pursue a raising rivals’ cost strategy by excessive patenting. The application of the model shows that the treble damages doctrine reduces the incentives for an incumbent to patent excessively.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Standard Essential Patents, Trolls and the Smartphone Wars: Triangulating the End Game

Daryl Lim, John Marshall Law has a paper on Standard Essential Patents, Trolls and the Smartphone Wars: Triangulating the End Game.

ABSTRACT: Few legal issues in recent years have captured the public’s attention more powerfully than litigation over standard essential patents (“SEPs”). This Article explains how SEP litigation overlaps with two other major centers of patent litigation – litigation involving smartphones and patent assertion entities (“PAEs”). It observes that attempting to pre-empt patent hold-ups by imposing blanket ex ante disclosure obligations and royalty caps on standard setting organizations (“SSOs”) is misdirected and counterproductive. Instead, the solution lies in clear and balanced rules to determine “fair, reasonable and non-discriminatory” (FRAND) royalties and injunctive relief. This solution will help parties make more realistic assessments of their options and help adjudicators resolve SEP disputes.
Correctly framed, implementers bear the burden of proving the breach of a FRAND commitment. FRAND royalties should, in the absence of comparable licenses, focus on apportioning the profits based on the relative importance of the patented technology in the covered product. Royalties should be measured at the time the standard is set but generally should not be discounted for the possibility of invalidity and non-infringement. Discriminatory licenses can be hard to detect, but targeted initiatives and improved transparency would make the task easier. Injunctions should be granted based the wording and intent of the relevant FRAND commitment, conduct of the parties, and proof that the technology drove the sales of the component or product on which the relief is sought. More broadly, courts must understand both the limits and opportunities of the antitrust and patent laws.  While useful in arresting ex ante misconduct, antitrust is largely irrelevant to SEP litigation; patent law has a role in both improving patent quality and deterring vexatious litigation.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Frequently Asked Antitrust Questions, Second Edition

The ABA Section of Antitrust Law has published Frequently Asked Antitrust Questions, Second Edition.

BOOK ABSTRACT: Frequently Asked Antitrust Questions is a tremendous resource for practitioners who need quick, plain language answers to questions that arise every day for every business. The book is useful both for the non-expert who needs easy access to the basic rules of the road and lawyers with significant experience in antitrust law who need to respond quickly and efficiently to questions from clients. This revision includes two new chapters addressing emerging issues in the areas of intellectual property and antitrust compliance. The prior edition's discussion of trade associations has also been expanded and now makes up its own chapter. Other chapters also contain expanded material, including additional references and footnotes for practitioners who need to delve deeper into specific issues. Expanded topics include:

  • communications with competitors,
  • dealing with antitrust authorities in the United States and abroad,
  • the Robinson-Patman Act and other pricing issues,
  • vertical arrangements between customers and suppliers, and more.

Even with this increased content, however, Frequently Asked Antitrust Questions remains a user-friendly and unique go-to resource for attorneys of all experience levels.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2014

Market Structure Control and Restriction of Anticompetitive M&As and 'Concentration' of Enterprises' Market Power in BRICS Countries: General Approaches (Asia - China and India, Euro-Asia - Russia and Africa - South Africa - In Focus)

Ksenia Belikova, Peoples' Friendship University of Russia discusses Market Structure Control and Restriction of Anticompetitive M&As and 'Concentration' of Enterprises' Market Power in BRICS Countries: General Approaches (Asia - China and India, Euro-Asia - Russia and Africa - South Africa - In Focus).

ABSTRACT: The articles represents a research of general approaches of BRICS countries legislation and legal order to counteraction against such an anticompetitive market strategy as abuse of dominant market power in legal orders of China, India, Russia and South Africa. The author pays particular attention to current legislation of BRICS countries in the field of competition protection with regard to provisions related to market structure control and restrictions of anticompetitive mergers & acquisitions (further on - M&As) and “concentration” of enterprises' market power control fixed by Asian (China and India), Euro-Asian (Russia) and African (South Africa) legal orders. The analysis of substantial contents of laws on competition and monopolies of the above mentioned BRICS countries and relevant case law shows the existence of a number of conventional generally acknowledged (unified) provisions and norms. At the same time there are specific features making them different. These generally acknowledged provisions and peculiarities will be in focus in the article.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

The Cost of Antitrust Law to Malaysia's Financial Services Sector

Bryane Michael, University of Hong Kong Faculty of Law; University of Oxford; Columbia Law School - Centre for the Advancement of Public Integrity, Mark Williams, Hong Kong Polytechnic University, and Susila Munisamy, University of Malaya analyze The Cost of Antitrust Law to Malaysia's Financial Services Sector.

ABSTRACT: Judging by only economic incentives, Malaysian financial institutions (particularly banks) should completely ignore the Competition Act. The data show that Malaysian banks probably benefit from anti-competitive behaviour. Political and family connections likely facilitate such behaviour. Given that the Malaysian Competition Commission will likely lack the resources to investigate and sanction anti-competitive behaviour in Malaysia’s banking industry – the banks’ best response to the Act probably consists of ignoring it. Maximum fines of 10 million ringgit and revenue-tied penalties of only 10% of worldwide revenue mean that banks still have strong incentives to engage in anti-competitive behaviour and to pay any low fine that might be levied. The best compliance programme for banks in Malaysia likely consists of actions that avoid detection rather than detecting and preventing anti-competitive behaviour. Private rights of action are unlikely to provide any stronger economic incentives for Malaysian banks to adopt strong antitrust compliance programmes and internal audit programmes. By staying the course, Malaysian banks can continue to earn about 15 billion ringgits (approximately US $4.6 billion in anti-competitive rents).

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Tacit Collusion under Multimarket Contact with Identical Firms and Markets

Niklas Horstmann, Karlsruhe Institute of Technology and Jan Kraemer, University of Passau; Karlsruhe Institute of Technology identify Tacit Collusion under Multimarket Contact with Identical Firms and Markets.

ABSTRACT: According to Bernheim and Whinston’s (The RAND Journal of Economics 21 (1), 1990) irrelevance result, multimarket contact may not facilitate tacit collusion if identical firms meet in identical markets. In contrast, we offer a novel behavioral explanation why multimarket contact may facilitate tacit collusion for this case. By means of an economic laboratory experiment without explicit communication, we show that a firm can implicitly communicate the collusive intention through its price setting behavior, i.e., by price signaling. We find that multimarket contact facilitates tacit collusion because, in contrast to single market contact, firms can send differentiated price signals.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Market Structure and Political Law: A Taxonomy of Power

Zephyr Teachout, Fordham University School of Law and Lina Khan, Yale University - Law School address Market Structure and Political Law: A Taxonomy of Power.

ABSTRACT: The goal of this Article is to create a way of seeing how market structure is innately political. It provides a taxonomy of ways in which large companies frequently exercise powers that possess the character of governance. Broadly, these exercises of power map onto three bodies of activity we generally assign to government: to set policy, to regulate markets, and to tax. We add a fourth category — which we call "dominance," after Brandeis — as a kind of catchall describing the other political impacts. The activities we outline will not always fit neatly into these categories, nor do all companies engage in all of these levels of power — that is not the point. The point is that Bank of America and Exxon govern our lives in a way that, say, the local ice cream store in your hometown does not. Explicitly understanding the power these companies wield as a form of political power expands the range of legal tools we should consider when setting policy around them.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Promoting Innovation

Spencer Weber Waller, Loyola University of Chicago, School of Law - Institute for Consumer Antitrust Studies and Matthew Sag, Loyola University Chicago School of Law are Promoting Innovation.

ABSTRACT: The economist Joseph Schumpeter recognized two essential facts of modern capitalism: the sudden displacement of the old by the new, a process he eloquently termed “creative destruction”; and the significance of innovation over incremental improvements in allocative efficiency to long-run economic growth. The twin Schumpeterian insights are now well accepted. How these insights should be incorporated into laws regulating the marketplace, such as antitrust and intellectual property, is far less clear.
Antitrust minimalists and skeptics tend to equate Schumpeter with laissez faire. After all, if even the most entrenched market behemoths are vulnerable to seismic shifts in technology, are not all supposed monopolies merely fleeting? We disagree. This view misreads Schumpeter and misunderstands markets and business strategy. Modern businesses are well aware of the threat of disruptive outsiders and, left unchecked, will do their utmost to prevent future waves of creative destruction from threatening the status quo. We propose thinking of creative destructive and competition policy as a two-stage process rather than a single event where the victor enjoys the spoils of innovation indefinitely without legal constraints. Instead, competition law as we currently understand it would remain in place while being somewhat more forgiving as to the acquisition of market power, yet still vigilant in policing the maintenance of such power.
We focus on historical, current, and hypothetical examples from US and EU competition and intellectual property law to show how contemporary law has already incorporated many of these insights and the law can maximize consumer welfare by doing so more thoroughly. Under such a two-step approach, some areas of antitrust and IP law would expand, some would contract, but all areas of the law would more clearly promote innovation and help create real Schumpeterian antitrust.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, October 13, 2014

Competition and macroeconomic outcomes factsheet

The OECD has produced a Competition and macroeconomic outcomes factsheet.

ABSTRACT: When customers can choose between different providers, they benefit and so does the economy as a whole. Customer's abilityto choose forces firms to compete with one another which leads to increased productivity, more innovation and economic growth.

However, it can be challenging to measure and find evidence of the link between competition policy and macroeconomic outcomes - such as productivity, innovation and growth, as well as other determinants of well-being such as inequality and employment.

This factsheet summarises existing evidence on the wider economic effects of competition and competition policy and helps competition agencies all over the world to advocate their work. The factsheet was built in form of a narrative and provides suggestions and references to the existing evidence. It was produced as part of the OECD work on the evaluation of competition agencies' interventions.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

The Role of 'Big Data' in Online Platform Competition

Andres V. Lerner, Compass Lexecon discusses The Role of 'Big Data' in Online Platform Competition.

ABSTRACT: The collection of user data by providers of online services recently has become a popular topic in debates about the application of competition policy to online markets. At issue is whether the collection of large amounts of data — sometimes referred to as “big data” — in particular data collected from users, leads to markets “tipping” to dominant online platforms and, as a result, whether online markets merit earlier and more aggressive antitrust intervention. Concerns regarding the collection of user data are based on the assumption that there is a strong “feedback loop” — that online providers need a large base of users from whom to collect data, and large amounts of user data in order to compete effectively for users and advertisers. In this article, I offer an analysis of the assumptions behind arguments that the collection of user data by large online platforms creates insurmountable scale advantages and thus leads to “tipping” to dominant platforms. The overall conclusion is that calls for greater antitrust scrutiny of the data collection efforts of large online platforms are based on unsupported assumptions rather than fact-based inquiry. User data is a valuable input into the provision of online services. The collection of user data is conducted by firms of all sizes, by firms offering a wide array of services to users, by both new entrants and established players, and by online as well as traditional offline (“brick-and-mortar”) firms. Online providers collect user data in order to improve the services offered to users and to monetize those services effectively through targeted advertising, which leads to valuable services being offered to users at subsidized prices, often for free. As a result, the collection of user data by online providers is an important part of the competitive process and generates sizable consumer benefits. However, the conclusion that the benefits of user data lead to significant returns to scale and to the entrenchment of dominant online platforms is based on assumptions unsupported by real-world evidence. While, in theory, control of an “essential” input can lead to the exclusion of rivals, a careful analysis of the evidence indicates that such concerns are unwarranted for many online businesses that have been the focus of the “big data” debate. As an initial matter, no single online provider controls all, most, or even a significant amount of user data. And, in contrast to economic theories about foreclosure of rivals through the control of an essential input, incumbent online providers do not have explicit or de facto exclusivity over user data. Moreover, competitive success is not dictated by control over vast troves of user data. The quality of services offered to users, as well as the ability to monetize effectively by attracting advertisers, is driven by many other inputs including, perhaps most importantly, engineering resources and technological investments and innovation. While there are economies of scale in the provision of many online services, as in most businesses, these economies are subject to rapidly diminishing returns. Consistent with these economic characteristics of online markets, there is no evidence that the vast majority of online markets have “tipped” to dominant platforms.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Mandating Final-Offer Arbitration of FRAND Royalties for Standard-Essential Patents

Greg Sidak (Criteroen Economics) has a new paper on Mandating Final-Offer Arbitration of FRAND Royalties for Standard-Essential Patents.

ABSTRACT: Mark Lemley and Carl Shapiro propose that standard-setting organizations (SSOs) mandate that their members henceforth submit to binding, final-offer arbitration (commonly called “baseball arbitration”) to set fair, reasonable, and nondiscriminatory (FRAND) royalties in licensing disputes concerning standard-essential patents (SEPs). SSOs should reject this proposal. It does not rest on sufficient facts or data, nor does it apply intellectually rigorous principles and methods of law and economics in a reliable manner. This is not to say that the voluntary use of arbitration to resolve FRAND licensing disputes is inherently problematic. However, the incremental efficiency that Lemley and Shapiro claim that their proposal would achieve over litigation or conventional commercial arbitration is illusory. For one, it is much harder to value a portfolio of SEPs over the span of five years than to value an individual baseball player for a single season. The Lemley-Shapiro version of mandatory baseball arbitration would not shed light on the question of what constitutes a FRAND offer. To the contrary, Lemley-Shapiro arbitration by design collapses questions of validity, infringement, and essentiality of the patent to the standard into a single damage calculation in which the arbitrator’s sole responsibility is to choose one of two disparate estimates of reasonable royalties. Yet, a FRAND offer contains not only a price, but also terms and conditions that (because they are nuanced and possibly tailored to the unique needs of an individual licensee) do not lend themselves to being easily standardized, let alone summarized in a single number, as the description of Lemley-Shapiro arbitration might incorrectly lead some to assume. Lemley-Shapiro arbitration would not say whether a royalty offer was fair, reasonable, and nondiscriminatory. Lemley and Shapiro claim that their arbitration proposal offers “best practices” for SSOs. That label is unsupported and misleading. The package that Lemley and Shapiro call “best practices” is in fact not a narrow proposal for binding baseball arbitration but rather a roadmap to redefine patent rights in a manner that would transfer wealth from inventors to infringers. Embedded within Lemley-Shapiro arbitration are normative changes in patent law and policy that Lemley and Shapiro have previously advocated but that SSOs and courts have not adopted. An SSO that adopted Lemley-Shapiro arbitration could expect its members to commercialize their next generation of inventions outside that particular SSO, if not outside an open standard altogether.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Jean Tirole Wins Nobel Prize in Economics

Finally! Jean Tirole has won the Nobel Prize in economics.  Tirole's contributions to IO have been incredible. He helped bring the game theory revolution to the field.  Tirole revolutionized industrial organization with his famous textbook.  His articles and books have created the foundation of much contemporary study in antitrust and regulation. 

Just this weekend I had to reread his chapter of Foreclosure (with Patrick Rey) from the Handbook of Industrial Organization III for a project.  The writing was both concise and brilliant. His writing over the years on all issues relating to IO has made his contribution to the field unique.  This is a wonderful award for Tirole and for all of the Toulouse faculty.

 

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Innovation, innovation strategy and survival

Stephen Roper (Warwick University Business School) and Helen Xia (Loughborough University)explore Innovation, innovation strategy and survival.

ABSTRACT:  Innovation has a recognised effect on survival. Undertaking more risky innovation, for example, may increase the risk of business failure, while more incremental innovation may reduce failure risk. Here, we investigate how firms’ innovation strategy choices – which may reduce the riskiness or costs of innovation and/or increase the innovation rewards – moderate the innovation-survival relationship. Our analysis is based on UK Community Innovation Survey data matched with survival data from firms’ published accounts. We are able to match nearly 80 per cent of UK CIS respondents. Contrary to expectations we find that innovation partnering and intellectual property protection have little or no moderating effect on the innovation-survival relationship. However, receiving public support for innovation has significant positive moderating effects. This suggests the notion of “survival additionality”, i.e. firms rece! iving public support derive more persistent benefits from innovation than firms which did not receive public support. Specifically, firms which receive public support for innovation are 2.7 per cent more likely to survive for eight years than firms which innovate but without public support. This result is strongest for product and service rather than process change, with implications for innovation policy design and evaluation.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

On patent strength, litigation costs, and patent disputes under alternative damage rules

Bertrand Chopard, EconomiX UMR 7235 CNRS & Paris Ouest Nanterre, Thomas Cortade, BETA UMR CNRS 7522 and Universites de Lorraine et de Strasbourg, Eric Langlais, EconomiX UMR 7235 CNRS & Paris Ouest Nanterre provide thoughts On patent strength, litigation costs, and patent disputes under alternative damage rules.

ABSTRACT: This paper analyzes the effects of two damage rules (Lost Profit vs Unjust Enrichment) mainly used by Courts in patent litigations. In our model, the Infringer either is a mere imitator of the Patentee or introduces incremental innovations, and litigation costs are private information such that a pretrial settlement may be better for both litigants. We show that the Unjust Enrichment rule yields less trials than the Lost Profit one. But regarding three main objectives, Patentee's protection, incentives to invest in R&D, and social welfare maximization, we find that no rule is better than the other generally speaking. Our model also allows to emphasize how the combination between the size of litigation costs, the negotiation gains and the IPR strength, shapes the incentives to enforce as well infringe a IPR, although in a way specific to each rule.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Saturday, October 11, 2014

Breakfast and Marketing: The Case of Hello Kitty

The comment this morning from my two year old when I showed her her new yougurt (Hello Kitty from Yoplait) was the precious, "Oh my God! It is so beautiful because it is Hello Kitty and pink."  My girls cannot get enough Hello Kitty.  We have dolls, backpacks, shirts, etc. but have not shared with them the controversy that Hello Kitty may not be a cat.

What might be next in terms of food and marketing?  Hello Kitty cereal? Apprently so.  Hello Kitty pop tarts?  Yes - at one time.  We'll stick to the more nutricious yogurt option.

Update 10/12/14

Apparently there are Hello Kitty smartcars (including one driven by former NFL player) and even a long range Hello Kitty jets (used by Taiwan based Eva Air).  The next time I fly to Taipei, you know what airline I am taking.

October 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, October 10, 2014

Theoretical Perspectives on Localised Knowledge Spillovers and Agglomeration

Samuli Leppala (Cardiff Business School) provides Theoretical Perspectives on Localised Knowledge Spillovers and Agglomeration.

ABSTRACT: There is substantial empirical evidence that innovation is geographically concentrated. Unlike what is generally assumed, however, it is not clear that localised knowledge spillovers provide a theoretically valid explanation for this. Studying spillovers of cost-reducing technology between Cournot oligopolists we show that 1) localised knowledge spillovers of any level do encourage agglomeration, but 2) whether this leads to higher levels of effective R&D depends on the type and level of knowledge spillovers, the number of firms, and the industry's R&D efficiency.

October 10, 2014 | Permalink | Comments (0) | TrackBack (0)

One-seller assignment markets with multiunit demands

Francisco Robles (Facultat d'Economia i Empresa; Universitat de Barcelona (UB)) and Marina Nunez (Facultat d'Economia i Empresa; Universitat de Barcelona (UB)) focus on One-seller assignment markets with multiunit demands.

ABSTRACT: We consider one-seller assignment markets with multi-unit demands and prove that the associated game is buyers-submodular. Therefore the core is non-empty and it has a lattice structure which contains the allocation where every buyer receives his marginal contribution. We prove that in this kind of market, every pairwise-stable outcome is associated to a competitive equilibrium and vice versa. We study conditions under which the buyers-optimal and the seller-optimal core allocations are competitive equilibrium payoff vectors. Moreover, we characterize the markets for which the core coincidences with the set of competitive equilibria payoff vectors. When agents behave strategically, we introduce a procedure that implements the buyers-optimal core allocation as the unique subgame perfect Nash equilibrium outcome.

October 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Nothing so certain as your anchors? A consumer bias that might lower prices

Barna Bako and Andras Kalecz-Simon,Corvinus University of Budapest Faculty of Economics ask Nothing so certain as your anchors? A consumer bias that might lower prices.

ABSTRACT: Anchoring is a well-known decision-making bias: original guesses for a certain question could act as anchors and could influence our final answers. Reference prices - in a similar fashion - can lead to a bias in consumer valuations, and thus consumer demand will be coherent but not one derived from a utility framework. In our paper we investigate the effect of the existence of anchoring on how oligopolistic firms might change their pricing strategy. More specifically, we analyze the effect of anchoring on pricing when differentiated firms compete in Bertrand fashion. We show that if the anchoring effect is smaller than a threshold the average price is lower compared to the no-anchoring case.

October 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Consumer Price Search and Platform Design in Internet Commerce

Consumer Price Search and Platform Design in Internet Commerce.

Michael Dinerstein (Stanford), Liran Einav (Stanford), Jonathan Levin (Stanford), and Neel Sundaresan (EBay) analyze Consumer Price Search and Platform Design in Internet Commerce.

ABSTRACT: Search frictions can explain why the "law of one price" fails in retail markets and why even firms selling commodity products have pricing power. In online commerce, physical search costs are low, yet price dispersion is common. We use browsing data from eBay to estimate a model of consumer search and price competition when retailers offer homogeneous goods. We find that retail margins are on the order of 10%, and use the model to analyze the design of search rankings. Our model explains most of the effects of a major re-design of eBay's product search, and allows us to identify conditions where narrowing consumer choice sets can be pro-competitive. Finally, we examine a subsequent A/B experiment run by eBay that illustrates the greater difficulties in designing search algorithms for differentiated products, where price is only one of the relevant product attributes.

October 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, October 9, 2014

Antitrust and the Patent System: A Reexamination

Herb Hovenkamp (Iowa) explores Antitrust and the Patent System: A Reexamination.

ABSTRACT: Since the federal antitrust laws were first passed they have cycled through extreme positions on the relationship between competition law and the patent system. Previous studies of antitrust and the patent system have generally assumed that patents are valid, discrete, and generally of high quality in the sense that they further innovation. As a result, increasing the returns to patenting increases the incentive to do socially valuable innovation. Further, if the returns to the patentee exceed the social losses caused by increased exclusion, the tradeoff is positive and antitrust should not interfere. If a patent does nothing to further innovation, however, then any amount of social loss from increased monopoly is harmful. In that case there is no additional benefit from innovation down the road. Since only a subset of patents are worthless, however, this naturally invites the question whether considerations of patent social value are a reasonable element of competition policy.
At various points in their history both antitrust law and patent law have engaged in considerable overreaching. Beginning in the late 1970s, however, antitrust law went through a lengthy and still ongoing process of court-imposed discipline that has brought its rules more closely into alignment with its stated concern, which is increasing consumer welfare by promoting competition. Antitrust cases are far more difficult to win, the per se rule is less frequently used, and we have considerably heightened the requirements of allegation and economic proof. By contrast, patent law has continued on an expansion course that is only now showing some signs of abating. Patent law largely still awaits the consumer welfare revolution that has already occurred in antitrust doctrine. Writing in the mid-sixties Ward S. Bowman and Robert H. Bork warned of a "crisis in antitrust," presaging the significant reform that was to follow. Today we are facing a crisis in patent law.
This article first examines antitrust and patent law as regulatory institutions with legislative mandates to regulate in their given areas, but subject to limitations that all regulatory institutions face -- namely, high cost, imperfect information, and special interest capture. One failed approach to this regulatory enterprise was the view that the patentee acts improperly when it engages in activity "beyond the scope" of the patent. The flip side is that activity that is not "beyond the scope" is permissible. A more sensible way to view the interaction between the patent and antitrust regulatory systems is to divide patent activity into two parts: pre-issuance and post-issuance conduct. Secondly one must look for explicit statutory authorization of the conduct in question. Post-issuance conduct that is not statutorily authorized is generally amenable to antitrust scrutiny. Next I examine the antitrust and patent systems as regulatory institutions, finding that today the presence of special interest capture is far stronger in the patent system than the antitrust system, although that may not always have been the case. After that I turn to the very different ways that antitrust and the patent system approach economic policy. The antitrust system is empirical, market based, and acutely sensitive to market diversity. In sharp contrast, the patent system is dominated by a much more myopic set of queries concerned with the boundaries of individual property rights and largely indifferent to market performance and diversity.
Finally this article develops a set of rules for evaluating specific disputes that implicate both antitrust and the patent system, focusing mainly on the difference between pre-issuance patent conduct, which is intensely regulated, and post-issuance conduct; as well as the differences between practices that are expressly authorized by the Patent Act and those that are not. Given the level of producer capture exhibited by the Patent Act, the search for express authorization is particularly important. A regulatory statute that bargains away the public interest must be followed, but silence and ambiguity should be construed against the interests in control of the legislative process. These principles are applied to a number of practices, including price-fixing in patent licenses, vertical practices, pay-for-delay settlements and other naked market division agreements, and improper patent enforcement actions.

October 9, 2014 | Permalink | Comments (0) | TrackBack (0)