Tuesday, June 7, 2005

Antitrust and IP: A View From The DOJ

Hewitt Pate, the current head of the antitrust division in the Department of Justice, spoke on antitrust and intellectual property last week at the 2005 EU Competition Workshop in Florence, Italy.   His talk was subtitled Licensing Freedom and the Limits of Antitrust.  Here's a sample:

"Sound antitrust enforcement condemns anticompetitive conduct. It does not attempt to regulate the amount of competition in a general sense or address vague questions of fairness. It does not attempt to create an affirmative incentive for procompetitive conduct, by promising any specific reward or legal recognition for competitors who play by the rules. It focuses on specific anticompetitive actions, as judged by their effects on markets and consumer welfare. Although this narrow focus is a limitation, at the same time it is a great strength--it makes possible objectivity, predictability, and transparency.

"Intellectual property laws, by contrast, provide a complex system of affirmative rewards for an important type of procompetitive behavior--innovation. They take consumer welfare into account, but in different ways than does antitrust. First, they reward innovators with exclusive rights that serve as an incentive to bring new and improved goods and services to market. The hope is that such innovations will lead to increased competition and increased consumer welfare in the long term. Second, they strike a balance between these rights and certain types of public access, such as fair use under copyright law or the disclosure requirement and the limited term of patents. They also include a fail-safe procedure under which a rival or a customer can sue to declare an intellectual property right noninfringed or unenforceable for a number of reasons. So the legislature, via the IP laws, has struck a balance between the rights of IP owners, the rights of consumers, and concerns for a competitive marketplace. This may or may not be the correct balance; nevertheless, it is the one the legislature has chosen.

"It is important to understand precisely what reward is offered by the IP laws. Each type of IP right provides "exclusivity" for its owner. What does this exclusivity mean? It does not mean a right to commercialize any invention or creation. The owner of an improvement patent, for example, may find itself blocked from practicing its own patent if it cannot secure permission from the original patentee. Instead, what IP rights provide is the right to exclude others. The right to exclude is not simply one of the rights provided by intellectual property, it is the fundamental right, the foundation upon which the entire IP system is built. "


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