Wednesday, January 24, 2007

Leslie on The Anticompetitive Effects of Unenforced Invalid Patents

Posted by D. Daniel Sokol

We have posted quite a bit in the past few weeks on the Antitrust-IP interface.  Along these lines, I just read a new paper posted on SSRN by Christopher Leslie of Chicago Kent entitled "The Anticompetitive Effects of Unenforced Invalid Patents" that may be of interest.

ABSTRACT: Antitrust law and patent law assume that an invalid patent cannot distort competition unless the patentee enforces the patent by initiating infringement litigation or explicitly threatening to do so. The Article argues that invalid patents can destroy competition - even without such enforcement efforts - by creating legitimate fears of litigation, increasing the costs of market entry, delaying market entry, scaring away competitors' customers and business partners, and deterring research. Despite the anticompetitive risks posed by invalid patents, neither patent law nor antitrust law does an effective job of ridding the marketplace of invalid patents. In particular, because antitrust law currently holds that a monopolist does not violate the Sherman Act unless it actually enforces its invalid patent, a monopolist with an invalid patent can improperly exclude competitors while not exposing itself to antitrust liability. Finally, the Article argues that eliminating the enforcement requirement from antitrust claims based on invalid patents would better accomplish the goals of both antitrust law and the patent system.

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That sounds a lot like Professor Pasquale's idea about the externality of search costs for other forms of IP.

Posted by: David | Jan 25, 2007 1:31:49 PM

Wow, so every patentee is potentially violating the antitrust laws? That's a pretty scary -- and incredibly wrong-headed -- proposition.

Now, if he wanted to confine it to obviously inequitably invalid patents, that would be one thing. But subjecting the owner/exclusive licensee of every invalidated (or invalid) patent to antitrust liability is a pretty serious remedy for that.

Moreover, if the patent office signs off on it as valid, it seems pretty ridiculous to hold the patentee liable in antitrust for a differing subsequent determination.

The whole idea is a nonstarter, even if it does have an anticompetitive effect? (c) has a much more anticompetitive effect, and lasts much longer, and moreover, doesn't even undergo examination, but attaches automatically every time something is created (and is presumptively valid for when something is registered).

Posted by: Ninja | Jan 25, 2007 4:37:53 PM

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