Harry First ‘Excessive Drug Pricing as an Antitrust Violation’ (forthcoming on the Antitrust Law Journal)

In the US, there have been antitrust enforcement efforts against various pharmaceutical practices that elevate price above the competitive level, such as reverse payments (or pay-for-delay), product hopping, and collusion among generic drug manufacturers. However, the conventional wisdom is that U.S. antitrust laws do not forbid high prices simpliciter. This paper argues that the conventional wisdom may be mistaken: Section 1 engages in a general discussion of the problem of high prices and provides two examples of a non-antitrust approach to this problem. The standard antitrust/welfare economics paradigm condemns high prices at least on the grounds of resource misallocation and deadweight welfare loss. Many scholars go beyond deadweight welfare loss concerns, condemning monopoly pricing because of the redistribution of the consumer surplus from consumers to producers, but some are indifferent to this redistribution. There is an additional argument that can be made against high prices, but it is one to which antitrust is often indifferent: high prices can be seen…

Peter Georg Picht  ‘FRAND determination in TCL v. Ericsson and Unwired Planet v. Huawei: Same same but different?’ Max Planck Institute for Innovation & Competition Research Paper No. 18-07

This paper, which can be found here,  compares Unwired Planet/Huawei – a UK case reviewed here, and which appeal was discussed last week – and TCL/Ericsson, a US case. TCL deals with Ericsson-owned SEPs and Ericsson-granted licences, while Unwired Planet focuses on SEPs acquired by Unwired Planet from Ericsson. While looking at similar sets of facts, the courts arrived at different conclusions regarding how to determine FRAND royalty rates. This paper argues that this difference arises from the courts’ take on two core approaches in FRAND royalty calculation – “top-down” and “comparable prior licences” (‘Comparables’). Unwired Planet can be said to have favoured a ‘Comparables’ approach, while TCL looks more favourably at the top-down approach. The paper contends that both methods are important in FRAND licensing, it is unlikely that either a top-down or Comparables approach will – or should – prevail as the obviously best approach to complex cases. The paper is structured as follows: Section II provides the…

Gunther Friedl and Christoph Ann ‘A cost-based approach for calculating royalties for standard-essential patents (SEPs)’(2018) The Journal of World Intellectual Property 21 369

This article, which can be found here, proposes a novel approach for calculating FRAND royalties, based upon average total cost per patent plus a reasonable return for the patent holder. Unlike the methods discussed in the paper above – which focus on the value of a patent – this method is cost-based. The paper is structured as follows: An introductory section explains why standards are important and why FRAND obligations are imposed. A significant increase in the relevance of standards can be predicted in the near future. Industry 4.0 will greatly increase the degree to which industrial processes will depend upon the exchange of information not only between people, but also between toolkits, that is, between “hardware.” The same holds true for a number of new technologies such as autonomous driving, data compression, or 3D printing. Standard-setting organizations (SSOs) are tasked with the development and creation of standards by identifying and selecting the most suitable technologies for the standard. It goes…

Is there a duty to license Standard Essential Patents to competitors? FTC v Qualcomm Case 5:17-cv-00220-LHK C. Nor

This post will discuss a summary judgment by a district court in California – the one responsible for most cases in Silicon Valley – on whether Qualcomm’s refusal to license its Standard Essential Patents (SEPs) to competitors infringed the non-discrimination limb of RAND commitments and, by extension, s. 5 of the FTC Act. The decision is available here. Background Cellular communications depend on widely distributed networks that implement cellular communications standards. These standards promote availability and interoperability of standardized products regardless of geographic boundaries. Standard-setting organizations (“SSOs”) – such as the Telecommunications Industry Association (“TIA”) and the Alliance for Telecommunications Industry Solutions (“ATIS”) in the United States, and the European Telecommunications Standards Institute (“ETSI”) in Europe – have emerged to develop and manage the relevant cellular standards. The cellular communications standards that SSOs develop and adopt may incorporate patented technology. In order to prevent the owner of a patent essential to complying with the standard—the “SEP holder”—from blocking implementation of…

When is a licence FRAND? The Court of Appeal judgment in Unwired Planet v Huawei

This judgment – which can be found here – is on appeal from Unwired Planet v Huawei judgment on the licensing of Standard Essential Patents (SEP) that I reviewed here. The Court of Appeal begins by explaining the link between the potential for anticompetitive abuse of SEPs and the imposition of FRAND licensing terms. After all: ‘the potential for anti-competitive behaviour is obvious. The owner of a SEP has the potential ability to “hold-up” users after the adoption and publication of the standard either by refusing to license the SEP or by extracting excessive royalty fees for its use, and in that way to prevent competitors from gaining effective access to the standard and the part of the telecommunications market to which it relates.’ It then moves on to review the factual background of the case and the High Court’s decision. In short, Unwired Planet acquired patents from Ericson that cover many of the foundational technologies that allow mobile devices…

Ashish Bharadwaj ‘A note on the neglected issue of reverse patent holdup’. (2018) Journal of Intellectual Property Law & Practice 13(7) 555

The purpose of this article – which can be found here – is to provide a comparative analysis of EU, US and Indian case law on reverse patent holdup in the context of standard essential patent licensing. The piece is structured as follows: The paper begins with a discussion of patent holdup and reverse holdup in general terms. Technological standards have become ubiquitous. Such standards foster interoperability, avoid inefficient rivalry between competing systems and facilitate competition in downstream product markets. It has been held that firms that commit their patents to a standard – and thereby own standard essential patents (SEPs) for the purposes of that standard – often abuse their dominant position by demanding excessive royalties or by seeking injunctive relief against infringers of their essential patents. Owning a SEP provides its holder with a certain amount of market power, because users of the standard must reach a licensing agreement with the patent holder. Theoretically, a SEP holder can…

Peter Menell  ‘Economic Analysis of Network Effects and Intellectual Property’ in Ben Depoorter & Peter S. Menell (eds.), Research Handbook on the Economics of Intellectual Property Law: Vol I. Theory (2018)

This piece – which can be found here – is a rather long , but very comprehensive book chapter that surveys and integrates the economic, business strategy and legal literatures on IP, competition and network effects. It is structured as follows: Part I introduces network effects. I have done this to death in the past, so I’m not going to repeat it here. Suffice it to say that the author looks mainly at demand side network effects, and what its implications are for IP and competition policy: ‘In a static economic model (i.e., one without innovation), consumers benefit from robust competition within product standards. Open access to product standards encourages realization of network externalities. Although bandwagon effects can enhance consumer welfare in a static context, they can also make it more difficult for developers of improved platforms to enter the market. Consumers and suppliers of complementary products can face significant switching costs in migrating from one platform to another.’ Like…

Robert D. Anderson and Bill Kovacic ‘The application of competition policy vis-à-vis intellectual property rights: The evolution of thought underlying policy change’

This paper was written at the behest of the WTO, and can be found here. It examines the evolution of national competition policies and enforcement approaches vis-à-vis intellectual property rights (IPRs) in major jurisdictions over the past decades. I think it is particularly useful because it provides an integrated analysis of some of the most important developments at the intersection between competition and IP. A first section describes how the application of competition law in IP has been characterised over the last decades by the replacement of form-based approaches for case-by-case analyses of the effects of IP-related practices.  Furthermore, following a period in which competition authorities largely deferred to intellectual property offices with respect to issues concerning the scope and legitimacy of patents and other IPRs, leading agencies have devoted significant resources to advocacy efforts aimed at ensuring the integrity of patent regimes and avoiding the issuance/recognition of ill-founded rights that potentially weaken competition or impede follow-on innovation without serving valid…

Pat Treacy,  Matthew Hunt ‘Litigating a ‘FRAND’ patent licence: the Unwired Planet v Huawei judgment’(2018) Journal of International Property Law and Practice 13(2) 124

This is a paper – which can be found here – on the the Unwired Planet v Huawei judgment reviewed in a post of 28 April 2017. You may remember that this is primarily an IP law decision. It is nonetheless relevant to us because it is the first decision I’ve seen where an (English) court determined a FRAND rate, and because it dealt with a number of competition law issues which were relevant for such determination. It is also relevant – and topical – because the court imposed a (quasi-)worldwide license, which brings to mind the lively discussion we had at the OECD in December on extra-jurisdictional remedies following Korea’s decision to impose a global FRAND license on Qualcomm. The paper begins by summarising the context in which SEP litigation tends to arise, before describing the specific factual background of this case. In March 2014, Unwired Planet (UP) sued Huawei, Samsung and Google in the English Patents Court alleging infringement of…

Makan Delrahim, Assistant Att’y Gen., Antitrust Div., Dep’t of Justice, Remarks at the USC Gould School of Law’s Center for Transnational Law and Business Conference (Nov. 10, 2017)

This is a speech by US Department of Justice Assistant Attorney General Makan Delrahim regarding the appropriate approach to standard-setting organisations (SSOs) (and FRAND). As you may or may not know, he is a registered patent lawyer—the first head of the Antitrust Division to be so, so it is unsurprising that he has strong views on the topic. He seems to favour letting IP law run its course unimpeded (or, as he puts it: “Antitrust enforcers should . . . strive to eliminate as much as possible the unnecessary uncertainties for innovators and creators in their ability to exploit their intellectual property rights, as those uncertainties can also reduce the incentives for innovation.”), and only have antitrust intervene exceptionally (‘In case anyone is inclined to misunderstand my comments, let me clearly state that there is an important role for antitrust scrutiny in the standard setting context.’) As he colourfully puts it: ‘Once upon a time, and in their best mode, [SSOs]…