Jose Contreras and Peter Georg Pycht ‘Patent Assertion Entities and Legal Exceptionalism in the EU and the US’ (2017) Max Planck Institute for Innovation and Competition Research Paper no 17-11

This paper – which can be found here – identifies similarities and differences between Europe and the US regarding the role that patent assertion entities play in patent policy and patent litigation; and seeks to determine whether the law applicable to PAEs is substantively different from the law governing patent litigation more generally. As explained in previous posts, Patent Assertion Entities (PAEs) are firms that are in the business of patent monetization: they acquire patents from a variety of sources and then seek to collect revenue from companies manufacturing and selling products covered by those patents. More pejoratively, PAEs are known as patent “trolls”. Many commentators and policy makers have described PAE litigation as a phenomenon distinct from ordinary patent litigation. A number of studies suggest that a significant portion of recent U.S. patent litigation is attributable to PAEs, and that PAE activity is significant in Europe as well. One recent study found that PAEs accounted for approximately 19% of…

Herbert Hovenkamp ‘Reasonable Patent Exhaustion’ (2018) University of Pennsylvania Law School Faculty Scholarship. 1790

Exhaustion is a typical figure of IP and competition law (and, in the EU, of free movement law as well). The principle is relatively straightforward: after a certain point, restrictions on use or sale of a product cannot be enforced by someone who would otherwise have the right to enforce such restrictions. Exhaustion is often also called the first sale doctrine, as the right to object to the use or sale of a product usually ends after the product is sold for the first time. For example, when someone grants a patent license to another person, the exhaustion rule says that the patentee may not by impose conditions on the patented product’s subsequent use or sale, nor enforce these conditions through a patent infringement suit. This paper – which can be found here –  provides an analysis of a recent US Supreme Court’s decision: Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. 1523 (2017). The case concerned a patent…

Christopher Buccafusco, Mark A. Lemley and Jonathan S. Masur ‘Intelligent Design’ (2017) Coase-Sandor Working Paper Series in Law and Economics 831

While this is a paper – which you can find here – is mainly on IP law, I circulate it because it highlights two matters relevant for competition practitioners: (i) how the regulation of topics other than competition can significantly affect competition – and competition law; (ii) how debates about the scope of individual competition law doctrines (e.g. abuse of IP rights, etc.) are often disguised debates about how to reform these regulatory frameworks. In other words, and as I noticed in previous posts, competition law operates in wider social and legal contexts that must be acknowledged. The argument of this paper is that when designers can obtain exclusive intellectual property (IP) rights in the functional aspects of their creations, they can wield these rights to increase both the costs their competitors incur and the prices that consumers must pay for their  goods. IP rights’ holders do this by using their rights in ways that do not promote the goals…

Saurabh Vishnubhakat ‘The Antitrusting of Patentability’ (2018) Seton Hall Law Review: Vol. 48 : Iss. 1 , Article 2

This paper, which can be found here,  focuses mainly on developments regarding IP patents in the US – in particular the adoption of per se rules by courts regarding the validity of patents. As such, my review will be quite succinct. The paper’s main argument is that the use of antitrust-style judicial shortcuts is not appropriate in patent law. The paper is structured as follows: It begins by comparing IP and antitrust law: ‘Both systems grapple with the jurisprudential tension, inherent in managing error costs, between legal standards and legal rules. Only antitrust law, however, has evolved a systematic approach to managing decision costs.’ The author argues that patent law has begun to borrow from competition law’s adoption of both form-based rules and detailed effects’ assessments by using the doctrine of patent-eligible subject matter as a shorthand for the more fact-intensive and costly doctrinal inquiries into whether an invention is truly patentable. To demonstrate this point, the paper engages in a…

Steven Andeman ‘Overplaying the Innovation Card: Stronger Intellectual Property Rights and Competition Law’ Kritika: Essays on intellectual property (ed.) Peter Drahos, Gustavo Ghidini, Hanns Ullrich (Elgar, 2015) 17-58

This paper is already over two years old, but it provides a good overview of the main challenges that arise at the intersection of competition and IP law. The article’s thesis is that patents and copyrights seek to promote innovation by striking a balance between protecting initial inventor rights, on the one hand, and fostering follow-on or cumulative innovation, on the other. It conceptualises recent efforts to use competition law to limit the scope of IP law as attempts to limit excessive protections granted to original inventors by IP rights to the detriment of follow-on innovation. Examples of such interventions in Europe include compulsory copyright licensing remedies, the sanctioning of certain attempts to manipulate the IP regime in order to extend the scope and duration of existing IP rights, the prohibition of pay-for delay agreements, and the use of competition law to limit reliance by Standard Essential Patent (SEP) holders on patent injunctions. The paper is structured as follows: Section…

Herbert Hovenkamp ‘Antitrust and Information Technologies’ 2017 Fla. L. Rev. 68 419

This is a polished version of a lecture given by Hovenkamp last year, and it can be found here.  As the name indicates it provides an overview of “the relationship between competition policy and the technologies of information.” A first section looks at the relationship between digital technology and market power. In particular, digital technology affects the way firms exercise market power and also creates serious measurement difficulties. A pervasive problem in analysing power in digital markets is that sellers typically have a very high ratio of fixed to variable costs. This entails that prices must be considerably above short-run marginal cost to be profitable. As a result of this, many traditional measures of market power produce unacceptable false positives. These measures include the Lerner Index and other tools derived from it, but are not limited to them: “None of the antitrust tools for assessing power is particularly sensitive to the presence of fixed costs”. He thus concludes that antitrust…

Herbert Hovenkamp ‘Antitrust and Innovation: Where Are We and Where Should We Be Going’ (2011) Faculty Scholarship 1832

This old paper – which can be found here – deals with a constant concern in Hovenkamp’s work, namely the interaction between IP and antitrust. He notes that: “The primary purpose of antitrust law is to promote competition. However, both antitrust law and intellectual property law for large parts of their history have worked so as to undermine innovation competition by protecting too much. Antitrust policy often has reflected exaggerated fears of competitive harm and responded by developing overly protective rules that shielded inefficient businesses from competition at the expense of consumers. By the same token, the intellectual property laws have often undermined rather than promoted innovation by granting intellectual property holders rights far beyond what is necessary to create appropriate incentives to innovate.” Given this, what should antitrust’s stance be as regards innovation in general, and IP in particular? Hovenkamp offers “a few principles for antitrust analysis in innovation-intensive markets, particularly those claims that involve the exercise of patent rights.”…

Alexander Galetovic & Stephen Haber ‘The Fallacies of Patent Hold Up Theory’ (2017) Journal of Competition Law & Economics, 13(1) 1

This paper – which can be found here – criticises the patent hold-up theory, which underpins most antitrust concerns regarding SEPs. The first section describes patent hold-up theory, which is said to: “consist of five nested claims. First, that patent owners can systematically overcharge manufacturers for licenses to their patents through the economic mechanism of holdup—the opportunistic appropriation of a downstream firm’s quasi rents (revenues in excess of short-run costs). Second, that when there are multiple patent holders, each practicing holdup on a downstream firm, cumulative patent royalty rates become astronomically high—a phenomenon patent-holdup theorists termed “royalty stacking. Third, that the holdup problem is exacerbated when patented technologies are included in the industry standards necessary to make IT products interoperable and compatible. Fourth, that patent holdup, royalty stacking, and the inclusion of patented technologies in industry  standards are strangling innovation, most particularly in SEP-intensive IT products. Fifth, that the government must intervene to solve this problem; the market, left on…

Jorge L. Contreras, Fabian Gaessler, Christian Helmers, Brian J. Love ‘Litigation of Standards-Essential Patents in Europe: A Comparative Analysis’Berkeley Technology Law Journal (2018, forthcoming)

This paper – which can be seen here – provides a comparative empirical study of European patent litigation relating to standards essential patents (SEPs). The paper begins with a description of SEPs and, more interestingly for our purposes, of the contexts in which SEP litigation arises. The simpler type of litigation occurs when the holder of a SEP and its potential licensee disagree whether an offered royalty rate is, indeed, FRAND. However, some SEP holders’ transfer patents to non-practicing entities (NPEs), including patent assertion entities (PAEs), for a variety of financial and strategic reasons. This practice is sometimes referred to as “privateering”. There are already a number of well-known cases involving SEP assertions by PAEs and other NPEs.  Moreover, there is increasing evidence that operating firms, often participants in SDOs, have been transferring significant numbers of SEPs to PAEs for enforcement purposes in privateering transactions. PAEs accounted for approximately 19% of patent assertions between 2000 and 2008 in Germany and 9%…

Richard A. Epstein and Kayvan B. Noroozi ‘Why Incentives for “Patent Holdout” Threaten to Dismantle FRAND, and Why It Matters’ IP² Working Paper No. 17006

This paper – which can be found here – argues that existing regulatory and judicial activity has unduly protected implementers (i.e. potential licensees) against SEP holders. In particular, the authors: “stress that implementers owe a significant duty to negotiate FRAND licenses in good faith, which courts have largely overlooked and underenforced. We demonstrate that implementers’ good faith obligations are a critical component of basic FRAND architecture that is strictly necessary to the development of innovation-driven standards. (…) [FRAND enables] the standards development effort to yield commercial benefits that would not exist absent innovators’ voluntary participation. We show both theoretically and empirically that courts’ failure to appreciate these aspects of the FRAND bargain, combined with their over-reliance on liability rules, i.e., damages over injunctions, incentivizes the very patent holdout problem FRAND was intended to avoid. That outcome, in turn, has motivated innovators to reduce their participation in FRAND bargains, threatening to unravel a massive innovation-commercialization marketplace, and its innumerable positive externalities to…