David Bailey ‘The New Frontiers of Article 102 TFEU: antitrust imperialism or judicious intervention?’ (2018) Journal of Antitrust Enforcement 6(1) 25-53

This paper – which can be found here – addresses the way in which EU competition law cuts across and interferes with other legal regimes such as pharmaceutical regulations (Astra Zeneca and patent settlement cases), energy rules (Gazprom) and data protection (Facebook). This has led to a debate about whether EU competition law and policy should be able to trespass on turf that is properly subject to other areas of law, and whether it is appropriate for it to act as a “repair service” for other fields of economic law that lack sanctioning mechanisms. The article is structured as follows: The second section examines four situations in which Article 102 TFEU controversially overlapped with a different area of law. Competition law applies to unilateral business conduct whenever there is an act (or omission) of a dominant undertaking that distorts the competitive process or is directly exploitative of consumers. On the other hand, the application of competition law is usually precluded by…

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…

Carl Shapiro and A. Douglas Melamed ‘How Antitrust Law Can Make FRAND Commitments More Effective’ (2018) Yale Law Journal 127 (7) 2110

In this paper – which can be found here – the authors argue that antitrust laws have an important role to play in ensuring that the rules established by standard-setting organizations are effective in preventing the owners of standard-essential patents from engaging in patent holdup after the standard is established and becomes commercially successful. The paper begins by summarising how the standard setting system operates, and how it can lead to holdup. While this was described in some of the pieces reviewed over the last weeks, the authors provide a good summary of the topic: ‘The largest and most immediate commercial and antitrust concern regarding SEPs is that the owners of SEPs will command very substantial market power once the standard in question becomes widely adopted. Put simply: without some checks, SEP owners could opportunistically engage in patent holdup, taking advantage of the fact that the firms and users adopting the standard become individually and collectively locked in to the…

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]…

Vincent Angwenyi ‘Hold-up, Hold-out and F/RAND: The quest for balance’ (2017) Journal of Intellectual Property Law & Practice 12 (12) 1012

This paper – which can be found here –  provides a good (and straightforward) overview of the various sides of the debate on how to deal with the standardisation of intellectual property rights, standard essential patents (SEPs) and their licensing. It covers a bit of the same ground as the paper just reviewed in the post below, but in a more detailed fashion. The relevance and recent prominence of SEPs derives from the fact that end-products in a number of economic sectors now require the incorporation of numerous patented technologies (resulting in a so-called multi-component product). The production of multi-component products requires manufacturers to manage patent thickets (i.e. networks of overlapping IP rights owned by multiple patent holders) and to obtain licences from multiple rights holders. The alleged patent thicket problem is linked to the hold-up problem because the threat of an injunction by a right holder against a patent implementer who has already invested heavily in the manufacture of…

Jorge Padilla, John Davies and Aleksandra Boutin ‘The Economic Impact of Technology Standards‘

This Compass Lexecon report – which can be found here – argues that standards can lead to significant efficiencies: they not only solve coordination problems, they also seem to promote more rapid innovation than would otherwise be the case. Whether standards accelerate innovation depends greatly on who the ‘gatekeeper’ to the technology is. Among possible ‘gatekeepers’, the most pro-competitive one are voluntary standard setting organisations (SSOs). SSOs and the licensing arrangements they support enable a “market for technology,” in which smaller and specialized technology providers can thrive. As a result, competition authorities should be loath to interfere with the contractual arrangements that underpin the functioning of SSOs, should as clauses regarding FRAND terms. In more detail, the paper is structured as follows: The paper begins with an overview of why standards are valuable. Standards help certain industries achieve scale, giving users and suppliers the confidence to buy or make compatible products. While not exclusive to the IT sector, the ‘economics of…

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…

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…