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…

Koren W. Wong-Ervin, Evan Hicks, and Ariel Slonim ‘Tying and Bundling Involving Standard-Essential Patents’ (2017) George Mason Law Review 24 1091

This paper – which can be found here –  slooks at whether it is “unfair” (and therefore unlawful) for a SEP holder to license its patents, including both SEPs and non-SEPs, on a portfolio basis. The basic argument is that “SEP and non-SEP portfolio theories of harm” advanced thus far are not economically sound (this is unsurprising, given that the very first sentence of the article is: “Competition agencies around the world have taken the unwarranted position that antitrust enforcement involving standard-essential patents (SEPs) upon which a patent holder has made an assurance to license on fair, reasonable, and nondiscriminatory (FRAND) terms should be subject to special rules or unique presumptions and burdens of proof” (emphasis is mine)). Instead, for these portfolios to infringe competition law there: “would have to be an exclusionary effect on other sellers because bundling thwarts buyers’ desire to purchase substitutes for one or more of the goods in the bundle from those other sellers to an…

Matthew Sipe ‘Patent Privateers and Antitrust Fears’ (2016) 22 Mich. Telecomm. & Tech. L. Rev. 191

this paper – which can be found here – deals with the relationship between patent assertion entities (a.k.a. patent trolls) and antitrust. This relates to privateering,  a practice through which a firm sponsors the assertion of IP claims by third parties (so-called patent assertion entities (“PAEs”)) with the ultimate objective of raising competitors’ costs without disclosing who is ultimately behind this practice. However,  PAEs act for themselvesin most cases, and their actions are not necessarily anti-competitive. PAEs are merely entities that acquire and enforce patents without actually practicing them – their business model is predicated on acquiring licensing fees from entities that actually provide goods and services (so-called “operating entities”). PAEs have been severely criticised, and it has been suggested that antitrust be deployed against them.  At first glance, the nexus between antitrust law and PAEs seems clear: if litigious patent trolls are unfairly deteriorating the markets for various patented goods, antitrust law can step in and reassert the proper rules…

David Teece and Edward Sherry ‘On Patent “Monopolies”: An Economic Re-Appraisal’ Antitrust Chronicle, Spring 2017

This paper – which you can find here – provides a short critical introduction to the intersection between IP and antitrust laws. It begins by pointing out the obvious:  in exchange for public disclosure, the patent system gives a successful patent applicant the right to exclude others from using the patented technology without her/his permission  for a period of time. The first instinct is to consider that this exclusivity amounts to a legal monopoly, which can make antitrust antennas start to tingle. However, it is now a truism that having an IP right does not mean one also has market power. Nonetheless, in the US a number of (older) decisions  refer to “patent monopolies.” This piece ask whether this “patent monopoly” language is useful, misleading, or something in between. Without surprise, the authors seek to argue that it is exceedingly misleading: simplistic assertions that patent rights constitute “monopolies” are not particularly informative or helpful. The argument starts by looking at the…

Unwired v Huawei [2017] EWHC 711 (Pat)

This judgment – which you can find here – is a recent UK court decision on FRAND terms. The factual background to this decision is convoluted (including five “technical” trials relating to the validity and infringement/essentiality of the relevant patents, which preceded the present trial regarding all competition law and FRAND issues), but the situation can be summarised shortly. Unwired Planet is a company that owns a number of worldwide patents, including many of the foundational technologies that allow mobile devices to connect to the Internet (4G, 3G and the like) – most of the relevant portfolio in this case was acquired from Ericsson. A number of these patents are essential to the relevant technical standards, and are thus deemed Standards Essential Patents (“SEPs”). The process of standardisation involves holders of patents which are essential to an international telecommunications standard declaring them to be essential to the relevant standards body –  in this case, the European  Telecommunications Standards Institute (“ETSI”). Standard…

Douglas Ginsburg, Koren Wong-Ewing and Joshua Wright ‘The Troubling Use of Antitrust to Regulate FRAND Licensing’ CPI Antitrust Chronicle October 2015 (1)

This paper – which can be found here – criticises the use of “antitrust sanctions on holders of standard essential patents (“SEPs”) for seeking injunctive relief against alleged infringers and for reneging on their commitment to license their patents on fair, reasonable, and non-discriminatory (“FRAND”) terms”.  They make two main criticisms of the use of antitrust to regulate FRAND licensing: First, they criticise the assumption, underpinning these developments, that patent “holdup” is a widespread problem that leads to significantly adverse consequences for competition and innovation. Instead, they argue that: (i) there is no empirical support for this assumption. On the contrary, sectors where SEPs are preponderant are among the most competitive ones around; (ii) as economic theory would predict, patent holders and those seeking to license and implement patented technologies write their contracts so as to minimize the probability of holdup; (iii) several mechanisms – including reputation and business costs – are available to transactors to mitigate the incidence and likelihood…

Pierre Larouche and Nicolo Zingales ‘Injunctive Relief in FRAND Disputes in the EU – Intellectual Property and Competition Law at the Remedies Stage’ in The Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents (CUP, 2017) 406

This paper – which you can find here – asks: what does (EU) competition law have to do with FRAND? It is, as far as I’m concerned, a rather good question. The paper begins by sketching a basic model of standards-related IP licensing negotiations and related litigation. Competition issues tend to arise when two parties are negotiating over the licensing of a SEP and the SEP holder is under an obligation to grant licenses on fair, reasonable and non-discriminatory (FRAND) terms. This negotiation is framed by the parties’ ability to start judicial proceedings under IP Law: SEP holders can ask for injunctions in order to enforce their rights, while potential licensees can challenge the validity, infringement or essentiality of a SEP. A number of outcomes are possible in this context: (i) the parties may negotiate on the terms; (ii) the SEP holder may rely on its market power to holdup the licensee in order to obtain exorbitant royalties; (iii) the potential…

Jorge L. Contreras ‘FROM PRIVATE ORDERING TO PUBLIC LAW: THE LEGAL FRAMEWORKS GOVERNING STANDARDS-ESSENTIAL PATENTS’

This paper, focusing on the interaction of standards and international law, was published in the Harvard Journal of Law & Technology, and can be found here. It starts from the observation that there is a “basic question [about] whether technical standard setting is best conceptualized as a private activity governed most efficiently by its own internal rules and procedures, or whether it is at root a public activity that should be regulated within the sphere of public law.” The article proceeds as follows: after a general introduction to private ordering structures (i.e. rules systems that private actors conceive, observe, and often enforce through extra-legal means) in Part II, Parts III and IV describe how technical standard setting has evolved as a private sector activity. Part V analyses the incorporation of standards bodies’ rules and norms into private law adjudication. Part VI shifts the focus to the public benefits that standard setting affords, and Part VII describes the recent debate regarding public…