Michael Katz and Jonathan Sallet ‘Multisided Platforms and Antitrust Enforcement’ (2018) Yale Law Journal 2142

This paper,  available here, looks at two questions regarding competition enforcement in platform markets: (i) how should one account for the distinct characteristics of platforms when defining an antitrust market; and (ii) how, if at all, should one weigh user groups’ gains and losses on different sides of a platform against one another. In short, the authors argue that enforcers and courts should use a multiple-markets approach to multisided platforms, in which different groups of users on different sides of a platform belong in different product markets. This approach allows one to account for cross-market network effects without collapsing all platform users into a single product market. They further argue that enforcers should consider the price structure of a platform, and not simply its net price, when assessing competitive effects. This justifies the use of a separate-effects analysis, according to which anticompetitive conduct harming users on one side of a platform cannot be justified just because that harm funds benefits for users…

Gregory J. Werden and Luke M. Froeb ‘Why Patent Hold-Up Does Not Violate Antitrust Law’ (forthcoming, Texas Intellectual Property Law Journal)

As the title indicates, this paper argues that patent hold-up, as courts and commentators define the term, does not undermine the competitive process and thus cannot give rise to a valid antitrust claim, at least in the US. The paper is available here and is structured as follows: Part II describes patent hold-up and sets out the economic framework employed by many antitrust intervention advocates. A relatively recent phenomenon is that important standards are encumbered by many—perhaps thousands—of Standard Essential Patents (SEPs). “Inventors” own SEPs and grant licences to them, while “implementers” manufacture or sell standard-compliant components or devices. Antitrust intervention advocates argue that these sunk costs permit inventors to engage in “opportunism” by demanding royalties that could “capture part of the fruits of another’s investment,” i.e., part of the sunk investment of implementers. This “opportunistic” behaviour by inventors is what generally is meant by the term “patent hold-up.” Out of a conviction that inventor opportunism is a serious problem, advocates of…

Jorge Contreras ‘Much Ado about Hold-Up’

This paper criticises the longstanding debate about patent holdup – and particularly about whether it is a systemic issue. In short, the paper argues that the ongoing hunt for empirical evidence of systemic patent hold-up in standardised product markets, or lack thereof, is a fruitless academic exercise. The paper can be found here and is structured as follows: Part I offers some essential background on standard setting and standards-essential patents. As I am sure we are now all fed up with this, I will skip it. Part II explores the interrelated questions that form the core of the current hold-up debate: how is hold-up defined, and what can empirical evidence tell us about hold-up in today’s technology-driven markets? The notion of economic hold-up originated with Oliver Williamson’s leading work on transaction costs and information asymmetry in the 1980s. The owners of specific assets are vulnerable to opportunistic behaviour by potential transaction partners who act dishonestly (e.g., by using deceptive means to…

Noel Maurer and Stephen Haber ‘An Empirical Analysis of the Patent Troll Hypothesis: Evidence from Publicly-Traded Firms’ (2018) Hoover Institution Working Paper no. 17003

Do firms that earn revenues from licensing their patent portfolios, rather than producing physical products – often referred to as patent assertion entities (PAEs) or, more disparagingly as ‘patent trolls’ – frustrate or facilitate innovation? According to one view, PAEs purchase specious intellectual property and then file frivolous lawsuits in order to extort revenues from operating companies that would rather settle than go through the expense of litigation. The revenues earned by PAEs are therefore a tax on innovation: dollars that would be spent on R&D by operating companies are diverted to non-productive uses. A business model based on using low value patents to file frivolous lawsuits for their nuisance value, with little risk of being countersued, should yield easy returns—and a high yield, low risk business model that is not characterized by barriers to entry should proliferate rapidly. It follows, accordingly, that PAEs are a systemic threat to innovation, economic growth, and consumer welfare, and thus the laws governing…

Jorge Padilla, Douglas H. Ginsburg and Koren W. Wong-Ervin ‘Antitrust Analysis Involving Intellectual Property and Standards: Implications from Economics’ (forthcoming, George Mason Law Review)

The paper, which can be found here, provides an overview of the economics of innovation and IP protection, licensing, and compulsory licensing, with specific applications to standards development and standard-essential patents. The authors also propose principles based on their economic analysis that courts and antitrust agencies can apply at each stage of an antitrust inquiry. The paper concludes with a summary of the approach to IP applied in China, the European Union, India, Japan, Korea, and the United States. The paper covers a lot of ground (and is quite long). I will try to summarise the argument as much as possible, but, to make it easier to read, I will also attempt to flag the specific topics addressed at each point, so that you may focus on those matters of greater interest to you. The paper is structured as follows: Section II summarises the relevant economic literature. While consumers gain from increases in static efficiency in the short run, economics teaches us…

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…

Frederick Abbott ‘Excessive Pharmaceutical Prices and Competition Law: Doctrinal Development to Protect Public Health’ (2016) UC Irvine Law Review 6 281

This paper can be found here. At the time it was written, competition law had rarely been used to address “excessive pricing” of pharmaceutical products. This was a worldwide phenomenon. In the United States, federal courts have refused to apply excessive pricing as an antitrust doctrine, either with respect to pharmaceutical products or more generally. Courts in some other countries have been more receptive to considering the doctrine, but application of the doctrine has been sporadic at best, including with respect to pharmaceuticals. Against this, the author argues that competition law and policy should develop robust doctrine to address excessive pricing in markets lacking adequate control mechanisms against exploitative behaviour. The article focuses specifically on the pharmaceutical sector because of its unique structure and social importance. This piece is divided into two parts. The first addresses competition policy and why it is appropriate to develop a doctrine of excessive pricing to address distortions in the pharmaceutical sector. The second part addresses…

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…

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…

Sophie Lawrance and Edwin Bond on ‘Reverse-payment’ patent settlement agreements: non-cash value transfers are not immune from competition law scrutiny’ (2018) Journal of Intellectual Property Law & Practice 13(7) 552

This article – which can be found here – argues that a non-cash value transfer – particularly commitments by the producer of a branded drug not to launch a generic version of its drug – is able to bring a pay-for-delay agreement within the scope of the antitrust prohibition of reverse-payment patent settlement agreements. It does so as follows: The paper first looks at the law in the US as regards non-cash value transfer settlements. In its landmark 2013 FTC v, Actavis decision, the US Supreme Court held that pharmaceutical patent settlements which involve ‘large’ and ‘unexplained’ reverse payments may breach the antitrust rules. However, and as a result of the Supreme Court’s lack of detailed guidance, the lower US courts have in the last few years found themselves considering a fairly basic question: what constitutes a ‘payment’? While a couple of US district courts concluded that patent settlements that do not involve a cash transfer could not constitute unlawful…