This paper – which we can find here – looks at the impact that antitrust can have on the legal, regulatory and political context in which innovation occurs.
The argument, while focusing on the US, is simple and stark. Patent and antitrust law are crucial to create an optimal innovation environment: patent law incentivises innovation by awarding exclusive rights that encourage investment while requiring the public disclosure of inventions. Antitrust law incentivises innovation by maximizing competition in a free marketplace and allowing innovators to disrupt markets and existing market power. Working within these legal regimes, private firms innovate and commercialize their products. They also create efficient transaction mechanisms, such as standard setting organizations (“SSOs”) and FRAND (“fair, reasonable, and non-discriminatory”) licensing agreements for standard essential patents (“SEPs”), so that innovators and their investors can efficiently obtain a return on their capital.
However, during the past ten years, innovation certainty in the United States has decreased dramatically, and the decrease is directly attributable to two general trends: the destabilization of patent law, and increased uncertainty in antitrust:
- Regarding the destabilisation of US patent law, this need not concern us here. In short, the authors argue that an assortment of judicial decisions and legislative acts made patents harder to obtain and to enforce.
- Regarding antitrust law, the argument is that a “wave of changes [have increased] legal uncertainty for patent owners and innovators. The FTC has taken an increasingly aggressive stance in asserting its authority under the FTC Act to investigate the licensing of intellectual property.” As argued, this change begun with the FTC’s decision to investigate and study “patent assertion entities” (PAEs). This added to uncertainty which already flowed from the Supreme Court’s recent decisions concerning patent exhaustion, and was further worsened by the FTC’s Section 5 complaint against Qualcomm for its licensing activities with respect to standard-essential patents and FRAND licensing [Note: A Section 5 complaint is not about pure antitrust as it is traditionally understood. Instead, Section 5 actions target “unfair methods of competition”, a not particularly well defined concept].
The outcome of these developments is “massive innovation uncertainty”. According to the authors, the value of publicly-traded patent rights has dropped by over 60 percent. This goes hand in hand with increased uncertainty about the validity of patents, increased refusals by implementers to license patents, and resulting higher levels of litigation. Taken together, these developments are said to have led to lower levels of innovation in the US, at the same time as innovation increases in China and Europe.
According to the authors, the answer to these problems is to make sure that IP and antitrust law work in tandem: “both legal regimes are intended to improve economies and consumer welfare in the long term, albeit utilizing different legal levers.” In particular, antitrust decision-makers should take into account developments in the IP sphere and vice-versa.
This is an interesting (and short) introduction to IP developments, in the US, and FTC actions in the IP sphere. However, and even discounting the size of the piece, it is unclear what relative weight the authors assign to antitrust and IP in these developments, or how they think that antitrust and IP should interact in practice. I think these would have been very interesting (analytical) considerations to make, but it is clear that such an analysis is beyond the scope of this piece..