Wolfgang Kerber ‘Data Sharing In IoT (Internet of Things’) Ecosystems And Competition Law: The Example Of Connected Cars’ (2019) Journal of Competition Law & Economics (forthcoming)

In Internet of Things (IoT) ecosystems, one firm often has exclusive control over the data produced by a smart device, as well as of the technical means of access to this device. Such a gatekeeper position can empower firms to eliminate competition for aftermarket and other complementary services in these ecosystems. This paper, available here, analyses whether competition law can help address problems concerning access to data and interoperability in this context, by reference to connected vehicles. In short, it argues that, while competition offers some solutions to these data access problems, on its own it is insufficient to fully address these problems. As such, additional solutions such as data portability requirements, data access rights or sector-specific regulation might also be needed. Section II provides a brief overview of the economics of digital ecosystems and of data interoperability. Data tends to be non-rivalrous in use. It follows that data should be used as much as possible to maximise its value….

Peter Alexiadis and Alexandre de Streel  ‘Designing an EU Intervention Standard for Digital Gatekeepers’ (working paper)

This paper is quite long and dense, so I am afraid this review will be both as well. A series of studies and reports on digital platforms have suggested that antitrust policy requires an overhaul. This view is driven by the belief that, as regards digital markets, the risk of making “Type 2” errors (i.e., under-enforcement) is greater than the risk of making “Type 1” errors (i.e., over-enforcement); and that, in addition to competition enforcement, there may be a role for regulation as well. While the authors take the view that the imperative for radical change is less pressing in the European Union than elsewhere, it is nonetheless appropriate to develop a blueprint for intervention against digital platforms both ex post and ex ante. This blueprint is developed as follows: A first section outlines the principles governing when to intervene in the digital economy. The Internet has generated significant levels of consumer welfare. Digital markets nevertheless have characteristics which lend…

Thomas F. Cotter, Erik Hovenkamp and Norman Siebrasse on ‘Switching Costs, Path Dependence and Patent Holdup’

Patent holdup occurs when a patent holder extracts higher royalties ex post than it could have negotiated ex ante, where the difference is not explained by an increase in the technology’s value. To date, the literature principally has focused on—indeed, sometimes conflated—two potential sources of holdup: the sunk costs the user has incurred ex ante to adopt the technology, and the “switching costs” of adopting an alternative ex post. This paper holds that the common source of holdup is neither sunk nor switching costs as such, but rather path dependence – and in particular the opportunistic exploitation of path dependence effects that magnify the value of the patented invention relative to the best available alternative. The paper, which can be found here, is structured as follows: Part II discusses the prior literature on patent holdup, along with the early literature on path dependence. Many commentaries on patent holdup confuse two important concepts – sunk and switching costs. A reader may reasonably…

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…

Mark A. Lemley and Timothy Simcoe ‘How Essential Are Standard-Essential Patents?

This working paper, which can be found here, seeks to understand what happens when standard essential patents (SEPs) are litigated in court. The authors find that, contrary to expectations, courts are more likely to find that SEPs are valid patents than a matched set of litigated non-SEP patents. However, courts are also significantly less likely to find that SEPs were infringed. One of the reason for this seems to be that many SEPs are asserted in court by non-practicing entities (NPEs), and NPEs do much worse in court than other patent holders. This has interesting implications for policy debates about both SEPs and NPEs. Standard-essential patents may not be so essential after all, perhaps because companies tend to err on the size of over-disclosing patents to standard-setting organisations. On the other hand, the failure of NPEs to win cases concerning the validity of what are, prima facie, a strong set of patents raises interesting questions about the role that NPEs play…

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…

Thomas Vinje ‘Intellectual Property and Antitrust Review (3rd Edition) – Chapter 5 – European Union’ (The Law Reviews, 2018)

The task of the book to which this chapter belongs is to provide an annual practical overview of developments on the relationship between antitrust and intellectual property. This chapter, which can be found here, describes the competition / IP law interface in Europe. It is structured as follows: Section II is devoted to a review of developments that took place in 2017. The section begins with a succinct description of the Google cases, before turning to a discussion on standard essential patents (SEPs). It also reviews the European Commission’s Communication on ‘Setting out the EU approach to Standard Essential Patents’. The paper then briefly discusses e-commerce. It begins by mentioning the ECJ’s Coty decision and the Policy Brief prepared by the European Commission concerning this judgment. This Brief states that Coty provides more clarity and legal certainty to market participants by confirming previous case law and establishing a clear legal framework for online commerce. The paper also mentions the Commission’s e-commerce sector…

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…