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The Patent-Antitrust Interface

The Patent-Antitrust Interface. Ted Banks Schoeman, Updike, Kaufman & Scharf. . . . or . . . How We Can Reconcile the Warring Partners. Muddled History. Competing trends in the common law Open competition is best for the economy and no restraints on alienation

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The Patent-Antitrust Interface

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  1. The Patent-Antitrust Interface Ted Banks Schoeman, Updike, Kaufman & Scharf

  2. . . . or . . .How We Can Reconcile the Warring Partners

  3. Muddled History • Competing trends in the common law • Open competition is best for the economy and no restraints on alienation • Property rights are important and the law will provide protection

  4. Making Patent & Antitrust Consistent • Incentive for invention with some competitive protection

  5. Patent & Antitrust Together • Encourage freedom to compete with some protections for little guys.

  6. Antitrust Violations • Conspiracies: more than one party gets together to eliminate competition • Price fixing • Market/customer allocation • Group boycott • Monopolies: one party gets too big

  7. Monopolies & Predation • Cut price below cost: competitors can’t match • After competitors exit, raise prices to recoup • Standard Oil?

  8. Other Antitrust Fun • Various practices reflecting elements of monopoly or conspiracy • Tying • Exclusive Dealing • The FTC Act: unfair or deceptive • It smells wrong, but I’m not sure exactly why it is bad

  9. What is “reasonable?” • Certain practices almost always bad = per se unreasonable (e.g., horizontal price fixing) • The “Rule of Reason”: some practices may be bad, depending on things like • Market shares • Impact on output, price • Alleged benefits of practice

  10. Key Challenge Can you explain to a lay person why you did what you did?

  11. Government vs. Private Enforcement • Most cases private; few trials • Great political fodder: fix the economy with antitrust • Parallel state enforcement • Evolution of DOJ/FTC enforcement philosophy • Bush: more deference to business decisions • Obama: closure scrutiny of practices, particularly where injuries alleged

  12. Who is Hurt? • Injury to a competitor: not necessarily bad • Injury to competition: probably bad • Injury to customer, consumer: probably bad

  13. The Patent Monopoly • Courts accept that a valid patent can be used to exclude others without antitrust liability.

  14. Horizontal Collusion • What happens when competitors get together? • As in price fixing, can be anticompetitive • If necessary to agree with competitors, adopt only those terms that are reasonably necessary

  15. Mandatory Grantbacks • Sounds like collusion, but judged under rule of reason. • Consider: • Exclusivity and rights of licensee • ability to grant sublicenses • scope of inventions covered by grantback • impact on promoting innovation • duration and royalties paid • market power of parties • extent of competition between the parties.

  16. Vertical Restraints • How, where, for how much, goods are re-sold • Law has fluctuated: rule of reason, per se, rule of reason • Price always most sensitive item: Do you really need to control it?

  17. Losing Antitrust Immunity for Your Patent Monopoly • Was the patent obtained by knowing & willful fraud? • Elements of common law fraud proved • No patent without the fraud • Is the suit a sham to interfere with business relationships of a competitor? • Are you trying to do more than the patent actually covers?

  18. Refusing to Deal • Generally, OK • Is there a duty to deal? • Prior course of dealing? • Network effects? • Is there a concerted refusal to deal (license)?

  19. What else is happening? • Princo • Standards • Reverse Payments

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