Antitrust and Patent Law As Component Parts of Innovation Policy

Summary

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Antitrust law and patent law have long been considered in tension. On a very simplistic level, antitrust law was seen as anti-monopoly, whereas the very object of the patent laws is monopoly. Antitrust law condemns exclusionary conduct and patent law grants exclusionary rights. There are two conceptions of the relationship between antitrust and patent: in tension or complementary. In reality, both conceptions have an element of truth, but antitrust and patent are neither always in tension nor always complementary. Rather, the relationship is multidimensional. Patent scholars recognize that if patent rights were overly expansive, or patent durations were excessively long, then patents could weaken innovation by unnecessarily shrinking the public domain and deterring innovative activity by others. This article expands on this wisdom, illustrating a variety of ways in which patent owners may exercise their IP rights in a manner that both chills innovation and exceeds the scope of their legitimate patent rights.

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Extract

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Antitrust and Patent Law As Component Parts of Innovation Policy

I. PATENT POLICY AS INNOVATION POLICY .............................................................. 1261

II. ANTITRUST POLICY AS INNOVATION POLICY ......................................................... 1263

III. PATENT AND ANTITRUST ARE INTERDEPENDENT PARTS OF INNOVATION POLICY 1269

A. Comparing Patent and Antitrust Responses to Invalid Patents ........................ 1270

1. The Patent System's Response to Invalid Patents ........................................ 1272

a. Invalidity Defense ................................................................................... 1272

b. Declaratory Judgment Actions ............................................................... 1274

2. Antitrust's Response to Invalid Patents ....................................................... 1274

a. Sham Patent Infringement Litigation ..................................................... 1274

b. Agreements That Conceal Invalid Patents ............................................. 1276

B. Inequitable Conduct Versus a Walker Process Claim ...................................... 1277

C. Patent Misuse Versus a Tying Claim ................................................................ 1283

D. Summary........................................................................................................... 1285

IV. STRIKING THE PROPER BALANCE BETWEEN PATENT AND ANTITRUST ................... 1285

V. CONCLUSION ......................................................................................................... 1289

Antitrust law and patent law have long been considered in tension. On a very simplistic level, antitrust law was seen as anti-monopoly, whereas "[t]he very object of [the patent laws] is monopoly."1 Antitrust law condemns exclusionary conduct and patent law grants exclusionary rights. These exclusionary rights are seen as the price of rewarding-and thus encouraging-innovation. But a reward that restrains competition seems at odds with antitrust's goal of removing trade restraints from the marketplace. Consequently, courts historically have discussed the "conflict between the patent laws on the one hand, which encourage monopoly power by granting patent holders the right to exclude and be free from competition, and the antitrust laws, on the other hand, which generally proscribe monopoly and encourage competition."2

In response to this saga of laws in tension, courts and commentators began to argue that antitrust and patent law were more properly viewed as complementary, because "both are aimed at encouraging innovation, industry and competition."3 In their recent report on antitrust, IP, and innovation, the antitrust enforcement agencies argued that:

[A]ntitrust and intellectual property are properly perceived as complementary bodies of law that work together to bring innovation to consumers: antitrust laws protect robust competition in the marketplace, while intellectual property laws protect the ability to earn a return on the investments necessary to innovate. Both spur competition among rivals to be the first to enter the marketplace with a desirable technology, product, or service.4

So antitrust and patent law both try to stimulate innovation: the former by stimulating competition, and the latter by temporarily suppressing it.5

We have two conceptions of the relationship between antitrust and patent: in tension or complementary. In reality, both conceptions have an element of truth, but antitrust and patent are neither always in tension nor always complementary. Rather, the relationship is multidimensional. Antitrust law and patent law are in tension in some contexts, particularly in the short run. For example, a patent holder can exclude infringing competitors from the market, even if the competitors can make the product more efficiently. In the long run, after the patent expires, consumers can purchase the innovation in a competitive marketplace.

The relationship between antitrust law and patent law involves a series of trade-offs: How much should competition be suppressed in the short run in order to encourage innovation in the long run? Are there instances and industries wher...

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