Book Review: Innovation for the 21St Century: Harnessing the Power of Intellectual Property and Antitrust

• DOI: 10.1177/0003603X1105600109
• Published date: 01 March 2011
• Author: Peter Carstensen
• Date: 01 March 2011
• Subject Matter: Book Review

T H E A N T I T R U S T B U L L E T I N : Vol. 56, No. 1/Spring 2011 : 165
INNOVATION FOR THE 21ST CENTURY:
HARNESSING THE POWER OF INTELLECTUAL PROPERTY
AND ANTITRUST
Michael A. Carrier
Oxford University Press (2009), vii + 412 pp., $65.00
Reviewed by Peter Carstensen, University of Wisconsin Law School
Professor Carrier has produced a timely and important book dis-
cussing aspects of the relationship between innovation and the legal
regimes of intellectual property (IP) and antitrust. The book is aimed
at a general audience as well as those of us with more specialized
interests. Hence, the author has provided useful introductory sum-
maries of antitrust, patent, and copyright law. The guiding principle
of this work is that the goal of public policy should be to support and
sustain innovation as a central and primary component of our public
economic policy. As a result, Professor Carrier has focused his atten-
tion on various ways in which the laws have worked poorly or are
frequently thought to have worked poorly to achieve that goal. In
some cases, he suggests that the concerns are overblown, but in others
he argues that indeed the current legal regime frustrates rather than
facilitates innovation.
This is also a book advocating law reform. After assessing each of
the major issues that he has evaluated, Carrier offers concrete sugges-
tions as to how patent, copyright, and antitrust law should be modi-
fied to improve the capacity to innovate successfully and at no greater
social or economic cost than necessary. In some instances, however, he
concludes that reform is not necessary or not yet needed given the
way markets have evolved. This illustrates his nuanced approach to
evaluating a variety of contexts.
© 2011 by Federal Legal Publications, Inc.

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166 : T H E A N T I T R U S T B U L L E T I N : Vol. 56, No. 1/Spring 2011
I.
AN OVERVIEW
The book has four major parts. The first offers a primer on innova-
tion, IP, and antitrust. Wisely, he starts with a chapter on innovation
itself. One of the overall strengths of this book is that Carrier retains a
strong focus on the instrumental policy goal of facilitating innovation,
which is itself one of the most important contributors to economic
growth over time. He defines innovation as “the discovery, develop-
ment, and commercialization of new and improved products and
processes.”1 Chapter 2 provides a thumbnail sketch of patent and
copyright law for those readers not well versed in its details. Chapter
3 provides a similar overview of antitrust law. The final two chapters
in this part present Carrier’s view of the evolution of antitrust law’s
response to innovation in the twentieth and twenty-first centuries.
Chapter 4 asserts that during much of the twentieth century antitrust
law was concerned only with static efficiency issues and so took a hos-
tile stance toward all patent and other rights that might support inno-
vation. Chapter 5 then contends that this perspective of antitrust law
changed toward the end of that century. A new pro-innovation public
policy stressed patent and copyright privileges as necessary legal sup-
port for innovation, sometimes at the expense of desirable competition
and antitrust rules. Looking forward Carrier sees a more balanced per-
spective that, he hopes and expects, will remain focused on the under-
lying goal of innovation and not get sidetracked into excessive
formalism concerning statutory rights. Thus, he sees a somewhat
greater role for antitrust and for competition policy concerns as neces-
sary to a successful overall public policy supportive of innovation.
The second part focuses on copyright issues. Here he examines
three prominent topics: the legal controls over peer to peer and other
technologies that arguably interfere with copyright ownership; the
current rules on damages for violating copyright privileges; and the
expansive use of the Digital Millennium Copyright Act (DMCA) to
foreclose competition in technologies outside the copyright field.2 In
1
MICHAEL A. CARRIER, INNOVATION FOR THE 21ST CENTURY: HARNESSING
THE POWER OF INTELLECTUAL PROPERTY AND ANTITRUST LAW 19 (2009).
2
Digital Millennium Copyright Act of 1998, Pub. L. No. 103-204, 112
Stat. 2860. The act amended various sections of Title 17 of the U.S. Code,
including adding protections against various efforts to evade security sys-
tems for digital materials.

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B O O K R E V I E W : 167
Chapter 6, Carrier argues that peer to peer exchanges of potentially
copyrighted material as well as other forms of access such as Tivos
should be more often lawful even if they contribute to the ability to
infringe copyrights. The current interpretation of copyright law puts
the producers of such products and systems at significant risk of
being found to have facilitated the buyers’ copyright infringement.
He would return the law to a stronger focus on the position of the
U.S. Supreme Court in the Sony case3 where the potential for legiti-
mate uses of an innovation (the VCR in that case) was central to
rejecting the secondary infringement claim. Such a policy balance
would facilitate innovation by restricting the ability of incumbent
copyright holders to frustrate entry by creating legal obstacles.
Chapter 7 makes the closely related case that the current statutory
damage rules impose undue risk and hardship on those innovators
who are found to have engaged in secondary copyright infringement.
Carrier would limit the statutory damages to direct copying of copy-
righted material while limiting other claims to actual damages or
injunctive relief. Once again, the balance that he would strike is one
that explicitly favors the innovator at the expense of the established
economic interests that dominate the market.
Finally, Chapter 8 argues that the DMCA is being misused to
block innovation and competition whenever a producer of a product
can insert a computer program into its access system. Congress
intended the statute to protect copyrighted materials such as movies
and musical performances from unauthorized copying. But various
product manufacturers found that if they imbedded a computer chip
to control access to parts (e.g., windshield wipers) or inputs (e.g.,
toner ink), they could charge copiers with violations whenever the
copier tried to decode the chip’s entry control system. Thus a statute
intended to avoid unauthorized copying of movies became a means
of excluding competition and raising prices in product markets as
well as a means of defeating reverse engineering by those innovators
who sought to improve on the original product. The conclusion of
this analysis is that the DMCA needs to be given a strict and narrow
interpretation to keep it from being used to frustrate innovation and
competition.
3
Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984).

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The third part takes up four problems in patent law: post-grant
challenges to patent validity, remedies for infringement, and two
related topics concerning biotechnology—the restrictions governing
use of research tools and material transfer agreements. Chapter 9
focuses on the problems arising from the potential that some patents
ought not to have been granted and should be revoked. There is a post-
grant opposition system currently, but it is cumbersome and creates
major risks for a challenger. Carrier’s analysis leads to the conclusion
that there ought to be a new system for opposition to patents already
granted. The concrete proposal for such a system would entail a
stronger showing by the challenger before such a proceeding could be
initiated,4 expand the time periods within which a challenge might be
initiated (he would have three different time periods), increase the
bases for a challenge (the current system limits this to only two bases—
novelty and nonobviousness), reduce the persuasion burden that a
challenger has to meet (from “clear and convincing” to “preponder-
ance”), and contain various procedural steps intended to minimize the
costs of the entire proceeding. Finally, he would limit the disclosure of
the identity of the challenger and limit the estoppel effect of any final
decision so that issues not resolved could be litigated in a future
infringement proceeding. This chapter shows Carrier’s balanced con-
cern for innovation—protecting the patent holder from undue expenses
but also protecting the competing innovator from excessive restraints
on its innovation resulting from unjustified patent grants.
With respect to remedies for infringement, Chapter 10 urges the
need to move away from the dominant traditional remedy of an auto-
matic injunction barring the infringer from continued production or
provision of its good or service when it contains an infringing compo-
nent. Many patents, especially in computer and telecommunications
technology, now provide only modest elements in the “infringing”
products. Yet the threat of an injunction blocking entirely the produc-
tion of the product can inhibit innovation because the innovator faces
inordinate risk especially if its product is at all successful. Hence, Car-
rier argues that the basic remedy for infringement should be damages
4
CARRIER, supra note 1, at 218–19 (suggesting that the standard for a
preliminary injunction might provide a useful model for the kind of eviden-
tiary showing that would warrant a review).

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based on lost license fees. He...