CROSSING THE GREAT DIVIDE: USING ADVERSE POSSESSION TO RESOLVE CONFLICTS BETWEEN THE ANTITRUST AND INTELLECTUAL PROPERTY REGIMES

• Date: 27 April 2004
• Published date: 27 April 2004
• DOI: https://doi.org/10.1016/S1048-4736(04)01505-X
• Pages: 149-199
• Author: Constance E. Bagley,Gavin Clarkson

CROSSING THE GREAT DIVIDE: USING

ADVERSE POSSESSION TO RESOLVE

CONFLICTS BETWEEN THE

ANTITRUST AND INTELLECTUAL

PROPERTY REGIMES

Constance E. Bagley and Gavin Clarkson*

ABSTRACT

Thispaperfocusesontworelatedquestionsattheintersectionof antitrust and

intellectual property law. First, under what circumstances must the holder

of a patent or a copyright or the owner of a trade secret allow others to

use that intellectual property? Second, under what circumstances can the

holder of an intellectual property right use that right to make it difficult for

another party to succeed in a related market? These questions have vexed

antitrust and intellectual property scholars alike ever since the Federal Cir-

cuit ruled in 2000 that patent holders “may enforce the statutory right to

exclude others from making, using, or selling the claimed invention free from

liability under the antitrust laws,” a ruling that directly contradicted the

∗Certain ideas and arguments presented in this paper were first discussed in “Adverse Possession

for Intellectual Property: Adapting an Ancient Concept to Resolve Conflicts Between Antitrust and

Intellectual Property Laws in the Information Age,” 16 Harv.J.L.&Tech. 327 (2003), which

contains an expanded legal analysis (including several hundred additional footnotes).

Intellectual Property and Entrepreneurship

Advances in the Study of Entrepreneurship, Innovation and Economic Growth,

Volume15, 149–199

© 2004 Published by Elsevier Ltd.

ISSN: 1048-4736/doi:10.1016/S1048-4736(04)01505-X

149

150 CONSTANCE E. BAGLEY AND GAVIN CLARKSON

Ninth Circuit ruling that antitrust liability could be imposed for almost iden-

tical conduct, depending on the motivations of the patent holder.The various

proceedings in United States v. Microsoft only added fuel to the firestorm

of controversy.

After briefly retracing the jurisprudential path to see how this situation

arose, we propose a solution that primarily involves a variation on the real

property concept of adverse possession for the intellectual property space

along with a slight extension of the Essential FacilitiesDoctrine for industries

that exhibit network effects. We examine, both for firms with and without

market power, how our proposal would resolve the situations presented

by large fixed asset purchases, the introduction of entirely new products,

and operating systems with network effects. We also demonstrate how our

proposal could be applied in the European antitrust enforcement context.

1. INTRODUCTION

This paper focuses on two related questions. First, under what circumstances must

the holder of a patent or a copyright or the owner of a trade secret allow others to

use that intellectual property? Second, under what circumstances can the holder

of an intellectual property right unilaterally1use that right to make it difficult for

another party to succeed in a related market? Although the Supreme Court ad-

dressed these issues somewhat obliquely in 1992 in its decision in Kodak v. Image

Technical Services (“Kodak I”),2these questions assumed new urgency in 2000

after the Federal Circuit created a split in the circuits by ruling in CSU v.Xerox that

patent holders “may enforce the statutory right to exclude others from making,

using, or selling the claimed inventionfree from liability under the antitrust laws.”3

The Federal Circuit expressly declined to follow a Ninth Circuit ruling that held

antitrust liability could be imposed for almost identical conduct, depending on

the motivation of the patent holder.4The District of Columbia Circuit’s statement

in United States v. Microsoft (“Microsoft 2001”)5that Microsoft’s assertion that

its copyrights on its software programs entitled it to impose restrictions on its

original equipment manufacturer (“OEM”) licensees was “no more correct than

the proposition that use of one’s personal property, such as a baseball bat, cannot

give rise to tort liability”6only added fuel to the firestorm of controversy.

The depth of this quandary became even more evident when, presented with

a seemingly obvious split in the circuits, the Solicitor General suggested that the

U.S. Supreme Court deny certiorari in the Xerox case to “allow these difficult

issues to percolate further in the courts of appeals.”7Indeed,the Antitrust Division

of the Justice Department and the Federal Trade Commission held an entire

Crossing the Great Divide 151

day of hearings on exactly these questions as part of their series of hearings on

competition and intellectual property policy.8The hearings produced a substantial

amount of thought and discussion, but no clear solution.

Given that determining antitrust liability for refusing to deal is already one of

the most challenging questions in the antitrust field, the additional requirement

of determining the scope of the intellectual property grant and the concomitant

right to exclude makes this problem that much more complex.9In order to arrive

at a potential solution, it is necessary to retrace briefly the jurisprudential path to

see how this issue arose. Section 2 of this paper discusses some of the intellectual

property and antitrust principles that should guide the development of any poten-

tial solution. Section 3 then reviews the origin and propagation of the problems

created when intellectual property rights (“IPR”) holders unilaterally refuse to

deal. In Section 4 we present our proposed solution, which calls for the application

of an adapted version of the real property concept of adverse possession in the

intellectual property arena, along with a slight extension of the Essential Facilities

Doctrine for industries that exhibit network effects. Our proposed solution is

designed to allow these cases to be resolved via summary judgment, and we

demonstrate this potential judicial efficiency by applying our framework to

various potential situations involving refusals to deal. In Section 5 we attempt to

answer some potential critiques of our solution, and in Section 6 we conclude with

suggestions for further exploration.

2. IP AND ANTITRUST BASICS

2.1. Patents, Copyrights, and Trade Secrets

Intellectual property is any product or result of a mental process that is given

legal protection against unauthorized use (Bagley, 2002a). Intellectual property

law identifies four categories of innovation – patents, copyrights, trade secrets,

and trademarks – and provides separate protection for each.

Although the present controversy focuses on patents and copyrights because

they are the most likely forms of IP to be at issue in a refusal to license, refusal to

disclose trade secrets has also been a problem in the antitrust context. As part of

the consent decree10 settling the suit brought by the United States and a number

of individual states, Microsoft Corporation is obligated to reveal certain trade

secrets to competitors, for instance, providing early disclosure of its application

programming interfaces (“APIs”).

A copyright11 includes the government-granted right to prevent others from

copying the original expression embodied in an original work of authorship. The