Do First Amendment Principles Limit the Antitrust Agencies' Ability to Prohibit Enforcement of Standards-essential Patents?
| Publication year | 2014 |
| Author | By David L. Meyer and Fabien Thayamballi |
By David L. Meyer1 and Fabien Thayamballi2
Recent antitrust enforcement actions have called attention to the potential that application of the antitrust laws, like all governmental action, is limited by the constraints of the First Amendment. This is not a new development. The half-century old Noerr-Pennington doctrine reflects, at least in part, limitations placed on the reach of the antitrust laws by the First Amendment right of petition. Recent developments at the interface between antitrust and patent enforcement have brought renewed attention to the potential for antitrust enforcement to run afoul of constitutional limits.
The issue is starkly illustrated by dueling comments issued by commissioners of the Federal Trade Commission ("FTC") addressing recent agency settlements that limited the defendants' ability to enforce their standards-essential patents in the courts by seeking injunctive relief. The commissioners disagreed on the proper application of Noerr-Pennington immunity, which shields genuine attempts to influence governmental action from antitrust liability irrespective of their effects on competition. In each case, the FTC opined that the owner of patents essential to the practice of industry standards could be subjected to liability for seeking injunctions against parties that were prepared to enter patent licenses, contrary to the owners' prior commitments to license those patents on Fair, Reasonable, and Non-Discriminatory ("FRAND") terms. Commissioner Maureen Ohlhausen dissented in both cases, arguing that "the Noerr-Pennington doctrine precludes Section 5 liability for conduct grounded in the legitimate pursuit of an injunction or any threats incidental to it."3 The FTC majority's response to that objection was that enforcing Section 5 does not offend the First Amendment when it merely "requires those making promises to keep them."4
Antitrust law is often invoked to regulate activities that could be regarded as within a class protected by the First Amendment. At least in some sense price fixing and other agreements in restraint of trade entail both "association" and "speech." However, since early in the last century, antitrust jurisprudence has paid little attention to First Amendment limitations, with the exception of Noerr-Pennington immunity and the occasional limits on the remedial powers of courts to regulate ongoing behavior by entities, like newspapers, for which expression is their stock in trade. If expressive conduct causes competitive harm that brings it into conflict with the antitrust laws, the conduct generally has not been treated as protected by the First Amendment. No court has suggested that the Constitution gives cartelists the privilege to utter "I agree" without consequence.
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This article examines how First Amendment principles can affect the application of the antitrust laws by first summarizing how courts have previously viewed the interaction between antitrust law and the First Amendment, then setting out the background behind the controversy over standards-essential patents and FRAND commitments, and finally evaluating the dueling positions articulated by the commissioners in these recent FTC matters against the principles courts have applied when assessing whether law enforcement implicates First Amendment concerns.
The antitrust laws prohibit many activities involving speech, association, and petitioning, yet the First Amendment is seldom a successful defense to liability. One commentator characterizes antitrust law as "almost wholly untouched by the First Amendment."5 There are two major exceptions to this principle: certain politically motivated boycotts receive constitutional protection, as do genuine attempts to petition the government. This state of affairs arises from the interaction of several basic First Amendment principles.
The Supreme Court recognizes certain "narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem."6 As a general matter, these categories involve speech viewed as having minimal social value, but which society has a strong interest in regulating. Examples of such exceptions include obscenity, "fighting words," threats, and (until fairly recently) libel.7 The Court finds support for excluding these categories from First Amendment protection both in in the historical context of the Constitution as well as its own assessment of costs and benefits of the conduct from the perspective of First Amendment principles.8
It is well-established that price fixing and other types of "contract[s], combination[s] . . . , or conspiracies], in restraint of trade or commerce"9 are treated as unprotected speech.10 Cartelists certainly fix prices by exchanging information aloud or in writing. And any resulting prosecution will inevitably punish the cartelists, at least in part, for the content of their communications, which must yield a meeting of the minds to violate antitrust laws.11 Yet price fixing is so clearly outside the purview of the First Amendment that it serves as the Supreme Court's paradigmatic example of why one cannot take seriously the expressive characteristics of communications that cause competitive or other harm that society has seen fit to condemn as unlawful. For example, when declining to extend First Amendment protection to an economic boycott, the Supreme Court noted that "[t]he most blatant, naked price-fixing agreement is a product of communication, but that is surely not a reason for viewing it with special solicitude."12
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The reasons why price fixing falls so clearly outside the protective scope of the First Amendment are instructive. Arguably, such conduct falls within several classes of unprotected speech. First, "[o]ffers to engage in illegal transactions are categorically excluded from First Amendment protection."13 As a result, the "long established criminal proscriptions" against conspiracy and solicitation pass constitutional muster because the speech involved has no social value whether or not it is part of a commercial exchange.14 In the antitrust arena, communications that amount to price fixing are themselves an integral step in the illegal act, and under this branch of First Amendment analysis can be proscribed without further judicial scrutiny.
Second, even if price fixing were not itself illegal, it surely could be framed as an incitement to "imminent lawless action"—namely, the course of illegally coordinated pricing that the agreement portends.15 Communications giving rise to an anticompetitive agreement go beyond "the abstract advocacy of illegality,"16 and are instead intended to or in fact do produce illegal restraints on competition. As is the case with conspiracy and solicitation, the social value of such incitement can be understood as clearly outweighed by society's interest in preventing illegal anticompetitive restraints.
Third, price fixing could fall under the exception for "speech or writing used as an integral part of conduct" in violation of a valid statute.17 The precise contours of this category are unclear and perhaps analytically unsatisfying.18 Nevertheless, the Court frequently alludes to this principle when the First Amendment and the antitrust laws intersect.19 The overarching lesson is that speech in furtherance of-—or that comprises a necessary link in establishing—anticompetitive conduct merits little or no First Amendment protection.20
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Other First Amendment principles operate, in some circumstances, to shield from liability certain forms of expressive conduct that would otherwise violate the antitrust laws but that might be thought outside the scope of the First Amendment under the principles set out above.21 Three examples chart the scope of First Amendment protection for conduct that causes, or leads indirectly to, potential competitive harm. First, in NAACP v. Claiborne Hardware Co.,22 the Supreme Court held that boycotts motivated by political principles, rather than by parochial economic interests, enjoy a constitutional shield against the antitrust laws even if they cause economic harm. The conduct at issue was a nonviolent boycott organized to protest racial discrimination, which the Court deemed "essential political speech lying at the core of the First Amendment."23 The Court subsequently narrowed the potential reach of its holding in in FTC v. Superior Court Trial Lawyers Ass'n,24 where it withheld First Amendment protection from a boycott of new indigent criminal defense appointments by trial lawyers, reasoning that the boycott sought a fee increase for those same lawyers and thus was economically motivated.25
Second, the Noerr-Pennington doctrine26 protects genuine attempts to seek governmental action.27 One foundation for that doctrine is the canon of constitutional avoidance, under which the Court interprets federal laws on the assumption that Congress did not intend to create a potential conflict with the First Amendment right of petition.28 Under the doctrine, genuine attempts to petition the government for redress are immune from antitrust liability, even if the petitioning activity seeks an anticompetitive outcome or itself causes incidental anticompetitive harm. Noerr itself concerned lobbying for anticompetitive legislation, and the doctrine has been extended to cover efforts to seek relief from courts and administrative agencies as well.29
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The doctrine does not, however, protect petitioning activity that is a "mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor."30 Stated another way, if the objective is only to cause harm to the marketplace by virtue of the petitioner's own conduct, rather than through the...
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