Introduction

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CHAPTER I

INTRODUCTION

A. Overview of Intellectual Property and Antitrust Law

The intersection of intellectual property law and antitrust law is

delimited by the nature and purpose of each body of law. In the analysis

of the antitrust treatment of the use of intellectual property, it is therefore

important to start with an outline of each body of law’s main principles.

Difficult questions arise when the nature and purpose of one set of laws

seem to conflict with those of the other.

1. Nature of the Intellectual Property Laws

Intellectual property is the collective term for a group of intangible

property rights, primarily patents, copyrights, trademarks, and trade

secrets, that give their owners a legal stake in the fruits of their creativity

and reputation. Broadly speaking, patents cover inventions; copyrights

cover expressive works of authorship; trademarks cover words and

designs that indicate source, sponsorship, or quality, and trade secrets

cover confidential business information.1 Each right protects a different

aspect of intangible property and is an independent right; none of these

rights is a subset of the others.2 Intellectual property aims to reward

creative effort with the promise of exclusive or near-exclusive rights—

whether to profits, recognition, or both—to encourage innovation, which

ultimately benefits consumers and society at large.3

Intellectual property is similar to other types of property in that each

right gives its owner the ability to exclude others, and each right can be

transferred via license (leased) or assignment (sold) for the owner’s

profit.4 However, intellectual property differs from tangible property in

that multiple users, whether ten, a thousand, or a million, can use a given

1. See WORLD INTELLECTUAL PROPERTY ORGANIZATION, INTELLECTUAL

PROPERTY HANDBOOK: POLICY, LAW & USE, §§ 2.1, 2.162, 2.319-20,

2.833-34 (WIPO 2008) [hereinafter WIPO HANDBOOK].

2. See Medtronic, Inc. v. Catalyst, 518 F. Supp. 946, 955 (D. Minn. 1981),

aff'd, 664 F.2d 660 (8th Cir. 1981).

3. See Mazer v. Stein, 347 U.S. 201, 219 (1954).

4. See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC

STRUCTURE OF INTELLECTUAL PROPERTY LAW 11-16 (2003).

2 Intellectual Property and Antitrust Handbook

item of intellectual property at the same time.5 Also, while it may be

expensive to create the first product unit of an intellectual asset, the

intellectual property portion of that product (as distinguished from any

tangible embodiment, such as the binding of a copyrighted book or the

metal in a patented machine) can be reproduced indefinitely at essentially

zero cost.6

Free riding—when a subsequent user benefits from the innovation of

an intellectual property creator without compensating that creator or

otherwise permitting the creator to recoup its investment—is a particular

hazard with intellectual property because of its low marginal cost of

reproduction.7 Intellectual property law, at its simplest, prevents free

riding, or at least limits it to levels that are less likely to discourage

innovation.8 The intellectual property laws may be thought of as ways to

devise artificial, legal barriers against this form of theft, and by doing so,

to preserve incentives to innovate.

The constitutional mandate for the protection of intellectual property9

strikes a balance between intellectual property owners and the general

public by encouraging and rewarding a creator’s innovation, but also

ensuring varying degrees of rights of use for the public. Intellectual

output not covered by the intellectual property laws, or creations to the

5. See id. at 20.

6. See William M. Landes & Richard A. Posner, An Economic Analysis of

Copyright Law, 18 J. LEG. STUD. 325, 326 (1989).

7. See id.; Hanns Ullrich, The Importance of Industrial Property Law and

Other Legal Measures in the Promotion of Technological Innovation, 28

INDUST. PROP. 102-03 (1989).

8. See Mark A. Lemley, Ex Ante Versus Ex Post Justifications for

Intellectual Property, 71 U. CHI. L. REV. 129, 138 (2004) (stressing the

need “to give creators of patented and copyrighted works power over

price because the act of creation imposes a cost that imitators do not

share”).

9. The public policy basis of the intellectual property laws finds its primary

source in the U.S. Constitution, which empowers Congress “[t]o promote

the Progress of Science and useful Arts, by securing for limited Times to

Authors and Inventors the exclusive Right to their respective Writings

and Discoveries.” U.S. CONST. art. 1, § 8, cl. 8. This clause casts private

rights in light of a public goal—“progress”—and tempers those rights by

recognizing them only for “limited times.” The terms “writings” and

“discoveries” are generally interpreted as corresponding to modern-day

copyrights and patents, respectively. See generally Eldred v. Ashcroft,

537 U.S. 186, 192-93 (2003) (referring to U.S. CONST. art. 1, 8, cl. 8 as

the “Copyright and Patent Clause”).

Introduction 3

extent they consist of expired rights, become part of the “public domain,”

a catch-all term for anything that the public may use without needing an

intellectual property owner’s permission.10 The interplay of intellectual

property rights and the public domain is the central tension of intellectual

property law and is the subject of frequent debate, and occasional action,

by Congress.11

There are four main types of intellectual property: patents,

copyrights, trademarks, and trade secrets. Since patents and copyrights

are the types that most frequently intersect with antitrust law, this chapter

discusses only these in detail below.

a. Patents

A patent is a government-created right to an invention.12 The owner

of a patent has the exclusive right to “practice” the patent—make, use,

offer to sell, sell, or import a product or service embodying the

invention—within the United States.13 There are three types of patents:

utility patents, plant patents, and design patents.14 Utility patents—by far

the most common type—may be obtained for any new and useful

process, machine, composition of matter, or useful improvement

thereof.15 Plant patents may be obtained for certain new varieties of

plants that the applicant has discovered and asexually reproduced.16

Utility and plant patents are awarded for a term of twenty years measured

10. See Feist Publ’ns v. Rural Tel. Serv., 499 U.S. 340, 350-51 (1991)

(describing how facts are in the public domain and ineligible for

copyright protection); Baker v. Selden, 101 U.S. 99, 103 (1880) (holding

that, because “the very object of publishing a book on science or the

useful arts is to communicate to the world the useful knowledge which it

contains,” such facts and knowledge become part of the public domain

upon publication).

11. For example, in 1998, Congress extended the term of copyright

protection—not merely for future works, but for existing ones as well—in

the Copyright Term Extension Act, Pub. L. 105-298, §§ 102(b) and (d),

112 Stat. 2827, 2827-28 (amending 17 U.S.C. §§ 302, 304). The Supreme

Court concluded that in doing so, Congress acted within its powers under

the Copyright and Patent Clause. Eldred, 537 U.S. at 194.

12. 35 U.S.C. § 101.

13. 35 U.S.C. § 271.

14. 35 U.S.C. §§ 101, 161, 171.

15. 35 U.S.C. § 101.

16. 35 U.S.C. § 161.