Patent Ships Sail an Antitrust Sea

• Publication year: 2006

SEATTLE UNIVERSITY LAW REVIEWVolume 30, No. 2WINTER 2007

Patent Ships Sail an Antitrust Sea

Joseph Scott Miller(fn*)

The novelty and nonobviousness requirements of patentability embody a congressional understanding, implicit in the Patent Clause itself, that free exploitation of ideas will be the rule, to which the protection of a federal patent is the exception.(fn1)

I. Introduction

This essay arises from my participation in an April 2006 conference at Seattle University Law School. The conference was titled, At the Intersection of Antitrust and Intellectual Property Law: Looking Both Ways to Avoid a Collision. This "intersection" metaphor is a common one for describing antitrust law's relationship with intellectual property law, among both commentators(fn2) and courts.(fn3) And the metaphor endures despite the decades-old recognition that the antitrust and intellectual property laws have the same overall goal-"to maximize wealth by producing what consumers want at the lowest cost."(fn4) Perhaps it endures because these two regimes pursue their shared goal through quite different means, one by fostering competition (antitrust) and one by curtailing it (intellectual property).(fn5)

My goal here is to explore a different metaphor for describing the relationship between antitrust law and patent law (the branch of intellectual property law with which I am most familiar). To wit: patent ships sail an antitrust sea, protecting those aboard from free competition's harshest dangers-but only for a time. No ship lasts forever; the seas abide.(fn6)

It is, of course, fair to ask, why spend more than a moment or two thinking about which metaphor-intersecting roads or a ship in the sea- is more apt? It's just a metaphorl The time is well spent, I think, because metaphors shape how we think about a topic and can also help illuminate that topic. As Professor Eugene Volokh notes in one of his works exploring the "slippery slope" metaphor in law, "metaphors are falsehoods that aim at exposing a deeper truth. They can be legitimate, and rhetorically powerful. Some of the most effective legal arguments use metaphor."(fn7) Indeed, as Professor Patricia Loughlan explains in her engaging, example-rich meditation on intellectual property metaphors, three metaphor clusters-"the metaphor of the unauthorised user of intellectual property as a 'pirate' or 'parasite' or 'poacher,' the metaphor of the author or inventor of an intellectual work as a 'farmer,' and the metaphor of intellectual creations which are not subject to private ownership, as 'a common'"(fn8)-powerfully shape our understanding of intellectual property law and policy.(fn9) I will, in any event, be brief, appreciating that we should not mistake even the most compelling metaphor for the reality that we are trying to understand.(fn10)

The deeper truths evoked by patent ships sailing an antitrust sea are three. First, free competition is the pervasive, baseline reality, the background norm; patent protection is the temporary, partial exception. Second, we grasp both patent and antitrust policy with a common science: economics. Third, although neither patent nor antitrust law doctrines are good tools for fixing fundamental problems in the other body of law, both bodies of law help us better understand the shortcomings of the other. I explore these ideas in turn, below.

II. Free Competition is the Rule, and Patent Law the Exception

When we think of patent law and antitrust law as intersecting roads, rather than as patent ships in an antitrust sea, we put these two bodies of law on roughly equal footing. In the "intersections" image, neither surrounds, nor could engulf, the other. That image thus misses a basic fact about our market economy. Free competition, which antitrust law helps ensure, is the fundamental norm. Indeed, "[t]he policy of free competition runs deep in our law."(fn11) Patent protection, if one can obtain it at all, is a hard-earned, partial exception. Assuming a given patent grant is proper, it provides the patentee the power to bring an enforcement action to exclude others from competing against it with a perfect duplicate or close functional equivalent of the claimed invention.(fn12) Competition is the norm, and patent litigation to prevent it is not self-executing: in any enforcement action, the patentee bears the burden of proving liability, and an infringement allegation may be untenable.(fn13) What follows from the competition norm?

First, antitrust law surrounds patent law. The standard economic account of intellectual property protection is that it is a solution to a market failure in the production of information goods.(fn14) As Professor Mark Lemley puts it, in the standard market failure account, "intellectual property is a necessary evil."(fn15) Our economy relies on interfirm competition to provide consumers with the things they desire at lower quality-adjusted prices. Firms are generally free to use public information to compete with one another, even if the information is found through a competitor's offering. "[I]n many instances there is no prohibition against copying goods and products. In general, unless an intellectual property right such as a patent or copyright protects an item, it will be subject to copying."(fn16) Moreover, the rights to exclude that patents and copyrights confer "are part of a 'carefully crafted bargain,' under which, once the patent or copyright monopoly has expired, the public may use the invention or work at will and without attribution."(fn17) This commitment to free competition reflects a faith "that imitation and refinement through imitation are both necessary to invention itself and the very life-blood of a competitive economy."(fn18)

Second, the more fundamental status of free competition and antitrust highlights a further truth. A patent's protection from free competition is never more than partial; it is dry aboard the ship, but the ship still bobs on an icy deep. The protection is limited in time: a utility patent expires twenty years from the date on which the application for it was first filed.(fn19) It is also limited by the realities of consumer preferences. Throughout the life of the patent, the patented invention competes against closer (or more distant) substitutes. For example, if I patent a laundry detergent formula and market a product that embodies it, the detergent will compete in a market filled with other detergents. Consumers' preferences, expressed through their willingness to pay, will determine which detergents, including my own, succeed. The relentless pressure of these more-or-less acceptable substitutes, not an abstract proposition about patent protection, determines the market power of my detergent patent.(fn20) More generally, "[t]he average patent... confers too little monopoly power on the patentee in a meaningful economic sense to interest a rational antitrust enforcer, and sometimes it confers no monopoly power at all."(fn21)

Third, the Supreme Court's recent decision in Illinois Tool Works Inc. v. Independent Ink, Inc.(fn22) embraces the basic fact that acceptable substitutes discipline the market for a patented technology. In Illinois Tool Works, the Court confronted the question of whether, in a challenge to a tying arrangement, the antitrust plaintiff is entitled to a presumption that the defendant has market power in the tying product if that tying product is patented.(fn23) The Court "concludefd] that the mere fact that a tying product is patented does not support such a presumption,"(fn24) overturning a decades-old approach from International Salt Co. v. United States (fn25) One reason, the Court stated, for rejecting the...