Wisconsin Patent Acquisition in the Final Frontier: Creating a Void.

AuthorThibodeau, Nicholas J.
  1. INTRODUCTION II. CONSTRUING THE LAW A. The Powers of the Wisconsin Aerospace Authority B. The Principles of Antitrust Law C. Preemption of State Contract Law III. WISCONSIN AEROSPACE AUTHORITY PREEMPTION A. Wisconsin Aerospace Authority Violates Antitrust Laws B. The WAA Would Be Preempted C. Combining to a Void D. Wisconsin Intellectual Property Acquisition IV. RESOLUTION I. INTRODUCTION

    In early 2006, the Wisconsin Legislature passed 2005 Wisconsin Act 335, creating the Wisconsin Aerospace Authority (WAA). (1) Unique to this particular act is the enumeration of the power to acquire intellectual property by the WAA. (2) While granting them the power to acquire intellectual property is not unique, there is an interesting problem with that acquisition: the Act does not conform to the Parker Doctrine, and thus allows the WAA to be subject to antitrust litigation in its intellectual property acquisition under the proper circumstances. Specifically, the Act allows the WAA to enter into exclusive contracts that allow the WAA to acquire intellectual property rights in patents and copyrights. If entering into these contracts are found to be in violation of antitrust law, the contracts could be challenged, and state contract law would be preempted by federal patent or copyright law. If federal law preempts state law and the contractual relationship is a violation of antitrust law, the specific provisions of the Act that allow for intellectual property rights acquisition could be held void. The key factor is the broad language in the Act and the limitless authority it grants to the WAA in acquiring intellectual property. While the cause of such broad language is left to speculation, the remedy to prevent such an action can lie in other states' aerospace authority statutes, such as the Alaska Aerospace Corporation and the New Mexico Regional Spaceport District. (3) This Comment will address the broad language of the Wisconsin statute that allows for intellectual property acquisition, focusing particularly on patents, the history of the antitrust law applied to state-owned entities, the circumstances needed for intellectual property acquisition to violate antitrust law, and the potential remedies.

    The problem with addressing these issues is that the issues are unique and rarely occur. While state-owned entities are no stranger to intellectual property acquisition, (4) my research was unable to locate any state-owned entity acquiring any intellectual property through anticompetitive behavior. Furthermore, my research uncovered only one article into potential state antitrust behavior in acquiring intellectual property, albeit, on a federal level. (5) And while trade secret misappropriation has resulted in patent applications, which have subsequently been denied, the very notion of state antitrust behavior seems contrary to the nature of private research, invention, and patent application imbued into the America Invents Act. (6) This Comment will first address the Wisconsin laws and the history of antitrust laws applied to state-owned entities. Next, part two will address how Wisconsin could violate those antitrust laws in their independent research and invention for a potential patent, and how that violation could preempt state common law. Part three will then address potential remedies, including, but not limited to patent sharing, broad oversight, and revision of those laws. Part four suggests revisions to the current laws to prevent state antitrust activity.

  2. CONSTRUING THE LAW

    Imagine this scenario: the WAA enters into an exclusive contract with the Astronautics Corporation of America (ACA), based in Milwaukee, to launch rockets from Spaceport Sheboygan to test new equipment the ACA is developing for the new Orion spacecraft. This new equipment, if proven through these tests, will allow for better aeronautic measurements than GPS, which, if mass produced, could eventually be put into every new manufactured airplane as well. One provision in this contract allows the WAA a partial ownership in any patents acquired by testing this equipment, since the WAA was integral in its creation, as it manages the only spaceport in the entire Midwest that is licensed for the launching of spacecraft. However, since the WAA has a monopoly over Midwestern space launches (and since there are no other Midwestern spaceports), such an exclusive contract could be challenged by Orbital Technologies, a competing aerospace engineering company out of Madison, as violating antitrust laws. This challenge could result in state contract law being preempted by federal law. If that law is preempted and found to violate federal antitrust law, then those specific provisions of the Wisconsin statutes that allowed the WAA to acquire intellectual property rights would be void.

    1. The Powers of the Wisconsin Aerospace Authority

      This may seem like a farfetched idea, but it will be a reality because of the specific statutory language. Wisconsin statute section 114.62 states, "the authority may ... [m]ake and execute contracts and other legal instruments necessary or convenient for the conduct of its business or to the exercise of its powers." (7) Additionally, the statute states

      the authority may ... [a]cquire, own, lease, construct, develop, plan, design, establish, create, improve, enlarge, reconstruct, equip, finance, operate, manage, and maintain ... [a]ny spaceport [and] [a]ny intangible property right, including any patent ... copyright ... or other right acquired under federal or state law, common law, or the law of any foreign country. (8) Under this provision, the WAA can enter into a contract to acquire a patent through an exclusive contract to test an invention at Spaceport Sheboygan. This is because of the lack of limiting language in the statute. It basically gives limitless authority to the WAA to enter into any contract and acquire virtually any intellectual property rights through those contracts so long as they are "convenient for the conduct of business" or are an "exercise of its powers," (9) of which includes the acquisition of intellectual property rights. The problem with this broad authority granted to the WAA is it violates antitrust laws if the state enters such contract.

    2. The Principles of Antitrust Law

      The applicability of antitrust laws to state-owned entities is outlined in the landmark case Parker v. Brown. (10) The California Agricultural Prorate Act (CAPA) was challenged by the Department of Agriculture under the antitrust laws of the Sherman Act, the Agricultural Marketing Agreement Act of 1937, and the Commerce Clause. (11) The Supreme Court found that the Sherman Act did not necessarily prohibit any legislative act of states, nor did the CAPA violate any other federal laws. (12) However, in evaluating the application of the Sherman Act, the Supreme Court stated that the state must "exercise[] its legislative authority in making the regulation and in prescribing the conditions of its application." (13) This created a two-part test: first, the state must clearly state an affirmative policy to allow anticompetitive conduct, and second, it must provide active supervision of that anticompetitive conduct. (14)

      While the CAPA did not violate antitrust laws, when the two-part test has been applied to other state entities, the Court has found otherwise. In North Carolina State Board of Dental Examiners v. Federal Trade Commission, the Court found that a non-sovereign entity is not entitled to immunity, stating "active market participants cannot be allowed to regulate their own markets free from antitrust accountability." (15) In other words, an entity cannot engage in anticompetitive activities unless the state law specifically allows them to do so. Additionally, in Federal Trade Commission v. Ticor Title Insurance, the Court found that the state must actively supervise, stating "mere potential for state supervision is not an adequate substitute for a decision by the State." (16) Thus, for a state-owned entity to be exempt under the Parker Doctrine, the state must explicitly provide that the entity can engage in antitrust activity, and the state must actively monitor that activity.

    3. Preemption of State Contract Law

      If the WAA does engage in antitrust behavior, the second issue with the Act creating the WAA is the federal preemption of state contract law. Beginning with jurisdiction, section 1338 of Title 28 of the U.S. Code grants federal courts original jurisdiction of any civil claim relating to patents and copyrights. (17) Additionally, section 1338(b) states that district courts will have jurisdiction of civil actions that assert "a claim of unfair competition when joined with a substantial and related claim under the copyright [or] patent laws." (18) Black's Law Dictionary defines "unfair competition" as "[t]he body of law encompassing various business and privacy torts, all...

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