August 10, 2003

Reading: Gifford: Antitrust/Intellectual Property Interface

There is a century of history of the complex relationship between antitrust law and intellectual property law, recognized in the "Antitrust Guidelines for Licensing of Intellectual Property" (1975) of the U.S. Justice Department and Federal Trade Commission. In "The Antitrust/Intellectual Property Interface: An Emerging Solution to An Intractable Problem" 31 Hofstra Law Review 363 (2003), Daniel J. Gifford describes his view that recent decisions are shaping a new paradigm for reconciling antitrust law and intellectual property law and the concepts of "patent abuse" and "copyright abuse."

Gifford reviews Supreme Court decisions in the early 20th century applying Section 3 of the Clayton Act, up to the Mercoid v. Mid-Continent and Mercoid v. Minneapolis-Honeywell decisions in 1944 that subordinated patent law to antitrust law and substantially limited the doctrine of contributory infringement. Changes in the Patent Law overruled the Court's Mercoid decisions, but the Court went on reducing the degree of market power needed to define an antitrust violation in the context of tying sales of patented products. This reflected the Court's view that tying sales served little purpose other than the suppression of competition, expressed in the 1949 Standard Oil of California decision.

In the 1950's, scholars such as R.A. Posner and R.H. Bork maintained that tying was principally used for price discrimination, an analyis reflected in the "Chicago School" of antitrust analysis. Recent studies have looked at uses of tying and price discrimination to impede the entry of new market competitors, a technique scholars have compared to "limit pricing."

As these studies emerged, Gifford maintains, the Court and Congress increased the liberty of patentees to tie sales involving intellectual property without committing "patent abuse." The Jefferson Parish decision in 1983 found that a 30% market share was not sufficient to support an antitrust violation for a tie-in sale. Congress added clauses to Section 271(d) of the Patent Act that Gifford describes as allowing patentees to tie a patent license to a specially made component, but prohibited a tie to an unrelated product if the patentee had market power.

Gifford describes and critiques the contributions in this field of four commentators, Louis Kaplow, Mark Patterson, Michael A. Carrier and David McGowan. Gifford found that all four identify transactions in which core intellectual property concerns are triggered and in such cases give intellectual property law precedence over antitrust law. Gifford sees various court decisions following a similar approach.

Concepts of copyright abuse were similarly shaped by the Lasercomb decision and later cases such as Kodak and the Congressional amendments of the Copyright Act in the Digital Millenium Copyright Act (DMCA).

Appellate decisions in recent years have developed a theme of primacy of intellectual property law over antitrust law with certain exceptions, according to Gifford. He points to the Federal and D.C. Circuit's decisions in Xerox, Alcatel and Microsoft that apply objective criteria, and the 9th Circuit's Kodak decision applying a "pretext" criteria. Gifford expresses his favor for the first approach, citing the Supreme Court's preference for objective criteria as expressed in the 1993 Professional Real Estate Investors decision.

Gifford closes by describing the synthesis he perceives to be developing: "The courts, through lines of superficially conflicting cases, are in fact evolving a new synthesis of antitrust law with patent and copyright law. This new synthesis gives priority to the incentive structure of the two intellectual property laws, but recognizes the lawfulness of a range of behavior protected by patents that has no protected analogue under copyright law."

Posted by dougsimpson at August 10, 2003 05:27 PM | TrackBack