Issue 60 | March 18, 2003
USDOJ at the Intersection of Antitrust and Intellectual Property
 In November 2002, the U.S. Department of Justice ("DOJ") and Federal Trade Commission ("FTC") concluded their joint hearings on "Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy." The goal of those hearings was to enhance the government's understanding of how antitrust and IP law and policy affect innovation and other aspects of consumer welfare on a number of issues, including patent pools and cross-licensing, standards-setting, refusals to license intellectual property, patent settlements, and international comparative law perspectives, to name a few. Although the official joint report is not expected until later this year, R. Hewitt Pate, the Acting Assistant Attorney General for the DOJ's Antitrust Division recently offered some perspective and a few observations to the American Intellectual Property Law Association's 2003 Mid-Winter Institute.

According to Mr. Pate, there appears to be a general consensus that:
  • the role of patents varies greatly by industry (The electronics industry, for example, is characterized by multiple patents covering every commercial product, and frequent cross-licensing. The pharmaceutical industry, in contrast, sees single-patent. products and less cross-licensing.);
  • unilateral duties to deal should be quite limited in all contexts, not just IP;
  • legitimate standard setting activities are generally pro-competitive and should be treated favorably under the antitrust laws; and
  • the "pretext" approach used by the Ninth Circuit for examining refusals to deal is unsound.
However, participants in the hearings disagreed over:
  • whether economics ever justify unilateral duties to license or scrutiny of conditional licensing;
  • whether IP is different from other forms of property;
  • the extent to which antitrust enforcers should engage in post-grant attacks on the validity of patents, and whether such endeavors were most appropriately left to the Patent Office; and
  • whether there has been an inappropriate proliferation of patents.
According to some witnesses, a key reason for the explosion in the number of patents is that the Federal Circuit has relaxed standards of patentability. The availability of continuing applications and the ability to avoid final patentability determinations also come in for criticism on this score. This, in turn, is said to have resulted in other firms seeking more patents to use defensively in order to maintain their freedom to

Nonetheless, Mr. Pate downplayed the romantic notion of abolishing or curtailing IP rights in order to somehow produce a wonderful and costless flowering of creativity and productivity. This, he said, is "naive" and "difficult to reconcile" with the period of extraordinary economic growth that has coincided with the strengthening of intellectual property rights. In his view, fundamental questions about the IP regime involve setting the right degree of appropriability to optimize both initial and sequential innovation. Antitrust's tools of factual and economic analysis of specific transactions are simply not very well suited to this task.

Instead, he suggested that a better course is for the IP and antitrust communities to work together to improve the system in more sensible ways. If there really are areas where IP law is in need of reform, then leaving them unaddressed will only strengthen the hand of those who are hostile to IP rights. Patent reforms that are decided by the IP community are likely to be better vehicles to address any problems in the system than proposals to ratchet up antitrust enforcement in order to limit IP rights.

For a complete copy of the "Address by R. Hewitt Pate, Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Before the American Intellectual Property Law Association 2003 Mid-Winter Institute Marco Island, Florida" go to http://www.aipla.org/html/whatsnew/pate.pdf. To discuss this topic further, please contact the author, Bill Heinze, at Thomas, Kayden, Horstemeyer & Risley. The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.