Some New Papers on PAEs and Antitrust, Part 2

1.  Michelle Miller and Janusz Ordover have published a paper in the January 2015 issue of CPI Antitrust Chronicle titled Intellectual Ventures v. Capital One: Can Antitrust Law and Economics Get Us Past the Trolls?  Here is a link to the paper, and here is the abstract:

Patent trolls are currently under intense scrutiny by lawmakers, regulators, academics, and industry players. The term “patent troll” generally refers to patent owners that do not make or sell products, and instead focus on licensing and litigation to monetize their acquired patents. These entities are also known as “patent assertion entities,” and in this paper, we use the terms interchangeably. Infringement suits brought by trolls have exploded over the last few years—in 2012 patent trolls accounted for 62 percent of all patent infringement suits, and recent studies estimate that trolls imposed direct costs of $29 billion in 2011. And these costs appear to be deterring investment in new businesses and technologies—one study estimated that venture capital funding was $8.1 billion lower over a five-year period than it would have been without PAE enforcement. 

Although most commentators have concluded that many patent troll business models lead to market inefficiencies, it is not clear what can be done in the short term to address the wide variety of concerns that troll activities raise. Various legislative solutions have been suggested and attempted, but these do not address the full scope of the problem. Attempts to bring antitrust claims against trolls also largely have failed, as in the case of Intellectual Ventures I LLC v. Capital One Financial Corp. Using the facts alleged by Capital One as a case study, we suggest that antitrust law can curb some of these abuses immediately, and we explore alternative approaches to the antitrust claims in that case that could lead to a different outcome in future litigation. In particular, we observe that, by concealing the scope of a large patent portfolio, a PAE can diminish incentives to design-around individual technologies within that portfolio, thereby reducing the viability of competing technologies in those individual technology markets.

2.  Expressing a different view are John "Jay" Jurata, Jr. and Amisha R. Patel in their paper  Taming the Trolls: Why Antitrust Is Not a Viable Solution for Stopping Patent Assertion Entities, 21 Geo. Mason L. Rev. 1251 (2014).  Here is a link to the paper, and here is the abstract:

Certain operating companies, including Google Inc., as well as consumer protection advocates, trade organizations, academics, and antitrust enforcement agencies, have suggested that antitrust law may offer a solution to concerns over PAE behavior. These arguments, taken together with the FTC’s continued interest in the effects of PAE assertion activity, beg the question: is antitrust enforcement a viable solution for patent assertion entities? Some have suggested yes. Proponents of antitrust enforcement solutions argue that PAE behavior raises antitrust policy concerns because it results in patent holdup, raised rivals’ costs, exclusion of companies from markets, and/or harms to innovation. But few specifics have been offered to back up these various theories.

This Article seeks to apply a disciplined antitrust analysis to these theories. This Article undertakes a traditional antitrust analysis under Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act to assess PAE conduct. The analysis examines whether the alleged harms associated with PAE behavior are harms to competition or the competitive process—a necessary element for antitrust liability. Ultimately, this Article concludes that, outside limited scenarios, antitrust laws are not a solution to the problematic aspects of PAE behavior.

3.   I should also mention that Florian Mueller has an interesting post on privateering over on the FOSS Patents Blog today.  Privateering is also the topic of the Maurits Dolmans paper I mentioned yesterday, as well as something that Erik Hovenkamp and I touch on in a recent paper.

4. Finally, not so much in the antitrust vein but relevant to the question of whether state anti-PAE laws are constitutional is Nick Vogel's comment titled Patently Preempted, 14 John Marshall Review of Intellectual Property Law 268 (2015).  Here is a link to the paper, and here is the abstract:

Small and medium size businesses often take advantage of the latest advancements in technology. Doing so, however, now seems to carry the risk of patent infringement. In 2012, so called patent trolls, also known as Non Practicing Entities, began sending letters to small and medium sized businesses demanding money in exchange for a license to use allegedly patented technology. Many saw the demands as an abuse of the patent system. In response, states have passed or are considering statutes that outlaw patent holders from delivering a bad faith notice of infringement. The State of Vermont was the first to address this issue. Vermont amended its consumer protection laws to outlaw “Bad faith assertions of patent infringement.” But how far can Vermont and other states go before being preempted by the federal government? This comment asks that very question. After analyzing the original intent of Congress, a theory of field preemption and the Constitutional right to petition the government, this comment concludes with the opinion that state-based laws meant to discourage Non Practicing Entities from sending bad faith cease and desist letters are preempted by the federal patent regime. Finally, this comment proposes that the best way to discourage Non Practicing Entities from harassing companies with frivolous law suits is to allow victorious defendants in patent infringement suits to collect damages from the losing plaintiffs.

For other papers discussing this issue, see my post here.