Friday, September 15, 2017

Some New Papers on Competition Law, FRAND, SEPs

In addition to the paper by FTC Commissioner Maureen Ohlhausen that I mentioned on Monday, the following articles also might be of interest to readers of this blog:
1.  Yee Wah Chin has posted a paper on ssrn titled Basic Antitrust Principles for Standard Essential Patents and Patent Assertion EntitiesHere is a link to the paper, and here is the abstract:
There have been significant calls recently for findings that infringement suits and licensing conduct by patent assertion entities (PAEs) labeled “patent trolls” and by holders of standard essential patents (SEPs) generally are monopolization or attempts to monopolize that violate Sherman Act §2, 15 U.S.C. §2. This paper argues that the basic principles of keeping in mind history and context, and general antitrust principles, apply equally to SEPs and PAEs as to other economic phenomena.  
2.  Erik Hovenkamp has posted a very interesting paper on ssrn titled Tying, Exclusivity, and Standard-Essential PatentsHere is a link to the paper, and here is the abstract:
When a technological standard is adopted, implementers must pay to license all “standard-essential” patents (SEPs)—those covering core features of the standard—although the particular price terms usually cannot negotiated beforehand. To allay implementers’ fear of being “held up,” SEP owners usually make commitments to offer licenses on “fair, reasonable, and nondiscriminatory” (FRAND) terms. Among other things, this acts as a contractual price control for SEP licenses—albeit an imprecise one that is subject to judicial interpretation.
Aside from licenses, an SEP holder may further supply an important “collateral input”—one that is not subject to the FRAND pledge, but which implementers nevertheless require in order to market a viable product. For example, this might be a physical component of the final product. The SEP holder might tie its SEP rights to the collateral input. It might also engage exclusive dealing or related practices, such as a “loyalty discounting” arrangement that imposes larger royalties on implementers who buy the input from competing providers. Importantly, FRAND’s operation as a price control significantly alters the economic analysis: here the primary impetus for tying may be to circumvent the price control by shifting the desired overcharge to the tied good—a concern that does not arise when a seller has complete autonomy over its pricing (as is usually the case). The natural result may be to foreclose competitors’ input sales.
Such restraints have received little attention in the FRAND literature, but they are an emerging concern for innovation and competition policy. They have recently been attacked in two high-profile complaints filed against Qualcomm—one by the Federal Trade Commission, and the other by Apple. Against this backdrop, this article provides a legal and economic evaluation of tying and exclusive dealing arrangements in FRAND licensing. Such practices may act to undermine the FRAND price control, potentially violating the SEP holder’s commitment. The case for antitrust intervention is harder to make, but in principle the arrangement could act to exclude actual or potential competition in the collateral input market, bringing it within antitrust’s reach. I conclude by offering several policy recommendations for how courts and standard setting organizations might address these tying and exclusivity arrangements. 
3.  Hannibal Travis has published a paper titled Counter-IP Conspiracies:  Patent Alienability and the Sherman Antitrust Act, 71 Univ. Miami L. Rev. 758 (2017).  This is a long paper and I haven't read very much of it yet myself, so I might have more to say about it at another time.  For now, here is a link, and here is the abstract: 
Anticompetitive collusion by intellectual property owners frequently triggered antitrust enforcement during the twentieth century. An emerging area of litigation and scholarship, however, involves conspiracies by potential licensees of intellectual property to reduce or eliminate opportunities by a property’s holders to profit from it, or even to recoup their investments in creating and protecting it. The danger is that potential licensees will collude with one another to suppress royalties or sale prices. This Article traces the history of such litigation, provides an overview of the scholarly and theoretical arguments against monopsonistic or oligopsonistic collusion against licensors of intellectual property, and summarizes empirical evidence that the prime economic and business-related justification for such collusion, namely the need to reduce patent holdup, is relatively weak. It argues that some decisions not to license intellectual-property rights, or to license them at suppressed rates, may be anticompetitive, particularly if they are the result of a collusive process or serve to maintain or expand market power. Finally, it urges greater attention from a macroeconomic perspective to the plight of inventors and workers in the high-technology and patent-intensive industries. As a preliminary attempt to heighten awareness of the issue, it describes recent allegations that market power on the part of consumers of high-technology patent licenses, and reduced bargaining clout on the part of individual employees and inventors, may be contributing to unemployment and inequality.

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