Antitrust policy, innovation efficiencies, and the suppression of technology

Antitrust Law Journal

Volumn 66, Issue 2, 1998, Pages 487-525

  Flynn, John J ^a  

^a UNIVERSITY OF UTAH   (United States)

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[No Author keywords available]

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EID: 0032363161     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (150)

1. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (1942). The debate and its evolution and implications for antitrust policy are reviewed in Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995) [hereinafter Innovation Market Symposium]. Professor F.M. Scherer has devoted considerable study to Schumpeter's thesis. See ENTREPRENEURSHIP, TECHNOLOGICAL INNOVATION AND ECONOMIC GROWTH: STUDIES IN THE SCHUMPETERIAN TRADITION (F.M. Scherer & Mark Perlman eds., 1992); F.M. SCHERER, INTERNATIONAL HIGH TECHNOLOGY COMPETITION (1992); F.M. SCHERER, INNOVATION AND GROWTH: SCHUMPETERIAN PERSPECTIVES (1984). Schumpeter's thesis has been described as "largely discredited," despite relatively recent attempts to revive it by legislation and a flurry of scholarship in the late 1980s. Editor's Note, Innovation Market Symposium, supra, at 2.
2. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (1942). The debate and its evolution and implications for antitrust policy are reviewed in Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995) [hereinafter Innovation Market Symposium]. Professor F.M. Scherer has devoted considerable study to Schumpeter's thesis. See ENTREPRENEURSHIP, TECHNOLOGICAL INNOVATION AND ECONOMIC GROWTH: STUDIES IN THE SCHUMPETERIAN TRADITION (F.M. Scherer & Mark Perlman eds., 1992); F.M. SCHERER, INTERNATIONAL HIGH TECHNOLOGY COMPETITION (1992); F.M. SCHERER, INNOVATION AND GROWTH: SCHUMPETERIAN PERSPECTIVES (1984). Schumpeter's thesis has been described as "largely discredited," despite relatively recent attempts to revive it by legislation and a flurry of scholarship in the late 1980s. Editor's Note, Innovation Market Symposium, supra, at 2.
3. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (1942). The debate and its evolution and implications for antitrust policy are reviewed in Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995) [hereinafter Innovation Market Symposium]. Professor F.M. Scherer has devoted considerable study to Schumpeter's thesis. See ENTREPRENEURSHIP, TECHNOLOGICAL INNOVATION AND ECONOMIC GROWTH: STUDIES IN THE SCHUMPETERIAN TRADITION (F.M. Scherer & Mark Perlman eds., 1992); F.M. SCHERER, INTERNATIONAL HIGH TECHNOLOGY COMPETITION (1992); F.M. SCHERER, INNOVATION AND GROWTH: SCHUMPETERIAN PERSPECTIVES (1984). Schumpeter's thesis has been described as "largely discredited," despite relatively recent attempts to revive it by legislation and a flurry of scholarship in the late 1980s. Editor's Note, Innovation Market Symposium, supra, at 2.
4. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (1942). The debate and its evolution and implications for antitrust policy are reviewed in Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995) [hereinafter Innovation Market Symposium]. Professor F.M. Scherer has devoted considerable study to Schumpeter's thesis. See ENTREPRENEURSHIP, TECHNOLOGICAL INNOVATION AND ECONOMIC GROWTH: STUDIES IN THE SCHUMPETERIAN TRADITION (F.M. Scherer & Mark Perlman eds., 1992); F.M. SCHERER, INTERNATIONAL HIGH TECHNOLOGY COMPETITION (1992); F.M. SCHERER, INNOVATION AND GROWTH: SCHUMPETERIAN PERSPECTIVES (1984). Schumpeter's thesis has been described as "largely discredited," despite relatively recent attempts to revive it by legislation and a flurry of scholarship in the late 1980s. Editor's Note, Innovation Market Symposium, supra, at 2.
5. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM AND DEMOCRACY (1942). The debate and its evolution and implications for antitrust policy are reviewed in Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995) [hereinafter Innovation Market Symposium]. Professor F.M. Scherer has devoted considerable study to Schumpeter's thesis. See ENTREPRENEURSHIP, TECHNOLOGICAL INNOVATION AND ECONOMIC GROWTH: STUDIES IN THE SCHUMPETERIAN TRADITION (F.M. Scherer & Mark Perlman eds., 1992); F.M. SCHERER, INTERNATIONAL HIGH TECHNOLOGY COMPETITION (1992); F.M. SCHERER, INNOVATION AND GROWTH: SCHUMPETERIAN PERSPECTIVES (1984). Schumpeter's thesis has been described as "largely discredited," despite relatively recent attempts to revive it by legislation and a flurry of scholarship in the late 1980s. Editor's Note, Innovation Market Symposium, supra, at 2.
6. Intellectual property licensing practices have been made the subject of extensive guidelines issued by the federal antitrust enforcement agencies. U.S. Department of Justice and Federal Trade Commission Antitrust Guidelines for the Licensing of Intellectual Property (1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,132 [hereinafter Guidelines].
7. Protection of the First Amendment right of access to government from antitrust litigation, the Noerr-Pennington doctrine, has been made more difficult to apply by the recent decision of Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) (PRE). The Court required a showing of both an "objectively" baseless lawsuit and a "subjective" intent to misuse access to government before conduct like a sham lawsuit could be made the basis of an antitrust violation. The meaning of "objective" and "subjective" intent were not clearly explained by the Court. The way the "subjective" and "objective" intent requirements apply to the acquisition and use of intellectual property rights remains unclear. There is also a separate basis upon which enforcement of intellectual property rights might constitute a violation of the antitrust laws, which does not involve Noerr immunity. In Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), the Court held that the enforcement of a patent obtained by fraud on the Patent Office could be the basis of an antitrust claim assuming the other elements (i.e., relevant market and the requisite market share) of a Sherman Act § 2 antitrust violation can be proved. Although the PRE decision did not expressly decide the relationship of the two doctrines, 508 U.S. at 61-62 n.6, the basis of a Walker Process claim is that the right to exclude competition has been obtained by fraud on the Patent Office and not the exercise of a political right to petition government to seek to protect or enforce a right to exclude. Consequently, a Walker Process claim is not subject to the "subjective"/"objective" limitations of a claim governed by Noerr-Pennington limitations. See Nobelpharma AB v. Implant Innovations, Inc., 129 F.3d 1463 (Fed. Cir. 1997). For an excellent analysis of the relationship between claims subject to a Noerr-Pennington defense and claims based on a Walker Process analysis, see James B. Kobak, Jr., Professional Real Estate Investors and the Future of Patent-Antitrust Litigation: Walker Process and Handgards Meet Noerr-Pennington, 63 ANTITRUST L.J. 185 (1994).
8. 15 U.S.C. §§ 4301-4305. Section 4302 mandates that the rule of reason be applied to any antitrust action under federal or state antitrust laws challenging a joint research or production venture meeting the requirements of the Act.
9. 15 U.S.C. § 4303 limits damages to actual damages in an action where an antitrust violation of federal or state law is found under the relaxed rule of reason standard set forth in § 4302 for ventures that have been duly disclosed by filings with the U.S. Attorney General and the Federal Trade Commission in accordance with the requirements of § 4305 of the Act.
10. In a 1997 § 7 case challenging a merger because of alleged threats to research and innovation, the FTC obtained a settlement with the merging gene therapy research companies that required the merged firms to license specified gene therapy technology and patent rights to a competing firm involved in gene therapy research and development along with divestiture of certain assets. See Ciba-Geigy Ltd., 5 Trade Reg. Rep. (CCH) ¶ 24, 182 (FTC 1997). The debate over defining markets for purposes of Sherman Act §§ 1 and 2 and Clayton Act § 7 in terms of "innovation markets" is explored in Innovation Market Symposium, supra note 1.
11. The original action by the Antitrust Division against Microsoft was settled by a consent decree prohibiting Microsoft from forcing computer manufacturers to pay a license fee for computers on which Microsoft's program is not installed. The decree provides that Microsoft can only charge a fee based on a per-copy installed basis. The decree also precludes Microsoft from conditioning a license on a licensee taking "any other Covered Product, Operating System Software product or other product (provided, however, that this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products ...)." United States v. Microsoft Corp., 1995-2 Trade Gas. (CCH) ¶ 71,096 (1995) [hereinafter Microsoft Consent Decree]. The draft decree and competitive impact statement may be found at 59 Fed. Reg. 42,845 (1994). Entry of the proposed decree had been rejected by Judge Sporkin in United States v. Microsoft, 1995-1 Trade Cas. (CCH) ¶ 70,897 (D.D.C. 1995), a decision vacated and remanded with instructions to enter the decree, 56 F.3d 1448 (D.C. Cir. 1995). Interpretation of the decree and Microsoft's practice of "bundling" or "tying" its Internet software access program into Microsoft's dominant operating system software is the subject of a government motion to hold Microsoft in contempt of court for allegedly violating the consent decree. See infra notes 35-36 and accompanying text.
12. See David Bank, Why Software and Antitrust Make an Uneasy Mix, WALL ST. J., Oct. 22, 1997, at B1.
13. Alan Murray, Antitrust Isn't Obsolete in an Era of High Tech, WALL ST. J., Nov. 10, 1997, at A1.
14. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
15. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
16. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
17. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
18. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
19. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
20. Judge Robert Bork put best the importance of defining the underlying normative goals of the statutes when he stated: "What is the point of the law - what are its goals? Everything else follows from the answer we give. ... Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules." ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 50 (1978). Bork argued that protecting and promoting allocative efficiency as defined by neoclassical price theory was the sole goal Congress had "in mind" when adopting the Sherman Act. Legal historians do not generally support that view, let alone the idea that Congress had a common "mind" on a specific set of values to be achieved. Most studies of the legislative history of the Act assert that Congress addressed a vague and general package of political, social, and economic concerns in adopting the Act. The most comprehensive study of the historical circumstances surrounding adoption of the Act and the debate in Congress may be found in HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY - ORIGINATION OF AN AMERICAN TRADITION (1955). A collection of the leading articles on the history of the Sherman Act may be found in James May, The Role of the States in the First Century of the Sherman Act and the Larger Picture of Antitrust History, 59 ANTITRUST L.J. 93, 94 n.3 (1990). The understanding of the purposes of the antitrust laws and the role of economics in defining that purpose has evolved and changed over the years, with shifts in political power and economic conditions deeply affecting the debate. For an excellent review of that evolution, see RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, 1888-1992: HISTORY, RHETORIC AND LAW (1996). For an excellent review of the modern evolution of various schools of economic thought and their relationship to law generally, see NICHOLAS MERCURO & STEVEN G. MENEMA, ECONOMICS AND THE LAW: FROM POSNER TO POST-MODERNISM (1997). From a jurisprudential point of view, the issue of antitrust goals involves the balancing of a complex set of political, social, and economic values in light of current circumstances underlying the choice to rely upon a competitive process to organize and govern economic activity in society. The "economics only" approach - particularly the neoclassical "consumer welfare only" approach emphasizing allocative efficiency advocated by Judges Bork, Posner, and others, which has come to dominate the current debate - avoids these deeper normative questions by assuming the existence of predetermined contract and property rights and the existence of perfectly competitive markets as a theoretical model by which to define the legality of conduct and market structures. See John J. Flynn, The Reagan Administration's Antitrust Policy, "Original Intent" and the Legislative History of the Sherman Act, 33 ANTITRUST BULL. 259 (1988); John J. Flynn, Antitrust Policy and the Concept of a Competitive Process, 35 N.Y.L. SCH. L. REV. 893 (1990). The underlying debate and struggle between these contrasting views continues in the courts. Compare Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (relying on neoclassical price theory to deny recovery under the express language of the Robinson-Patman Act, 15 U.S.C. §§ 13-14), with Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (opening up to review under the antitrust laws the right of supplier of parts for servicing supplier's equipment to refuse to deal with firms competing with supplier in repair services for the equipment).
21. Rudolph J.R. Peritz, A Counter-History of Antitrust Law, 1990 DUKE L.J. 263, 317. For a more extended analysis of the issue of the purposes of antitrust policy, see PERITZ, supra note 10; DUDLEY H. CHAPMAN, MOLTING TIME FOR ANTITRUST: MARKET REALITIES, ECONOMIC FALLACIES, AND EUROPEAN INNOVATIONS (1991); May, supra note 10.
22. Rudolph J.R. Peritz, A Counter-History of Antitrust Law, 1990 DUKE L.J. 263, 317. For a more extended analysis of the issue of the purposes of antitrust policy, see PERITZ, supra note 10; DUDLEY H. CHAPMAN, MOLTING TIME FOR ANTITRUST: MARKET REALITIES, ECONOMIC FALLACIES, AND EUROPEAN INNOVATIONS (1991); May, supra note 10.
23. For an exploration of the jurisprudential factors underlying the recognition and enforcement of property rights in our system, see John J. Flynn, The Chicken and the Egg, in FUNDAMENTALS OF THE ECONOMIC ROLE OF GOVERNMENT ch. 9 (Warren J. Samuels ed., 1989). There are also constitutional limitations upon the creation of some property rights limiting the scope and purpose for creating such rights. See Edward S. Irons & Mary H. Sears, The Constitutional Standard of Invention - The Touchstone of Patent Reform, 1973 UTAH L. REV. 653.
24. For an exploration of the jurisprudential factors underlying the recognition and enforcement of property rights in our system, see John J. Flynn, The Chicken and the Egg, in FUNDAMENTALS OF THE ECONOMIC ROLE OF GOVERNMENT ch. 9 (Warren J. Samuels ed., 1989). There are also constitutional limitations upon the creation of some property rights limiting the scope and purpose for creating such rights. See Edward S. Irons & Mary H. Sears, The Constitutional Standard of Invention - The Touchstone of Patent Reform, 1973 UTAH L. REV. 653.
25. See JOHN M. BLAIR, ECONOMIC CONCENTRATION: STRUCTURE, BEHAVIOR AND PUBLIC POLICY 228-45 (1972); Walter Adams & James W. Brock, Antitrust, Ideology and the Arabesques of Economic Theory, 66 COLO. L. REV. 257, 263-64 (1995); James W. Brock, Structural Monopoly, Technological Performance, and Predatory Innovation: Relevant Standards Under Section 2 of the Sherman Act, 21 AM. BUS. REV. L.J. 291 (1983).
26. See JOHN M. BLAIR, ECONOMIC CONCENTRATION: STRUCTURE, BEHAVIOR AND PUBLIC POLICY 228-45 (1972); Walter Adams & James W. Brock, Antitrust, Ideology and the Arabesques of Economic Theory, 66 COLO. L. REV. 257, 263-64 (1995); James W. Brock, Structural Monopoly, Technological Performance, and Predatory Innovation: Relevant Standards Under Section 2 of the Sherman Act, 21 AM. BUS. REV. L.J. 291 (1983).
27. See JOHN M. BLAIR, ECONOMIC CONCENTRATION: STRUCTURE, BEHAVIOR AND PUBLIC POLICY 228-45 (1972); Walter Adams & James W. Brock, Antitrust, Ideology and the Arabesques of Economic Theory, 66 COLO. L. REV. 257, 263-64 (1995); James W. Brock, Structural Monopoly, Technological Performance, and Predatory Innovation: Relevant Standards Under Section 2 of the Sherman Act, 21 AM. BUS. REV. L.J. 291 (1983).
28. A concern for long term economic values, such as innovation efficiency, may also be the basis for an even more critical view of conduct or practices threatening to suppress technology. See John H. Barton, Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation, 65 ANTITRUST L.J. 449 (1997).
29. Flynn (1988), supra note 10, at 304-05; see also Eleanor Fox, The Modernization of Antitrust: A New Equilibrium, 66 CORNELL L. REV. 1140, 1154 (1981). There appears to be increasing use of the power of government to create exclusive property-like rights not necessarily meeting the requirements of the Patent Clause of the Constitution. Some of the rights created have the impact of excluding competitive technologies or innovations by granting exclusive rights for a limited period of time to products or devices not meeting the requirement of being an "invention." See John J. Flynn, The Orphan Drug Act: An Unconstitutional Exercise of the Patent Power, 1992 UTAH L. REV. 389.
30. Flynn (1988), supra note 10, at 304-05; see also Eleanor Fox, The Modernization of Antitrust: A New Equilibrium, 66 CORNELL L. REV. 1140, 1154 (1981). There appears to be increasing use of the power of government to create exclusive property-like rights not necessarily meeting the requirements of the Patent Clause of the Constitution. Some of the rights created have the impact of excluding competitive technologies or innovations by granting exclusive rights for a limited period of time to products or devices not meeting the requirement of being an "invention." See John J. Flynn, The Orphan Drug Act: An Unconstitutional Exercise of the Patent Power, 1992 UTAH L. REV. 389.
31. For an interesting example of this form of analysis, upholding dismissal of a complaint in the context of an antitrust damage action claiming that theft of patent rights constituted an antitrust violation, see Brunswick Corp. v. Riegel Textile Corp., 752 F.2d 261 (7th Cir. 1984). Judge Posner could not find a "consumer interest" in the case of the alleged theft of a monopoly patent right because it made no difference to consumers which claimant has the monopoly. While agreeing that the purpose of the antitrust laws is to protect the health of the competitive process, Judge Posner viewed the justification for doing so as "discourag[ing] practices that make it hard for consumers to buy at competitive prices - rather than to promote the welfare of particular competitors." Id. at 266. While the conduct might not have affected pricing, it may have affected innovation or incentives to innovate, which might have altered the consequences of not prohibiting the conduct under the antitrust laws. It is still likely that a court might conclude that the conduct should not be found within the scope of duties imposed by the Sherman Act because, under the circumstances, the conduct does not adversely affect incentives to innovate. But analyzing the case in terms of the conduct's impact on innovation efficiency requires consideration of a different range of facts and consequences from those considered when allocative efficiency is held to be the sole purpose of the antitrust laws.
32. For a recent criticism of an excessive reliance on the neoclassical model and its use to determine all public policy, see ROBERT KUTTNER, EVERYTHING FOR SALE: THE VIRTUES AND LIMITS OF MARKETS (1997). For a defense of the Chicago School approach in the context of vertical restraints, mislabeling critics "populists" and claiming "New Institutional Economics" takes account of factual departures from perfect competition, see Alan J. Meese, Price Theory and Vertical Restraints: A Misunderstood Relation, 45 U.C.L.A. L. REV. 143 (1997). The contrast between the different views about the normative ends of competition policy and the role of economics in law is necessarily simplistic for the purposes of this article. There are several different and evolving schools of economic thought. For an excellent review of the broad contours of the different schools of thought and recent criticisms of them, see MERCURO & MEDEMA, supra note 10.
33. For a recent criticism of an excessive reliance on the neoclassical model and its use to determine all public policy, see ROBERT KUTTNER, EVERYTHING FOR SALE: THE VIRTUES AND LIMITS OF MARKETS (1997). For a defense of the Chicago School approach in the context of vertical restraints, mislabeling critics "populists" and claiming "New Institutional Economics" takes account of factual departures from perfect competition, see Alan J. Meese, Price Theory and Vertical Restraints: A Misunderstood Relation, 45 U.C.L.A. L. REV. 143 (1997). The contrast between the different views about the normative ends of competition policy and the role of economics in law is necessarily simplistic for the purposes of this article. There are several different and evolving schools of economic thought. For an excellent review of the broad contours of the different schools of thought and recent criticisms of them, see MERCURO & MEDEMA, supra note 10.
34. Professor Joseph Bradley, a leading antitrust scholar, is the principal advocate of this position. He authored a significant article suggesting that "innovation efficiency" is the most important form of "efficiency" generated by competitive markets and fostered by antitrust enforcement. Joseph Brodley, The Economic Goals of Antitrust: Efficiency, Consumer Welfare and Technological Process, 62 N.Y.U. L. REV. 1020 (1987);
35. see also F.M. Scherer, Antitrust, Efficiency and Progress, 62 N.Y.U. L. REV. 998 (1987).
36. Brodley, supra note 18, at 1023.
37. Id. at 1026.
38. 15 U.S.C. §§ 4301-4305. The Act was first passed in 1984 under the title of The National Cooperative Research Act of 1984, Pub. L. No. 98-462, at the behest of the Reagan Administration and based on academic scholarship justifying a relaxation of antitrust policy to do so. The statute was adopted in the name of enhancing the competitiveness of American firms in international competition, based on a belief that the costs of research and innovation were too great for individual firms to undertake in the face of powerful foreign competitors. See Thomas M. Jorde & David J. Teece, Acceptable Cooperation Among Competitors in the Face of Growing International Competition, 58 ANTITRUST L.J. 529 (1989); Thomas M. Jorde & David J. Teece, Rule of Reason Analysis of Horizontal Arrangements: Agreements Designed to Advance Innovation and Commercialize Technology, 61 ANTITRUST L.J. 579 (1993). Considerable doubt has been cast on this assumption both by recent events in Asian and European economies where collaborative business activity was the norm and by academic scholarship. See MICHAEL E. PORTER, THE COMPETITIVE ADVANTAGE OF NATIONS (1990); SCHERER, supra note 1.
39. 15 U.S.C. §§ 4301-4305. The Act was first passed in 1984 under the title of The National Cooperative Research Act of 1984, Pub. L. No. 98-462, at the behest of the Reagan Administration and based on academic scholarship justifying a relaxation of antitrust policy to do so. The statute was adopted in the name of enhancing the competitiveness of American firms in international competition, based on a belief that the costs of research and innovation were too great for individual firms to undertake in the face of powerful foreign competitors. See Thomas M. Jorde & David J. Teece, Acceptable Cooperation Among Competitors in the Face of Growing International Competition, 58 ANTITRUST L.J. 529 (1989); Thomas M. Jorde & David J. Teece, Rule of Reason Analysis of Horizontal Arrangements: Agreements Designed to Advance Innovation and Commercialize Technology, 61 ANTITRUST L.J. 579 (1993). Considerable doubt has been cast on this assumption both by recent events in Asian and European economies where collaborative business activity was the norm and by academic scholarship. See MICHAEL E. PORTER, THE COMPETITIVE ADVANTAGE OF NATIONS (1990); SCHERER, supra note 1.
40. 15 U.S.C. §§ 4301-4305. The Act was first passed in 1984 under the title of The National Cooperative Research Act of 1984, Pub. L. No. 98-462, at the behest of the Reagan Administration and based on academic scholarship justifying a relaxation of antitrust policy to do so. The statute was adopted in the name of enhancing the competitiveness of American firms in international competition, based on a belief that the costs of research and innovation were too great for individual firms to undertake in the face of powerful foreign competitors. See Thomas M. Jorde & David J. Teece, Acceptable Cooperation Among Competitors in the Face of Growing International Competition, 58 ANTITRUST L.J. 529 (1989); Thomas M. Jorde & David J. Teece, Rule of Reason Analysis of Horizontal Arrangements: Agreements Designed to Advance Innovation and Commercialize Technology, 61 ANTITRUST L.J. 579 (1993). Considerable doubt has been cast on this assumption both by recent events in Asian and European economies where collaborative business activity was the norm and by academic scholarship. See MICHAEL E. PORTER, THE COMPETITIVE ADVANTAGE OF NATIONS (1990); SCHERER, supra note 1.
41. Brodley, supra note 18, at 1027. While research joint ventures may be justified in the name of minimizing high capital costs, duplication of effort, and risk in certain circumstances, it has also been recognized that such joint action - particularly when undertaken by dominant firms in an industry - may be action that limits and retards innovation or the pace of innovation in an industry, contrary to the policies of the antitrust laws. See Antitrust Guide Concerning Research Joint Ventures 11-12 (1980), reprinted in 4 Trade Reg. Rep (CCH) ¶ 13,120.
42. Brodley, supra note 18, at 1027.
43. One of the main attractions of using neoclassical price theory in antitrust litigation, aside from cliches about "consumer welfare" and the like, is that it generates legal rules that are certain and predictable, whereas reliance upon a broad collection of normative values as the policy goals of antitrust does not. It is a case of formalism versus instrumentalism in law. See Mark Cooney, Why Is Economic Analysis So Appealing to Law Professors?, 45 STAN. L. REV. 2211 (1993). At one level, however, formalistic economic price theory can best be described as "a children's guide to reality" because the factual simplification by artificial assumptions can divorce the analysis from the reality with which law must deal, especially the interpretation of the relevant "facts." In law, concepts like "market" and "monopoly power" are used functionally to define what the facts are and to link facts to consequences in light of the normative principles behind the law, not to identify some physical thing in time and space. See John J. Flynn, Antitrust Policy and Health Care Reform, 39 ANTITRUST BULL. 59, 88 n.71 (1994).
44. One of the main attractions of using neoclassical price theory in antitrust litigation, aside from cliches about "consumer welfare" and the like, is that it generates legal rules that are certain and predictable, whereas reliance upon a broad collection of normative values as the policy goals of antitrust does not. It is a case of formalism versus instrumentalism in law. See Mark Cooney, Why Is Economic Analysis So Appealing to Law Professors?, 45 STAN. L. REV. 2211 (1993). At one level, however, formalistic economic price theory can best be described as "a children's guide to reality" because the factual simplification by artificial assumptions can divorce the analysis from the reality with which law must deal, especially the interpretation of the relevant "facts." In law, concepts like "market" and "monopoly power" are used functionally to define what the facts are and to link facts to consequences in light of the normative principles behind the law, not to identify some physical thing in time and space. See John J. Flynn, Antitrust Policy and Health Care Reform, 39 ANTITRUST BULL. 59, 88 n.71 (1994).
45. Brodley, supra note 18, at 1027.
46. Id. at 1030.
47. Id. at 1031-32.
48. Id. at 1032.
49. See, e.g., United States v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir. 1945) (Alcoa) (establishing the analytical methodology of markets, power, and conduct in Sherman Act § 2 monopolization cases). See also discussion infra part III.
50. See, e.g., United States v. AT&T, 524 F. Supp. 1336 (D.D.C. 1981) (denying AT&T's motion to dismiss the government's case), aff'd, 460 U.S. 1001 (1983). The AT&T divestiture has been generally successful in opening up competition in long-distance service and in equipment markets. But see infra note 43 (discussing the reasons why competition in local telecommunications markets still suffers).
51. For a summary of a more activist approach, see Adams & Brock, supra note 13.
52. The early history of Kodak's rise to dominance in the camera, film, and photographic paper markets is described in United States v. Eastman Kodak Co., 226 F. 62 (W.D.N.Y. 1915), appeal dismissed, 255 U.S. 578 (1921).
53. See Brock, supra note 13, describing Kodak's behavior in cases like Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979), as a example of technology suppression and not one of allegedly predatory innovation. The distinction is significant because many have viewed Kodak as an innovator being sued by a firm that was not given access to the innovation. According to Brock, the innovations involved were not ones made by Kodak, but allegedly were acquired and phased into production and use by Kodak at a time and pace of Kodak's choosing. Kodak's overwhelming market share and control of film finishing gave it the market power to control the introduction of and pace of technological evolution by others and to acquire new technologies invented by others. In Berkey Photo the court specifically found that Kodak had monopoly power in the film market. Id. The court, however, refused to impose an obligation to predisclose a new film format to competing camera manufacturers because it found that Kodak was introducing the new film format as part of its introduction of a new camera technology, which Kodak had no obligation to disclose. Litigation relating to Kodak's control over technologies has continued in the related field of high-volume photocopiers and micrographic equipment. In 1992 the U.S. Supreme Court held that Kodak was not entitled to summary judgment on a claim that Kodak's refusal to sell parts in the service aftermarket to independent service providers was a potential violation of § 2 of the Sherman Act. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992). On remand, a jury found for the plaintiff, and the resulting award of damages and injunctive relief was upheld based on a theory that Kodak had used its monopoly power over parts for servicing Kodak equipment to monopolize the service market for Kodak equipment. Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997). But in a similar case involving Xerox Corporation's refusal to license its patented and copyrighted products to independent service operators, the trial court held that Xerox is free to refuse to license lawfully acquired patented technology or copyrighted matters to competing independent service operators. In re Independent Serv. Orgs. Antitrust Litig., 1997 WL 805237 (D. Kan. 1997). It would appear a conflict between circuits is in the making over the antitrust constraints upon the refusal to license intellectual property as a means for excluding competing and potentially innovative competitors.
54. The early history of United Shoe Machinery is described in United States v. United Shoe Machinery Co., 222 F. 349 (D. Mass. 1915), aff'd, 247 U.S. 32 (1918).
55. The trial court refused to enter the proposed decree relating to these practices on the ground that the court was not presented with sufficient information to make an informed decision about whether the consent decree was in the public interest and whether the decree adequately dealt with the enumerated practices. See supra note 7: The proposed consent decree also addressed other practices that might have excluded competitors and suppressed competing technologies, including long-term contracts with original equipment manufacturers (OEMs) requiring minimum commitments and applying unused contractual balances to future contracts. See United States v. Microsoft Corp., 159 F.R.D. 318 (D.D.C. 1995). The trial court's refusal to enter the decree was reversed by the U.S. Court of Appeals for the D.C. Circuit, which ordered the consent decree to be entered as written. United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995). The meaning and scope of the decree have become issues because of charges by the Antitrust Division that Microsoft's bundling of its Internet Explorer Program with its Windows 95 operating system constitutes a violation of the decree. For a description of the history of the dispute, see United States v. Microsoft Corp., 1997-2 Trade Cas. (CCH) ¶ 71,990 (D.D.C. 1997).
56. The effect of Microsoft's per-processor licensing charge was to impose a tax on a manufacturer's use of a competing operating system, thereby impeding future innovation and competition in the operating systems market. See Joel Klein & Preeta Bansall, International Antitrust Enforcement in the Computer Industry, 41 VILL. L. REV. 173, 174 (1996). For a critical analysis of the Antitrust Division's case against Microsoft and of practices that establish technical standards, see Stan Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L. & TECH. 283 (1996). The Antitrust Division's pending enforcement action against Microsoft began with assertions that Microsoft violated an earlier consent decree prohibition upon packaging application programs with the Windows operating system. The case has evolved into a possibly broader one challenging Microsoft's future right to package its Internet access software and other application programs with its dominant operating system software. Netscape, whose Internet access software competes directly with Microsoft's Internet Explorer, lodged complaints about Microsoft sales practices allegedly designed to suppress competing Internet access technologies. Part of the Antitrust Division's case was believed settled by Microsoft's agreement to make available its latest version of Windows 95 without the Internet Explorer program. A motion for a contempt citation for allegedly violating a preliminary injunction barring the bundling of the Microsoft operating program and Internet access program, pending a determination of whether the practice violated the terms of the earlier consent decree, has been resolved by a negotiated settlement. The settlement does not resolve the issues of the validity of the preliminary injunction and other potential issues, like bundling Microsoft's Internet access software into future versions of its operating program. See Microsoft and Antitrust Division Settle Dispute on Order Compliance, 74 Antitrust & Trade Reg. Rep. (BNA) 76 (Jan. 22, 1998). Another competing software developer, Caldera, Inc., has filed a private treble-damages action asserting that Microsoft's licensing practices and product pre-announcements are designed to suppress competition from other software developers. A summary of the complaint is available at 〈http://www.caldera.com〉.
57. The effect of Microsoft's per-processor licensing charge was to impose a tax on a manufacturer's use of a competing operating system, thereby impeding future innovation and competition in the operating systems market. See Joel Klein & Preeta Bansall, International Antitrust Enforcement in the Computer Industry, 41 VILL. L. REV. 173, 174 (1996). For a critical analysis of the Antitrust Division's case against Microsoft and of practices that establish technical standards, see Stan Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L. & TECH. 283 (1996). The Antitrust Division's pending enforcement action against Microsoft began with assertions that Microsoft violated an earlier consent decree prohibition upon packaging application programs with the Windows operating system. The case has evolved into a possibly broader one challenging Microsoft's future right to package its Internet access software and other application programs with its dominant operating system software. Netscape, whose Internet access software competes directly with Microsoft's Internet Explorer, lodged complaints about Microsoft sales practices allegedly designed to suppress competing Internet access technologies. Part of the Antitrust Division's case was believed settled by Microsoft's agreement to make available its latest version of Windows 95 without the Internet Explorer program. A motion for a contempt citation for allegedly violating a preliminary injunction barring the bundling of the Microsoft operating program and Internet access program, pending a determination of whether the practice violated the terms of the earlier consent decree, has been resolved by a negotiated settlement. The settlement does not resolve the issues of the validity of the preliminary injunction and other potential issues, like bundling Microsoft's Internet access software into future versions of its operating program. See Microsoft and Antitrust Division Settle Dispute on Order Compliance, 74 Antitrust & Trade Reg. Rep. (BNA) 76 (Jan. 22, 1998). Another competing software developer, Caldera, Inc., has filed a private treble-damages action asserting that Microsoft's licensing practices and product pre-announcements are designed to suppress competition from other software developers. A summary of the complaint is available at 〈http://www.caldera.com〉.
58. The effect of Microsoft's per-processor licensing charge was to impose a tax on a manufacturer's use of a competing operating system, thereby impeding future innovation and competition in the operating systems market. See Joel Klein & Preeta Bansall, International Antitrust Enforcement in the Computer Industry, 41 VILL. L. REV. 173, 174 (1996). For a critical analysis of the Antitrust Division's case against Microsoft and of practices that establish technical standards, see Stan Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L. & TECH. 283 (1996). The Antitrust Division's pending enforcement action against Microsoft began with assertions that Microsoft violated an earlier consent decree prohibition upon packaging application programs with the Windows operating system. The case has evolved into a possibly broader one challenging Microsoft's future right to package its Internet access software and other application programs with its dominant operating system software. Netscape, whose Internet access software competes directly with Microsoft's Internet Explorer, lodged complaints about Microsoft sales practices allegedly designed to suppress competing Internet access technologies. Part of the Antitrust Division's case was believed settled by Microsoft's agreement to make available its latest version of Windows 95 without the Internet Explorer program. A motion for a contempt citation for allegedly violating a preliminary injunction barring the bundling of the Microsoft operating program and Internet access program, pending a determination of whether the practice violated the terms of the earlier consent decree, has been resolved by a negotiated settlement. The settlement does not resolve the issues of the validity of the preliminary injunction and other potential issues, like bundling Microsoft's Internet access software into future versions of its operating program. See Microsoft and Antitrust Division Settle Dispute on Order Compliance, 74 Antitrust & Trade Reg. Rep. (BNA) 76 (Jan. 22, 1998). Another competing software developer, Caldera, Inc., has filed a private treble-damages action asserting that Microsoft's licensing practices and product pre-announcements are designed to suppress competition from other software developers. A summary of the complaint is available at 〈http://www.caldera.com〉.
59. The function of defining "markets" in structural antitrust cases under § 2 of the Sherman Act and § 7 of the Clayton Act may be understood in very different ways. According to an "instrumentalist" approach, the concept of a market is a means to an end: an analytical instrument that links facts to consequences in light of the underlying policy goals of the relevant statute. At the other extreme, a "formalist" approach treats market definition as the task of identifying a physical thing in time and space (i.e., defining product and geographic markets as physical things existing in time and place). The instrumentalist would view this goal as one possible element in the market definition process, but would emphasize a more functional concept of market definition as a means of or a tool for determining whether the policy of the statute is or is not violated in light of the facts of the case and the consequences of finding a violation. Even physically identical or similar products can be separate "markets" for these purposes where the underlying policies of the law require such an analysis in the factual circumstances of a case. For a more elaborate exploration of these issues, see Flynn, supra note 10. For an example of both approaches, see the majority (formalist) and dissenting (functional) opinions in United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956) (whether product market is cellophane or flexible wrapping materials).
60. Alcoa, 148 F.2d at 431.
61. Id. at 430 (alluding to Alcoa's "unlawful practices" to maintain its monopoly beyond the period when its patents expired). At the heart of the case was Judge Hand's controversial finding that Alcoa unlawfully maintained its monopoly position - which it attained, in part, as a result of patent rights and patent licensing practices found unlawful in 1912-by embracing each new opportunity to exclude competition.
62. AT&T's dominant position in telecommunications resulted in part from the company's acquisition of new technologies and its control over their introduction into the national phone system. See JOSEPH GOULDEN, MONOPOLY (1968). It was often said that one could have any kind of phone so long as it was black, manufactured by Western Electric, and leased from AT&T. The monopoly power of AT&T began to be undone with the Carterfone decision, In re Carterfone Device, 13 F.C.C.2d 420, reconsideration denied, 14 F.C.C.2d 571 (1968) (limiting AT&T's power to restrict interconnections of non-AT&T equipment to network). See also In Re Applications of Microwave Communications, Inc. 18 F.C.C.2d 953 (1969) (approving interconnection of non-AT&T new technology, microwave transmissions, to the AT&T network); Litton Sys., Inc. v. Southwestern Bell Tel. Co., 539 F.2d 418 (5th Cir. 1976) (reviewing interconnection of non-AT&T branch exchange under the antitrust laws). AT&T's control over telecommunications technology, and the ways in which that power was exercised to exclude competitors and competing technologies, were central to Judge Greene's denial of AT&T's motion to dismiss the government's complaint that AT&T was in violation of § 2 of the Sherman Act. AT&T, 524 F. Supp. 1336. Since the dissolution of AT&T's monopoly, there has been an explosion of new technologies, equipment, and innovative competitors in telecommunications and related businesses, leading to the conclusion that the earlier presence of a monopolist had a significant effect in suppressing innovation, the introduction of competing technologies, and different methods of doing business.
63. See United States v. Automobile Mfrs. Ass'n, 1969 Trade Cas. (CCH) ¶ 72,907 (C.D. Cal. 1969) (consent decree enjoining joint research by major auto manufacturers on pollution control equipment), decree modified, 1982-83 Trade Cas. (CCH) ¶¶ 65,088 & 65,175 (C.D. Cal. 1982). The decree was modified as a result of the Reagan Administration's emphasis on encouraging joint research ventures, as reflected by the adoption of The National Cooperative Research Act in 1984 and its amendment in 1993 to include production joint ventures. 15 U.S.C. §§ 4301-4305.
64. This is the issue being litigated by the Antitrust Division in its action to hold Microsoft in contempt of court for allegedly violating the 1995 consent decree by bundling its Internet access program into the Windows operating program. See supra note 36. Microsoft has a "bottleneck monopoly" because its operating system has become the standard for approximately 90% of all PCs, thereby giving Microsoft upstream power in the PC manufacturing market and downstream power in the application programs market dependent on compatibility with Microsoft's operating system. See Kevin J. Arquit, Neglecting Anticompetitive Behavior in the Computer Industry Could Prove Catastrophic, INTELLECTUAL PROP., Jan. 1998, at 5. Given that Microsoft has a very large installed base of Windows users, as well as effective control over standards for all application programs that must interface with Windows, Microsoft has significant power to raise prices and change the conditions of its licenses. See, e.g., Amy Cortese, There's More Than One Way to Play Monopoly, BUS. WK., Jan. 26, 1998, at 36 (reporting changes in Microsoft licensing practices requiring corporate users to pay license fees for each employee, rather than fees based on the average number of employees using the program concurrently). Consumers in the installed base have no real alternatives, other than changing their equipment or retraining users on different operating systems and applications programs, which makes users of Windows even more vulnerable to monopoly pricing and exclusionary tactics. For general commentary on these issues, see Joseph Farrell & Garth Saloner, Installed Base and Compatibility: Innovation, Product Pre-Announcements, and Predation, AM. ECON. REV. 940 (1986); Joseph Kattan, Market Power in the Presence of an Installed Base, 62 ANTITRUST L.J. 1 (1993).
65. This is the issue being litigated by the Antitrust Division in its action to hold Microsoft in contempt of court for allegedly violating the 1995 consent decree by bundling its Internet access program into the Windows operating program. See supra note 36. Microsoft has a "bottleneck monopoly" because its operating system has become the standard for approximately 90% of all PCs, thereby giving Microsoft upstream power in the PC manufacturing market and downstream power in the application programs market dependent on compatibility with Microsoft's operating system. See Kevin J. Arquit, Neglecting Anticompetitive Behavior in the Computer Industry Could Prove Catastrophic, INTELLECTUAL PROP., Jan. 1998, at 5. Given that Microsoft has a very large installed base of Windows users, as well as effective control over standards for all application programs that must interface with Windows, Microsoft has significant power to raise prices and change the conditions of its licenses. See, e.g., Amy Cortese, There's More Than One Way to Play Monopoly, BUS. WK., Jan. 26, 1998, at 36 (reporting changes in Microsoft licensing practices requiring corporate users to pay license fees for each employee, rather than fees based on the average number of employees using the program concurrently). Consumers in the installed base have no real alternatives, other than changing their equipment or retraining users on different operating systems and applications programs, which makes users of Windows even more vulnerable to monopoly pricing and exclusionary tactics. For general commentary on these issues, see Joseph Farrell & Garth Saloner, Installed Base and Compatibility: Innovation, Product Pre-Announcements, and Predation, AM. ECON. REV. 940 (1986); Joseph Kattan, Market Power in the Presence of an Installed Base, 62 ANTITRUST L.J. 1 (1993).
66. This is the issue being litigated by the Antitrust Division in its action to hold Microsoft in contempt of court for allegedly violating the 1995 consent decree by bundling its Internet access program into the Windows operating program. See supra note 36. Microsoft has a "bottleneck monopoly" because its operating system has become the standard for approximately 90% of all PCs, thereby giving Microsoft upstream power in the PC manufacturing market and downstream power in the application programs market dependent on compatibility with Microsoft's operating system. See Kevin J. Arquit, Neglecting Anticompetitive Behavior in the Computer Industry Could Prove Catastrophic, INTELLECTUAL PROP., Jan. 1998, at 5. Given that Microsoft has a very large installed base of Windows users, as well as effective control over standards for all application programs that must interface with Windows, Microsoft has significant power to raise prices and change the conditions of its licenses. See, e.g., Amy Cortese, There's More Than One Way to Play Monopoly, BUS. WK., Jan. 26, 1998, at 36 (reporting changes in Microsoft licensing practices requiring corporate users to pay license fees for each employee, rather than fees based on the average number of employees using the program concurrently). Consumers in the installed base have no real alternatives, other than changing their equipment or retraining users on different operating systems and applications programs, which makes users of Windows even more vulnerable to monopoly pricing and exclusionary tactics. For general commentary on these issues, see Joseph Farrell & Garth Saloner, Installed Base and Compatibility: Innovation, Product Pre-Announcements, and Predation, AM. ECON. REV. 940 (1986); Joseph Kattan, Market Power in the Presence of an Installed Base, 62 ANTITRUST L.J. 1 (1993).
67. This is the issue being litigated by the Antitrust Division in its action to hold Microsoft in contempt of court for allegedly violating the 1995 consent decree by bundling its Internet access program into the Windows operating program. See supra note 36. Microsoft has a "bottleneck monopoly" because its operating system has become the standard for approximately 90% of all PCs, thereby giving Microsoft upstream power in the PC manufacturing market and downstream power in the application programs market dependent on compatibility with Microsoft's operating system. See Kevin J. Arquit, Neglecting Anticompetitive Behavior in the Computer Industry Could Prove Catastrophic, INTELLECTUAL PROP., Jan. 1998, at 5. Given that Microsoft has a very large installed base of Windows users, as well as effective control over standards for all application programs that must interface with Windows, Microsoft has significant power to raise prices and change the conditions of its licenses. See, e.g., Amy Cortese, There's More Than One Way to Play Monopoly, BUS. WK., Jan. 26, 1998, at 36 (reporting changes in Microsoft licensing practices requiring corporate users to pay license fees for each employee, rather than fees based on the average number of employees using the program concurrently). Consumers in the installed base have no real alternatives, other than changing their equipment or retraining users on different operating systems and applications programs, which makes users of Windows even more vulnerable to monopoly pricing and exclusionary tactics. For general commentary on these issues, see Joseph Farrell & Garth Saloner, Installed Base and Compatibility: Innovation, Product Pre-Announcements, and Predation, AM. ECON. REV. 940 (1986); Joseph Kattan, Market Power in the Presence of an Installed Base, 62 ANTITRUST L.J. 1 (1993).
68. The history of attempts to enter telecommunications markets dominated by AT&T by using new technologies, such as microwave technology, is reviewed in Judge Cudahy's extensive opinion in MCI's treble damages suit, MCI Communications Corp. v. AT&T, 708 F.2d 1081 (7th Cir. 1983), as well as in Judge Greene's opinion in United States v. AT&T, 524 F. Supp. 1336 (D.D.C. 1981). Currently, local telephone markets continue to be controlled by local telephone operating companies with monopoly power over local loop switching operations. Certain sections of the Telecommunications Act of 1996 preclude the Bell operating companies and their affiliates, but not other local operating companies, from entering long-distance markets until such time as there is effective competition in local markets, but those sections recently were struck down as an unconstitutional "bill of attainder" in SBC Communications, Inc. v. FCC, 981 F. Supp. 996 (N.D. Tex. 1997). If this decision stands, the Bell operating companies likely will be able to maintain their bottleneck monopoly power, reducing incentives for other companies to innovate and introduce new technology that might be capable of circumventing existing wired local loops because of the cost of doing so and the practical problem of having access to the existing installed base to provide universal service. Manipulation of interconnection may also present long term barriers to entry. Analogous problems are being experienced in the deregulation of parts of the natural gas and electric utility industries. See United Distrib. Cos. v. FERC, 88 F.3d 1105 (D.C. Cir. 1996) (reviewing FERC Order No. 636 and the restructuring of the natural gas industry seeking to bring competition to gas production markets and common carriage to pipeline transportation); FERC Order No. 888, 61 F.R. 21,540 (1996) (analyzing steps necessary for unbundling power production and long-distance service in the electric power industry, a necessarily more complex process than that in the gas industry because of the need for regulating system operations). In the steel industry, too, a highly concentrated market structure may have enabled the dominant firms to delay for several years the introduction of new and more efficient steel-making processes pioneered by small foreign firms. See Walter Adams & Joel Dirlam, Big Steel, Invention and Innovation, 80 Q.J. ECON. 167 (1966).
69. Various categories of practices involving patent rights and raising technology suppression issues, including blocking patents, patent pools, and patent licensing practices, are reviewed in 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 704 et seq.; see also HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE §§ 5.5 & 7.11 (1994); LOUIS B. SCHWARTZ ET AL., FREE ENTERPRISE AND ECONOMIC ORGANIZATION 935 et seq. (6th ed. 1983); Barton, supra note 14.
70. Various categories of practices involving patent rights and raising technology suppression issues, including blocking patents, patent pools, and patent licensing practices, are reviewed in 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 704 et seq.; see also HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE §§ 5.5 & 7.11 (1994); LOUIS B. SCHWARTZ ET AL., FREE ENTERPRISE AND ECONOMIC ORGANIZATION 935 et seq. (6th ed. 1983); Barton, supra note 14.
71. The doctrine of patent misuse was first recognized in Motion Picture Patents Co. v. Universal Film Manufacturing Co., 243 U.S. 502 (1917), codified at 35 U.S.C. § 271(d); see also ROBERT CHISUM, 3 PATENTS § 19.04 (1990); Mark A. Lemley, The Economic Irrationality of the Patent Misuse Doctrine, 78 CAL. L. REV. 1599 (1990) (criticizing the patent misuse doctrine as a doctrine independent from antitrust limitations upon misuse of a patent and arguing the doctrine should be abolished as a separate doctrine of patent law). A patent may be rendered unenforceable as a matter of patent law due to inequitable conduct or misrepresentations, even if this behavior does not rise to the level of "fraud" necessary to assert an antitrust claim. For a discussion of the various doctrines, see Nobelpharma A.B. v. Implant Innovations, Inc., 129 F.3d 1463 (Fed. Cir. 1997) (failure to reveal best mode of practice invalidates patent but does not rise to level of fraud on the Patent Office). The misuse doctrine has been extended to other forms of intellectual property as well. See, e.g., Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (copyright).
72. Guidelines, supra note 2. The Guidelines treat intellectual property rights the same as other property rights. They do not presume that the grant of such a right automatically justifies a presumption that the holder has market power, recognizing that the licensing of intellectual property rights is "generally procompetitive." Id. § 2. In defining the concept of "market power," the Guidelines speak in terms of allocative efficiency only: "Market power is the ability profitably to maintain prices above, or output below, competitive levels for a significant period of time." Id. § 2.2.
73. Guidelines, supra note 2. The Guidelines treat intellectual property rights the same as other property rights. They do not presume that the grant of such a right automatically justifies a presumption that the holder has market power, recognizing that the licensing of intellectual property rights is "generally procompetitive." Id. § 2. In defining the concept of "market power," the Guidelines speak in terms of allocative efficiency only: "Market power is the ability profitably to maintain prices above, or output below, competitive levels for a significant period of time." Id. § 2.2.
74. WALTON HAMILTON, TEMPORARY NATIONAL ECONOMIC COMMITTEE (TNEC), MONOGRAPH No. 31, PATENTS AND FREE ENTERPRISE, INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER, 76th Cong., 3d Sess. (1941) [hereinafter TNEC MONOGRAPH]. The Monograph describes several anticompetitive cartel agreements, including the one between the Standard Oil Companies and I.G. Farben to suppress the introduction of crucial technologies relating to synthetic rubbers and gasoline, which was alleged to have occurred on the eve of and during World War II. The allegations were the subject of highly inflammatory Congressional hearings and were resolved by a consent decree, United States v. Standard Oil Co., 194043 Trade Cas. (CCH) ¶ 56,198 (D.N.J. 1942), that later was amended to require compulsory licensing of refining and synthetic rubber patents, 1940-43 Trade Cas. (CCH) ¶ 56,269 (D.N.J. 1943).
75. See also JOSEPH BORKIN, THE CRIME AND PUNISHMENT OF I.G. FARBEN ch. 4 (1978).
76. There also have been cases where an industry resisted the use of patent policy to control an industry by forming a patent pool and instituting royalty-free licensing for members of the pool. The Ford Motor Company did so after Seldon's automobile patents were narrowly construed in Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893 (2d Cir. 1911). Ford established a policy of granting royalty-free patents. It also founded the Automobile Manufacturer's Association, a patent pool that licensed patents freely to members that had furnished patents to the pool. See TNEC MONOGRAPH, supra note 47; C.A. Welsh, Patents and Competition in the Automobile Industry, 13 LAW & CONTEMP. PROBS. 260 (1948).
77. Proving what would have taken place but for the existence of a patent system is, of course, impossible. Nevertheless, some have made the attempt. See, e.g., Fritz Machlup, Why Have Patents? An Economic Review of the Patent System, Study No. 15, Subcomm. on Patents, Trademarks and Copyrights, Senate Judiciary Comm., 85th Cong., 2d Sess. (1958).
78. It is widely recognized that, in the long run, technological progress "contributes far more to consumer welfare than does the elimination of allocative inefficiencies caused by non-competitive pricing." Donald Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 ANTITRUST L.J. 485 (1984) (citing Jesse Markham, Concentration: A Stimulant or Retardant to Innovation?, in INDUSTRIAL CONCENTRATION: THE NEW LEARNING, 247, 253-54 (H. Goldschmidt et al. eds., 1974)). Consequently, it is argued that maintenance of a strong patent system is essential not only to create incentives to invent, but also to encourage the disclosure of inventions and provide opportunities for inventors to market their patented ideas. See S. Chesterfield Oppenheim, A New Approach to Evaluation of the American Patent System, 33 J. PAT. OFF. SOC'Y 555 (1951).
79. It is widely recognized that, in the long run, technological progress "contributes far more to consumer welfare than does the elimination of allocative inefficiencies caused by non-competitive pricing." Donald Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 ANTITRUST L.J. 485 (1984) (citing Jesse Markham, Concentration: A Stimulant or Retardant to Innovation?, in INDUSTRIAL CONCENTRATION: THE NEW LEARNING, 247, 253-54 (H. Goldschmidt et al. eds., 1974)). Consequently, it is argued that maintenance of a strong patent system is essential not only to create incentives to invent, but also to encourage the disclosure of inventions and provide opportunities for inventors to market their patented ideas. See S. Chesterfield Oppenheim, A New Approach to Evaluation of the American Patent System, 33 J. PAT. OFF. SOC'Y 555 (1951).
80. It is widely recognized that, in the long run, technological progress "contributes far more to consumer welfare than does the elimination of allocative inefficiencies caused by non-competitive pricing." Donald Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 ANTITRUST L.J. 485 (1984) (citing Jesse Markham, Concentration: A Stimulant or Retardant to Innovation?, in INDUSTRIAL CONCENTRATION: THE NEW LEARNING, 247, 253-54 (H. Goldschmidt et al. eds., 1974)). Consequently, it is argued that maintenance of a strong patent system is essential not only to create incentives to invent, but also to encourage the disclosure of inventions and provide opportunities for inventors to market their patented ideas. See S. Chesterfield Oppenheim, A New Approach to Evaluation of the American Patent System, 33 J. PAT. OFF. SOC'Y 555 (1951).
81. For a summary of instances where new technologies in concentrated industries have been suppressed for anticompetitive purposes, see Adams & Brock, supra note 13, at 264.
82. This was the central claim, for example, in Telex Corp. v. IBM, 367 F. Supp. 258 (N.D. OkLa. 1973), rev'd, 510 F.2d 894 (10th Cir. 1975), as well as several of the other IBM computer cases of the 1960s and 1970s, such as In re IBM Peripheral EDP Devices Antitrust Litigation, 481 F. Supp. 965 (N.D. Cal. 1979), aff'd, 698 F.2d 1377 (9th Cir. 1983). The trial court found in Telex that IBM manipulated design changes to defeat competitors' innovations in peripheral equipment and to maintain IBM's dominant position in peripherals that were "plug compatible" with IBM computers. That decision was reversed by the Tenth Circuit, a reversal strongly criticized on empirical grounds in Note, Innovation Competition: Beyond Telex v. IBM, 28 STAN. L. REV. 285 (1976). In a petition for certiorari to the U.S. Supreme Court, a convincing argument was made that IBM's manipulation of peripheral connection standards, along with its exclusion of innovative peripheral equipment by pre-announcing its own products and improvements well before they were available, suppressed new technologies and ought to have been found a violation of the antitrust laws. However, the Telex case was settled and dismissed before action was taken on the petition.
83. In a recent case before the FTC, a proposed merger was challenged because of its potential effects in gene therapy research markets. Ciba-Geigy Ltd., 5 Trade Reg. Rep. (CCH) ¶ 24,182 (1997) (consent order). The settlement conditioned approval of the $63 billion merger between Ciba-Geigy and Sandoz, Ltd. on the licensing of specific technology and patent rights to a third firm also engaged in gene therapy research. The Commission did this in order "to ensure that the merger does not slow research and development or raise prices for gene therapy products closest to marketability, or slow innovation toward future products...." The merger was analyzed in terms of the effect of the acquisition in innovation markets. For a collection of similar recent cases where mergers and other practices have been analyzed in terms of their effects in innovation markets, see the Appendix to Robert J. Hoerner, Innovation Markets: New Wine in Old Bottles?, 64 ANTITRUST L.J. 49, 70-73 (1995).
84. Continental Paper Bag Co., v. Eastern Paper Bag Co., 210 U.S. 405 (1908); Special Equip. Co. v. Coe, 324 U.S. 370, 379-80 (1945). These cases also have been relied upon for the principle that a patent owner has a general right to refuse to license. See, e.g., Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176 (1980). For a criticism of these and similar decisions, see Note, Limiting the Anticompetitive Prerogative of Patent Owners: Predatory Standards in Patent Licensing, 92 YALE L.J. 831 (1983), as well as Justice Douglas's dissent in Special Equipment, 324 U.S. at 380. Justice Douglas argued that patent suppression is inconsistent with the Constitutional purpose of the patent clause, which is to promote the progress of science and the useful arts, and therefore believed that the Court should withhold its assistance from a patentee "who has employed or plans to employ the patent not to exploit the invention but to suppress it in order to protect another patent or otherwise...." Id. at 384. The refusal-to-license rule, which is still law today, is inconsistent with an antitrust policy that ranks innovation efficiency as the primary goal of the antitrust laws and views the purpose of the patent laws as the public one of promoting innovation by obtaining disclosure of new ideas with reward to the inventor being secondary.
85. Continental Paper Bag Co., v. Eastern Paper Bag Co., 210 U.S. 405 (1908); Special Equip. Co. v. Coe, 324 U.S. 370, 379-80 (1945). These cases also have been relied upon for the principle that a patent owner has a general right to refuse to license. See, e.g., Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176 (1980). For a criticism of these and similar decisions, see Note, Limiting the Anticompetitive Prerogative of Patent Owners: Predatory Standards in Patent Licensing, 92 YALE L.J. 831 (1983), as well as Justice Douglas's dissent in Special Equipment, 324 U.S. at 380. Justice Douglas argued that patent suppression is inconsistent with the Constitutional purpose of the patent clause, which is to promote the progress of science and the useful arts, and therefore believed that the Court should withhold its assistance from a patentee "who has employed or plans to employ the patent not to exploit the invention but to suppress it in order to protect another patent or otherwise...." Id. at 384. The refusal-to-license rule, which is still law today, is inconsistent with an antitrust policy that ranks innovation efficiency as the primary goal of the antitrust laws and views the purpose of the patent laws as the public one of promoting innovation by obtaining disclosure of new ideas with reward to the inventor being secondary.
86. See SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981).
87. For a collection of recent cases involving diverse claims that acquisitions and other practices would affect innovation or potential innovation, see Hoerner, supra note 53. Conduct aimed at preserving one's market position is to be expected. Indeed, competition itself ensures self-preservation by, for example, cutting prices or improving product quality and reliability. In situations concerning the acquisition, use, or non-use of patent and other intellectual property rights, the difficulty in drawing a line between permissible and prohibited conduct under the antitrust laws is one of balancing two public interest goals: first, securing disclosure of new ideas by granting exclusive rights in those ideas for a stated period of time; and second, preventing the misuse of these rights to displace the competitive process in ways not necessary to secure disclosure. The classic article discussing this balancing process is Louis Kaplow, The Patent Antitrust Intersection: A Reappraisal, 97 HARV. L. REV. 1813 (1984); see also Barton, supra note 14.
88. Where there is some added element beyond the unilateral suppression of an individual patent, such as the acquisition of several patents with the purpose of intent to use them in combination to suppress competing technologies, can be an antitrust violation, assuming the other elements of an antitrust violation are present. See Kobe, Inc. v. Dempsey Pump Co., 198 F.2d 416 (10th Cir. 1952). Similarly, while the accumulation of patents, without more, is not a basis for a patent misuse or antitrust claim, see Automatic Radio Mfg. Co., Inc. v. Hazeltine Research, Inc., 339 U.S. 827 (1950), the pooling of patents by industry members for the purpose of dividing markets, suppressing competition in the use of the technology, or fixing the prices of the product made with the technology all would violate the antitrust laws. Hartford-Empire Co. v. United States, 323 U.S. 386 (1945).
89. Guidelines, supra note 2.
90. Guidelines § 3.2.3 defines an "innovation market" as "the research and development directed to particular new or improved goods or processes, and the close substitutes for that research and development." For an excellent review of the development and use of the concept of innovation markets in § 7 analysis, along with criticisms of the approach, see generally Innovation Market Symposium, supra note 1.
91. The development of a methodology for analyzing the impact of a merger on innovation efficiencies would expand the scope of § 7 by imposing limitations on intellectual property asset acquisitions that might have an adverse effect on innovation, as well as conglomerate mergers which might not otherwise come to mind as potentially subject to § 7 of the Clayton Act. Although often overlooked, it is well to remember that § 7 applies to asset acquisitions as well as stock acquisitions. See SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981) (patent acquisition); United States v. Columbia Pictures Corp., 189 F. Supp. 152, 181-83 (S.D.N.Y. 1960) (film exhibition rights).
92. The original advocates of an "innovation market" approach in § 7 cases set forth a detailed framework, in Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63 ANTITRUST L.J. 569 (1995). The use of an innovation market approach is described in George A. Hay, Innovation in Antitrust Enforcement, 64 ANTITRUST L.J. 7 (1995), and is criticized in Richard T. Rapp, The Misapplication of the Innovation Market Approach to Merger Analysis, 64 ANTITRUST L.J. 19 (1995), and in Hoerner, supra note 53. Gilbert and Sunshine replied to these criticisms in The Use of Innovation Markets: A Reply to Hay, Rapp, and Hoerner, 64 ANTITRUST L.J. 75 (1995).
93. The original advocates of an "innovation market" approach in § 7 cases set forth a detailed framework, in Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63 ANTITRUST L.J. 569 (1995). The use of an innovation market approach is described in George A. Hay, Innovation in Antitrust Enforcement, 64 ANTITRUST L.J. 7 (1995), and is criticized in Richard T. Rapp, The Misapplication of the Innovation Market Approach to Merger Analysis, 64 ANTITRUST L.J. 19 (1995), and in Hoerner, supra note 53. Gilbert and Sunshine replied to these criticisms in The Use of Innovation Markets: A Reply to Hay, Rapp, and Hoerner, 64 ANTITRUST L.J. 75 (1995).
94. The original advocates of an "innovation market" approach in § 7 cases set forth a detailed framework, in Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63 ANTITRUST L.J. 569 (1995). The use of an innovation market approach is described in George A. Hay, Innovation in Antitrust Enforcement, 64 ANTITRUST L.J. 7 (1995), and is criticized in Richard T. Rapp, The Misapplication of the Innovation Market Approach to Merger Analysis, 64 ANTITRUST L.J. 19 (1995), and in Hoerner, supra note 53. Gilbert and Sunshine replied to these criticisms in The Use of Innovation Markets: A Reply to Hay, Rapp, and Hoerner, 64 ANTITRUST L.J. 75 (1995).
95. The original advocates of an "innovation market" approach in § 7 cases set forth a detailed framework, in Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63 ANTITRUST L.J. 569 (1995). The use of an innovation market approach is described in George A. Hay, Innovation in Antitrust Enforcement, 64 ANTITRUST L.J. 7 (1995), and is criticized in Richard T. Rapp, The Misapplication of the Innovation Market Approach to Merger Analysis, 64 ANTITRUST L.J. 19 (1995), and in Hoerner, supra note 53. Gilbert and Sunshine replied to these criticisms in The Use of Innovation Markets: A Reply to Hay, Rapp, and Hoerner, 64 ANTITRUST L.J. 75 (1995).
96. United States v. Motor Vehicle Mfrs. Ass'n, 1982-83 Trade Cas. (CCH) ¶ 65,088 (C.D. Cal. 1982) (modification of 1969 consent decree); competitive impact statement explaining modification, reprinted in 47 Fed. Reg. 7529 (1982). The Antitrust Division charged in 1969 that American auto manufacturers had "engaged in a combination whose dual objectives were the elimination of all competition in the research, development, manufacture and installation of air pollution control equipment and the elimination of competition in the purchase of patents and patent rights from other parties covering air pollution control equipment." The 1969 case was settled by consent decree, see supra note 41, which became the subject of negotiations to modify the decree a decade later. United States v. Motor Vehicle Mfrs. Ass'n, 643 F.2d 644, 645 (9th Cir. 1981). The modified decree, permitted in light of changed conditions such as the energy shortage, joint research into the most effective pollution control equipment, but ordered the royalty-free licensing of pollution control technologies. Adoption of The National Cooperative Research and Production Act of 1993, see supra note 4, modifies significantly the standards to be applied to ventures complying with the filing and other requirements of the Act.
97. As explained infra note 65, per se rules ought to be understood as they have been used - as evidentiary presumptions of illegality. Unique circumstances like the energy shortage and the need to develop energy efficient trucks and autos may justify joint research by major auto manufacturers and decisions not to follow one path of research rather than another so long as the joint arrangement is subject to government review and public disclosure. See discussion of United States v. Motor Vehicle Mfrs. Ass'n, supra note 62.
98. State of Wash. v. American Tobacco Co., No. 96-2-15056-8, WL 931316 (Wash. Super. Ct. Nov. 19, 1996); 1997 WL 714842 (Wash. Super. Ct. June 6, 1997). In addition to charging violations of Washington state antitrust law, the complaint enumerates additional allegations that the defendants suppressed the commercialization of a patented process for producing a less harmful cigarette, and that producers holding patents for safer cigarettes were induced not to market these products for fear of supporting the view that conventional cigarettes were harmful. Of particular interest to lawyers is the additional claim that one method for carrying out the alleged conspiracy was the formation of a committee of counsel representing each of the major manufacturers, which allegedly was used to coordinate, among other things, the suppression of research on safer cigarettes and the exploitation of safer cigarette products that some firms had discovered and patented.
99. Per se rules of illegality ought to be considered as evidentiary presumptions of varying levels of rebuttability, ranging from the nearly conclusive to the mildly presumptive subject to justification, depending on the circumstances. In contrast, rule of reason analysis should involve no presumption of illegality. See John J. Flynn, Rethinking Sherman Act Section 1 Analysis: Three Proposals for Reducing the Chaos, 49 ANTITRUST L.J. 1593 (1980) [hereinafter Flynn, Chaos];
100. John J. Flynn, The "Is" and "Ought" of Vertical Restraints After Monsanto Co. v. Spray-Rite Service Corp., 71 CORNELL L. REV. 1095, 1142 (1986). In view of the primary value of innovation competition to a competitive process, horizontal agreements or conspiracies to suppress research or new technologies ought to be per se unlawful, with relatively little room for excuse or justification absent affirmative governmental sanction or review of the arrangement.
101. This practice is specifically banned by the consent decree obtained by the Antitrust Division in the Microsoft Consent Decree, supra note 7, as are licensing provisions requiring manufacturers to sign licensing agreements lasting more than one year, agreements prohibiting computer manufacturers from using other operating systems, and a requirement conditioning an operating system license on the purchase of any other software product. An exception to the last prohibition is made for "integrated products" that Microsoft may choose to develop. The current dispute challenging Microsoft's bundling or "tying" its Internet access program into its Windows operating system revolves around interpretation of these provisions of the consent decree. See Preliminary Injunction Bars Microsoft from Packaging Operating System and Browser, 73 Antitrust & Trade Reg. Rep. (BNA) 573 (Dec. 18, 1997).
102. 15 U.S.C. § 2. The distinction between "monopolization" and "attempted monopolization" offenses has been narrowed considerably by the U.S. Supreme Court's decision in Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), which interprets the "attempt to monopolize" offense as requiring proof of a dangerous probability that a defendant would achieve monopoly power in a relevant market as a result of the conduct in question. Id. at 455. In attempt cases, therefore, one must prove relevant product and geographic markets, a dangerous probability that the defendant will monopolize the defined markets, a specific intent to do so, and predatory or anticompetitive conduct. Id. It is unclear whether the dangerous probability requirement is qualitative (i.e., dependent upon the character of the exclusionary conduct) or quantitative (i.e., based on market share percentages).
103. 15 U.S.C. § 2. The distinction between "monopolization" and "attempted monopolization" offenses has been narrowed considerably by the U.S. Supreme Court's decision in Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), which interprets the "attempt to monopolize" offense as requiring proof of a dangerous probability that a defendant would achieve monopoly power in a relevant market as a result of the conduct in question. Id. at 455. In attempt cases, therefore, one must prove relevant product and geographic markets, a dangerous probability that the defendant will monopolize the defined markets, a specific intent to do so, and predatory or anticompetitive conduct. Id. It is unclear whether the dangerous probability requirement is qualitative (i.e., dependent upon the character of the exclusionary conduct) or quantitative (i.e., based on market share percentages).
104. 15 U.S.C. § 14. The analysis of exclusive dealing and tying practices is reviewed in HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE ch. 10 (1994). The per se status of tying arrangements is a matter of considerable debate. If one views per se rules as evidentiary presumptions of varying levels of rebuttability, designating tying arrangements as presumptively unlawful (subject to certain defined defenses, justifications, or excuses) avoids the confused analysis which appears to be caused by treating per se condemnation as a fixed rule to be applied deductively no matter the facts or consequences. See Flynn, Chaos, supra note 65. Limitations on the jurisdictional reach of the Clayton Act (particularly the limitation that § 3 of the Clayton Act only applies to transactions involving "goods or commodities") has resulted in some tying cases being brought under the Sherman Act. Although the Supreme Court designated "tying" a per se violation of the Sherman Act in Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958), the Court's analysis left considerable room for litigation by requiring a finding of two separate products and power in the tying product market. For purposes of § 1 of the Sherman Act, however, the contract, agreement, or understanding requiring a buyer to take one product from a seller in order to obtain another is a contract satisfying the concerted action requirement of § 1. See Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137 (10th Cir. 1997) (overruling prior Tenth Circuit opinions holding that a plaintiff needed to show concerted action involving a third party to invoke § 1 of the Sherman Act in tying cases, and that a tying arrangement imposed on a single party did not meet the concerted action requirement of § 1). The central issue in tying cases is whether there is an exercise of economic power displacing the competitive process causing consumers to purchase the bundled product or not.
105. 15 U.S.C. § 45. The scope of the FTC's § 5 jurisdiction over anticompetitive practices includes, but is not limited to, violations of the Sherman and Clayton Acts. See Sperry Hutchinson Co. v. FTC, 405 U.S. 233, 244 (1972) (holding that the FTC, in evaluating the fairness of a practice under § 5, has the power to "consider public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws.") The FTC has not attempted to define the outer limits of this definition of its authority. It has, however, shown an increased interest in protecting competition in innovation in merger cases. See, e.g., discussion of Ciba-Geigy Ltd., supra note 53. An interesting FTC case involving conflicting claims about innovation efficiencies is Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457 (1941) (prohibiting women's fashion designers and manufacturers guild from combatting the manufacture and sale of "pirated" dress designs).
106. See HOVENKAMP, supra note 68, at 368 (discussing technological reasons for tying arrangements in some cases).
107. See id. at 370-72 (discussing the leverage theory of tying arrangements and the allocative efficiency argument that there is only one monopoly profit and that therefore leverage does enhance monopoly profits).
108. For an extensive analysis of the one-product/two-product issue in the context of computer operating systems, see the controversial decision In re Data Gen. Corp. Antitrust Litig., 490 F. Supp. 1089, 1104-17 (N.D. Cal. 1980), rev'd and remanded, Digidyne Corp. v. Data Gen. Corp., 734 F.2d 1336 (9th Cir. 1984), cert. denied, 473 U.S. 908 (1995). The case was controversial because the Ninth Circuit opinion held that a presumption of power in the tying product market could be engaged in where the tying product was patented or copyrighted. The Patent Interference and Misuse Reform Act of 1988, 35 U.S.C. § 271 (d), eliminated the presumption of power in misuse cases simply because the tying product is patented. In antitrust cases there has been a trend away from assuming market power because the tying product is patented or copyrighted. See HOVENKAMP, supra note 68, at 359.
109. The debate over whether "products" are separable or not, so as to be two separate products for antitrust analytical purposes, may be a titillating metaphysical debate, but it is hardly an enlightening antitrust one. See United States Steel Corp. v. Fortner Enters., Inc., 429 U.S. 610 (1977) (Fortner II) (whether credit (tying product) extended by a manufacturer of prefabricated houses (tied product) were two separate products). The normative issue is whether there has been an exercise of economic power from one area of economic activity to displace the competitive process determining entry, innovation, or pricing in a different area of economic activity, without a justification or excuse for the practice. A good part of the analytical confusion has been generated by the mechanical application of a "per se" antitrust rule that requires proof of two "products," power in the market designated the tying product market and the conditioning of one on the purchase of another, rather than using antitrust standards as evidentiary presumptions.
110. Once examined in light of claimed technological justifications, forced tying or bundling has been open to question in a number of previously regulated activities. The deregulation movement in natural gas, telephone, and electric power has resulted in litigation aimed primarily at the technological justification for bundling different services in a package to be offered by a single provider. Where not justified on technological grounds, unbundling has been ordered and consumers have been given the choice of how to purchase the product and services. See cases cited supra note 43. The fact that the tie may be economically efficient or convenient in the allocative sense should not be a sufficient justification in cases where the tie or bundling is being done because of the unilateral exercise of monopoly power. Where innovation is viewed as the primary value of antitrust policy and the regulation of economic affairs, the effects of entry barriers caused by forced bundling should be the focus of the analysis. In the Microsoft circumstance, bundling the operating program used by most personal computers with a Microsoft Internet access program is not only significant to competitors in both the operating program market and the Internet access program market, but also may be a significant barrier to competitors in application markets should the Internet become a network source of operating and application programs.
111. Claims that Microsoft is giving away its Internet access program "free" would be irrelevant in such an analysis, even if one were to believe those claims. The impact on innovation caused by the exclusion of competitors and the expansion of a monopoly should be the central factual issues, along with technological justifications - if any - for the tying or packaging of the functions. Microsoft is now setting the standards for approximately 90% of personal computer operating systems - a status and market share that confers monopoly power over computer operating systems and also gives Microsoft the power to determine which programs can and cannot interface with whatever Microsoft defines as the operating system standard.
112. In some cases, courts have ordered compulsory licensing of intellectual property rights where those rights have been used to violate the antitrust laws. See Hartford-Empire Co. v. United States, 323 U.S. 386 (1944); United States v. United Shoe Mach. Corp., 110 F. Supp. 295 (D. Mass. 1953), aff'd per curiam, 347 U.S. 521 (1954). Similarly, courts have refused to enforce intellectual property rights where the owner of the rights is using them in violation of the antitrust laws. See Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942). Courts have also remedied the misuse of intellectual property rights to violate the antitrust laws by ordering the divestiture of the assets used. See United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).
113. This is a practical reality long recognized as a characteristic of some industries, but one requiring complex injunctive remedies where the antitrust laws are relied upon to remedy the injury to the competitive process. See United States v. Terminal R.R. Ass'n, 224 U.S. 383 (1912).
114. 722 F.2d 1370 (8th Cir. 1983).
115. Id. at 1373. The Eighth Circuit also vacated the punitive damages award.
116. Id. (citing Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983)).
117. 722 F.2d at 1374. Despite the express language of § 4 of the Clayton Act, 15 U.S.C. § 15, granting "any person" injured in their business or property "by anything" forbidden by the antitrust laws the right to maintain a treble damage action, several federal courts have been imposing different interpretations of these standing factors upon treble damage plaintiffs. Some "activist" courts have even asserted the power to determine who is "the most 'efficient' enforcer of the antitrust laws" and have denied standing to plaintiffs deemed not to be the most efficient enforcers. See, e.g., Angelico v. Lehigh Valley Hosp., Inc., 1997-2 Trade Cas. (CCH) ¶ 71,965 (E.D. Pa. 1997).
118. 722 F.2d at 1374.
119. W. (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) (injury suffered must be "directly related" to the harm the antitrust laws were designed to prevent)); see also Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983).
120. 722 F.2d at 1377.
121. Id. at 1383.
122. Id. at 1384.
123. Brunswick, 429 U.S. at 489 (plaintiff must show it suffers antitrust injury of the type the antitrust laws were designed to prevent and that the injury flows from that which makes the defendant's acts unlawful.)
124. 722 F.2d at 1383.
125. Id. at 1384.
126. For articles critical of an expanded role for antitrust on these issues, see Liebowitz & Margolis, supra note 36; Janusz A. Ordover & Robert D. Willig, An Economic Definition of Predation: Pricing and Product Innovation, 91 YALE L.J. 8 (1981).
127. Felix Cohen summarized a dream by Rudolph VonJehring (a nineteenth century German philosopher) of dying and going to a heaven where legal concepts had taken on an independent life of their own. Disembodied spirits of "good faith," "bad faith," "property," and so on floated around detached from reality, along with all the logical tools to analyze them and split their meaning infinitely. VonJehring reveled in finally being able to see and meet abstract legal concepts others seemed to know intimately. Felix Cohen, Transcendental Nonsense and the Functional Approach, 35 COLUM. L. REV. 809 (1935).
128. Flast v. Cohen, 392 U.S. 83, 129 (1968) (Harlan, J., dissenting). Standing has come to be used to analyze a wide variety of issues, including the scope of the duty imposed by the antitrust laws; whether a plaintiff is within the target area of the wrong; whether the injury is of a type forbidden by antitrust policy; whether the violation caused the injury; whether the plaintiff is the "most efficient" plaintiff to bring the case; and a balancing of several factors to establish the degree of wrong and the plaintiffs relationship to the wrong alleged. For a case considering all these factors under the rubric of "standing" and dismissing an otherwise viable antitrust claim, see R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d 139 (9th Cir. 1989).
129. For insightful reviews and criticism of standing doctrine in antitrust, see C. Douglas Floyd, Antitrust Victims Without Antitrust Remedies: The Narrowing of Standing in Private Antitrust Actions, 82 MINN. L. REV. 1 (1997); Joseph F. Brodley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 MICH. L. REV. 1 (1995). On standing doctrine generally, see William A. Fletcher, The Structure of Standing, 98 YALE L.J. 221 (1988); Wayne McCormack, The Justiciability Myth and the Concept of Law, 14 HASTINGS CONST. L.Q. 595 (1987).
130. For insightful reviews and criticism of standing doctrine in antitrust, see C. Douglas Floyd, Antitrust Victims Without Antitrust Remedies: The Narrowing of Standing in Private Antitrust Actions, 82 MINN. L. REV. 1 (1997); Joseph F. Brodley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 MICH. L. REV. 1 (1995). On standing doctrine generally, see William A. Fletcher, The Structure of Standing, 98 YALE L.J. 221 (1988); Wayne McCormack, The Justiciability Myth and the Concept of Law, 14 HASTINGS CONST. L.Q. 595 (1987).
131. For insightful reviews and criticism of standing doctrine in antitrust, see C. Douglas Floyd, Antitrust Victims Without Antitrust Remedies: The Narrowing of Standing in Private Antitrust Actions, 82 MINN. L. REV. 1 (1997); Joseph F. Brodley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 MICH. L. REV. 1 (1995). On standing doctrine generally, see William A. Fletcher, The Structure of Standing, 98 YALE L.J. 221 (1988); Wayne McCormack, The Justiciability Myth and the Concept of Law, 14 HASTINGS CONST. L.Q. 595 (1987).
132. For insightful reviews and criticism of standing doctrine in antitrust, see C. Douglas Floyd, Antitrust Victims Without Antitrust Remedies: The Narrowing of Standing in Private Antitrust Actions, 82 MINN. L. REV. 1 (1997); Joseph F. Brodley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 MICH. L. REV. 1 (1995). On standing doctrine generally, see William A. Fletcher, The Structure of Standing, 98 YALE L.J. 221 (1988); Wayne McCormack, The Justiciability Myth and the Concept of Law, 14 HASTINGS CONST. L.Q. 595 (1987).
133. 7 Cal. Rptr. 2d 718 (Ct. App. 1992). An unreported earlier federal case involving federal antitrust claims was dismissed on standing grounds.
134. A published review of the second trial states that the contract between the parties called for the defendant to sell the technology back to the plaintiff should it be found inherently defective. The defendant never offered to do so, a fact the plaintiff used effectively in its argument to the jury suggesting that the defendant's purpose was to suppress the technology. Statistical Evidence Boosts Plaintiffs' Case Fraud Trial, INSIDE LITIG., Dec. 1994, at 7.
135. The second jury verdict was affirmed by the California Court of Appeals in an unpublished opinion dated Aug. 25, 1997. Review of the court of appeals' decision by the California Supreme Court has been denied in an unreported denial of the appeal.
136. The enforcement of invalid intellectual property rights and attempts to enforce valid intellectual property rights beyond the proper scope of the right can also be a form of technology suppression. Innovation may be threatened by the mere existence of an invalid intellectual property right or by aggressive attempts to enforce a valid right beyond the scope of the right granted. The legal hurdles to deterring such conduct are, however, substantial. Even if a patentee enforces a patent obtained by fraud on the Patent Office under the standards set out by Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), an antitrust claim requires independent proof that the conduct of enforcing the patent procured by fraud constitutes an antitrust violation. If a § 2 attempt-to-monopolize case is filed, for example, the plaintiff must prove that the patented product monopolized a relevant market, or that the defendant had a dangerous probability of monopolizing the defined market, and so on. For a case where bad faith enforcement of a patent was found to be a § 2 violation, see Handgards, Inc. v. Ethicon, 743 F.2d 1282 (9th Cir. 1984); see also Brunswick Corp. v. Riegel Textile Corp., 752 F.2d 261 (7th Cir. 1984) (fraud on the Patent Office and enforcing patent obtained fraudulently can, but does not always, constitute a violation of the antitrust laws).
137. One issue raised by new technologies in structural antitrust cases is whether a "market" exists where the new technology is not yet extant. See Hoerner, supra note 53. For those who do not hypostatize ("thingify") legal concepts like markets, however, the physical presence or absence of a tangible thing one can identify as a market is not of significance. The concept of a market is used functionally for broader normative purposes of the law (i.e., determining whether joint conduct or exclusionary monopoly conduct restrains trade or commerce) rather than to define or describe some physical thing in time and space. See Cohen, supra note 91. Besides, the new technology may be sufficiently unique to be defined as a market or potential market for purposes of determining whether antitrust policy is violated by suppressing the technology. See Gilbert & Sunshine, supra note 61.
138. These requirements are the source of some of the considerable confusion traveling under the "standing" umbrella. At bottom, these are requirements that a factual connection between the violation of the antitrust laws and injury to the plaintiff be shown in order to entitle a plaintiff to injunctive or damage relief. Compare Blue Shield of Va. v. McCready, 457 U.S. 465 (1983), with Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (1982). Defining what conduct falls within the prohibitions of the antitrust laws is the substantive question of the scope of the duties imposed by the statute, not a question of causation or measurement of damage.
139. Such a requirement is similar to the requirement of proving an antitrust violation in a fraudulent enforcement of a patent case by clear and convincing evidence, as set forth in Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282 (9th Cir. 1984).
140. The standing requirements for injunctive relief under § 16 of the Clayton Act only require proof that the conduct in violation of the antitrust laws "threatened loss or damage." 15 U.S.C. § 26.
141. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).
142. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990).
143. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977); Kansas v. Utilicorp United, Inc., 497 U.S. 199 (1990).
144. See Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183 (2d Cir. 1970).
145. In the ballast technology suppression case, the plaintiff was able to present several different damage theories comparing the last five years of sales of electronic ballasts, which had become the industry standard by 1994, with earlier periods when it was alleged the defendant was suppressing the technology. See Statistical Evidence Boosts Plaintiffs' Case Fraud Trial, supra note 95, at 1. In technology suppression cases where the technology has been completely suppressed, there may not be a basis for comparison.
146. John Flynn, Which Past Is Prologue? The Future of Private Antitrust Enforcement, 35 ANTITRUST BULL. 879, 902-03 (1990).
147. Fletcher, supra note 93, at 229.
148. The issue should be framed in terms of duty, scope of duty, and evidence sufficient to prove a breach of the duty in order to avoid the confused and confusing issues of "proximate causation" and standing, which often are used to obscure the analysis rather than enlighten it. Once the duty and breach are shown, the remaining issues in a damage action are whether there is a factual connection to the plaintiffs claimed injury and the amount of damage. Mindless clichés like "the antitrust laws protect competition not competitors" have no role in this form of analysis, which should be followed in treble damage antitrust litigation to emphasize the scope of the duty imposed on market participants by the antitrust laws. For a succinct exposition of the significance of the "duty/risk" analytical approach in the field of torts, as opposed to the proximate cause approach, see E. Wayne Thode, Tort Analysis: Duty-Risk v. Proximate Cause and the Rational Allocation of Functions Between Judge and Jury, 1977 UTAH L. REV. 1.
149. Although beyond the scope of this article, it is worth noting that an analysis ranking innovation efficiencies as the central economic value of antitrust policy could also provide a basis for using the antitrust laws to order the forfeit of, or otherwise enjoin, intellectual property rights based on their non-use, where it is shown that the purpose and effect of non-use is to suppress technology. Foreign antitrust and intellectual property laws permit such actions, as well as compulsory licensing of essential intellectual property rights. See John Temple Lang, Defining Legitimate Competition: Companies' Duties to Supply Competitors and Access to Essential Facilities, 18 FORDHAM INT'L L.J. 437 (1994).
150. Michael E. Porter, Innovation, Rivalry and Competitive Advantage: Interview, ANTITRUST, June 1991, at 5: The central focus of antitrust policy . . . ought to be on fostering progressiveness, defined broadly to include not only technological innovation but new ways of competing in product, marketing, services, and so on. When faced with tradeoffs, we should weight progressiveness much higher than static efficiency or a snapshot of price-cost margins.