The case for antitrust law to police the patent holdup problem in standard setting

Antitrust Law Journal

Volumn 77, Issue 3, 2011, Pages 913-945

  Cary, George S ^a   Nelson, Mark W ^a   Kaiser, Steven J ^a   Sistla, Alex R ^a  

^a California and District of Columbia Bars ^*  (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84857160584     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (60)

1. See George S. Cary, Larry C. Work-Dembrowski & Paul S. Hayes, Antitrust Implications of Abuse of Standard-Setting, 15 GEO. MASON L. REV. 1241 (2008) [hereinafter Cary et al. (2008)].
2. See, e.g., U.S. DEP'T OF JUSTICE & FED. TRADE COMM'N, ANTITRUST ENFORCEMENT AND INTELLECTUAL PROPERTY RIGHTS: PROMOTING INNOVATION AND COMPETITION 33 (2007) [hereinafter PROMOTING INNOVATION AND COMPETITION] ("Industry standards are widely acknowledged to be one of the engines driving the modern economy."), available at http://www.justice.gov/atr/ public/hearings/ip/222655.pdf.
3. See, e.g., Mark A. Lemley, Intellectual Property Rights and Standard- Setting Organizations, 90 CALIF. L. REV. 1889, 1896 (2002) ("Some standards are extremely complex and technical in nature. . . . But standards need not be so sophisticated. . . . In the United States, electrical plugs and outlet are built to a particular standard for voltage, impedance, and plug shape. Without this standardization, no one could stay in a hotel room and have any confidence that his hair dryer would work . . . .").
4. See Joseph Farrell et al., Standard Setting, Patents, and Hold-Up, 74 ANTITRUST L.J. 603, 611-615 (2007).
5. See, e.g., Eur. Telecomms. Standards Inst. (ETSI), Intellectual Property Rights Policy, H 8.1.1-8.1.2 (2008), available at http://www.etsi.org/WebSite/ document/Legal/ETSI-IPRPolicy.pdf.
6. See Business Review Letter from Thomas O. Bamett, Assistant Att'y Gen., U.S. Dep't of Justice, Antitrust Div., to Michael A. Lindsay, Esq., Dorsey & Whitney LLP (Apr. 30, 2007) (stating that DOJ would not oppose a proposal by the Institute of Electrical and Electronics Engineers Inc. (IEEE) to implement a policy allowing patent holders to commit publicly during the standard-setting process to specific restrictions on their future licensing terms and conditions for the use of patents that are essential to IEEE standards), available at http://www.justice.gov/atr/public/busreview/222978.pdf.
7. Business Review Letter from Thomas O. Barnett, Assistant Att'y Gen., U.S. Dep't of Justice, Antitrust Div., to Robert A. Skitol, Esq., Drinker, Biddle & Reath (Oct. 30, 2006) (stating that DOJ would not challenge, unless it proved anticompetitive in practice, the VMEbus International Trade Association's (VITA) proposal requiring upfront disclosure of patents and patent licensing terms in connection with VMEbus standard-setting activities), available at http://www.justice.gov/atr/public/busreview/219380.pdf.
8. See Daniel G. Swanson & William J. Baumol, Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power, 73 ANTITRUST L.J. 1, 10-11 (2005).
9. Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 TEX. L. REV. 1991, 1993 (2007).
10. Damien Geradin et al., The Complements Problem Within Standard Setting: Assessing the Evidence on Royalty Stacking, 14 B.U. J. Set. & TECH. L. 144, 146 (2008).
11. See FRAND Roundtable, GLOBAL COMPETITION REV., Apr. 2008, at 25, 26-27 (comments of Damien Geradin) ("But the more complicated question is whether, when a license has been given ex ante, it is necessarily opportunistic to charge different rates ex post?").
12. See, e.g., Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 531 (1983) ("Congress intended the [Sherman] Act to be construed in the light of its common-law background.").
13. Bruce H. Kobayashi & Joshua D. Wright, Federalism, Substantive Preemption, and Limits on Antitrust: An Application to Patent Holdup, 5 J. COMPETITION L. & ECON. 469, 471 (2009).
14. But see Einer Elhauge, Do Patent Holdup and Royalty Stacking Lead to Systematically Excessive Royalties?, 4 J. COMPETITION L. & ECON. 535 (2008) (arguing that Professors Lemley and Shapiro overstate potential patent holdup and royalty stacking problems).
15. See, e.g., Stanley M. Besen & Robert J. Levinson, Standards, Intellectual Property Disclosure, and Patent Royalties After Rambus, 10 N.C. J.L. & TECH. 233 (2009).
16. Christopher Hardee, Single-Firm Opportunism and the FTC's Rambus Defeat: Implications for Section 2 of The Sherman Act, 18 TEX. INTELL. PROP. L.J. 97 (2009).
17. Robert A. Skitol & Kenneth M. Vorrasi, Patent Holdup in Standards Development: Life After Rambus v. FTC?, ANTITRUST, Summer 2009, at 26.
18. Thomas F. Cotter, Patent Holdup, Patent Remedies, and Antitrust Responses, 34 J. CORP. L. 1151, 143-148 (2009).
19. See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 133 (1998).
20. See, e.g., Ankur Kapoor, What Is the Standard of Causation of Monopoly?, ANTITRUST, Summer 2009, at 38, 39 ("[T]he D.C. Circuit's but-for causation analysis in Rambus appears at odds with its analysis in Microsoft, where the court rejected Microsoft's but-for causation argument and upheld liability for acts that 'reasonably appear capable of making a significant contribution' to monopoly.") (citation omitted).
21. David J. Teece & Edward F. Sherry, Standards Setting and Antitrust, 87 MINN. L. REV. 1913 , 1986 (2003).
22. Michael A. Carrier, Why Antitrust Should Defer to the Intellectual Property Rules of Standard- Setting Organizations: A Commentary on Teece & Sherry, 87 MINN. L. REV. 2019, 2027 (2003) ("[TJhey do not sufficiently engage the antitrust statutes and case law, which inform the determination of the proper role for antitrust.").
23. Credit Suisse Sec. (USA) LLC v. Billing, 551 U.S. 264 (2007).
24. NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998).
25. United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965).
26. E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 135 (1961). Kobayashi and Wright mention several other recent cases but do not appear to rely on them for their principal thesis.
27. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
28. Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007).
29. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004).
30. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993)).
31. See, e.g., Altria Group, Inc. v. Good, 555 U.S. 70, 77 (2008).
32. Gordon v. N.Y. Stock Exch., Inc., 422 U.S. 659 (1975).
33. Silver v. N.Y. Stock Exch., 373 U.S. 341 (1963)).
34. Credit Suisse Sec. (USA) LLC v. Billing, 551 U.S. 264, 283 (2007).
35. See Stacey L. Dogan & Mark A. Lemley, Antitrust Law and Regulatory Gaming, 87 TEX. L. REV. 685, 694-695, 703 (2009).
36. See Parker v. Brown, 317 U.S. 341, 350-51 (1943) ("[N]othing in the language of the Sherman Act or in its history . . . suggests that its purpose was to restrain a state or its officers or agents from activities directed by [the state] legislature.").
37. see also S. Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 56 (1985).
38. Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 (1980). The FTC has likewise misunderstood the state-action doctrine, seeking to regulate mergers and other activity in state-regulated industries, with little success.
39. See, e.g., FTC v. Equitable Res., Inc., 512 F. Supp. 2d 361, 364 (W.D. Pa. 2007), remanded by 2008 U.S. App. LEXIS 27971 (3d Cir. Feb. 22, 2008 J, vacated on other grounds, 2008 U.S. Dist. LEXIS 111849 (W.D. Pa. June 25, 2008). The authors represented Equitable in that matter.
40. E.R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 137 (1961).
41. See U.S. PTO, Reexamination Operational Statistics Through FY201I Q3, available at http://www.uspto.gov/patents/Reexamination-operational-statistic- through-FY201lQ3.pdf.
42. See Atl. Richfield Corp. v. USA Petroleum Co., 495 U.S. 326, 344 (1990) (recognizing that "the per se rule permits the prohibition of efficient practices in the name of simplicity").
43. Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).
44. See Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1021-22 (Fed. Cir. 2008).
45. See, e.g., Therasense, Inc. v. Becton, Dickinson & Co., No. 2008-1511, 2011 U.S. App. LEXIS 10590 (Fed. Cir. May 25, 2011).
46. See Nobelpharma A.B. v. Implant Innovations Inc., vacated and withdrawn, 141 F.3d 1059 (Fed. Cir. 1998).
47. Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282 (9th Cir. 1984).
48. Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir. 1979).
49. See, e.g., Herbert J. Hovenkamp, Standards Ownership and Competition Policy, 48 B.C. L. REV. 87, 106 (2007).
50. Mark A. Lemley, Ten Things to Do About Patent Holdup of Standards (And One Thing Not to Do), 48 B.C. L. REV. 149, 167-168 (2007).
51. Rambus Inc. v. FTC, 522 F.3d 456, 466-67 (D.C. Cir. 2008).
52. Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 314 (3d Cir. 2007).
53. See A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1042-1043 (Fed. Cir. 1992).
54. See, e.g., Robert P. Merges & Jeffrey M. Kuhn, An Estoppel Doctrine for Patented Standards, 97 CALIF. L. REV. 1, 39 (2009) ("At a minimum, then, the misrepresentation element of equitable estoppel requires some communication or relationship between the parties, since the infringer must know of the relevant patent in order to reasonably infer that the patentee acquiesced in the allegedly infringing activity.
55. See Analysis of Proposed Consent Order to Aid Public Comment, In re Negotiated Data Solutions LLC, FTC File No. 051-0094 (Jan. 23, 2008), available at http://www.ftc.gov/os/caselist/0510094/080122analysis.pdf.
56. See Statement of the Federal Trade Commission, In re Negotiated Data Solutions LLC, FTC File No. 051-0094 (Jan. 23, 2008), available at http://www.ftc.gov/os/caselist/0510094/080122statement.pdf.
57. See, e.g., United States v. Microsoft Corp., 253 F.3d 34, 59 (D.C. Cir. 2001) ("Finally, in considering whether the monopolist's conduct on balance harms competition and is therefore condemned as exclusionary for purposes of § 2, our focus is upon the effect of that conduct, not upon the intent behind it. Evidence of the intent behind the conduct of a monopolist is relevant only to the extent it helps us understand the likely effect of the monopolist's conduct.") (citations omitted)
58. K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 130 (2d Cir. 1995) ("[E]vidence of defendants' intent, even belief that what they were doing might be unlawful, is unavailing in the absence of evidence of anti-competitive effect.").
59. A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1402 (7th Cir. 1989) ("[Liability under § 2 for abuse of monopoly power stems from anti-competitive effects and not intent[.]")
60. see also 1 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW § 113, at 140 ( 3 d ed. 2006) ("Judges and others' sometimes write as if the purpose of antitrust is to control evil or anticompetitive intent, but that is not the case.").