Showing 9 of 83 Publications by Alden Abbott

The FTC Should Not Enact a Deceptive or Unfair Marketing Earnings-Claims Rule

TOTM Back in February 2022, the Federal Trade Commission (FTC) announced an advance notice of proposed rulemaking (ANPRM) on “deceptive or unfair earnings claims.” According to the FTC… Read . . .

Back in February 2022, the Federal Trade Commission (FTC) announced an advance notice of proposed rulemaking (ANPRM) on “deceptive or unfair earnings claims.” According to the FTC…

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Antitrust & Consumer Protection

Using Bayh-Dole March-in to Set Patent Price Controls: An Assault on American Innovation

TOTM Under the Bayh-Dole Act, the federal government has the right to “march in” on patents on inventions created using taxpayer funds—to require the patentholder to . . .

Under the Bayh-Dole Act, the federal government has the right to “march in” on patents on inventions created using taxpayer funds—to require the patentholder to license the federally funded patent to other applicants. The terms of the license must be “reasonable under the circumstances.” The act limits the exercise of march-in to specific circumstances related to accessibility of the invention, as well as national health and safety (35 U.S.C. 203).

The law does not list the pricing of a license as a grounds justifying march-in.

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Intellectual Property & Licensing

Comments of Patent-Law Experts in NIST ROI on Exercise of March-In Rights

Regulatory Comments As scholars, former judges, and former government officials who are experts in patent law, patent licensing, and innovation policy, we respectfully submit this comment in . . .

As scholars, former judges, and former government officials who are experts in patent law, patent licensing, and innovation policy, we respectfully submit this comment in response to the Request for Information (RFI) by the National Institute of Standards and Technology (NIST) on the Draft Interagency Guidance Framework for Considering the Exercise of March-in Rights (Guidance Framework).[1] In the RFI, NIST states that it seeks “to ensure that [the Guidance Framework] is clear, and its application will both fulfill the purpose of march-in rights and uphold the policy and objectives of the Bayh-Dole Act.”[2] We believe that the Guidance Framework contradicts both the text and purpose of the Bayh-Dole Act, and thus it should be withdrawn by NIST.

For the first time since the enactment of the Bayh-Dole Act in 1980, NIST proposes a Guidance Framework for the four march-in powers in 35 U.S.C. § 203 that provides that “march-in is warranted” and thus an agency may issue licenses without authorization by the patent owner if “the price or other terms at which the product is currently offered to the public are not reasonable.”[3] The RFI expressly states that agencies that provided funding for subject inventions under the Bayh-Dole Act may “include consideration of factors that unreasonably limit availability of the invention to the public [as triggers of the march-in powers under § 203], including the reasonableness of the price and other terms at which the product is made available to end-users.”[4]

The Guidance Framework’s inclusion of “the reasonableness of the price [paid by] end-users” as a new criterion for any agency exercising the march-in powers in § 203 represents unprecedented and unauthorized regulatory authority. It lacks statutory authorization in the Bayh-Dole Act, as confirmed by its text, its purpose, and by other sources of statutory interpretation long relied on by courts and agencies, such as past interpretations of a statute by government officials. In fact, § 203 of the Bayh-Dole Act never mentions “price” as a criterion for the exercise of the four specified march-in powers, as contrasted with the RFI’s reference to “price” twenty-six (26) times.

Congress knows how to enact a price-control statute and to state clearly in a statute’s text that federal officials or agencies may consider “reasonable price” or even merely “price” as a condition for authorizing direct or indirect price controls on products produced and sold by private companies to consumers. One example is the Emergency Price Control Act of 1942,[5] among many others. The Bayh-Dole Act does not authorize this administrative power to control directly or indirectly prices, neither generally nor specifically in the four march-in conditions in § 203.

Other organizations and individuals with direct experience and knowledge in research and development in companies and universities, patent licensing under the Bayh-Dole Act, and in other related commercial activities in the U.S. innovation economy have submitted comments on these matters about which they have expertise. As legal experts, our comment explains why the Bayh-Dole Act does not authorize an agency to issue march-in licenses for the purpose of lowering prices on any product or service embodying a patent covered by this statute. First, it describes the evidence of the proven success of the patent system as a driver of innovation and economic growth. This is the necessary legal and policy framework for evaluating any proposed regulatory alterations to patent rights, especially unprecedented proposals like the Guidance Framework that would weaken or eliminate these patent rights. Second, it explains why the Guidance Framework lacks authorization in the Bayh-Dole Act according to its plain text, its statutory function, and its consistent implementation by agencies over several decades by bipartisan administrations. Third, it identifies how Senators Birch Bayh and Robert Dole expressly rejected claims by professors over two decades ago that the Bayh-Dole Act authorized agencies to use the march-in powers to control market prices of products and services. NIST should withdraw the proposed Guidance Framework.

The Success of the Patent System as a Driver of Economic Growth and Innovation

The patent system has been a key driver of the U.S. innovation economy for over 200 years, as economists, historians, and legal scholars have repeatedly demonstrated.[6] The patent system was central to the successes of the Industrial Revolution in the nineteenth century, the pharmaceutical and computer revolutions in the twentieth century, and the biotech and mobile telecommunications revolutions in the twenty-first century.[7] Patent systems that secure reliable and effective property rights to inventors consistently and strongly correlate with successful innovation economies.[8]

Dr. Zorina Khan, an award-winning economist, has demonstrated that reliable and effective property rights in innovation—patents—were a key factor in thriving markets for technology in the United States in the nineteenth century.[9] Other economists have also identified features of these robust nineteenth-century innovation markets—such as an increase in “venture capital” investment in patent owners, the rise of a secondary market in the sale of patents as assets, and the embrace of specialization via licensing business models—as indicators of value-maximizing economic activity made possible by reliable and effective patents.[10] This remains true today: a twenty-first-century startup with a patent more than doubles its chances of securing venture capital financing compared to a startup without a patent, and this patent-based startup has statistically-significant increased chances of success in the marketplace as well.[11]

These general economic insights and historical facts are especially evident in the biopharmaceutical sector. Historically, the U.S. has been a global leader in first securing innovations in new drugs, diagnostics, and other biotech innovations in healthcare.[12] As a result, the U.S. is a global leader in biomedical innovation. More than one-half of new drugs worldwide are invented in the U.S., improving the quality and duration of human life here and abroad.[13] For this reason, the U.S. patent system was identified as the “gold standard” in securing reliable and effective property rights in the fruits of innovative labors—patents.[14]

The real-world results of reliable and effective property rights—whether in real property or in patents—is extensive private investments, development of new products and services, and the creation and growth of new commercial markets. Just as in the high-tech sector and in the mobile revolution,[15] these same economic consequences are manifest in modern healthcare. The annual private investment in research and development (R&D) of new pharmaceutical and biotech innovations is approximately $129 billion (as of 2018).[16] This is almost triple the total amount of total public funding of $43 billion of R&D in healthcare innovations (as of 2018).[17] Medical diagnoses that once were either death sentences or led to a greatly diminished quality of life—cancer, hepatitis, and diabetes—are now treatable and manageable medical conditions within a relatively normal lifespan. This data is relevant in assessing the Guidance Framework because the Biden Administration has argued that it serves the purpose of lowering drug prices,[18] although the Guidance Framework does not state this nor does it limit the proposed “reasonable price” criterion to patented drugs and other inventions resulting from some upstream research funding in the life sciences by the federal government.

The evidence of the historical, economic, and empirical success of the U.S. patent system in driving innovation and economic growth is the baseline by which NIST should consider new regulatory proposals that ultimately weaken or restrict reliable and effective patents on new innovations throughout all sectors of the U.S. innovation economy. This includes the Guidance Framework, which includes an unprecedented power to issue nonexclusive licenses for the purpose of controlling prices on any patented product or service because a funding agency may deem it to be sold at “unreasonable prices.” The eight scenarios and examples in the Guidance Framework make clear that consideration of “reasonable price” as a condition for exercising the march-in power applies to every sector of the U.S. innovation economy, from manufacturing of highway signage to the 5G communication technologies implemented in connected cars.[19]

The evidentiary burden is on any official or agency proposing wide-ranging regulatory restrictions, additional costs, and additional legal uncertainties on patent owners. First, they must explain that proposed regulations are legally authorized. Second, they must explain, even if legally authorized, that there is reliable and robust data that supports this proposal as evidence-based policymaking. As will now be explained the Guidance Framework fails on both of these necessary conditions for an agency adopting new regulations, especially those that authorize unprecedented powers such as the Guidance Framework’s authorization of an agency to impose price controls under a “reasonable price” criterion for issuing nonexclusive licenses under § 203 of the Bayh-Dole Act. § 1498. These arguments are equally incorrect, as detailed below.

A Price-Control Power Contradicts the Text and Statutory Purpose of the Bayh-Dole Act

Congress enacted the Bayh-Dole Act in 1980 to provide an incentive for private parties to make the significant, risky investments in new product development, in creating manufacturing capabilities, and in setting up supply and distribution chains that bring new innovations to consumers. These are necessary investments in translating original discoveries into useful commercial products.[20] Before 1980, the government effectively claimed ownership in inventions resulting from government-funded research, offering nonexclusive licenses to anyone requesting one; this undermined the commercialization of these inventions given the absence of property rights that are the legal platform for contracts and other commercial activities.[21] The Bayh-Dole Act corrected this mistaken policy by establishing that innovators can obtain patents for inventions arising from some government-funded research and retain ownership in these patents, which facilitates licensing and other commercial activities in the marketplace.[22]

Section 203 in the Patent Act, as enacted in the Bayh-Dole Act, creates the limited exception to this core function of the Bayh-Dole Act by creating the “march in right.”[23] To ensure commercialization of inventions arising from research funded by government agencies, § 203 authorizes a federal agency that has funded research that resulted in a patented invention “to grant a nonexclusive, partially exclusive, or exclusive license” under four specified conditions.[24] A federal agency may grant these licenses “to a responsible applicant” without authorization from the patent owner in four delimited circumstances: (1) if “the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use,” (2) “to alleviate health or safety needs which are not reasonably satisfied,” (3) “requirements for public use specified by Federal regulations . . . are not reasonably satisfied,” or (4) “a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement.”[25]

The statutory text of § 203 does not support the unprecedented inclusion of “reasonable price” as a criterion for any agency in imposing price controls on patented products or services produced by private companies and sold to private consumers in the marketplace. The four march-in conditions, set forth in § 203(a) in the disjunctive, constitute the only authorizations in this exemption in the Bayh-Dole Act for a federal agency to exercise the march-in power. Notably, there is no mention of “reasonable price” in the four authorizing conditions for a federal agency to invoke the march-in power to issue licenses without approval from a patent owner.

Congress would have expressly enacted text conferring a price-control power in § 203 if it intended a “reasonable price” to trigger use of the march-in power under § 203. Congress has enacted numerous statutes that have authorized officials or agencies to impose price controls on transactions in the marketplace.[26] The Emergency Price Control Act of 1942 is one such example.[27] Similarly, rate-regulation statutes enacted by the states according to their police powers expressly authorize legislators or regulators to set “prices” or determine “rates.”[28] Contrary to these price-control or rate-regulation statutes, § 203 is devoid of any archetypical pricing terms, such as “price,” “prices charged by an assignee or licensee,” “market price,” or “reasonable price.” According to the “the ordinary meaning of the words used” in § 203 and § 201(f) in the Bayh-Dole Act, the march-in power does not authorize licenses for the purpose of imposing price controls.[29]

Moreover, there is no catch-all clause in § 203 authorizing the march-in power for anything not already covered by the four specific march-in conditions. This is significant for at least two reasons. First, Congress knows how to create broadly framed and expansive authorizations for agency action, if this is its purpose. For example, Congress has expressly created broadly-framed authorizations of general administrative powers in other statutes, such as the well-known language in the Federal Communications Act of 1934 authorizing the Federal Communications Commission to grant radio transmission licenses according to whether the “public convenience, interest, or necessity will be served thereby.”[30] Second, the canon of statutory construction of expressio unius est exclusio alterius establishes that, without a catch-all clause, the march-in power is delimited to only these four express exemptions from the longstanding rights of patent owners covered by the Bayh-Dole Act to freely assign or license their property in the marketplace.[31] In sum, Congress chose not to create an open-ended grant of authority in § 203 in listing only four specific march-in conditions that strictly specify the narrow scope and application of the march-in power exemption in the Bayh-Dole Act, which comports with the general function of the Bayh-Dole Act in promoting private commercialization of patented innovations in the marketplace.

The inclusion of “reasonable price” as a criterion in the Guidance Framework follows the work of activists and academics who have argued for over two decades that the first condition in the march-in provision that specifies the failure “to achieve practical application” of an invention as a trigger for the march-in power means that that prices can prevent this “practical application” with consumers.[32] As is typical of modern legislation, the Bayh-Dole Act has a lengthy definition of “practical application” in which these advocates for this price-control theory of § 203 have focused on a single phrase (“available to the public on reasonable terms”).[33] These activists and academics have spun an entire theory of unprecedented and vast regulatory power to control prices in the marketplace of patented products and services based on only two general phrases in two separate sections of the Bayh-Dole Act—“practical application” and “reasonable terms.”

This price-control theory of § 203 is wrong as a matter of law and statutory interpretation. First, their argument creates vast administrative powers based on an out-of-context, laser-like focus on phrases that have been isolated from lengthy and complex statutory provisions. This commits the classic interpretative error of wooden textualism.[34] For example, these activists and academics do not acknowledge that “terms” is often a distinct legal concept from “price,” as these distinct words have been used in many legal instruments. In fact, statutes often distinguish between “price” and “terms” by listing these two words separately.[35]

These advocates for the price-control theory of § 203 also do not acknowledge that the partial definition of “practical application” in § 203(a)(1) as “reasonable terms” in § 201(f) in the Bayh-Dole Act follows past usage of “practical application,” which was understood to refer to the “successful development and terms of the license, not with a product’s price.”[36] For example, President John F. Kennedy issued a statement on patent policy in 1963 in which he proposed mandating licensing of government-owned inventions in order to achieve “practical application” of an invention and to “guard against failure to practice the invention.”[37]

Second, in interpreting a specific statutory provision or a specific clause within a statutory provision, the advocates for the price-control theory of § 203 violate fundamental legal rules governing the interpretation and application of statutes. Courts always inquire into “the specific context in which that language is used, and the broader context of the statute as a whole.”[38] The Supreme Court has bluntly stated in far too many cases to cite or quote: “We do not . . . construe statutory phrases in isolation; we read statutes as a whole.”[39] “Courts have a ‘duty to construe statutes, not isolated provisions.’”[40]

Congress stated its express intent in the Bayh-Dole Act: “It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development.”[41] The march-in power is an exemption from the function of the Bayh-Dole Act to stimulate universities and other researchers receiving federal research funds to obtain patents to utilize licenses in commercializing their inventions. In fact, this exemption was included in the Bayh-Dole Act precisely because it advanced this primary commercialization function of the statute: if a patented invention is not licensed or made available in the marketplace by its owner or licensees, then an agency is authorized to act to achieve this goal. Thus, § 203(a)(1)-(4) specifies four conditions in which the march-in power is justified, and these conditions identify situations in which inventions are not sold or commercialized in the marketplace.[42]

Lastly, the Guidance Framework’s lack of legal authorization in the Bayh-Dole Act is confirmed by Supreme Court precedent that agencies may not arrogate powers to themselves that are not specifically granted in statutes. An unprecedented power to impose price controls on all patented products or services produced and sold in the marketplace that were created from upstream research supported by some federal funding requires more than vague or generalized statutory terms like “effective steps to achieve practical application.” This is especially true given that Congress has consistently and repeatedly rejected bills that would impose compulsory licensing on U.S. patent owners, from the First Congress in 1790 up through the twentieth century.[43]

The Supreme Court has consistently instructed agencies that “Congress, we have held, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions— it does not, one might say, hide elephants in mouseholes.”[44] The Supreme Court has rejected other agencies’ claims to regulatory authority under similarly vague and generalized terminology as the statutory phrase “practice application” in § 203, which has been the justification of the price-control power that the Guidance Framework implements. In these many other legal cases, the Supreme Court has stated bluntly that “‘Congress could not have intended to delegate’ such a sweeping and consequential authority ‘in so cryptic a fashion.’”[45] The Supreme Court again stated last year that it repeatedly “requires Congress to enact exceedingly clear language if it wishes to significantly alter . . . the power of the Government over private property.”[46] The Guidance Framework lacks a clear authorization in § 203 to justify its unprecedented inclusion of “reasonable price” as a criterion for authorizing the march-in power.

Agency Interpretations of § 203 Confirm It Does Not Authorize a Price-Control Power

The plain text of § 203 and its function within the Bayh-Dole Act as a whole explains why federal agencies—spanning bipartisan administrations over several decades—have repeatedly rejected numerous petitions to use the march-in power to impose price controls on drug patents. In 2016, the Congressional Research Service identified six petitions submitted to the NIH requesting it to exercise its march-in power solely for the purpose of lowering prices of patented drugs sold in the healthcare market.[47] The NIH denied all six petitions on the grounds that § 203, as confirmed by the NIH’s prior interpretation of this statutory provision, did not permit the march-in power to be used for the purpose of lowering drug prices.[48] By 2019, four more petitions had been filed with the NIH by policy organizations and activists, each requesting again that the NIH invoke the march-in power for the sole purpose of lowering drug prices.[49] As with the prior six petitions reaching back to the 1990s, the NIH rejected these petitions on the statutory ground that “the use of march-in to control drug prices was not within the scope and intent of its authority.”[50]

In 1997, for example, the NIH was petitioned to invoke the march-in power for the Isolex 300, a patented medical device used in organ transplant procedures.[51] The NIH rejected the petition for failing to meet the burden of proof that any of the four march-in conditions specified in § 203 had been triggered, authorizing the NIH to march in and license other companies to make and sell this medical device in the healthcare market. The NIH found that the Isolex 300 was being commercialized in the marketplace: the patent owner was actively licensing the patented device, seeking regulatory approval, and meeting research demands.[52] These facts precluded the triggering of the march-in power under the four authorizing conditions in § 203.

In rejecting this march-in petition, the NIH further explained why lowering prices on a medical device like the Isolex 300—imposing price controls on the healthcare market—was not justified by the plain text of § 203 and the function of the Bayh-Dole Act in promoting the commercialization of patented inventions. The NIH stated that, even if the petitioner proved that there would be greater accessibility and lower prices given additional licenses from the NIH invoking the march-in power, this rationale lacked authorization under § 203.[53] The NIH stated bluntly that the march-in power in § 203 did not exist for the purpose of “forced attempts to influence the marketplace.”[54] It acknowledged the contradiction between the Bayh-Dole Act’s primary function in promoting the commercialization of new innovations in the marketplace and adopting a march-in power for the purpose of imposing price controls, observing that “such actions may have far-reaching repercussions on many companies’ and investors’ future willingness to invest in federally funded medical technologies.”[55] This was not merely a freestanding policy assessment by the NIH of this petition; it derived this conclusion from the plain meaning of § 203 within the context of the Bayh-Dole Act and its commercialization function.

Another petition in 2004 again requested that the NIH invoke the march-in power in § 203 to license a patent specifically to lower the price for Norvir, a drug used to treat AIDS. Again, the NIH rejected the petition.[56] The NIH explained that “the extraordinary remedy of march-in is not an appropriate means of controlling prices,” and that “[t]he issue of drug pricing has global implications and, thus, is appropriately left for Congress to address legislatively.”[57] The NIH again rejected another march-in petition seeking to lower the price of Norvir in 2013, again stating that the imposition of price controls on drug patents was not a statutorily authorized march-in power in § 203 of the Bayh-Dole Act.[58] The NIH bluntly concluded: “As stated in previous march-in considerations the general issue of drug pricing is appropriately addressed through legislative and other remedies, not through the use of the NIH’s march-in authorities.”[59] The frustration by NIH officials with the serial petitions seeking to impose price controls on drug patents via the march-in provision in the Bayh-Dole Act is palpable.

Lastly, on March 21, 2023, the NIH rejected the latest petition (filed again) for this agency to invoke the march-in power solely to lower the price of Xtandi, a cancer drug covered by patent.[60] In its latest rejection of the price-control theory of the Bayh-Dole Act, the NIH reiterated that the “purpose of the Bayh-Dole Act is to promote commercialization and public availability of government-funded inventions.”[61] With this statutory framework and purpose in mind, the NIH expressly “found Xtandi to be widely available to the public on the market” and “[t]herefore, the patent owner, the University of California, does not fail the requirement of bringing Xtandi to practical application.”[62] The NIH further pointed out that this decision about Xtandi is consistent with its prior multiple rejections of march-in petitions also seeking to lower drug prices.[63] It also recognized that the administrative processes and delays, especially in light of Xtandi’s remaining patent term, led it to conclude that “NIH does not believe that use of the march-in authority would be an effective means of lowering the price of the drug.”[64]

The NIH’s multiple decisions over several decades in interpreting the scope of the march-in power granted to it under § 203 is significant evidence that the Bayh-Dole Act does not authorize NIST to include “reasonable price” as a criterion for agencies like the NIH to use the march-in power under § 203. The eleven or more decisions ranging from the 1990s through 2023 in which the NIH has consistently rejected march-in petitions requesting it impose price controls on drug patents under § 203 constitute “the well-reasoned views of the agencies implementing a statute [that] ‘constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.’”[65]

Original Sponsors of the Bayh-Dole Act Stated Their Law Did Not Authorize Price Controls

The Guidance Framework’s inclusion of “reasonable price” as a criterion for applying the march-in power under § 203 is a statutory power that was allegedly discovered and argued for by two professors in a law journal article published more than two decades after the enactment of the Bayh-Dole Act.[66] When they later published an op-ed advancing their article’s argument, Senator Birch Bayh and Senator Robert Dole responded by expressly rejecting their theory that the Bayh-Dole Act authorized price controls as an essential tool of the march-in power in § 203.

Professors Peter Arno and Michael Davis published an op-ed in the Washington Post in 2002 restating their argument from their law journal article the year before that the Bayh-Dole Act mandates that patented inventions resulting from “federal funds will be made available to the public at a reasonable price.”[67] Professors Arno and Davis’ op-ed prompted a response from Senators Bayh and Dole, published as a letter to the editor in the Washington Post two weeks later:

Bayh-Dole did not intend that government set prices on resulting products. The law makes no reference to a reasonable price that should be dictated by the government. . . . The [Arno and Davis] article also mischaracterizes the rights retained by the government under Bayh-Dole. The ability of the government to revoke a license granted under the act is not contingent on the pricing of the resulting product or tied to the profitability of a company that has commercialized a product that results in part from government-funded research. The law instructs the government to revoke such licenses only when the private industry collaborator has not successfully commercialized the invention as a product.[68]

Although this letter does not have the same legal status as the canons of statutory interpretation and official interpretation and application of a statute, Senators Bayh and Dole make clear that the inclusion of “reasonable price” as a criterion authorizing the march-in power is unconnected to the text or purpose of their statute. The proposed Guidance Framework, ultimately born of the price-control theory spawned by Professors Arno and Davis, is an unprecedented assertion of agency power to control prices in private market transactions without a legal basis in the Bayh-Dole Act.

Conclusion

The Guidance Framework proposes the addition of “reasonable price” as an unprecedented criterion for exercising the march-in powers specified in § 203 of the Bayh-Dole Act. This is a legally unjustified and unauthorized arrogation of power by NIST. The Bay-Dole Act does not state in its plain text a congressional authorization for federal agencies to consider “reasonable price” as a criterion for imposing price controls on all Bayh-Dole patented products or services that are commercialized in the marketplace. In addition to lack of authorization in the plain text of § 203, the Guidance Framework’s inclusion of “reasonable price” as a march-in criterion contradicts the function of Bayh-Dole in promoting the commercialization of inventions by patent owners in the marketplace. The NIH has consistently and repeatedly confirmed this lack of statutory authorization in § 203 to impose price controls across bipartisan administrations over several decades in rejecting all march-in petitions seeking to impose price controls.

NIST states in its RFI, “[t]o date, no agency has exercised its right to march-in,” but it fails to acknowledge the numerous, repeated rejections by the NIH of march-in petitions seeking to impose price controls on drug patents. NIST should follow these repeated actions by the NIH, including in its most recent rejection of the Xtandi march-in petition less than a year ago, in applying the clear text and function of the Bayh-Dole Act. Thus, NIST should withdraw the proposed Guidance Framework and permit the Bayh-Dole Act to function according to its intended function in promoting the commercialization of innumerable innovations in the marketplace.

[1] See National Institute of Standards and Technology, Request for Information Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, 88 Fed. Reg. 85593 (Dec. 7, 2023).

[2] 88 Fed. Reg. 85593.

[3] Id. at 85598.

[4] Id. (emphasis added).

[5] See Pub. L. No. 77-421, 56 Stat. 23 (1942); see also Economic Stabilization Act of 1970, Pub. L. No. 91-379, § 202, 84 Stat. 799, 799-800 (“The President is authorized to issue such orders and regulations as he may deem appropriate to stabilize prices, rents, wages, and salaries at levels not less than those prevailing on May 25, 1970.”); Housing and Rent Act of 1947, Pub. L. No. 129, 61 Stat. 193, 198 (imposing rent controls on existing structures set at levels permitted to be charged under the Economic Price Control Act of 1942).

[6] See, e.g., ROBERT P. MERGES, AMERICAN PATENT LAW: A BUSINESS AND ECONOMIC HISTORY (2023); JONATHAN M. BARNETT, INNOVATORS, FIRMS, AND MARKETS: THE ORGANIZATIONAL LOGIC OF INTELLECTUAL PROPERTY (2021); DANIEL SPULBER, THE CASE FOR PATENTS (2021); B. ZORINA KHAN, INVENTING IDEAS: PATENTS, PRIZES, AND THE KNOWLEDGE ECONOMY (2020); Stephen Haber, Innovation, Not Manna from Heaven (Hoover Institution, Sep. 15, 2020); B. Zorina Khan, Trolls and Other Patent Inventions: Economic History and the Patent Controversy in the Twenty-First Century, 21 GEO. MASON L. REV. 825, 837-39 (2014); Naomi R. Lamoreaux, Kenneth L. Sokoloff & Dhanoos Sutthiphisal, Patent Alchemy: The Market for Technology in US History, 87 BUS. HIST. REV. 3 (Spring 2013); RONALD A. CASS & KEITH N. HYLTON, LAWS OF CREATION: PROPERTY RIGHTS IN THE WORLD OF IDEAS (2013).

[7] See generally MERGES, supra note 6; BARNETT, supra note 6; KHAN, supra note 6.

[8] See, e.g., Stephen Haber, Patents and the Wealth of Nations, 23 GEO. MASON L. REV. 811 (2016); Jonathan M. Barnett, Patent Tigers: The New Geography of Global Innovation, 2 CRITERION J. INNOVATION 429 (2017).

[9] See B. ZORINA KHAN, THE DEMOCRATIZATION OF INVENTION: PATENTS AND COPYRIGHTS IN AMERICAN ECONOMIC DEVELOPMENT, 1790–1920, at 9-10 (2005) (“[P]atents and . . . intellectual property rights facilitated market exchange, a process that assigned value, helped to mobilize capital, and improved the allocation of resources. . . . Extensive markets in patent rights allowed inventors to extract returns from their activities through licensing and assigning or selling their rights.”).

[10] See, e.g., Naomi R. Lamoreaux, Kenneth L. Sokoloff & Dhanoos Sutthiphisal, Patent Alchemy: The Market for Technology in US History, 87 BUS. HIST. REV. 3, 4–5 (2013).

[11] See Joan Farre-Mensa, et al., What Is a Patent Worth? Evidence from the U.S. Patent “Lottery,” 75 J. Finance 639 (2019), https://doi.org/10.1111/jofi.12867.

[12] See Kevin Madigan & Adam Mossoff, Turning Gold to Lead: How Patent Eligibility Doctrine Is Undermining U.S. Leadership in Innovation, 24 Geo. Mason L. Rev. 939, 942-44 (2017).

[13] See Ross C. DeVol, Armen Bedroussian & Benjamin Yeo, The Global Biomedical Industry: Preserving U.S. Leadership 5 (Sep. 2011), http://www.ncnano.org/CAMIExecSum.pdf.

[14] Madigan & Mossoff, supra note 12, at 940-41.

[15] See Letter from Alden Abbott, Kristina M.L. Acri, et al. to Assistant Attorney General Jonathan Kanter, Nov. 30, 2022, https://s3.amazonaws.com/media.hudson.org/Letter+to+AAG+Kanter+re+SEPs+and+Patent+Pools+10.30.22.pdf, at 1-2 (detailing economic evidence); see also Alexander Galetovic, Stephen H. Haber & Ross Levine, An Empirical Examination of Patent Holdup, 11 J. COMP. L. & ECON. 549, 564-69 (2015), https://papers.ssrn.com/abstract=2588169 (finding quality-adjusted prices for devices and other products in the patent-intensive telecommunications market to have fallen at a faster rate as compared to other sectors of the innovation economy).

[16] See U.S. Investments in Medical and Health Research and Development 2013–2018, at 7 (Research America, 2019), https://www.researchamerica.org/wp-content/uploads/2022/09/InvestmentReport2019_Fnl.pdf (estimating total private investment in biopharmaceutical R&D in 2018 is estimated to be $129 billion). For each drug approved by the FDA for use by patients, there is on average $2.6 billion in R&D expenditures incurred over 10–15 years. See Joseph A. DiMasi, Henry G. Grabowski, & Ronald W. Hansen, Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs, 47 J. Health Econ. 20 (2016).

[17] See U.S. Investments in Medical and Health Research and Development 2013–2018, supra note 17, at 8.

[18] See FACT SHEET: Biden-?Harris Administration Announces New Actions to Lower Health Care and Prescription Drug Costs by Promoting Competition (Dec. 7, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/12/07/fact-sheet-biden-harris-administration-announces-new-actions-to-lower-health-care-and-prescription-drug-costs-by-promoting-competition/ (“Today, the Biden-Harris Administration is announcing new actions to promote competition in health care and support lowering prescription drug costs for American families, including the release of a proposed framework for agencies on the exercise of march-in rights on taxpayer-funded drugs and other inventions, which specifies that price can be a factor in considering whether a drug is accessible to the public.”).

[19] See 88 Fed. Reg. 85601-85605 (detailing the eight scenarios in which the march-in power may be used by an agency).

[20] See generally BARNETT, supra note 6.

[21] See, e.g., S. Rep. No. 480, 96th Cong., 1st Sess., at 2 (1979) (explaining that the government’s policy of owning patents on inventions arising from government-funded research and offering nonexclusive licenses “has proven to be an ineffective policy” and that “the private sector simply needs more protection for the time and effort needed to develop and commercialize new products than is afforded by a nonexclusive license”).

[22] See id., at 28 (“It is essentially a waste of public money to have good inventions gathering dust on agencies’ shelves because of unattractiveness of nonexclusive licenses.”).

[23] See 35 U.S.C. § 203 (2011).

[24] § 203(a).

[25] § 203(a)(1)-(4).

[26] See, e.g., Economic Stabilization Act of 1970, Pub. L. No. 91-379, § 202, 84 Stat. 799, 799-800 (“The President is authorized to issue such orders and regulations as he may deem appropriate to stabilize prices, rents, wages, and salaries at levels not less than those prevailing on May 25, 1970.”); Housing and Rent Act of 1947, Pub. L. No. 129, 61 Stat. 193, 198 (imposing rent controls on existing structures set at levels permitted to be charged under the Economic Price Control Act of 1942).

[27] See Pub. L. No. 77-421, 56 Stat. 23 (1942).

[28] See, e.g., Nebbia v. People of New York, 291 U.S. 502, 515 (1934) (“The Legislature of New York established by chapter 158 of the Laws of 1933, a Milk Control Board with power, among other things to ‘fix minimum and maximum … retail prices to be charged by … stores to consumers for consumption off the premises where sold.’”); Stone v. Farmers’ Loan & Trust Co., 116 U.S. 307, 308 (1886) (reviewing “the statute of Mississippi passed March 11, 1884, entitled ‘An act to provide for the regulation of freight and passenger rates on railroads in this state, and to create a commission to supervise the same, and for other purposes’”).

[29] INS v. Phinpathya, 464 U.S. 183, 189 (1984) (stating that “in all cases involving statutory construction, our starting point must be the language employed by Congress, . . . and we assume that the legislative purpose is expressed by the ordinary meaning of the words used”) (quotations and citations omitted).

[30] 47 U.S.C. § 307(a) (“The Commission, if public convenience, interest, or necessity will be served thereby, subject to the limitations of this Act, shall grant to any applicant therefor a station license provided for by this Act.”).

[31] See Tennessee Valley Authority v. Hill, 437 U.S. 153, 188 (1976) (“In passing the Endangered Species Act of 1973, Congress was also aware of certain instances in which exceptions to the statute’s broad sweep would be necessary. Thus, § 10, 16 U.S.C. § 1539 (1976 ed.), creates a number of limited ‘hardship exemptions,’ . . . . meaning that under the maxim expressio unius est exclusio alterius, we must presume that these were the only ‘hardship cases’ Congress intended to exempt.”); see also 73 Am. Jur. 2d Statutes § 129 (2002) (describing the statutory canon of interpretation, expressio unius est exclusio alterius).

[32] See, e.g., Letter from Amy Kapczynski, Aaron S. Kesselheim, et al. to Senator Elizabeth Warren, at 6-7 (Apr. 20, 2022), https://tinyurl.com/yt62wt4t; Fran Quigley & Jennifer Penman, Better Late than Never: How the U.S. Government Can and Should Use Bayh-Dole March-In Rights to Respond to the Medicines Access Crisis, 54 WILLAMETTE L. REV. 171 (2017); Peter S. Arno & Michael H Davis, Why Don’t We Enforce Existing Drug Price Controls? The Unrecognized and Unenforced Reasonable Pricing Requirements Imposed upon Patents Deriving in Whole or in Part from Federally Funded Research, 75 TULANE L. REV. 631 (2001).

[33] See 35 U.S.C. § 201(f) (defining “practical application” to mean “to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms”).

[34] See Sackett v. Environmental Protection Agency, 143 S. Ct. 1322, 1340 (2023) (“construing statutory language is not merely an exercise in ascertaining ‘the outer limits of a word’s definitional possibilities’”) (quoting FCC v. AT&T, 562 U.S. 397, 407 (2011)); cf. Antonin Scalia, Common-Law Courts in a Civil Law System: The Role of the United States Federal Courts in Interpreting the Constitution and Law, in A MATTER OF INTERPRETATION: FEDERAL COURTS AND THE LAW 23-24 (Amy Gutmann, ed., 1997) (critiquing out-of-context linguistic construction of statutory terms because a “good textualist is not a literalist”).

[35] See, e.g., 47 U.S.C. § 335(b)(3) (“A provider of direct broadcast satellite service shall meet the requirements of this subsection by making channel capacity available to national educational programming suppliers, upon reasonable prices, terms, and conditions, as determined by the Commission . . . .”) (emphasis added); 42 U.S.C. § 2375 (“The charges and terms for the transfer of any utility may be established by advertising and competitive bid, or by negotiated sale or other transfer at such prices, terms, and conditions as the Commission shall determine to be fair and equitable.”) (emphases added); 10 U.S.C. § 3372(a)(1) (“A contracting officer of the Department of Defense may not enter into an undefinitized contractual action unless the contractual action provides for agreement upon contractual terms, specifications, and price . . . .”) (emphasis added); 43 U.S.C. § 375c (“The Secretary is authorized to sell such land to resident farm owners or resident entrymen, on the project upon which such land is located, at prices not less than that fixed by independent appraisal approved by the Secretary, and upon such terms and at private sale or at public auction as he may prescribe . . . .”) (emphases added); 2 U.S.C. § 4103 (“[I]n any contract which is entered into by any person and either the Administrator of General Services or a contracting officer of any executive agency and under which such person agrees to sell or lease to the Federal Government (or any one or more entities thereof) any unit of property, supplies, or services at a specified price or under specified terms and conditions (or both), such person may sell or lease to the Congress the same type of such property, supplies, or services at a unit price or under terms and conditions (or both) . . . .”) (emphases added).

[36] Joseph Allen, New Study Shows Bayh-Dole is Working as Intended—and the Critics Howl, IPWATCHDOG (March 12, 2019), https://www.ipwatchdog.com/2019/03/12/new-study-shows-bayh-dole-working-intended/id=107225/.

[37] Government Patent Policy, Memorandum of Oct. 10, 1963, Fed. Reg. 10943 (Oct. 12, 1963).

[38] Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997).

[39] Samantar v. Yousuf, 560 U.S. 305, 319 (2010) (quoting United States v. Morton, 467 U.S. 822, 828, (1984)).

[40] Graham Cty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 290 (2010) (quoting Gustafson v. Alloyd Co., 513 U.S. 561, 568 (1995)); see also Gonzales v. Oregon, 546 U.S. 243, 273 (2006) (stating that “statutes ‘should not be read as a series of unrelated and isolated provisions.’”) (quoting Gustafson v. Alloyd Co., 513 U.S. 561, 570, (1995)); Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (“It is a ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’”) (quoting Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 809 (1989)); Louisville & N.R. Co. v. Gaines, 3 F. 266, 276 (C.C.M.D. Tenn. 1880) (“Where the language [of a statute] is clear and explicit the court is bound . . . . It must be construed as a whole. The office of a good expositor, says My Lord Coke, ‘is to make construction on all its parts together.’”).

[41] 35 U.S.C. § 200.

[42] See supra notes 23-31, and accompanying text.

[43] See, e.g., Bruce W. Bugbee, Genesis of American Patent and Copyright Law 143-44 (1967) (discussing the rejection of a Senate proposal for a compulsory licensing requirement in the bill that eventually became the Patent Act of 1790); Kali Murray, Constitutional Patent Law: Principles and Institutions, 93 Nebraska Law Review 901, 935-37 (2015) (discussing 1912 bill that imposed compulsory licensing on patent owners who are not manufacturing a patented invention, which received twenty-seven days of hearings, but was not enacted into law).

[44] Whitman v. Am. Trucking Associations, 531 U.S. 457, 468 (2001).

[45] See West Virginia v. Environmental Protection Agency, 142 S. Ct. 2587, 2608 (2022) (quoting Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159 (2000)). See also MCI Telecommunications Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 231 (1994) (“It is highly unlikely that Congress would leave the determination of whether an industry will be entirely, or even substantially, rate-regulated to agency discretion—and even more unlikely that it would achieve that through such a subtle device as permission to ‘modify’ rate-filing requirements.”).

[46] Sackett, 143 S. Ct. at 1341 (quoting United States Forest Service v. Cowpasture River Preservation Ass’n, 140 S. Ct. 1837, 1849-50 (2020)).

[47] See John R. Thomas, March-In Rights Under the Bayh-Dole Act 8-10 (Congressional Research Service, Aug. 22, 2016).

[48] Id.

[49] See Return on Investment Initiative for Unleashing American Innovation 29 (NIST Special Publication 1234, April 2019) (identifying 10 petitions to break patents through the march-in power in § 203 solely for the purpose of imposing price controls on drug patents).

[50] Id.

[51] See, e.g., NIH Office of the Director, Determination in the Case of Petition of CellPro, Inc. (Aug. 1, 1997), https://www.ott.nih.gov/sites/default/files/documents/policy/cellpro-marchin.pdf (rejecting petition in part to invoke march-in power given argument that company was too slow in bringing a medical device to market).

[52] Id.

[53] Id.

[54] Id. at 7.

[55] Id. at 7.

[56] See NIH Office of the Director, In the Case of Norvir Manufactured by Abbott Laboratories, Inc. (July 29, 2004), http://www.ott.nih.gov/sites/default/files/documents/policy/March-In-Norvir.pdf.

[57] Dr. Elias A. Zerhouni, Nat’l Institute of Health, Determination in the Case of Norvir I, at 5-6 (July 2, 2004).

[58] NIH Office of the Director, In the Case of Norvir Manufactured by AbbVie (Nov. 1, 2013), https://www.ott.nih.gov/sites/default/files/documents/policy/March-In-Norvir2013.pdf.

[59] Id.

[60] See Letter from Lawrence A. Tabak, Performing the Duties of the NIH Director, to Robert Sachs and Clare Love (Mar. 23, 2023), https://www.keionline.org/wp-content/uploads/NIH-rejection-Xtandi-marchin-12march2023.pdf (rejecting petition to impose price controls on Xtandi).

[61] Id. at 2.

[62] Id.

[63] Id.

[64] Id.

[65] See United States v. Mead Corp., 533 U.S. 218, 227 (2001) (quoting Bragdon v. Abbott, 524 U.S. 624, 642 (1998) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)))

[66] See Arno & Davis, supra note 32.

[67] See Peter Arno & Michael Davis, Paying Twice for the Same Drugs, Washington Post (March 27, 2002), https://www.washingtonpost.com/archive/opinions/2002/03/27/paying-twice-for-the-same-drugs/c031aa41-caaf-450d-a95f-c072f6998931/ (emphasis added).

[68] Birch Bayh and Robert Dole, Our Law Helps Patients Get New Drugs Sooner, Wash. Post (Apr. 11, 2002), https://www.washingtonpost.com/archive/opinions/2002/04/11/our-law-helps-patients-get-new-drugs-sooner/d814d22a-6e63-4f06-8da3-d9698552fa24/.

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Intellectual Property & Licensing

A European Commission Challenge to iRobot’s Acquisition Is Unjustified and Would Harm Dynamic Competition

TOTM Once again, a major competition agency, the European Commission, appears poised to take an anticompetitive enforcement action—in this case, blocking Amazon’s acquisition of consumer robotic-manufacturer . . .

Once again, a major competition agency, the European Commission, appears poised to take an anticompetitive enforcement action—in this case, blocking Amazon’s acquisition of consumer robotic-manufacturer iRobot.

Read the full piece here.

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Antitrust & Consumer Protection

FTC v. Illumina/Grail – A Rare FTC Merger Victory? (Actually, a Loss for Consumers)

TOTM Although it was overshadowed by the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) year-end release of the 2023 merger guidelines, one should also note . . .

Although it was overshadowed by the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) year-end release of the 2023 merger guidelines, one should also note the abrupt end of the FTC v. Illumina/Grail saga. The saga finished with the FTC’s Dec. 18 press release announcing that Illumina decided on Dec.17 to divest itself of its recently reacquired Grail cancer blood-testing subsidiary.

The press release crowed that the 5th U.S. Circuit Court of Appeals “issued an opinion in the case finding that there was substantial evidence supporting the Commission’s ruling that the deal was anticompetitive.”

Read the full piece here.

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Antitrust & Consumer Protection

The Porcine 2023 Merger Guidelines (The Pig Still Oinks)

TOTM Well, they have done it. On Dec. 18, the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) issued their final 2023 merger guidelines, as an . . .

Well, they have done it. On Dec. 18, the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) issued their final 2023 merger guidelines, as an early New Year’s gift (nicely sandwiched between Hanukkah, which ended Dec. 15, and Christmas) of the porcine sort.

The two agencies try to put lipstick on this pig by claiming that the guidelines “emphasize the dynamic and complex nature of competition,” an approach that supposedly “enables the agencies to assess the commercial realities of the United States’ modern economy when making enforcement decisions.” But no amount of verbal makeup prevents this porker from oinking, despite the valiant best efforts of the antitrust agencies’ talented and highly respected chief economists (Susan Athey and Aviv Nevo) to argue otherwise.

Read the full piece here.

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Antitrust & Consumer Protection

ICLE Amicus to the 1st Circuit in US v American Airlines

Amicus Brief INTERESTS OF AMICUS CURIAE[1] The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center aimed at building the . . .

INTERESTS OF AMICUS CURIAE[1]

The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy.  ICLE promotes the use of law & economics methodologies to inform public policy debates and has longstanding expertise in the evaluation of antitrust law and policy.  ICLE has an interest in ensuring that antitrust promotes the public interest by remaining grounded in sensible legal rules informed by sound economic analysis.

Amici also include five scholars of antitrust, law, and economics.  Their names, titles, and academic affiliations are listed in the Addendum.  All have longstanding expertise in, and have done extensive research in, the fields of antitrust law and economics.

Amici have an interest in ensuring that antitrust law remains grounded in clear rules, established precedent, record evidence, and sound economic analysis.  The district court’s decision erodes such foundations by focusing on the number of competitors rather than the impact on competition.  Overall, amici have a profound interest in an intellectually coherent antitrust policy focused upon safeguarding competition itself.[2]

INTRODUCTION

Over a century ago, the Supreme Court wisely recognized that “[t]he true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.”  Bd. of Trade of Chi. v. United States, 246 U.S. 231, 238 (1918).  Echoing that foundational insight, the district court opinion (the “Opinion”) opened by posing, “This case turns on what ‘competition’ means,” only to proceed by applying a flawed analysis of the Sherman Act and governing authority.  ADD10.[3]

The Opinion launches its scrutiny of the NEA by positing as an aim of federal antitrust law the fostering of “participation by a diverse array of competitors.”  Id.  But the Opinion provides no citation or clarification for this proposition, which is at odds with the Opinion’s later recognition that the antitrust laws are concerned with competition, not the specific competitors.  See ADD68 (“[T]he Sherman Act ‘unequivocally’ establishes a policy favoring and protecting competition.”).  The Opinion further leaves out that “consumer welfare” is the touchstone of antitrust analysis, not the health of any particular array of competitors.  See Concord v. Bos. Edison Co., 915 F.2d 17, 21 (1st Cir. 1990); see also Apex Hosiery Co. v. Leader, 310 U.S. 469, 500-01 (1940).

This amicus brief addresses three fundamental failings of the Opinion, each of which requires reversal:  First, the Opinion equates the simple reduction in the number of competitors by one with a fatal (and illegal) reduction in competition.  Second, the Opinion analyzes the Northeast Alliance (“NEA”), involving specific operations focused on New York, New Jersey, and Boston, as a horizontal merger.  Finally, the Opinion subjected the NEA to an inappropriate, truncated review rather than a full rule of reason analysis.

This Court should reverse the district court’s faulty application of key competition law principles.  A counting exercise tallying autonomous rivals is not what matters under the Sherman Act; rather, the focus is on an economic process that assesses impacts on “material progress.”  N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958).  Getting the competition definition right matters greatly, as everything else follows from that foundation.  An opportunity to reiterate and cement proper understandings seldom appears; seizing this occasion is imperative.

ARGUMENT

I.              Alliances Are Not of Themselves Synonymous With Anticompetitive Harm

Inherent in any joint venture is some degree of restraint on the direct competition between the joint venture parties themselves as they create a single venture with the goal of greater competition against other competitors and better results for consumers, usually through increased output or improved products or services at competitive prices.  See Fed. Trade Comm’n & Dep’t of Justice, Antitrust Guidelines for Collaboration Among Competitors (April 2000) at 2 (hereinafter “Collaboration Guidelines”) (“[P]articipants in a collaboration typically remain potential competitors, even if they are not actual competitors for certain purposes (e.g., R&D) during the collaboration.”) (emphasis added).  As Appellant’s brief summarizes, through the NEA, the two airlines here achieved exactly those goals of increasing output and enhancing the quality of services without any demonstrated price increases, such that consumer welfare was greatly enhanced in a procompetitive fashion, notwithstanding that on certain routes they were no longer direct competitors.  App. Br. 6-14.

Throughout, the Opinion’s analysis is skewed by the notion that “the number of competitors has literally decreased by one,” which the Opinion treats as an intrinsically intolerable “assault on competition.”  ADD43, ADD92.  Simply put, the Opinion improperly conflates “competition” with “number of competitors,” effectively ignoring established legal authority and economics confirming that safeguarding the overall competitive process is the paramount means for maximizing consumer welfare—not preserving an existing market structure with a particular number of rivals.  As this Court has long held:

[T]he Court recognizes that the antitrust laws exist to protect the competitive process itself, not individual firms. [citations omitted] And the antitrust laws protect the competitive process in order to help individual consumers by bringing them the benefits of low, economically efficient prices, efficient production methods, and innovation.

Grappone, Inc. v. Subaru of New Eng., 858 F.2d 792, 794 (1st Cir. 1988) (Breyer, J.) (collecting cases, including Brown Shoe and Broad. Music, Inc.).

The Opinion’s treatment of the mere reduction of competitors by one on NEA routes in favor of a limited, regional collaboration as an “assault on competition” infected all of the Opinion’s analysis of the impact of the collaboration, and this error independently requires reversal.  Economics and binding precedent caution that static market shares and a mere reduction in the number of competitors do not constitute a basis for condemnation absent proof that prices increased, output decreased, or quality suffered.  See, e.g., Ohio v. Am. Express Co., 138 S. Ct. 2274, 2288 (2018) (“This Court will ‘not infer competitive injury from price and output data absent some evidence that tends to prove that output was restricted or prices were above a competitive level.’” (citing Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 237 (1993))).

A.            Joint Ventures Depend on Collaboration to Increase Consumer Welfare

The Opinion concludes that there will be future competitive harm based on a minor reduction in competitors without requiring a showing—despite the “tidal wave of evidence” (ADD12)—that output diminished or prices increased.  Such a showing is an essential prerequisite to render concentration economically meaningful.  See Am. Express Co., 138 S. Ct. 2274 at 2284 (“Direct evidence of anticompetitive effects would be ‘proof of actual detrimental effects’ . . . such as reduced output, increased prices, or decreased quality . . .”) (citations omitted).  The Opinion is rife with statements demonstrating that the loss of one competitor on regional routes was dispositive here—the ultimate thumb on the scales:

  • First, the NEA has eliminated the once vigorous competition between two of the four largest domestic carriers in the northeast . . .” ADD76 (underlining in original).
  • “This, in and of itself, is a fundamental assault on competition and an actual harm the Sherman Act is designed to prevent . . . .” ADD77.
  • “Eliminating potential competition is, by definition, anticompetitive.” Id. (quoting Impax out of context).
  • “As explained already, the overarching purpose of the NEA is anticompetitive. Through the NEA, American and JetBlue cease to compete and, instead, operate as a single carrier in the northeast.  That it is the core of the relationship, and it is a naked assault on competition.”

Such quick and premature condemnation of business collaborations on flimsy theories of concentration and alleged loss of independent decision-makers contravenes the precedent of this Court and of other circuit courts.  See, e.g., Augusta News Co. v. Hudson News Co., 269 F.3d 41, 47 (1st Cir. 2001) (under rule of reason, “adverse effects on consumer welfare are an important part of the equation” and that “it is hard to imagine a rule of reason violation absent a potential threat to the public”); Marucci Sports, L.L.C. v. Nat’l Collegiate Athletic Ass’n, 751 F.3d 368, 377 (5th Cir. 2014) (“A restraint should not be deemed unlawful, even if it eliminates a competitor from the market, so long as sufficient competitors remain to ensure that competitive prices, quality, and service persist.”) (emphasis added); Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (“reduction of competition does not invoke the Sherman Act until it harms consumer welfare”).  Such summary disposition virtually assures penalizing or prohibiting beneficial alliances that advantage consumers and enhance consumer choice.

As the Collaboration Guidelines have recognized for over two decades, “collaborations often are not only benign, but procompetitive.”  Collaboration Guidelines at 2.  Further, the Collaboration Guidelines emphasize, in the first sentence of the preamble, that “[i]n order to compete in modern markets, competitors sometimes need to collaborate.”  Id. at 1; see also id. at 6 (“A collaboration may allow its participants to better use existing assets, or may provide incentives for them to make output-enhancing investments that would not occur absent the collaboration.  The potential efficiencies from competitor collaborations may be achieved through a variety of contractual arrangements including joint ventures . . . .”).  Notably, the Opinion largely ignores the Collaboration Guidelines and their explication of the benefits of joint ventures, citing them only in passing as a “see also” for the proposition that “some collaborations” should be treated like “complete or partial merger[s].”  ADD69.  In the Opinion’s take on the Collaboration Guidelines, the tail wags the dog.

The Collaboration Guidelines are consistent with established Supreme Court precedent recognizing the common benefits of competitor collaborations, even as they require specific, limited collaboration rather than competition between enterprises that are otherwise competitors.  See Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 2155 (2021) (“[M]any joint ventures are calculated to enable firms to do something more cheaply or better than they did it before.  And the fact that joint ventures can have such procompetitive benefits surely stands as a caution against condemning their arrangements too reflexively.”) (citation omitted); Texaco Inc. v. Dagher, 547 U.S. 1, 6 n.1 (2006) (recognizing the “economic justifications,” “numerous synergies and cost efficiencies” resulting from a joint venture).

And this Court has recognized that “bona fide joint ventures”—like the U.S.-Department-of-Transportation-approved NEA here—allow two competitors to pool their resources to “provide offerings” that neither “could easily provide by itself.”  Augusta News, 269 F.3d at 48.  This Court’s articulation in Augusta News of the joint venture providing offerings that neither partner “could easily provide by itself” is a more permissive standard than the Opinion’s jaded view requiring a joint venture to pool “complementary assets.”  ADD93; see also id. (“[T]he defendants have not established their pooled assets are ‘complementary,’ . . . such that they enable the defendants to create an innovative product”).

The Opinion seems to hold that for a joint venture to overcome its intrinsic “assault on competition” it must produce something novel, as opposed to enhancing competition (through better service or greater output) against other competitors.  Rejecting the NEA’s plaintiffs-conceded, pro-competitive benefits, the Opinion notes that “other firms (Delta and United), acting independently, already offer ‘products’ comparable to the one they claim their collaboration will enable . . .”   ADD92; see also id. (“Collaboration between the defendants is not required in order to create a new product or market that could not otherwise exist.”).  But under the Sherman Act and the Collaboration Guidelines, horizontal joint ventures are not held to a “Eureka!” novel-creation standard.

Notably, the DOJ’s Collaboration Guidelines expressly contemplate a similar asset-collaboration.  Collaboration Guidelines at 31.  In Example 6, two major software producers—neither of which was a “major competitor” of the two dominant firms in the word-processing software market—joined forces “to develop a markedly better word-processing program together than either [could] produce on its own.”  Id.  This combination was “an efficiency-enhancing integration of economic activity that promotes procompetitive benefits.”  Id.  So too with the NEA.

Indeed, if combinations were held to a novel-creation standard, the joint venture analyzed by the Supreme Court in Dagher for refining and selling gasoline in the western states (where Texaco and Shell previously competed) could not have survived scrutiny.  547 U.S. at 4 (describing Texaco and Shell Oil joint venture agreement as “ending competition between the two companies in the domestic refining and marketing of gasoline”).  The Supreme Court not only accepted as lawful a joint venture between two companies that were previously direct competitors (547 U.S. at 4 n1.), but also ruled that even the joint venture’s price-setting was not subject to per se treatment, citing the combination’s overall procompetitive benefits.  Id. at 8 (“[T]he pricing decisions of a legitimate joint venture do not fall within the narrow category of activity that is per se unlawful.”).

In insisting that American and JetBlue create something novel, i.e., not offered by competitors like Delta or United, or contribute only “complementary” assets to the NEA to do something each could not have done on its own, the Opinion is unsupported by legal authority and should be reversed.

B.            The Proof Is in the Pudding, Not in the Number of Rivals

By enshrining the mere independence of competitors above actual competitive performance and by failing to examine the NEA’s actual consumer welfare effects, the Opinion unjustifiably penalized the NEA’s consumer-enhancing aspects.  See ADD94-ADD95 (recognizing that NEA allowed for certain benefits, such as better route scheduling, but faulting parties because such benefits occurred through parties “cooperat[ing] in ways that horizontal competitors normally would not”).  Indeed, the Opinion sharply (and repeatedly) minimizes or ignores altogether tangible evidence regarding NEA-generated network expansions, connectivity optimization, increased service frequencies to underserved airports, enhanced schedule optionality, reciprocal loyalty benefits, and codesharing conveniences enhancing routing choices.  See ADD30 (noting, without further acknowledging, that the NEA-generated services and benefits “extend to most of the carriers’ flights to and from Logan, JFK, LaGuardia, and Newark”).

Moving beyond the reduction of competitors on certain routes, the proof was in the pudding of the extensive trial record.  The evidence demonstrated that the NEA (1) increased capacity by more than 200% at NEA airports (2-JA1293),
(2) offered almost 50 new nonstop routes, (3) increased their frequency on over 130 routes, and (4) increased their capacity on 45 New York City flights (2-JA1367-68).  In fact, the record shows that the NEA well-exceeded the growth commitments for 2022 and beyond to which American and JetBlue had agreed with the Department of Transportation to obtain its blessing.  See 2-JA821.

But the Opinion rejected all of these procompetitive, consumer-friendly benefits because, in its view, they were the result of the “unlawful” reduction of competitors by one.  The Opinion’s rejection of these benefits was erroneous and in contravention to settled authority.  See United States v. Interstate Commerce Comm’n, 396 U.S. 491, 523 (1970) (affirming dismissal of complaint challenging railroad merger where “the long-run effect of the merger would be to benefit communities . . . , and that the brief and transitory dislocations the merger would occasion were not sufficient to outweigh the merger’s benefits”); Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486, 500-01 (1968) (affirming dismissal of competitor suits opposing merger, noting that evidence showed merger would benefit general public, allowing “the unified company to ‘accelerate investments in transportation property and continually modernize plant and equipment . . . and provide more and better service’”).  The Opinion’s singular focus was also contrary to the Collaboration Guidelines, which state that, even in cases where the number of competitors drops, “the evaluating Agency would take account of . . . any procompetitive benefits . . .  under present circumstances, along with other factors.”  Collaboration Guidelines at 29-30.

This Court has the opportunity to underscore that, under federal antitrust law, efficiency assertions deserve a balanced assessment in calculating net effects, rather than the cramped disposal through summary scapegoating of innovative integration models that occurred in the Opinion (ADD88-ADD99).  See Cont’l T.V. v. GTE Sylvania, 433 U.S. 36, 49 (1977) (under rule of reason, “the fact-finder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition”); see also Am. Express Co., 138 S. Ct. at 2290 (affirming judgment for defendants where plaintiffs could not show anticompetitive effects and thus “failed to satisfy the first step of the rule of reason”); Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 886 (2007) (“In its design and function the rule [of reason] distinguishes between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest.”).

II.           THE DISTRICT COURT ERRED BY TREATING THE NEA’S LIMITED REGIONAL COLLABORATION LIKE A FULL-ON HORIZONTAL MERGER

One of the core flaws permeating the Opinion’s analysis is its effective adoption of the plaintiffs’ view that the NEA should be analyzed as a merger— comprehensively eliminating the rivalry between American and JetBlue—instead of a joint ventureSee ADD37 (“Nevertheless, as implemented by the parties, its effects resemble those of a merger of the parties’ operations within the northeast . . . .”), ADD38 (“[T]hey function like a single airline in the NEA region, as much as possible.”), ADD40 (faulting airlines for adjusting certain nationwide priorities, including American’s deprioritizing Philadelphia for New York and JetBlue pausing plans for growth in Fort Lauderdale); ADD46 (faulting JetBlue for supposedly increasing its operating costs).  But contrary to the Opinion’s suggestion (ADD69), not even the Collaboration Guidelines support the Opinion’s analysis.  See, e.g., Collaboration Guidelines at 5 (“The competitive effects from competitor collaborations may differ from those of mergers due to a number of factors.”).

A.            The NEA Is a Limited Regional Joint Venture That Preserved Each Participant’s Pricing Decisions Even Within the Region

The Opinion’s merger-like view of the regional collaboration ignored or downplayed important distinctions between the NEA’s operation and those of a national merger of competitors, not the least of which was that American and JetBlue maintained independent pricing.  See ADD77 (“American and JetBlue do not discuss the fares they will set . . . .”).  More generally, the NEA is structured like the archetypical limited joint venture, including (1) a fixed scope and duration, (2) no asset transfer, (3) no price coordination, and (4) separate management and business strategies, even in the NEA’s market.  See ADD27-ADD37; see also id. at ADD37 (“Both [American and JetBlue] have operations that fall beyond the NEA’s reach, and the agreement does not formally embody a complete combination of the partners’ operations even within the NEA region.”).

Critically, each airline retained control over routes not covered, with flexibility in responding through tactical fare adjustments even within the Northeast region.  See 1-JA572 (“Q. And do you ever discuss capacity outside the Northeast Alliance with American.  A. Absolutely not.”)); ADD30 (noting that each partner “will continue to make independent decisions regarding pricing, capacity, and network management”).

These characteristics, among many others, make it inappropriate and legal error for the Opinion to analyze the NEA effectively as a horizontal merger.  See, e.g., Addamax Corp. v. Open Software Found., 152 F.3d 48, 52 (1st Cir. 1998) (when “there is patently a potential for a productive contribution to the economy, [] conduct that is strictly ancillary to this productive effort (e.g., the joint venture’s decision as to the price at which it will purchase inputs) is evaluated under the rule of reason”).

B.            Joint Ventures Offer Unique, Pro-Competitive Benefits

The Opinion’s treatment of the NEA as a merger and not a limited joint venture was error, particularly given that joint ventures such as the NEA offer unique benefits, often superior both to firms operating independently and to a merger.  Joint ventures and mergers differ substantially in structure, scope, competitive impacts, and efficiency gains.  Whereas mergers combine entire firms under common ownership and control, joint ventures allow companies to “pool a portion of their resources within a common legal organization” through partnership, while still operating as independent entities.  See Bruce Kogut, Joint Ventures: Theoretical and Empirical Perspectives, 9 Strategic Mgmt. J. 319, 319 (1988).  The remaining independence is what distinguishes joint ventures from mergers.  See Herbert Hovenkamp & Phillip E. Areeda, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶2100c (5th ed. 2022) (“[J]oint ventures are calculated to enable firms to do something more cheaply or better than they did it before” making them “presumably efficient.”).  This allows greater flexibility to renegotiate or unwind collaborations without the permanence of an acquisition.  Joint ventures allow valuable collaboration and access to partners’ knowledge without requiring a permanent, fully integrated merger that may be costly to reverse.  See Srinivasan Balakrishnan & Mitchell P. Koza, Information Asymmetry, Adverse Selection and Joint-Ventures: Theory and Evidence, 20 J. Econ. Behav. & Org. 99, 103 (1993).

Joint ventures also frequently have a narrower objective than mergers, focusing on specific areas rather than seeking complete integration across all business functions.  In the case of the NEA, the focus areas were increased service frequencies to underserved airports, enhanced schedule optionality in the face of tight FAA regulations and limited gate availability, and reciprocal loyalty benefits in one geographic location.  ADD30.  And by maintaining separate pricing decisions (ADD77), the NEA could realize productive efficiencies for the parties and consumers from collaboration, asset pooling, and knowledge sharing without the potential anticompetitive effects of an outright merger.

Economic theory and experience suggest that joint ventures pose fewer anticompetitive concerns because they do not reduce the number of independent competitors in a market, contrary to the Opinion.  For example, Gugler & Siebert find that mergers and joint ventures in the semiconductor industry increased participating firms’ market shares on average, identifying net efficiency gains allowing the participating firms to win more of the market.  As such, joint ventures represent desirable alternatives to mergers from a consumer welfare perspective.  See Klaus Gugler & Ralph Siebert, Market Power Versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry, 89 Rev. Econ. Stat. 645, 646 (2007).  By maintaining separate ownership and pricing control, joint ventures allow firms to pool assets and improve productivity while preserving more market participants.  Thus, the structure enables collaboration without the consolidated market power of an outright merger.  This further highlights the key differences between joint ventures and full integration through acquisition, which the Opinion misses entirely.

III.        JOINT VENTURES LIKE THE NEA REQUIRE FULL RULE OF REASON ANALYSIS—NOT QUICK LOOK OR SHORT CUTS

Finally, the Opinion incorrectly concluded that agreements between competitors that reduce the number of market participants was “especially harmful.”  ADD83.  The Opinion then subjected the NEA to an inappropriate truncated style of review, tantamount to the “quick look” approach the Opinion claimed to recognize was not in fact permitted here.  See ADD75.  Rather than conduct a full rule of reason analysis, the Opinion holds that as to the NEA, “no deep and searching analysis is required in order to discern its unlawfulness.”   ADD76 (going so far as to state that “the NEA is situated ‘at one end of the competitive spectrum’”)); see also ADD87 (indicating that NEA could be deemed unreasonable “in the twinkling of an eye”).  Nowhere does the Opinion conduct the required weighing of the competitive benefits identified by Appellant against presumed, long-run risks alleged by the plaintiffs.  See Dagher, 547 U.S. at 5 (rule of reason “presumptively applies” absent per se violations).

A.            In Dagher, the Supreme Court Confirmed the Presumptive Application of Rule of Reason to Joint Ventures

In Dagher—under similar facts to here—the Supreme Court overturned a decision by the Ninth Circuit condemning the practices of a gasoline refining and sales joint venture, Equilon Enterprises, set up by oil giants Shell and Texaco in the western region of the United States.  As the Supreme Court explained, the district court had rejected plaintiffs’ request to apply quick look, and at summary judgment had upheld the joint venture’s challenged activities procompetitive.  547 U.S. at 4.  The Ninth Circuit reversed, characterizing the position of the petitioners as seeking an exception to the per se prohibition on price fixing.  Id. 

In confirming that the rule of reason applied to the joint venture’s challenged activities, the Supreme Court unambiguously stated that “this Court presumptively applies rule of reason analysis, under which antitrust plaintiffs must demonstrate that a particular contract or combination is in fact unreasonable and anticompetitive before it will be found unlawful.”  Id. at 5 (emphasis added).  The Court specifically rejected applying per se or anything other than full, rule of reason scrutiny to Equilon, effectively rejecting any sort of Topco-like suggestion that there should be “an especially heavy burden on the collaborators to justify what otherwise would be obviously unlawful collusion.”  ADD14; see also Dagher, 547 U.S. at 5 (“These cases do not present such an agreement, however, because Texaco and Shell oil did not compete with one another in the relevant market—namely, the sale of gasoline to service stations in the western United States—but instead participated in the market jointly through their investments in Equilon.”).  The Court was also clear that any challenge to the formation of the joint venture itself would need to prove that “its creation was anticompetitive under the rule of reason.”  Id. at 6 n.1.

Here, the district court transgressed the fundamentals of Dagher and other Supreme Court authority on joint ventures by dispensing with the NEA based on a truncated analysis.  See Alston, 141 S. Ct. at 2155 (rejecting a “quick look” analysis for the challenged joint venture and affirming that “[m]ost restraints challenged under the Sherman Act—including most joint venture restrictions—are subject to the rule of reason”); Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 23 (1979) (per se rule does not apply to all agreements between competitors, “[j]oint ventures and other cooperative arrangements are also not usually unlawful”).  Only by insisting on disciplined economic welfare-based analysis—not conclusory structural shortcuts—can this Court correct methodological shortfalls and realign doctrine in this Circuit to safeguard innovative joint ventures that enhance consumer choice and welfare.

B.            “Quick Look” Analysis Applies Only to a Narrow Category Of Agreements That Does Not Include the NEA

Beyond Dagher and other Supreme Court authority, since at least 1978 the Supreme Court, in decisions like Professional Engineers, has carefully confined the application of truncated “quick look” analysis.  “Quick look” analysis is reserved for that limited category of restraints where genuinely anticompetitive effects are so intuitively obvious that “no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement.”  Nat’l Soc’y of Prof’l Eng’rs. v. United States, 435 U.S. 679, 692 (1978); see Alston, 141 S. Ct. at 2155 (noting that joint venture restrictions are subject to rule of reason).

Such cases typically feature overt, horizontal output restrictions, price agreements, or naked market divisions devoid of cognizable efficiencies.  In Professional Engineers, it was a bidding agreement that “operates as an absolute ban on competitive bidding.”  435 U.S. at 692.  The NEA—with its established output expansion and consumer choices—falls far outside such restrictions.

And it remains equally settled that where defendants provide plausible justifications that a practice enhances overall efficiency and makes markets more competitive, per se and quick look approaches must end and full rule of reason procedures must begin.  As the Supreme Court has explained, “per se rules are appropriate only for ‘conduct that is manifestly anticompetitive,’ . . . that is, conduct ‘that would always or almost always tend to restrict competition and decrease output.’”  Bus. Elecs. v. Sharp Elecs., 485 U.S. 717, 723 (1988) (internal citation omitted) (citing cases); see also Fed. Trade Comm’n v. Ind. Fed’n of Dentists, 476 U.S. 447, 458-59 (1986) (“[W]e have been slow . . . to extend per se analysis to restraints imposed in the context of business relationships where the economic impact of certain practices is not immediately obvious.”).  Numerous decisions underscore that quick-look bypassing of comprehensive balancing is permissible only for “agreements whose nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry is needed.”  Nat’l Soc’y of Prof’l Eng’rs, 435 U.S. at 692.

C.            The Opinion Erred by Not Applying Full Rule of Reason Review

While the Opinion stated it “declines to apply per se analysis,” the Opinion intimates that its approach was effectively per seSee ADD83 (“deliberate market allocation inherent in the NEA is strong evidence of its actual anticompetitive effect”).  Given the wide gap between the NEA and per se agreements, the Opinion was without legal basis “to conclude that the NEA is situated ‘at [one] end[] of the competitive spectrum” such “that no deep and searching analysis is required in order to discern its unlawfulness.”   ADD76 (citing Alston, 141 S. Ct. at 2155).

Instead, when business collaborations between competitors incorporate sets of tradeoffs, immediate condemnation remains wholly improper without balanced vetting.  The default rule of Dagher requires a full rule of reason analysis, given intrinsic efficiency possibilities.  547 U.S. at 5.  Reasoned scrutiny becomes imperative for collaborations with facially plausible claims of providing new products, penetrating untreated geographic segments, optimizing scheduling, capturing scale economies, or administering loyalty programs more seamlessly than individual participants could achieve alone.  See ADD30 (noting such NEA arrangements).

The airline context poses heightened calls for caution before neutralizing innovative business formats with a quick look, because alliances there can generate acknowledged consumer value through coordinated flight timing, codesharing, reciprocal lounge privileges, baggage handling, and enhanced network connectivity.  See ADD100 (competing domestic carriers “commonly” make arrangements for codesharing and loyalty reciprocity to benefits consumers); ADD25 (the West Coast International Alliance includes codesharing and reciprocal benefits); see also ADD27 (no other domestic airline joint venture has received antitrust scrutiny).

In no sense does the NEA fit into the category of agreements that are so facially anticompetitive that they merit a presumption of illegality.  Rather, the NEA reflects efforts to construct integrated national networks—responding in part to consumer choice expansion pressures from low-cost carrier growth, and in part to competitive pressures from other major carriers in the region.  See ADD21 (“It is against this backdrop of industry consolidation, in this competitive landscape . . . that the agreement at issue here arose.”).  The NEA established intricate revenue-sharing calculations, reciprocal loyalty programs, coordinated scheduling committees, and joint corporate customer arrangements—all premised on maximizing efficiency and reducing operational costs.  See 1-JA342, 1-JA348, 2-JA1224-25.

These provisions aimed at forging a unified domestic connector system warrant more than a quick look before abandoning them as hopeless.  Indeed, the Opinion accepted that the NEA generated capacity increases at slot-constrained airports in the Northeast region, while expressing concern “that capacity growth within the NEA comes at the expense of resources and output by the defendants elsewhere, as well as evidence the defendants each would have pursued at least some of this growth with or without the partnership.”  ADD95-ADD96.  Neither theoretically nor actually did the NEA reflect a naked restraint on output or pricing.  The important point is not to settle whether there was a net capacity increase or a reallocation that increased consumer welfare.  The important point is that, at minimum, such contractual complexities command a balanced rule of reason review rather than a truncated analysis through thinly substantiated assumptions.

By dispensing with the NEA with an abbreviated analysis, the Opinion departed from binding case-law.  See Alston, 141 S. Ct. at 2155 (joint ventures “are subject to the rule of reason, which (again) we have described as ‘a fact-specific assessment of market power and market structure’ aimed at assessing the challenged restraint’s ‘actual effect on competition’”) (citing Am. Express Co., 138 S. Ct. at 2284); Augusta News, 269 F.3d at 48 (“[I]t is commonly understood today that per se condemnation is limited to ‘naked’ market division agreements, that is, to those that are not part of a larger pro-competitive joint venture.”).

CONCLUSION

Because the district court equated competition to the number of competitors, effectively treated the NEA erroneously as a horizontal merger, and applied an improper, truncated analysis far short of a full rule of reason analysis, this Court should reverse the judgment of the district court and vacate the permanent injunction.

[1] Under Rule 29(a)(4)(E) of the Federal Rules of Appellate Procedure, amici certify that (i) no party’s counsel authored the brief in-whole or in-part; (ii) no party or a party’s counsel contributed money that was intended to fund preparing or submitting the brief; and (iii) no person, other than amici or its counsel, contributed money that was intended to fund preparing or submitting the brief.

[2] All parties have consented to the filing of this brief.

[3] “ADD” refers to the Addendum attached to the Appellant’s Brief.  “JA” refers to the Joint Appendix filed with the Appellant’s Brief.

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