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In Brussels, the talk of the town is that the European Commission (“Commission”) is casting a new eye on the old antitrust conjecture that prophesizes a negative relationship between industry concentration and innovation. This issue arises in the context of the review of several mega-mergers in the pharmaceutical and AgTech (i.e., seed genomics, biochemicals, “precision farming,” etc.) industries.

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Summary

The proposed guidelines are founded on a commendable set of underlying assumptions: that intellectual property (“IP”) is, for antitrust purposes, amenable to the same sort of analysis that applies to other forms of property, and, that IP licensing presents presumptively procompetitive opportunities for market actors to manage their property rights.
As the proposed guidelines recognize, licensing, along with a variety of vertical arrangements, frequently allows separate firms to realize efficiencies in the production, marketing and commercialization process that are otherwise difficult, if not impossible, to achieve individually.1 As the proposed guidelines note, this translates not merely into single firms commercializing a particular discovery, but also into their undertaking a variety of licensing relationships that, for example, encourage licensees to further improve upon the original invention.

More broadly, in many cases, licensing arrangements allow inventive firms that lack sufficient capital to license inventions to firms that are better positioned to engage in the efficient production of complicated or expensive processes and products. Economic literature broadly recognizes the value of this form of specialization,2 and the proposed guidelines are to be commended for likewise recognizing this reality and generally encouraging the practice.

Although, in short, our assessment of the proposed guidelines is positive, we offer some constructive criticism in the remainder of this comment. In particular, we believe, first, that the proposed guidelines should more strongly recognize that a refusal to license does not deserve special scrutiny; and, second, that traditional antitrust analysis is largely inappropriate for the examination of innovation or R&D markets.

Filed under: antitrust, doj, essential facilities, federal trade commission, truth on the market Tagged: Intellectual property, Patent

It’s not quite so simple to spur innovation. Just ask the EU as it resorts to levying punitive retroactive taxes on productive American companies in order to ostensibly level the playing field (among other things) for struggling European startups. Thus it’s truly confusing when groups go on a wholesale offensive against patent rights — one of the cornerstones of American law that has contributed a great deal toward our unparalleled success as an innovative economy.

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About a month ago, I was asked by some friends about the shift from the first-to-invent patent system to a first-to-file patent system in the America Invents Act of 2011 (AIA). I was involved briefly in the policy debates in the spring of 2011 leading up to the enactment of the AIA, and so this query prompted me to share a short essay I wrote in May 2011 on this issue. In this essay, I summarized my historical scholarship I had published up to that point in law journals on the legal definition and protection of patents in the Founding Era and in the early American Republic. I concluded that a shift to a first-to-file patent system contradicted both the constitutional text and the early judicial interpretations of the patent statutes that secured patent rights to first inventors.

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I’d like to begin by discussing Geoff’s post on the pending legislative proposals designed to combat strategic abuse of drug safety regulations to prevent generic competition. Specifically, I’d like to address the economic incentive structure that is in effect in this highly regulated market.

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Brand drug manufacturers are no strangers to antitrust accusations when it comes to their complicated relationship with generic competitors — most obviously with respect to reverse payment settlements. But the massive and massively complex regulatory scheme under which drugs are regulated has provided other opportunities for regulatory legerdemain with potentially anticompetitive effect, as well.

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Trade secrets are frequently one of the most powerful forms of intellectual property that a company has in its competitive arsenal. Particularly given the ongoing interest in whittling away at the property rights of patent holders (e.g. the enhanced IPR process, and even the more tame VENUE Act), trade secrets are a critical means for firms to obtain and retain advantages in highly competitive markets.

Yet, historically the scope of federal recognition of these quasi-property rights was exceedingly circumscribed. That is until yesterday when President Obama signed the Defend Trade Secrets Act (“DTSA”) into law. The Act is designed to create a uniform body of federal law that will allow jurisdiction-straddling entities to more effectively enforce their often very valuable interests in proprietary information. Despite the handful of critics of this effort over the last few years, the law passed Congress with minimal friction, and, at least at this early stage, seems like a fairly laudable step in the right direction.

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Last March, I published an op ed in the the Washington Times on the proposed VENUE Act, a recently introduced bill taken wholesale from a portion of HR 9 (the tendentiously titled “Innovation Act”).  HR 9 has rightly stalled given its widespread and radical changes to the patent system that weaken and dilute all property rights in innovation.  Although superficially more “narrow” because the VENUE Act contains only the proposed venue rule changes in HR 9, the VENUE Act is just the Son of Frankenstein for the innovation industries.  This bill simply continues the anti-patent owner bias in the DC policy debates that has gone almost completely unchecked since before the start of President Obama’s first term in office.

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Yesterday a federal district court in Washington state granted the FTC’s motion for summary judgment against Amazon in FTC v. Amazon — the case alleging unfair trade practices in Amazon’s design of the in-app purchases interface for apps available in its mobile app store. The headlines score the decision as a loss for Amazon, and the FTC, of course, claims victory. But the court also granted Amazon’s motion for partial summary judgment on a significant aspect of the case, and the Commission’s win may be decidedly pyrrhic.

Read the full piece here.