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Scholarship Abstract The New Madison Approach, championed by former Assistant Attorney General Makan Delrahim, sets forth a framework for understanding how antitrust law, patent law, and . . .
The New Madison Approach, championed by former Assistant Attorney General Makan Delrahim, sets forth a framework for understanding how antitrust law, patent law, and contract law intersect and interrelate in the field of technology standards. Commentators often conflate these divergent, but complementary, areas of law and seek to substitute one for the other, especially in disputes involving standard essential patents. In doing so, they often arrive at the conclusion that the puzzle is missing some pieces. By recognizing the work that each of these doctrines can and should do, the New Madison Approach solves the puzzle and presents an appealing picture of competition in the innovation age.
Regulatory Comments ICLE comments filed Feb. 1, 2021, to the U.S. Federal Trade Commission in response to the FTC's Advance Notice of Public Rulemaking concerning future amendments to the premerger notification rules under the Hart-Scott-Rodino Antitrust Improvements Act.
We thank the Commission for the opportunity to comment on its Advance Notice of Proposed Rulemaking (“ANPRM”) concerning future amendments to the premerger notification rules under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR’’).
The International Center for Law and Economics (ICLE) is a nonprofit, nonpartisan research center whose work promotes the use of law & economics methodologies to inform public policy debates. We believe that intellectually rigorous, data-driven analysis will lead to efficient policy solutions that promote consumer welfare and global economic growth.
ICLE’s scholars have written extensively on competition and consumer protection policy. Some of our writings are included as references in the comment below. Additional materials may be found at our website: www.laweconcenter.org.
Our comment argues that the FTC’s rulemaking initiatives should be informed by the error-cost framework. As we explain, the framework offers several key insights that authorities should carefully consider when reviewing existing merger rules and guidance.
Among other things, it demonstrates that the societal costs stemming from false negatives (i.e. anticompetitive mergers that evade antitrust enforcement) are inextricably linked to those that originate from false positives (efficient mergers that are prohibited or deterred) and administrative costs (the social costs that are created by the operation of a given regulatory regime). As a result, any attempt to reduce one of these costs necessary entails a tradeoff as far as the others are concerned. All three costs should thus be considered together.
In short, we urge the FTC to take a holistic view when updating HSR rules and interpretations of those rules. In particular, it is important to consider the overall welfare costs of new rules, and not just their ability to plug existing enforcement gaps.
Read the full comments here.
TOTM Admirers of the late Supreme Court Justice Louis Brandeis and other antitrust populists often trace the history of American anti-monopoly sentiments from the Founding Era . . .
Admirers of the late Supreme Court Justice Louis Brandeis and other antitrust populists often trace the history of American anti-monopoly sentiments from the Founding Era through the Progressive Era’s passage of laws to fight the scourge of 19th century monopolists. For example, Matt Stoller of the American Economic Liberties Project, both in his book Goliath and in other writings, frames the story of America essentially as a battle between monopolists and anti-monopolists.
Read the full piece here.
TOTM ICLE President Geoffrey Manne and Director of Innovation Policy Kristian Stout's latest post on Truth on the Market about how the successful COVID-19 vaccine trials demonstrate the value of the patent system.
With the COVID-19 vaccine made by Moderna joining the one from Pfizer and BioNTech in gaining approval from the U.S. Food and Drug Administration, it should be time to celebrate the U.S. system of pharmaceutical development. The system’s incentives—notably granting patent rights to firms that invest in new and novel discoveries—have worked to an astonishing degree, producing not just one but as many as three or four effective approaches to end a viral pandemic that, just a year ago, was completely unknown.
TOTM As an academic working at the intersection of economics, law, and innovation, I was excited to see Nicolas Petit apply an interdisciplinary approach to investigate . . .
As an academic working at the intersection of economics, law, and innovation, I was excited to see Nicolas Petit apply an interdisciplinary approach to investigate big tech in the digital economy. Working across law, business, and engineering has taught me the importance of bringing together different theoretical perspectives and mindsets to address complex issues. [RL1] Below is a short discussion of a few interdisciplinary areas where Petit helps us to bridge the theoretical gap so as to unveil the complexity and provide new insights for policymakers.
TL;DR Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.
Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.
Some academics argue that patent holders tend to charge excessive license fees to firms that implement their inventions, thereby impeding downstream innovation. The courts have responded by weakening the enforcement of patents in various ways, including by denying patent holders permanent injunctions.
By making it more difficult for patent holders to obtain injunctions, courts have effectively reduced the incentive for firms to invest in primary inventions. This has arguably had a stronger negative effect on overall rates of innovation.
Read the full explainer here.
Scholarship Property rights are an essential economic institution. As the great UCLA economist Harold Demsetz famously argued, property rights spur specialization, investment, and competition, which in turn increase productivity, innovation, and wealth throughout the economy.
Property rights are an essential economic institution. As the great UCLA economist Harold Demsetz famously argued, property rights spur specialization, investment, and competition, which in turn increase productivity, innovation, and wealth throughout the economy.
The same holds true for intellectual property rights, including patents, which are no less important than their traditional counterparts in facilitating innovation and the efficient organization of productive economic activity, particularly in the modern, high-tech economy. A wealth of literature indicates that much, if not most, of the value of innovation is passed on to consumers in the form of lower prices and higher quality goods and services. Indeed, as Nobel Laureate William Nordhaus finds, even in the presence of patents to facilitate the appropriability of the value of innovation by inventors, “only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.” Thus, although measurement problems plague such research, there is strong evidence that nations with greater levels of patent protection have historically achieved significantly higher innovative output than those with lower levels of patent protection.
TOTM In their original post, Manne and Auer argued that the antitrust argument against Qualcomm’s no license/no chips policy was based on bad economics and bad . . .
In their original post, Manne and Auer argued that the antitrust argument against Qualcomm’s no license/no chips policy was based on bad economics and bad law. They now seem to have abandoned that argument and claim instead – contrary to the extensive factual findings of the district court – that, while Qualcomm threatened to cut off chips, it was a paper tiger that OEMs could, and knew they could, ignore. The implication is that the Ninth Circuit should affirm the district court on the no license/ no chips issue unless it sets aside the court’s fact findings. That seems like agreement with the position of our amicus brief.
TOTM Geoffrey Manne and Dirk Auer’s defense of Qualcomm’s no license/no chips policy is based on a fundamental misunderstanding of how that policy harms competition. The harm is . . .
Geoffrey Manne and Dirk Auer’s defense of Qualcomm’s no license/no chips policy is based on a fundamental misunderstanding of how that policy harms competition. The harm is straightforward in light of facts proven at trial. In a nutshell, OEMs must buy some chips from Qualcomm or else exit the handset business, even if they would also like to buy additional chips from other suppliers. OEMs must also buy a license to Qualcomm’s standard essential patents, whether they use Qualcomm’s chips or other chips implementing the same industry standards. There is a monopoly price for the package of Qualcomm’s chips plus patent license. Assume that the monopoly price is $20. Assume further that, if Qualcomm’s patents were licensed in a standalone transaction, as they would be if they were owned by a firm that did not also make chips, the market price for the patent license would be $2. In that event, the monopoly price for the chip would be $18, and a chip competitor could undersell Qualcomm if Qualcomm charged the monopoly price of $18 and the competitor could profitably sell chips for a lower price. If the competitor’s cost of producing and selling chips was $11, for example, it could easily undersell Qualcomm and force Qualcomm to lower its chip prices below $18, thereby reducing the price for the package to a level below $20.
