The FTC and Innovative Business Models for Patented Innovation
The Federalist Society has started a new program, The Executive Branch Review, which focuses on the myriad fields in which the Executive Branch acts outside of the constitutional and legal limits imposed on it, either by Executive Orders or by the plethora of semi-independent administrative agencies’ regulatory actions.
I recently posted on the Federal Trade Commission’s (FTC) ongoing investigations into the patent licensing business model and the actions (“consent decrees”) taken by the FTC against Bosch and Google. These “consent decrees” constrain Bosch’s and Google’s rights in enforce patents they have committed to standard setting organizations (these patents are called “standard essential patents”). Here’s a brief taste:
One of the most prominent participants at the FTC-DOJ workshop back in December, former DOJ antitrust official and UC-Berkeley economics professor Carl Shapiro, explained in his opening speech that there was still insufficient data on patent licensing companies and their effects on the market. This is true; for instance, a prominent study cited by Google et al. in support of their request to the FTC to investigate patent licensing companies has been described as being fundamentally flawed on both substantive and methodological grounds. Even more important, Professor Shapiro expressed skepticism at the workshop that, even if there was properly acquired, valid data, the FTC lacked the legal authority to sanction patent licensing firms for being allegedly anti-competitive.
Commentators have long noted that courts and agencies have a lousy historical track record when it comes to assessing the merits of new innovation, whether in new products or new business models. They maintain that the FTC should not continue such mistakes by letting its decision-making today be driven by rhetoric or by the widespread animus against certain commercial firms. Restraint and fact-gathering, institutional virtues reflected in a government animated by the rule of law and respect for individual rights, are key to preventing regulatory overreach and harm to future innovation.
Go read the whole thing, and, while you’re at it, check out Commissioner Joshua Wright’s similar comments on the FTC’s investigations of patent licensing companies, which the FTC calls “patent assertion entities.”
Filed under: antitrust, doj, error costs, federal trade commission, intellectual property, licensing, patent, regulation Tagged: bosch, consent decree, Executive Branch Review, Federal Trade Commission, Federalist Society, FTC-DOJ workshop, google, joshua wright, patent assertion entity, patent licensing, patent troll, regulatory overreach