antitrust law

By Christina Bohannan and Herbert Hovenkamp, law professors at The University of Iowa College of Law

Promoting rivalry in innovation requires a fusion of legal policies drawn from patent, copyright, and antitrust law, as well as economics and other disciplines. Creation without Restraint looks first at the relationship between markets and innovation, noting that innovation occurs most in moderately competitive markets and that small actors are more likely to be truly creative innovators. Then we examine the problem of connected and complementary relationships, a dominant feature of high technology markets. Interconnection requirements, technological compatibility requirements, standard setting, and the relationship between durable products and aftermarket parts and supplies all involve interconnection, or “tying.” But views about the practice tend toward two extremes. Some see tying as inherently anticompetitive, while others view it as unexceptionally benign. In fact, bundling products or technologies is essential in high technology markets and most of it is socially beneficial, but some possibilities of abuse nevertheless remain. 

Identifying good substantive legal rules for facilitating innovation is often very difficult. Two generations ago antitrust law addressed problems of complexity by shifting the focus to harm. The courts reasoned that they could often avoid unmanageable substantive doctrine by considering whether the plaintiff had suffered the appropriate kind of injury. Plaintiffs who are injured by more rather than less competition should be denied a remedy. In the case of patent and copyright law, the appropriate question is whether an infringer’s conduct served to undermine the right holder’s incentive to innovate, with incentives measured from before the innovation occurred. Some IP infringements do no harm to the incentive to innovate; others actually make the right more rather than less valuable. In these situations relief should be denied without inquiry into the merits of the infringement case.

Patent and copyright law are both in crisis today – major problems include overissuance, overly broad and ambiguously defined protections, and rules that permit both patentees and copyright holders to make broad claims on unforeseen innovations that lie in the future. The result has been that many patents are valueless, while others have very considerable value precisely because they enclose ideas or technologies that rightfully belong in the public domain. Patent law could be greatly improved if inventions were tied to real, nonobvious technology actually in the patentee’s possession at the time its application was filed, and if patentees were obliged to give comprehensible and timely notice of their inventions. Copyright law would be greatly improved by an aggressive theory of harm that reduces the scope of the derivative works right and increases the scope of fair use. In Eldred the Supreme Court suggested that the First Amendment should not be an important copyright infringement defense because the Constitution’s IP clause and the initial copyright act were passed “close in time,” leading to an inference that Congress must have considered these concerns. But the original copyright act bears little resemblance to the expansive coverage granted by the current Act, passed almost two centuries later.

The following is a roundup of some recent developments in antitrust news:

• The Federal Trade Commission plans to launch a formal investigation into whether Google Inc. has “abused its dominance in Web-search advertising,” a probe that some policy watchers say could be a watershed moment for antitrust policy, The Wall Street Journal reports. While Google has been the subject of several antitrust investigations, prior investigations have focused on mergers and acquisitions, as opposed to the search advertising business, which is Google’s biggest money-maker, according to WSJ. In a blog post, Google Fellow Amit Singhal responds to the FTC’s announced investigation by articulating Google’s core principles, which he says will enable the company to “stand up to scrutiny.”  And in a recent column in Main Justice, TechFreedom Senior Adjunct Fellow Geoffrey Manne blasts the FTC’s plan to investigate Google for “unfair methods of competition” under Section 5 of the FTC Act, which, he argues, does not apply to claims that Google harms competitors rather than consumers.

• AT&T’s planned acquisition of T-Mobile is sparking continued questions about the reason for the merger, with the FTC investigating AT&T’s claim that it needs more “wireless spectrum” to avoid dropped calls and satisfy the need for data access, and a Department of Justice probe continuing, NPR reports. Sprint and other opponents of the deal allege AT&T has more licensed spectrum than any other carrier in the country, and that much of it goes unused, but some policy experts say AT&T is just doing long-range planning. Sprint also filed an FCC petition against AT&T last month.

• Intel Corp., Apple and several other large companies have received approval from the Department of Justice to bid on a “trove of high-tech patents” from the now-bankrupt telecommunications gear-maker Nortel Networks Corp.,The Wall Street Journal reports.