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.
We also explain why the doctrine of intellectual property “misuse” is so troubling today. “Misuse” traditionally occurs when an IP holder’s licensing restriction unreasonably controls something beyond the IP right itself. The courts initially created the draconian remedy of making the misused IP right unenforceable against anyone. Then they created overly narrow substantive coverage as an offset. Misuse law needs broader substantive coverage, reaching restraints on innovation and attempts to enclose the public domain, but remedies should be limited to an injunction against the offending practice.
Finally, we examine the role of both antitrust and intellectual property law in two areas, exclusionary practices and licensing arrangements among multiple firms. On the first, one of the most controversial practices is refusal to license, because compulsory licensing rules are so difficult to administer. Nevertheless, serious competition concerns arise when dominant firms acquire technologies from others mainly to shut them down without actually employing them. We also examine claims that innovation itself should be regarded as anticompetitive when it makes the technology of others incompatible with a dominant firm’s technology.
The size and diversity of the “innovation commons,” or the vast area involving collaborative innovation and dissemination of IP rights, is driven mainly by the fact that IP rights are nonrivalrous. In addition, however, in some industries patents are worthless or have negative value. Pooling becomes a mechanism by which firms use private ordering to “back out” of an IP system that is unsuitable to their needs. By recognizing this fact the legal system can provide greater accommodation for much needed diversity in IP coverage.