The Antitrust Law Journal, Patent Assertion Entities, and Politics
As you know, I am a big fan of the Antitrust Law Journal, which is produced by the American Bar Association’s Antitrust Law Section. It is the journal where antitrust lawyering meets antitrust economics and academics. I like to hang out at this intersection.
A couple weeks ago, another issue of the Antitrust Law Journal arrived. I haven’t had a chance to read any of the articles yet—as I’ve been fortunately quite busy—but I skimmed it and it looks like a good one. Let’s review it together.
It is a double symposium issue, which is great because symposium issues can be a bummer if you don’t like the topic. This gives you twice the odds of liking at least some of the articles. The two topics are (1) Patent Assertion Entities, and (2) Politics and Antitrust.
Patent Assertion Entities
A patent assertion entity does not develop or practice patents, but instead acquires them from others, like inventors, companies or other patent assertion entities. They often aggressively enforce these acquired patent rights against companies. They are about as popular as Congress (or lawyers), as many vilify them by accusing them of extortion and worst for bringing lawsuits to demand royalties.
Indeed, it appears that much of patent litigation today involves patent assertion entities in one way or another.
But they do contribute to competition in an important way by monetizing patents that individual inventors and sometimes companies probably couldn’t enforce on their own. So if you are an inventor, you can focus on inventing by selling your patent to a patent assertion entity, which is structurally able to enforce it. This ought to encourage inventors by creating a better market for the patent rights to their inventions.
Patent assertion entities have interfered with the previously prevailing custom that had similarities to the nuclear battles of my childhood and earlier between the free and communist countries—MAD (Mutually Assured Destruction).
Big technology companies each build stockpiles of arms (i.e. patents). If the first company sues the second for infringing a patent, the second company routinely countersues for infringing one of their patents. They also often add an antitrust claim, but that is a different issue. Each company, knowing the other can countersue by reaching into their cadre of patent holdings, was deterred to a certain extent from filing the first lawsuit. Lawsuits still happened, of course, but this dynamic played out.
Patent assertion entities, however, don’t sell technology products. So if they sue a technology company, they don’t have any products that are vulnerable to a countersuit. So the offense doesn’t need a good defense to win. This led to an explosion of patent litigation that still ensues.
For some reason, many people look to antitrust to solve this problem. My views might change as I read the articles in this issue, but my initial inclination is that the patent assertion entities are not an antitrust problem themselves, but like any entity, could violate the antitrust laws in traditional ways.
Sort of like gun advocates say, “guns don’t kill people, people kill people,” I say, “it isn’t the patent assertion entity structure that violates the antitrust law, but its implementation in certain circumstances.” Not quite as catchy, but you get the point.
There is a danger to the antitrust laws and competition that whenever a new entity or business approach develops, many people reflexively think that the structure of antitrust should change to prohibit these entities or business practices. I disagree. I think that, like any antitrust issue, you have to examine the competitive circumstances in individual cases and let the law develop, just like it does with the older types of entities and businesses.
If you are too quick to jump in and limit these business innovations, you might harm society in the same way that you could harm it if you reflexively kill new technologies that seem different.
Scanning the articles, I recommend the article by FTC Commissioner Wright and Judge Ginsburg as a good place to start. They’ve written articles together before that are quite good (and often challenge the established thinking on topics).
Politics and Antitrust
I don’t like this issue quite as much. It might be because I have too much idealist in me when it comes to competition issues and I hate the idea of politics sullying the protection of competition. But politics does have a role, although I would love to minimize it.
My view is that the appropriate role for politics is as a focus of emphasis. That is, the party that controls the executive has a wide-variety of competition issues to choose from in bringing enforcement actions and (in the FTC’s case) engaging in competition advocacy. The party in power chooses how to allocate the government’s resources in emphasizing some issues over others.
But, in the end, each antitrust agency has to enforce their priorities in the courts, which do not change with administrations (although I recognize the possibility of politics in judicial decision-making).
For this reason, I support limits on the ability of agencies to unilaterally affect the competitive landscape. Excessively expensive investigations that are akin to a punishment themselves and merger challenges that effectively kills mergers place too much power in the administrative agencies. Agencies should have to enforce their priorities in the courts. The situation in Europe, of course, is quite different as the European Commission has substantial power on its own.
The first article in the politics symposium that I will read is William Kovacic’s article entitled “Politics and Partisanship in U.S. Federal Antitrust Enforcement,” because the former FTC Commissioner is one of the great antitrust and competition giants, not only in his work, but also his historical perspectives on antitrust. I think it will make for a great read.
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