The Precompetitive Interest in Intellectual Property Law
Thomas F. Cotter
University of Minnesota Law School
Washington & Lee Legal Studies Paper No. 2005-25
The conventional wisdom that antitrust is less tolerant of monopoly than is intellectual property (IP) law is sometimes true, but there is another side of the coin that is less frequently commented upon and that deserves further scrutiny. On occasion, IP law condemns conduct on the part of IP owners - or excuses otherwise infringing activity on the part of IP defendants - expressly for the purpose of promoting competition, even though antitrust law (if it were to apply at all) would not find anticompetitive harm absent a more thorough analysis of whether the antitrust defendant possesses power over a well-defined market. Salient examples include the misuse doctrines in patent and copyright law; some applications of merger and fair use in copyright; and trademark law's functionality doctrine. In this paper, I develop an explanation for this divergence between antitrust and IP. Specifically, I argue that in some limited contexts the expected social costs (including error costs) of ruling for IP defendants are relatively low in comparison with the expected anticompetitive harm from ruling for IP plaintiffs. As a result, it is sometimes welfare-enhancing for IP courts to be less concerned than antitrust courts about the expected costs of "false positives," that is, cases wrongly decided against the party defending the allegedly anticompetitive conduct. Thus, in an appropriate case courts should deploy IP doctrine to prevent harms that would be deemed unduly speculative, or not cognizable at all, in the analogous antitrust context, including (1) harms stemming from the exercise of small-scale, transitory, or localized market power; (2) harms that are individually of little competitive significance, but which in the aggregate threaten a substantial reduction in consumer welfare; (3) threats to dynamic efficiency stemming from the reduction of competition in innovation markets; and (4) potential reductions in expressive output that, for reasons rooted in the First Amendment, may be qualitatively, but not quantitatively, significant. I further contend, however, that such cases probably are more common in the copyright than in the patent law context, and that even in copyright contexts courts should be cautious about casually inferring anticompetitive harm; but that the analysis provides a rationale for a relatively expansive definition of trademark functionality.
Number of Pages in PDF File: 96working papers series
Date posted: December 14, 2005
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