ANTITRUST: ANTITRUST LAW & POLICY eJOURNAL

"Portfolio Licensing at the End-User Device Level: Analyzing Refusals to License FRAND-Assured Standard-Essential Patents at the Component Level" Free Download

KOREN W. WONG-ERVIN, George Mason University School of Law - Global Antitrust Institute
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JORGE PADILLA, Compass Lexecon
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Competition agencies around the globe have recently initiated investigations involving a standard-essential patent (SEP) holder’s refusal to license patents at the component level, such as the chipset, that it has committed to license on fair, reasonable, and nondiscriminatory (FRAND) terms.  While much has been written about FRAND-assured SEPs, the literature to date focuses largely on the appropriateness of seeking and obtaining injunctive relief on such patents or on the appropriate royalty rate and the meaning of “fair and reasonable� (FR), and has largely ignored the “nondiscriminatory� (ND) prong of FRAND.  This paper analyzes the common-industry practice of licensing on a portfolio basis at the end-user device level and whether a refusal to license at all levels of the production chain may constitute an antitrust violation, concluding that: (1) whether the “ND� prong of FRAND requires licensing at the component level is a fact-specific inquiry that depends upon the specific standard-development organization’s (SDO’s) Intellectual Property Rights (IPR) Policy at issue; and (2) regardless, evasion of a FRAND assurance alone does not constitute an antitrust violation.  In addition, while U.S. antitrust agency practice and law highly disfavor imposing antitrust liability for refusals to license, such liability (including in Europe and elsewhere) would at the very least require a showing of anticompetitive harm such as foreclosure.

Through a simple model, we show that due to the FRAND commitment and because most FRAND-assured SEP holders do not assert their patents at the component level, there is likely no foreclosure or exclusionary conduct or otherwise harm to competition. Our model features two SEP holders, one of which is vertically integrated with a component manufacturer, and a competing non-integrated component manufacturer. By refusing to license at the component level, the vertically integrated SEP holder de facto bundles its component (the bundled product) with its SEP portfolio (the bundling product). We show that this bundling strategy will not lead to the foreclosure of the component market if (i) the vertically integrated SEP holder does not assert its patents at the component level, and (ii) it licenses its SEP portfolio to end-devise manufacturers on FRAND terms irrespective of whether they source components from its own subsidiary or from the non-integrated rival. Intuitively, when (i) and (ii) hold, the bundle offered by the vertically integrated SEP holder can be replicated competitively by end-device manufacturers by mixing and matching the component sold by the non-integrated component supplier and the patent portfolio of the integrated SEP holder. Finally, we note that there are a number of legitimate business reasons for the common industry practice of licensing at the end-user device level, including avoiding patent exhaustion, reducing administrative costs, and ease of monitoring or verifying the number of units sold. These efficiency reasons motivate the decision of both vertically integrated and, tellingly, non-integrated SEP holders to license at the end-user device level only.

"After Lexmark Rejects Multifactor Measures for Standing, Which Challengers Stand in the Zone of Interests for Lanham Act Remedies?" Free Download

CHARLES LEE THOMASON, Ohio State University (OSU) - Michael E. Moritz College of Law
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The commercial value of trademarks, brand names, and related assets depends heavily on the certainty and predictability of the laws for registering, opposing, protecting, and cancelling these intellectual property assets. Predictability about the trademark laws drives the private recommendations and risk assessments that clients receive from attorneys and advisers. Trademarks, brand names, and other source-identifiers can become the most valuable intellectual property of a company. However, during the five years after a trademark is registered, a petition to cancel that registration can be filed, which can plead any ground on which registration might have been denied at the outset. Thus, after four-plus years of establishing brand identity and committing substantial investment to promoting a trademark, some unknown “person who believes that he is or will be damaged . . . by the registration� can petition to have it cancelled — if that “person� has statutory standing. Using outdated, multi-factor tests for standing enables overuse or the threat of use of Trademark Trial and Appeal Board (“TTAB�) procedures to challenge registered marks.

Lanham Act-standing was bound up in Article III tenets and “prudential� limitations disconnected from the statutory text. The Act’s remedies required resort to civil suits and appeals, as well as petitions to an administrative tribunal whose decisions were reviewable in a district court or by direct appeal to the Federal Circuit.

Recent Supreme Court decisions on the Lanham Act’s remedies impact, or should impact, the pleading, practice, and effect of actions to oppose or to cancel a registered trademark. The degree to which these decisions affect the predictability of the Lanham Act and the concomitant effect on the value of trademarks and brand names will evolve through the lower courts. One purpose of this Article is to urge that standing to petition the TTAB administrative tribunal for the remedies of cancellation or opposition should be governed by the pleading and practice standards the Supreme Court articulated in Lexmark International, Inc. v. Static Control Components, Inc. Although, Lexmark only considered Lanham Act § 43(a) claims. Yet, it dealt with statutory text virtually identical to that governing standing in §§ 13 and 14 actions, and as to all of these challenges, the harm typically claimed is a likelihood of marketplace confusion. Based on corresponding text in the statutes and similarities in the basis for the challenges, the Lexmark pleading requirements — being in the statutory “zone of interests� and alleging harm closely connected to those interests — should be extended to the pleading of TTAB challenges to registration of trademarks.

"Competition Law and Global Supply Chains" Free Download

DAVID J. GERBER, Illinois Institute of Technology - Chicago-Kent College of Law
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Global supply chains (or value chains or production networks) produce most of the manufactured products used by most people in most developed countries most of the time. They often represent a highly efficient and valuable set of economic arrangements, but they also carry a potential for harm that is often beyond the reach of current legal remedies. GSCs can shield those that produce faulty or hazardous products or artificially raise prices from legal responsibility for the harms they cause to markets, consumers and to the environment. This article focuses on one of those potential harms -- those caused by anti-competitive conduct, but many of the issues also arise in relation to environmental, financial and other types of harm. The article also looks at the impact of such arrangements on emerging markets and suggests ways in which the interests of low income source countries can be better aligned with high income destination countries.

"Standard Essential Patents and Antitrust: A Comparative Analysis of the Approaches to Injunctions and Frand-Encumbered Patents in the United States and the European Union" Free Download
TTLF Working Papers, No. 23, Stanford-Vienna Transatlantic Technology Law Forum (2016)

Ă?LVARO FOMPEROSA RIVERO, Cleary Gottlieb Steen & Hamilton LLP, College of Europe, Bruges, Students, Stanford University - Stanford Law School
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This paper looks at the holdup problem stemming from the apparent incompatibility between Standard Essential Patents — those subject to fair, reasonable and nondiscriminatory (FRAND) licensing — and the use of injunctions, and analyzes the potential complementary use of antitrust rules to strike the right balance to optimize competition and innovation.

I conclude that in the U.S., patent law and the ruling in eBay provide courts with sufficient tools to avoid the holdup problem, though the FTC could still have a policing role under Section 5 of the FTC Act. In the E.U., the fragmentation of remedies in patent law calls for antitrust enforcement by the European Commission, in line with the safe harbor approach adopted in the Samsung case.

Prior to eBay, antitrust enforcement in the United States was limited to the scope of Section 5 of the FTC Act and its associated remedies, i.e. cease and desist orders. However, current patent law counts on judicial tools to identify and prevent holdups created through the threat of injunctions. In particular, the eBay test has enabled courts to limit the potential anticompetitive effects of an injunction sought against a willing licensee. Once courts have signaled the unlikelihood or practical impossibility of obtaining an injunction against such a licensee, holdup issues disappear and any threat to seek injunctions losses all credibility. Courts can then establish damages for past infringement and to set ongoing royalties.

In Europe, remedies for patent law breaches diverge across jurisdictions and while some seem more in line with the eBay balancing test (the Netherlands), others still use injunctions as the default remedy (Germany). The potential benefits of an Ebay-style balancing test are thus not available across the E.U. Meanwhile, patentees can continue to leverage the threat of injunctions to obtain unfair licensing terms. The European Commission has stepped up to take a decisive stance against injunctive relief in the presence of Standard Essential Patents as stated in its decisions in the Motorola Mobility and Samsung cases. The European Commission has the authority to establish an adequate framework for negotiation under FRAND under the Samsung decision. It should exercise this power to set an ex ante expectation that no injunctive relief will be granted and that parties will have to reach to an agreement sooner or later or leave it for the courts to decide the FRAND terms.

"What Role for Abuse of Superior Bargaining Position Laws?" 
New York Law Journal, Vol. 256, No. 3

YEE WAH CHIN, Ingram Yuzek Gainen Carroll & Bertolotti, LLP
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Abuse of superior bargaining position laws prohibit a party to a business arrangement, holding what is considered to be a superior bargaining position relative to another party to the arrangement, from engaging in activities that are deemed to be unfair trade practices. The United States has no law at the federal level regarding “unfair trade practices� generally. With respect to abuse of superior bargaining position in particular, the United States has no law that addresses that concept generally. However, the United States is a federal system, and U.S. states may and do enact laws that overlap with or fill in gaps in federal laws, and/or are inconsistent with federal laws. Many states have specific laws that reflect concerns with superior bargaining positions. A focus on comparative advantage, which is distinct from dominant market position and based on relative bargaining power rather than on market power, may interject antitrust enforcers into commercial negotiations, which government is poorly suited for, and into normal market operations, which may impede normal market functioning. If an abuse of superior bargaining position law is nonetheless adopted or retained, the same economic principles and analytical framework that support abuse-of-dominant-position provisions could be applied to abuse-of-superior-bargaining position provisions. Under this framework, when the conduct challenged as an abuse of superior bargaining position does not have an anticompetitive effect and instead results in enhanced efficiency and increased consumer welfare, it should not be deemed abuse of superior bargaining position.

"A Reluctant Standard-Bearer for Chicago-School Antitrust" 
CPI Antitrust Chron., Summer 2016

MAX HUFFMAN, Indiana University Robert H. McKinney School of Law
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Justice Scalia was part of the intellectual ferment that gave rise to the deregulatory mindset in the 1970s and 1980s. He was involved in the intellectual conversations around ideas including textualist interpretive philosophy (statutes), originalist interpretation (constitutions), and free-market economic thought. Justice Scalia adopted the originalist philosophy from Judge Bork and advanced it from the pulpit of the Supreme Court. For the most part, he did not take the same leadership role in advancing the Chicago School tradition in antitrust. It would be impossible, however, in light of his long tenure on the Court and his engagement with the core intellectual philosophies that underlie much of modern antitrust, for him not to have had an impact on the body of law. And in Kodak (dissenting), Empagran (concurring), and Trinko (for the majority), he did.

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This eJournal distributes working and accepted paper abstracts dealing with all aspects of antitrust and competition policy, including mergers, cartels, monopolies, and price discrimination.

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ANTITRUST & REGULATED INDUSTRIES EJOURNALS

BERNARD S. BLACK
Northwestern University - Pritzker School of Law, Northwestern University - Kellogg School of Management, European Corporate Governance Institute (ECGI)
Email: bblack@northwestern.edu

RONALD J. GILSON
Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
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Antitrust: Antitrust Law & Policy eJournal

JAMES R. ATWOOD
Covington & Burling

JONATHAN B. BAKER
Professor of Law, American University - Washington College of Law

MAXWELL M. BLECHER
Attorney at Law, Blecher and Collins

DENNIS W. CARLTON
Professor, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

FRANK H. EASTERBROOK
Senior Lecturer, University of Chicago Law School

NICHOLAS ECONOMIDES
Executive Director, Networks, Electronic Commerce, and Telecommunications Institute, Professor of Economics, New York University - Leonard N. Stern School of Business - Department of Economics

EINER R. ELHAUGE
Professor of Law, Harvard Law School

ELEANOR M. FOX
Professor of Law, New York University School of Law

HERBERT J. HOVENKAMP
Professor, University of Iowa - College of Law

LOUIS KAPLOW
Professor of Law, Harvard Law School, National Bureau of Economic Research (NBER)

DANIEL L. RUBINFELD
Professor, University of California at Berkeley - School of Law, National Bureau of Economic Research (NBER), NYU Law School

CARL SHAPIRO
University of California, Berkeley - Haas School of Business