Patents of Damocles
48 Pages Posted: 29 Oct 2008 Last revised: 28 Dec 2013
Date Written: October 28, 2008
Patentees sometimes use fraudulently procured patents to secure illegal monopolies, excluding efficient competitors and raising prices to consumers. While antitrust doctrine condemns the acquisition of monopoly power through fraudulently procured patents, antitrust liability hinges on whether the monopolist actually "enforced" the patent. Despite the critical importance of the definition of patent enforcement for antitrust law, no scholarship or commentary exists that addresses what conduct constitutes patent enforcement. Without explanation, lower courts have narrowly defined patent enforcement to mean either filing an infringement lawsuit or explicitly threatening to do so. This Article explains how monopolists with fraudulently procured patents have exploited this narrow conception of patent enforcement in order to effectively exclude competitors without triggering antitrust scrutiny.
This Article argues that whenever a monopolist exercises the exclusionary power of a patent, it is in fact effectively enforcing the patent for antitrust purposes. The Article concludes that courts must broaden their conception of "patent enforcement" to include, depending on context, publicly flaunting one's patent, publicly stating a general intent to sue infringers, accusing competitors of infringement, threatening competitors' business partners, and licensing activities. Courts currently do not consider these actions to ever constitute patent enforcement. As a result, the current interpretation of the enforcement requirement for antitrust purposes renders patent fraud cost-beneficial. Absent antitrust liability, it is rational for a monopolist to commit fraud on the PTO, maintain the patent as an ever-present threat, and simply not actively enforce it. These are not incentives that either patent law or antitrust law should create. Expanding the definition of patent enforcement will close the loophole that currently allows firms to acquire and exercise illegal monopoly power through the acquisition of fraudulently procured patents.
Keywords: antitrust, patent, intellectual property
JEL Classification: L4, K21
Suggested Citation: Suggested Citation