Patent Assertion Entities and Antitrust: A Competition Cure for a Litigation Disease?

27 Pages Posted: 1 Apr 2015

See all articles by Joshua D. Wright

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty

Douglas H. Ginsburg

U.S. Court of Appeals for the District of Columbia Circuit; George Mason University - Antonin Scalia Law School, Faculty

Date Written: March 30, 2015

Abstract

PAEs have been much in the news because of certain practices that imply their demand for royalties is nothing more than extortion based upon the nuisance value of a lawsuit the PAE might bring, or explicitly threatens to bring, if no agreement is reached with the party practicing the patent. The PAE phenomenon has prompted suggestions that the antitrust laws be applied to limit the effect that PAEs have upon innovation by the companies most affected, typically those in the high-tech sector.

We conclude there is no evidence at this point that PAEs create a new or unique antitrust problem, that their business model warrants more or less scrutiny than others as a matter of antitrust analysis, or that competition enforcement agencies would be coming to the aid of consumers by devising creative extensions of or departures from the standard antitrust framework in order to address PAEs’ conduct and business arrangements. If and when PAEs present legitimate antitrust problems by acquiring or otherwise creating market power to anticompetitive ends, which is certainly possible, the standard antitrust framework is fully capable of reaching that conduct and providing adequate remedies.

This is not to say some activities of PAEs are not problematic or do not call for law reform insofar as PAEs are exploiting aspects of the litigation system to extract settlements based not upon the merits of their claims but rather upon the cost of defending against them. The rise of PAEs, however, does not mark the first time lawyers have found a way to profit from bringing or threatening to bring cases purely for their settlement value. Indeed, this has been a recurring problem, though it has arisen in a variety of otherwise unrelated types of litigation.

Therefore, we suggest caution before changing substantive antitrust standards or enforcement policies to reach PAEs rather than proceeding upon the reasonable premise that the inefficiencies associated with PAEs are the result of a litigation problem.

Keywords: antitrust law, competition, innovation, intellectual property, litigation, patent assertion entities, PAE, United States Patent and Trademark Office, PTO

JEL Classification: K11, K21, K41

Suggested Citation

Wright, Joshua D. and Ginsburg, Douglas H., Patent Assertion Entities and Antitrust: A Competition Cure for a Litigation Disease? (March 30, 2015). Antitrust Law Journal, Vol. 79, No. 2, pp. 501-526, 2014; George Mason Law & Economics Research Paper No. 15-11. Available at SSRN: https://ssrn.com/abstract=2587191

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

Douglas H. Ginsburg (Contact Author)

U.S. Court of Appeals for the District of Columbia Circuit ( email )

333 Constitution Ave NW
Room 5523
Washington, DC 20001
United States

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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