Does Asymmetry Cause Anti-Competitive Practices?

Abstract

Typically the licensing of IP such as patents or trademarks is controlled by a license agreement. Although in Western Democracies there is great freedom to determine the clauses of such a contract, basic contract law and Anti-trust or Unfair Competition law may restrict the details of such a contract. There is however a concern that Anti-trust or Unfair Competition law is complex and inadequate to deal with certain business practices, particularly, relating to the negotiation and enforcement of terms of licensing contracts resulting from a gross economic imbalance between contractual partners. This can happen particularly in asymmetric partnerships/negotiations involving small and/or young firms (e.g. spin-offs, spin-outs, start-ups, SME’s), and larger organizations (e.g. multinationals). In such inter-organisational interactions tensions to co-create and capture value are interlinked between players of greatly different resources and market power. And though more often the smaller, younger firms are at disadvantage in such interactions, larger incumbents are not always ones to profit. The latter situation can occur for two possible reasons: either the larger incumbents’ smaller contract partners do not reveal anything related to their IP due to fear of misappropriation, or large incumbents interact with even larger organizations that hold the upper hand in terms of bargaining power. The present paper attempts an overview of such issues with some suggestions for improvements.

Keywords: asymmetry, anit-competitive proactices, unfair competition, anti-trust