Patents, Property, and Competition Policy

Article excerpt

I. INTRODUCTION ........................................................................................................ 1243

II. COMPETITION POLICY AND PATENT PROPERTY: BOUNDARIES AND PRIORITIES ...... 1247

A. Walker Process and the Boundary Problem ....................................................... 1248

B. Uncertain Boundaries and Patent Lawsuit Settlements ..................................... 1251

C. Priorities, Standard Setting and Holdup ............................................................ 1252

III. COMPETITION POLICY UNDER CLEAR PROPERTY RIGHTS ....................................... 1254

IV. WHO BENEFITS FROM AMBIGUOUS OR OVERLY BROAD PATENT BOUNDARIES AND PRIORITIES? ..................................................................................................... 1256

V. CONCLUSION: PATENT FAILURE, INTEREST GROUPS, AND COMPETITION POLICY ... 1257

I. INTRODUCTION

Should competition policy have a more prominent role than it currently has in helping the patent system promote innovation? In many other regulated industries the antitrust laws have a role, although often attenuated, in promoting competition. As regulation is less "complete. there is generally more room for antitrust. For example, the role of antitrust has tended to increase under deregulation.1 While the two most recent Supreme Court decisions on the issue refused to apply the antitrust laws to agency regulated practices, both did so because the Court believed that the regulatory agencies in question were taking an active and effective role in monitoring competitive problems.2

In many ways the patent system resembles partial regulation. First, the patent application process involves a petition to a government agency followed by a largely ex parte procedure in which the agency and the applicant negotiate the issuance of a patent. Unlike many other regulatory regimes, there is no automatic period of public comment or objection by third parties.3 In any event, once a patent issues the process of agency regulation largely comes to an end for that particular patent. Nearly all subsequent government supervision comes from the courts through privately initiated lawsuits. To be sure, judicial inquiries during this period may relate back to the regulatory process-for example, a Walker Process antitrust claim may require reconsideration of the circumstances under which a patent was obtained, but this task generally befalls the court or perhaps the Federal Trade Commission or International Trade Commission, rather than the Patent & Trademark Office (PTO) itself.4

The decision to regulate generally involves the identification of markets where simple assignment of property rights is not sufficient to produce satisfactory competitive results, usually because some type of market failure obtains.5 By contrast, if property rights are well defined at the time they are initially created and can subsequently be traded to some reasonably competitive equilibrium, then regulation is thought not to be necessary. In such cases the antitrust laws have a significant role to play in ensuring that the market can be as competitive as free trading allows.

One problem with the patent system is that it has neither significant ongoing regulation nor a clear and effective initial assignment of property rights that serves to make the market perform competitively. One could attempt to correct this system either by defining the initial assignment of property rights more clearly or else by imposing more elaborate regulation that continued through the period subsequent to patent issuance and perhaps even for the remainder of a patent's enforcement life. Most of the proposals for reform would prefer the former course of action.

Historically the antitrust laws treated patents as a species of monopoly. Judges spoke of the "monopoly patent grant," and were strongly suspicious of exclusive or collusive practices that they viewed as unauthorized attempts to expand patent rights. …