Ilene Knable Gotts, Scott Sher, Oct 01, 2012
Recent events demonstrate that patents increasingly are being purchased and used for anticompetitive means. For example, patent assertion entities (also known as “patent trolls” or “PAEs”) collect patents to extract high licensing fees; competitors acquire patents to create blocking positions that serve to exclude other competitors from competing in downstream markets; and firms acquire patents to create “patent thickets,” which are patent collections on such a scale to make it difficult for smaller competitors to evaluate potential infringement with regard to their product development and innovation. The problem is particularly pronounced in the mobile marketplace, where intellectual property litigation is rampant, as market participants jockey for the dominant position in this hundreds-of-billions of dollars market.
A recent example involving the highly publicized patent dispute between Apple and Samsung highlights the potential for anticompetitive application of a high tech patent portfolio. In its trial brief, Samsung accused Apple of using patent enforcement to “stifle legitimate competition and limit consumer choice to maintain its historically exorbitant profits.” Although Apple ultimately prevailed in its litigation, securing a potential multi-billion dollar settlement from Samsung, as well as a potential injunction that would prohibit Samsung from selling many of its mobile products in the United States, that case and others demonstrate the potential exclusionary effect of IP in these highly competitive mobile markets.
Indeed, under current marketplace dynamics, a company competing in high-tech industries must amass a large patent portfolio to defend itself against the inevitable lawsuits that competitors or non-practicing entities (or “patent trolls”) bring either to impose high rents on necessary technology components or prevent new competing products from entering the market. It is for this reason that antitrust authorities around the world have taken a heightened interest in IP market dynamics, and have conducted a number of very high profile investigations, and announced several significant consent decrees.