Apples and Oranges: Comparing Assertions of SEPs and Differentiating Patents from an Antitrust Perspective

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Jay Jurata, Adya Baker, Mar 31, 2015

Intellectual property and antitrust laws share a common goal of fostering innovation while protecting competition. In the United States, the Patent Act bestows on the patent holder the right to exclude others from making, using, selling, or importing the patented invention, as well as the right to exploit the patented invention through licensing it to others. The Sherman Antitrust Act, while targeted toward anticompetitive conduct, does not restrict the long recognized right to freely exercise one’s independent discretion to deal, or to announce in advance the circumstances under which he or she will refuse to deal. Indeed, the possession of monopoly power, and the concomitant charging of monopoly price, is not only lawful; it is an important element of the free-market system.

Consequently, patent rights are as fundamental to preserving research and innovation as the antitrust laws are to preserving free market competition. Together these complementary bodies of law form a system that rewards risk taking and entrepreneurialism necessary for economic growth.

Intellectual property and antitrust laws also share a common goal of preventing conduct that harms competition. In the ordinary course, obtaining, licensing, and enforcing patents is beneficial conduct that should be encouraged, not impeded, by antitrust law. There are situations, however, where separating conduct that is harmful from conduct that is beneficial is difficult because there is the potential for both anticompetitive harms and economically beneficial effects.

Collaborative standards-setting activities—where companies come together in a forum to agree on industry standards that require the use of patented technology—is a perfect example of a such situation. Accordingly, the formal standards-setting process warrants strong protection against related anticompetitive conduct by holders of standard-essential patents (“SEPs”) that have expressly committed to license those patents on fair, reasonable, and non-discriminatory (“FRAND”) terms in return for their adoption in a standard. This is especially true today, when licensing rates for SEPs are growing out of proportion as some SEP holders demand increasingly exorbitant rates.

It is even more important, however, that the rationale for imposing antitrust-based limits on patents in the standards context be well-understood and distinguished from the application of antitrust-based limits on the ordinary assertion and enforcement of patents relating to non-standard essential patents (e.g., differentiating, proprietary technology). Differentiating patents, unlike SEPs, affirmatively promote innovation and thus the ordinary enforcement of such patents should not be constrained under antitrust laws, no matter how valuable those patents may be. Indeed, where these circumstances exist, the holder of a differentiating patent should be free to license and exploit its patents as it sees fit so as to ensure that the incentive-creating function of the exclusive patent rights are maintained.