Exploitative Abuses of Intellectual Property Rights

Posted by Social Science Research Network

Exploitative Abuses of Intellectual Property Rights

Harry First (New York University School of Law)
Abstract:      It is the standard view in the United States that US antitrust law does not reach acts of exploitation by a monopolist, particularly monopoly pricing (“rent extraction”). Even more so for intellectual property, where U.S. courts have emphasized the right of an intellectual property right holder to raise prices and exploit its rights to the fullest, constrained only by market demand. Competition law in the rest of the world appears to be otherwise, however, with many countries generally condemning excessive high prices by dominant firms, even if often reluctant to invoke such provisions in practice.

Despite apparent differences in legal approaches, current enforcement practice worldwide with regard to price-raising exploitation of intellectual property rights by monopolists shows a uniform willingness to condemn such conduct as anticompetitive. This paper describes this concern for exploitation, focusing on competition law enforcement in the United States, China, Europe, Japan, and Korea in three substantive areas: patents subject to FRAND licensing obligations, disclosure requirements imposed on patent holders with monopoly power to prevent them from exploiting licensees or potential licensees, and post-expiration royalties.

This paper argues that this concern for exploitative behavior is consistent with sound competition policy. Preventing the undue exploitation of intellectual property rights is an important aspect of economizing on the reward we give to incentivize innovation. Antitrust has traditionally favored placing some limits on intellectual property rights and placing greater reliance on the incentives for innovation that competitive markets can provide.