The FTC's Challenge to Intel's Cross-Licensing Practices

After an investigation lasting several months, in June 1998 the Federal Trade Commission brought an antitrust lawsuit against Intel Corporation based on Intel's conduct towards Intergraph, and similar conduct towards Digital Equipment Corporation and Compaq, all in the context of disputes where Intel was accused of patent infringement. The FTC charged that Intel's practices were an abuse of Intel's monopoly position in microprocessors. Is Intel's conduct anti-competitive and thus illegal under the antitrust laws? That is the central question explored in this paper. An introductory section provides some background for the case by discussing the tension between intellectual property rights and antitrust law, a tension that is evident in the FTC's dispute with Intel, and by describing the role of patents in the semiconductor industry. Section 3 provides a succinct summary of the facts surrounding Intel's conduct in each of the three patent disputes identified by the FTC. Section 4 explains the FTC's theory of how Intel's conduct was anti-competitive. Section 5 presents Intel's response. Section 6 describes the settlement reached between the FTC and Intel. The final section discusses legal and economic developments since the case was settled and remarks on the lasting implications of the Intel case.

Pioneers, Submariners, or Thicket-builders: Which Firms Use Continuations in Patenting?

The continuations procedure within the U.S. patent system has been criticized for enabling firms to manipulate the patent review process for strategic purposes. Changes during the 1990s in patent procedures affected the incentives of applicants to exploit the continuations process, and additional reforms in continuations currently are being considered. Nonetheless, little is known about applicants' use of the three major types of continuations -- the Continuation Application (CAP), the Continuations-In-Part (CIP), and Divisions -- to alter the term and scope of patents. This paper analyzes patents issued from the three types of continuations to U.S. firms during 1981 - 2004 (with priority years 1981 - 2000), and links their frequency to the characteristics of patents, assignees and industries. We find that CIPs are disproportionately filed by R&D-intensive, small firms that patent heavily, and are more common in chemical and biological technologies. Patents resulting from CIP filings contain more claims and backward citations per patent on average, and cover relatively "valuable" inventions. In contrast, CAPs cover less valuable patents from large, capital-intensive firms that patent intensively, particularly in computer and semiconductor patents. We also analyze the effects of the 1995 change in patent term on continuation applications and find that the Act reduced the use of continuations overall, while shifting the output of CAPs toward "less important" patents.

Antitrust, Innovation, and Uncertain Property Rights: Some Practical Considerations

The intersection of antitrust and intellectual property circumscribes two century-long debates. The first pertains to questions about how antitrust law and intellectual property law interact, and the second pertains to questions about how parties can exploit property rights, including intellectual property rights, to exclude competitors. This iBrief finesses these questions and turns to practical considerations about how innovation and intellectual property can impinge antitrust enforcement. This iBrief develops two propositions. First, although collaborative research and development has often been and remains unwittingly misunderstood, what is understood about it is consistent with the long- standing observation that antitrust has rarely interfered with collaborative ventures. Second, shifting focus from “intellectual property rights” to “uncertain property rights” makes it easier to understand what innovation and intellectual property imply for enforcement processes. Both intellectual property and tangible assets imply the same processes, but the boundaries of intellectual properties may be uncertain and may, in turn, allow parties to game enforcement processes in ways that would not be feasible in antitrust matters that principally feature tangible assets. Even so, uncertain property rights might not frustrate enforcement processes as the antitrust authorities may yet be able to factor parties’ strategic behaviors into the design of antitrust remedies

The strategic use of patents and its implications for enterprise and competition policies

This report was commissioned as a study into the strategic use of patents. In the course of its case investigations and legislative reviews the European Commission became aware of changes in the use of intellectual property, in particular the use of patents. It was noted that firms’ uses of intellectual property are becoming increasingly strategic. This raised concerns about the implications of firms’ patenting behaviour for enterprise and competition policy. The following report contains a comprehensive review of patenting behaviour, the extent to which patenting is becoming more strategic and the implications this has for competition and enterprise policies

Patent Portfolio Races in Concentrated Markets for Technology

Patent application numbers grow exponentially in many industries, a phenomenon that has been linked to high fragmentation of patent ownership. Contradicting these findings and theoretical arguments, we show that such fragmentation is not a precondition for sudden and strong increases in patenting. We describe and analyze a patent portfolio race in an industry with highly concentrated patent ownership, namely the newspaper printing machines oligopoly. Triangulating data from patent analysis, interviews, and document research, we find that patent strategy change by one player triggered a patent portfolio race with its main competitor. Implications for managers are that increasing patent output may yield temporary advantages but, as in a price war, implies the risk of a prisoner’s dilemma-type outcome with potentially severe implications for effectiveness and efficiency of the innovation process.Patent Strategy; Motives to Patent; Intellectual Property; Patent Thickets

Markets for technology (why do we see them, why don't we see more of them and why we should care)

This essay explores the nature, the functioning, and the economic and policy implications of markets for technology. Today, the outsourcing of research and development activities is more common than in the past, and specialized technology suppliers have emerged in many industries. In a sense, the Schumpeterian vision of integrating R&D with manufacturing and distribution is being confronted by the older Smithian vision of division of labor. The existence and efficacy of markets for technology can profoundly influence the creation and diffusion of new knowledge, and hence, economic growth of countries and the competitive position of companies. The economic and managerial literatures have touched upon some aspects of the nature of these markets. However, a thorough understanding of how markets for technology work is still lacking. In this essay we address two main questions. First, what are the factors that enable a market for technology to exist and function effectively? Specifically we look at the role of industry structure, the nature of knowledge, and intellectual property rights and related institutions. Second, we ask what the implications of such markets are for the boundaries of the firm, the specialization and division of labor in the economy, industry structure, and economic growth. We build on this discussion to develop the implications of our work for public policy and corporate strategy

Are Universities Patent Trolls?

Hold-up is a primary component of patent litigation and patent licensing today. Universities are engaged in an unprecedented surge in patenting. At the confluence of these seemingly unrelated developments is a growing frustration on the part of industry with the role of universities as patent owners. Time and again, when I talk to people in a variety of industries, their view is that universities are the new patent trolls. In this article, I argue that universities should take a broader view of their role in technology transfer. University technology transfer ought to have as its goal maximizing the social impact of technology, not merely maximizing the university’s licensing revenue. Sometimes those goals will coincide with the university’s short-term financial interests. Sometimes universities will maximize the impact of an invention on society by granting exclusive licenses for substantial revenue to a company that will take the invention and commercialize it. Sometimes, but not always. At other times a non-exclusive license, particularly on a basic enabling technology, will ultimately maximize the invention’s impact on society by allowing a large number of people to commercialize in different areas, to try out different things and see if they work, and the like. University policies might be made more nuanced than simply a choice between exclusive and non-exclusive licenses. For example, they might grant fieldspecific exclusivity, or exclusivity only for a limited term, or exclusivity only for commercial sales while exempting research, and they might condition continued exclusivity on achievement of certain dissemination goals. Particularly in the software context, there are many circumstances in which the social impact of technology transfer is maximized either by the university not patenting at all or by granting licenses to those patents on a royalty-free basis to all comers. Finally, I think we can learn something about the raging debate over who is a patent troll and what to do about trolls by looking at university patents. Universities are non-practicing entities. They share some characteristics with trolls, at least if the term is broadly defined, but they are not trolls. Asking what distinguishes universities from trolls can actually help us figure out what concerns us about trolls. What we ought to do is abandon the search for a group of individual companies to define as bad actors. In my view, troll is as troll does. Universities will sometimes be bad actors. So will non-manufacturing patent owners. So will manufacturing patent owners. Instead of singling out bad actors, we should focus on the bad acts and the laws that make them possible

The case for technology policy: A tentative evaluation

This paper is a tentative summary and appraisal of the main theoretical arguments and empirical evidence for/against an industrial policy in support of high-tech industries. The paper reviews arguments based on endogenous growth theory and strategic trade theory and surveys the most relevant pieces of empirical evidence, notably on external learning effects and international rent-shifting. The author concludes that there is no solid empirical basis for sector-specific technology policies, but that one might make a sensible case for non-discriminatory government support to knowledge creation by private firms, e.g., through a generous tax treatment of private spending on research and development.

National technology policies and international friction: Theory, evidence, and policy options

Economic theory and empirical evidence suggest that governments might usefully intervene in high-technology competition in two ways: First, they could act as a neutral agent that creates the necessary credibility, commitment and mutual trust among private companies so as to facilitate cooperation in high-risk, high-volume R&D. Second, if — in view of the externalities involved — an element of subsidization is to be added, this could be done in a nondiscriminatory fashion. A favourable tax treatment of R&D expenditures may be the most appropriate tool to achieve this task. In practice, governments do engage in targeted industrial and technology policies, whether justified on economic grounds or not. As a consequence, the string of trade conflicts in hightech industries that began in the 1980s is unlikely to end in the near future, unless substantial reforms are undertaken in some crucial areas of the international trade order. Above all, appropriate reform steps should be made with a view to the regulations on (i) subsidies, (ii) structural impediments, and (iii) dumping and anti-dumping. To mitigate the frictions that arise from a subsidization of domestic firms, a new set of rules should be established. The rules should provide that all plans to grant or to alter existing subsidies are to be notified to and approved by the WTO. Moreover, all subsidies should be ranked according to their potential distortional effects on competition and trade. For each category, quantitative limits that constrain the provision of subsidies to a certain fraction of the subsidy base should be set. To facilitate further liberalization steps, a country should be allowed to exceed these limits, if a national subsidy program offers an open access to firms located in third markets. Besides restrictive business practices of private firms, government regulations and technical standards are the most important structural impediments to trade. Existing GATT Articles already offer a multilateral route to conflict resolution in cases of structural impediments. However, this route has not been used by complainants up to now. The so-called "non-violation" clause of Article 23 GATT provides access to a multilateral dispute settlement even if the defending country has not explicitly violated GATT rules. This route should be tested and, if necessary, improved. To reduce the potential for a protectionist abuse of existing anti-dumping regulations, explicit reference to the state of competition in the relevant exporting and importing country markets should be made in anti-dumping investigations. To meet specific anti-trust concerns in hightech competition — notably with respect to network externalities, systems leverage, standardization, and innovation cartels — one might consider adopting the Draft International Antitrust Code (DIAC) that has recently been proposed by an international group of legal experts. --