[Adam Mossoff, guest-blogging, May 7, 2009 at 10:49pm] Trackbacks
Patent Thickets, Patent Pools and Antitrust:

This is my final blog posting, and I'd like to briefly raise an issue with the readers of this series about a complex policy and legal issue: antitrust and its impact on patent pools.

Among all the differences between the nineteenth century and the modern age that have been identified and discussed by VC commentators and others over the past week, this is perhaps one of the most consequential. Interestingly, it's a difference in law, not in science or technology. Yet this may have the biggest impact on patent thickets, because it makes its private-ordering solution that much harder to form.

As I discussed in my posting about the Sewing Machine Combination, this patent pool and commercial trust was attacked in the popular press as a "grinding, pitiless monopoly." In the Sewing Machine Combination's patent infringement lawsuits, defendants repeated such arguments, such as calling its litigation war chest an act of "oppressive conduct." Such arguments, however, fell on deaf ears in the courts. In one 1862 case, for instance, a federal court rejected this claim, asking rhetorically, "why they might not make a common fund for the purpose of protecting their common rights by prosecuting those they thought had infringed them, I am at a loss to conceive."

After the enactment of the Sherman Antitrust Act in 1890, this was no longer a rhetorical question for a court to ask, as the federal government embarked on a campaign of "trust busting" (to use Teddy Roosevelt's famous term).

I am not an antitrust expert, and so I am very much hoping for some substantial feedback from the VC readers. It's my understanding that, for much of its history, antitrust law prohibited patent pools as anticompetitive -- they were deemed to be a form of collusion for the purpose of squelching competition. In more recent years, this hard line against patent pools has softened a bit, as the federal government now applies a "rule of reason" analysis to determine if patent pools are pro- or anti-competitive. This requires the courts to engage in a market-specific, context-sensitive, patent-specific analysis of the nature of the pool and its function, asking such questions as whether the patents in the pool are complementary or substitutes for each other, whether prices will rise or fall, whether the pool will facilitate a product coming to market or not, etc.

Now, I think there is a legitimate philosophical question to ask about whether such concepts are even valid, but that is beyond the scope of both my paper and this blog posting. Here, my inquiry is pretty limited in scope.

Antitrust scholars acknowledge that rule-of-reason analysis is "indeterminate," which means that it is next to impossible for the firms to predict ex ante whether their actions will run afoul of the antitrust laws or not. So, here's my question: How does this indeterminacy impact the use of patent pools to resolve paten thickets? If so, does this make patent thickets more or less problematic today? In other words, is one of the reasons for the problem of patent thickets today exogenous to the patent system -- is antitrust mucking up the workings of the patent system here?

I don't know the answers to these questions yet, but it seems commonsensical that antitrust would be relevant to the patent thicket problem. The question would seem to be how much and in what way. I'm really interested in hearing from people who know more about antitrust than I do -- I'm currently researching it as part of my writing project on patent thickets -- and so any ideas, suggestions, pointers, cases, etc. would be greatly appreciated.

With that said, I'm now signing off from my guest-blogging stint here at The Volokh Conspiracy. I wanted to thank Eugene again for inviting me to do this. I had a lot of fun, and I hope you (the readers) did, too. I know that my final paper will be far improved as a result of this experience. In fact, I really enjoyed my engagements with the commentators, who are to be commended for their thoughtful and substantive remarks. The comments stayed on track and did not get sidetracked, and for that, thank you.