Drawing the right line between the end of monopoly rights
and the start of competition has always been tricky, but the
development of globally deployed, mind-bogglingly complex
technology poses a growing challenge.
Owners of patents deemed to be essential to the standards
that ensure the compatibility and standardisation of technology
say that patent pools cut costs and make the business of
licensing far more efficient. But antitrust officials are now
paying attention to the downsides.
Last week EU
Competition Commissioner Joaquín Almunia (right)
underlined the Commission’s increasingly dim view
of industry practices relating to standard-essential patents
when he issued a statement of objections to Motorola Mobility
over its efforts to injunct Apple in a row over FRAND
In doing so, he indicated where the Commission may be going
to draw that line between patent rights and competition wrongs.
"The protection of intellectual property is a cornerstone of
innovation and growth. But so is competition," he said.
There’s growing pressure for antitrust
watchdogs on the other side of the Atlantic to get tougher on
patent pooling practices too. This week
David Balto, a former policy director at the FTC, urged his
ex-colleagues to ensure that patent pools are not used as a
pretext for naked price fixing, that the arrangements create
efficiencies that could not be achieved in their absence, and
that pro-competitive benefits outweigh anticompetitive
There are few people who would disagree with the theory.
Putting it into practice, however, is more difficult. The aim
of antitrust law is ultimately to protect consumers, but that
means different things to different people: if patent pools
provide the companies participating with more cash to use for
innovation and developing new products, is that better than
reducing barriers to entry or cutting prices in the
One option is
to ask economists to unearth data and develop their analysis.
as Robin Jacob suggested earlier this year, is simply to
look at industry outcomes. In a swipe at
economists’ attempts to value patents and
intervene in IP competition policy, he said that the mobile
telecoms sector had seen "astonishing and rapid" innovation
despite (or perhaps even because of) the use of patents in the
sector. But perhaps another is to ensure that antitrust
officials have access to resources needed to hold patent owners
to the promises that they make about their IP.
Balto says that in recent years, some high-tech companies
have acquired large patent portfolios subject to antitrust
conditions designed to ensure they do not suppress competition
by the way they use and license the IP. "Many observers,
however, remain skeptical that the parties’
commitments will be fulfilled," he concludes.
Giving competition officials the resources they need to hold
patent owners to their promises sounds an inherently sensible
middle way. It’s not just IP opponents or
capitalism conspiracy theorists who should exercise healthy
scepticism about the way patent pools work. After all, Adam
Smith himself had a few doubts about the intentions of people
of the same trade meeting together.