Patent Holdup, Patent Remedies, and Antitrust Responses

Abstract

Commentators on antitrust and law over the past decade have advanced the view that patent poses a serious threat to innovation and consumer welfare. In recent months, however, a more skeptical literature has emerged to challenge holdup on both theoretical and empirical grounds. This article responds to the skeptics' theoretical challenge, by placing holdup within the broader class of holdup or holdout behavior as discussed in mainstream law and economics. Defining holdup as a type of opportunistic behavior that threatens substantial harms to both static and dynamic efficiency, I argue that both the law of remedies and the law of antitrust should play a role (albeit a limited one) in responding to, or enabling private efforts to avoid, holdup. As for remedies, I argue, among other things, that consistent with the Supreme Court's decision in eBay Inc. v. MercExchange, L.L.C. courts should award damages in lieu of injunctive relief in a subset of infringement cases involving serious risks of holdup-generated harm to either static or dynamic welfare. On the antitrust side, I argue, contrary to the D.C. Circuit's holding in Rambus, Inc. v. FTC, that a owner's deceptive conduct that results in the adoption of its patented technology or that enables the owner to avoid a RAND licensing commitment can be actionable as a violation of Sherman Act ? 2. I also argue that, consistent with the recommendations of many recent observers (including the Antitrust Modernization Commission), joint bargaining between standard setting organization members, on the one hand, and individual members/patent owners, on the other, over the price terms of licenses should be evaluated under the rule of reason-though only to the extent that such collective bargaining is reasonably necessary to avoid the threat that holdup poses to dynamic efficiency.