Mind the Gap: Economic Costs and Innovation Perils in the Space between Patent and Competition Law

Posted by D. Daniel Sokol

George Addy, Davies Ward Phillips & Vineberg LLP and Erika Douglas, Davies Ward Phillips and Vineberg LLP ask readers to Mind the Gap: Economic Costs and Innovation Perils in the Space between Patent and Competition Law

ABSTRACT: This article considers a gap between patent law and competition law that is being profitably exploited by “patent trolls”, firms whose business is the acquisition and assertion of patents against parties who are already using the patented technology. First, we frame the discussion by considering the interaction of competition law and patent law and how the interaction can, in theory, impact innovation. Then we look at the example of patent trolls and how they are taking advantage of an absence of competition or patent law enforcement: what they are, the reasons for their recent emergence and the main arguments in defence of patent trolling. Next, we examine the economic cost and harm to innovation caused by patent trolls as they relate to wider issues in competition and patent law and policy, including asymmetry of litigation risk, the hold-up problem and the growing valuation of patents based on the right to exclude rather than the economic value of the underlying invention. Finally, we survey the efforts to stem patent abuse, including patent trolling, through market, judicial, legislative and regulatory means. Regardless of the source of the solution, be it patent or competition, law or policy, patent trolling highlights a clear need for reform to achieve the innovation goals of both the competition and patent regimes. Law makers, enforcement agencies, regulators and the courts need to bridge the ever-widening gap.