Patent Assertion Entities and Antitrust: A Competition Cure for a Litigation Disease?

Posted by Social Science Research Network

Should Market Definition Be Abandoned in Estimating Market Power? An Affirmative Answer from Qihoo v. Tencent–  Joshua D. Wright (Federal Trade Commission) & Douglas H. Ginsburg (U.S. Court of Appeals for the District of Columbia Circuit)

Abstract: PAEs have been much in the news because of certain practices that imply their demand for royalties is nothing more than extortion based upon the nuisance value of a lawsuit the PAE might bring, or explicitly threatens to bring, if no agreement is reached with the party practicing the patent. The PAE phenomenon has prompted suggestions that the antitrust laws be applied to limit the effect that PAEs have upon innovation by the companies most affected, typically those in the high-tech sector.

We conclude there is no evidence at this point that PAEs create a new or unique antitrust problem, that their business model warrants more or less scrutiny than others as a matter of antitrust analysis, or that competition enforcement agencies would be coming to the aid of consumers by devising creative extensions of or departures from the standard antitrust framework in order to address PAEs’ conduct and business arrangements. If and when PAEs present legitimate antitrust problems by acquiring or otherwise creating market power to anticompetitive ends, which is certainly possible, the standard antitrust framework is fully capable of reaching that conduct and providing adequate remedies.