Author(s)
Source
Journal of Competition Law & Economics, Vol. 8, No. 1, pp. 1-46, 2012
Summary
The authors argue the FTC’s patent regulation proposal is an overreach that will disrupt and impede the IP marketplace.
Policy Relevance
The FTC’s proposal to change patent regulation is unnecessary and violates the notion that if “it ain’t broke, don’t fix it.” The FTC ought to exercise restraint rather than institute a rule that reduces private coordination in IP.
Main Points
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The Federal Trade Commission (FTC) issued a report setting forth a proposal that would change the current private coordination activities in the Intellectual Property (IP) marketplace.
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If adopted, the proposal would affect standard-setting organizations (SSOs), markets, and formal legal systems of patents, property, and contract. These are fundamental institutions in IP.
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The FTC’s proposal would change the process for pricing licenses in such a way that makes it more advantageous for patent licensees to refrain from contracting voluntarily and seek judicial pricing of licenses.
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The proposal thus would most likely reduce the amount of private party contracting and coordination in the short term and require patent holders to sue in court for infringement—a major holdup.
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One of the keys to the U.S. patent system’s success has been its traditional preference for privately negotiating IP rights without having to rely on government intervention.
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The FTC’s current proposal reverses the incentives for private coordination in favor of potential patent licensees holding out and then forcing a patent licensor to sue them in court.
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The FTC’s proposal is based on misguided measures of damages, misguided effects of damages, and misguided calculations of costs and constraints in the IP marketplace.
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The FTC’s proposal is an unnecessary overreach. The proposal seeks to institute major structural changes in the marketplace that are not needed. The FTC should refrain from instituting rules that hold-up private coordination.