Restraint Of Trade

Hovenkamp on Walker Process and Exclusionary Uses of Patents

As noticed on the Antitrust & Competition Policy Blog, Professor Hovenkamp has written a new piece entitled   "The Walker Process Doctrine: Infringement Lawsuits as Antitrust Violations."

I highly recommend the paper, which is available here:  Download hovenkamp_walker_process.pdf, to practitioners working on cases involving the exclusionary use of patents, as well as anyone studying the issue generally.  Judges should be aware of it too.  It brings some clarity to the analysis.

The issue addressed is how patents may be used in an exclusionary manner to improperly obtain or maintain monopoly power and how antitrust law can address this.  In typical fasion, Hovenkamp avoids getting bogged down in formalistic distinctions and instead stays focused on the harm to competition and how it should be addressed.

For example, some defendants have argued in antitrust cases that, unless the patent allegedly used to obtain monopoly power was obtained by outright fraud on the Patent Office, antitrust law cannot provide a remedy.  Hovenkamp correctly rejects this:

"[I]nfringement actions can also be qualifying exclusionary practices under [section] 2 when they are based on valid patents that are known by the infringement plaintiff to be unenforceable as a result of improprieties in procurement, or on valid patents but where the infringement plaintiff knew or should have known that the infringement defendant was not an infringer."  (p4)

Others have argued that there should be no liability for wielding an improperly-obtained patent, as long as a patent infringement suit was not actually filed.  Hovenkamp points out that patents can be enforced in an exclusionary manner in many ways - not just by filing a lawsuit:

"Of course, one might enforce a fraudulently obtained patent in other ways than by making or threatening infringment actions.  For example, one might simply assert the patent and warn a potential rival to stay out of the market the patent assertedly covers; or one might insist on collecting a royalty for technology allegedly covered by such a patent.  Clearly a patent obtained by fraud could be used in an anticompetitive way falling short of an infringement suit.  Whether such practices are sufficiently exclusionary so as to violate the antitrust laws cannot be stated categorically."  (p10-11)

Finally, Hovenkamp rejects the claim made by some - including in the DDAVP case discussed below - that purchasers of products who were overcharged because of exclusionary uses of patents should not have standing to bring damages claims.  He notes that the DDAVP decision on this point is "odd" and "apparently incorrect."  (fn 102).

 

A first in China

The Beijing Times and many other sources (see one here) are reporting that "the No.1 Intermediate People's Court of Beijing" rejected an anti-monopoly case under the nation's new antitrust law, which went into effect last month. 

The case, which appears to be the first one brought under the law, was dismissed on what sounds like statute of limitations grounds.  The facts are difficult to decipher.

"The plaintiffs were four anti-counterfeiting ventures based in the Chinese capital led by Beijing Zhaoxin Information Technology Co., Ltd.

They insisted the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), an industry regulator, violated two Chinese laws including the anti-monopoly law in the latter's efforts to popularize an online network known as Product Identification Authentication and Tracking System (PIATS). They also raised a legal case with the Beijing court to sue the latter for administrative monopoly on Aug. 1, which coincided with the date when the country's first anti-monopoly law took effect."

The real test of the new law will be how Chinese regulators apply it to Coke's $2.4 billion bid to acquire China Huiyuan Juice Group Ltd.

As the WSJ reports, the Ministry of Commerce, which oversees application of the antimonopoly law and will be responsible for defining the relevant market, has yet to be staffed.  Coke controls 28% of the Chinese juice market, focusing on the lower end with its Minute Maid brand.  Huiyuan competes mostly in the high-end juice market.

As the Whole Foods / Wild Oats case has shown (see la times story), market definition is both crucial and elusive. 

Lande: Taking on Intel is World War 4.0

Following in the wake of the European Commission's issuance of a supplemental Statement of Objections (SSOs) to Intel (see post below), Robert Lande, professor of law at University of Baltimore and a director of the American Antitrust Institute, published a provocative opinion piece in the Baltimore Sun last week:  "World War 4.0:  Consumers will win with pursuit, punishment of any anticompetitive practices by Intel."

See the post on the AAI website here.

Lande notes the parallels between the emerging actions around the globe against Intel and the actions successfully waged against Microsoft's abuse of its dominant power of the PC operating system market in the 1990s and early 2000s.  "Together, Microsoft and Intel monopolize the two key products that comprise PCs."  And just as Microsoft employed a variety of anticompetitive tactics lacking business justification to maintain its monopoly, Lande notes the EC's SSO indicates Intel may have done the same thing. 

As we observed below, the EC suggests, for example, that Intel may have made payments in order to induce a leading computer manufacturer to delay the planned launch of a product line incorporating an AMD based CPU. 

Lande:  "To use an Olympic-year analogy, Intel is not being accused of taking steroids to run faster.  Rather, it allegedly tripped its only rival."

Although the World War analogy is provocative, Lande is certainly right that the charges against Intel potentially mean that "tens of millions of computer users" could have been affected.