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Bohannan & Hovenkamp on Refusals to License Intellectual Property

By Lawrence Solum

Christina Bohannan and Herbert J. Hovenkamp (University of Iowa - College of Law and University of Iowa - College of Law) have posted Concerted Refusals to License Intellectual Property Rights on SSRN. Here is the abstract:

Unilateral refusals to license intellectual property rights are almost never antitrust violations, as is true of most unilateral refusals to deal. Concerted refusals to deal are treated more harshly under the antitrust laws because they can facilitate collusion or, in the case of technology, keep superior products or processes off the market.

In its Princo decision the Federal Circuit en banc held for the first time that §271(d) of the Patent Act protects concerted as well as unilateral refusals to license from claims of patent misuse. The provision itself is worded in the singular and makes no distinction between unilateral and concerted refusals.

Blanket legality for concerted refusals to license patents, and unused patents in particular, would have serious implications for competition and innovation. A concerted refusal to license a plant or other input can facilitate collusion by denying resources to rivals unless they can find other sources. Of course, not every concerted refusal to license should be unlawful per se. In antitrust, they are appropriately covered by the ancillary restraints doctrine. Naked agreements not to license are unlawful per se, while refusals reasonably necessary to further joint research or production would be unlawful only if market power and anticompetitive effects were proven. By contrast, reading §271(d) to authorize all concerted refusals is likely to harm both competition and the incentive to innovate. In its Independent Ink decision the Supreme Court virtually equated the scope of antitrust liability with the scope of misuse as defined by §271(d).

Blanket legality for concerted refusals to license patents, and unused patents in particular, would have serious implications for competition and innovation. A concerted refusal to license a plant or other input can facilitate collusion by denying resources to rivals unless they can find other sources. A concerted refusal to license an unused patent can go much further. Not only does it deny rivals that particular technology but it also prevents them from developing any technology independently that would infringe one or more of that patent?s claims.

Full post as published by Legal Theory Blog on November 18, 2010 (boomark / email).