The Global Antitrust Attack On Intellectual Property Rights And What The U.S. Should Do About It
There is a disturbing trend among international antitrust authorities: using antitrust laws to devalue intellectual property rights, to intervene in favor of one side or another in licensing disputes, and to impose unwarranted extra-jurisdictional remedies on patent licensing (i.e., foreign governments telling U.S. companies how to price U.S. and other foreign patents). This trend is a serious problem for innovation, economic growth, and consumers.
For example, several countries, including China, India, Korea, and even some government officials in the United States, have proposed or imposed antitrust rules that would diminish the value of patents essential to interoperability standards such as the 3G and 4G standards critical to innovation in wireless markets.
The new antitrust rules seek to regulate price by, among other things, creating an antitrust sanction (with the threat of treble damages or other high fines) for charging a royalty based on a percentage of the end-user device (such as a mobile phone) as opposed to on the smallest component part (such as a chipset). Such rules ignore the economic evidence finding that the existing industry practice of end-user device licensing tends to result in lower overall prices for consumers and to spur innovation. They also overlook that wireless cellular technologies often read on the system or device level, rather than the component level. These rules interfere with private arms-length negotiations in patent licensing and ignore the number of considerations that may dictate the parties’ selection of a royalty base. Industry practice and the reduction of transaction and administrative costs (easy monitoring or verification of the number of units sold) are a few such considerations.
One recent example is Korea’s approximately $865 million fine and decision against Qualcomm in which Korea’s antitrust authority seeks to dictate how the company will license its patents and to act as the world’s competition police by imposing remedies not only on Korean patents, but also U.S. and other non-Korean patents. Such remedies conflict with principles of international comity and are likely to result in significant substantive conflicts with the competition agencies of other countries given the wide variety of approaches taken globally on antitrust. Honoring principles of comity can mitigate a race to the bottom in competition law enforcement by preventing the lowest common denominator approach from governing across the board.