Journal of Competition Law and Economics Advance Access published online on May 15, 2008
Journal of Competition Law and Economics, doi:10.1093/joclec/nhn010
THE STOCHASTIC RELATIONSHIP BETWEEN PATENTS AND ANTITRUST
This article develops a novel theory by which to construe the interaction between the patent and antitrust laws. The rules of these respective disciplines are often portrayed as conflicting in means, yet harmonious in purpose. Although the intellectual property and antitrust laws have ostensibly divergent views on the role of competition, their interaction is typically limited to one of constraint. More specifically, antitrust rules have been (poorly) designed to limit the exclusivity inherent in a patent grant to the claimed invention alone. This article, however, articulates a new vision for the role of antitrust: it posits that competition rules operate as a stochastic regulator of exclusionary patent rights. The Sherman Act constrains patentees' efforts to positively transform the probabilistic nature of their intellectual property rights through contract. Yet, because the empirical calculation of optimal innovation rates is an elusive, if not Sisyphean, task, the normative desirability of the foregoing fact is abstruse. Nevertheless, policymakers' inability to pinpoint precisely the ex post rewards required to trigger ideal levels of ex ante investment need not bind our hands to inaction. If contemporary rates of innovation are deemed acceptable (even if not necessarily perfect), there may be ways to trigger equivalent levels of ex ante investment with lower social cost. In this regard, it is clear that currently enacted competition rules significantly accentuate the uncertainty surrounding patents' apotropaic effect. Concluding that contracts securing otherwise stochastic rights may be highly desirable, the article calls for the incorporation of this concern into contemporary rules, with modest substantive effect, and further advocates a qualified antitrust immunity for "gold-plated" patents if and when they are introduced.
* Associate, Latham & Watkins LLP. BBL (Int'l), University College Dublin, Ireland; J.D., Stanford Law School; LL.M, J.S.D. University of Chicago Law School. E-mail: Alan.Devlin{at}lw.com. The author would like to express his most sincere gratitude to Professor Michael Jacobs of DePaul University, Professor Mark Lemley of Stanford Law School, and Professor Richard Epstein of the University of Chicago.