Posts in Antitrust

This week on Capitol Hill, the heated drug pricing debate is back in the spotlight, with a Senate Judiciary Committee hearing on intellectual property and the price of prescription drugs on Tuesday. In the House of Representatives, oversight hearings will examine both the activities of the U.S. Patent and Trademark Office and data security efforts made by the Federal Trade Commission. Off the Hill, The Cato Institute looks at U.S. cyber defense capabilities, and the week closes with a Brookings Institution event on China’s actions towards global tech dominance.

Now that Apple and Qualcomm have made peace it would be easy to allow the case and the issues to recede into the background. That is likely what Apple would prefer, and almost certainly why Apple made the decision to settle with Qualcomm rather than proceed with trial. The case presented an existential threat for Qualcomm, which would have required the San Diego tech company to fight as if the company depended on victory–because it did.  What is most shocking is how successful Apple was in its coordinated effort to manipulate the licensing market and effectively extinguish any reasonable notion of a fair, reasonable, and non-discriminatory rate (FRAND) in the process. Meanwhile, fabricated licensing rates wholly unrelated to the Qualcomm portfolio were used by Apple to dupe regulators into chasing Qualcomm across the world for committing phantom antitrust violations.

Patents are often referred to as monopolies. But that is a fundamental misunderstanding of how patents work to enhance competition. The truth is that a patent is a natural anti-monopoly. In a functioning patent system, inventions become investible assets when they are patented, and the value of the invention increases as market demand increases. Because of the direct relationship between market demand and patent value, a patented invention can attract enough investment to compete with entrenched incumbents in the market for the invention. This effect introduces new competitors into the market who are protected against incumbents for a long enough period that they can survive after the patent expires. Thus, patents act to increase competition by introducing new competitors into the market and thereby create competitive markets. But perhaps even more important, some inventions deliver a strong dose of creative destruction to monopolistic incumbents who did not innovate fast enough, causing those companies to fail and clearing the market of dead weight, thus opening the market to innovative new companies. Patents are the ultimate anti-monopoly in a free market. But for this to work, the market must function undisturbed by crony laws and regulations. A patent must be a presumed valid “exclusive Right.”

IPWatchdog’s most recent Patent Masters™ Symposium, held Monday and Tuesday March 25-26 in Washington, D.C., examined the state of the U.S. patent system and how we arrived here. Some concluded that Congress, rather than the courts, must take action to resolve the many conflicts that presently exist in the muddled judicial approach to patents that has been developed over the last two decades or the U.S. patent system will become irrelevant. While the mainstream narrative traditionally has held that patents impede innovation by making access to technology too difficult or expensive, the narrative that unfolded over the two days of discussions with some of the leading legal experts in the field told quite an opposite tale. Institutions such as the Cleveland Clinic are closing up their diagnostics shops due to uncertainty around Section 101 law in that area, and small businesses are unable to secure funding due to the many risks and expenses surrounding patent enforcement in a post-America Invents Act environment. These developments demonstrate that patents are vital to economic prosperity and that weak patents result in medical and other technologies simply not being made here. Many of the Masters lamented the fact that China and Europe currently have more reliable patent systems than the United States, precisely because those countries have begun to copy the previous U.S. approach, while we stray farther away from it. Alden Abbott, General Counsel of the U.S. Federal Trade Commission, delivered a keynote speech in which he emphasized that uncertainty around the ability to obtain patents is also harming the U.S. competitive process.

Thank you, Gene, and your colleagues from IP Watchdog, for having invited me to address this great conference.  Today I will focus on the interaction between patent law reform and competition policy, with particular regard to questions of patentability raised by proposals to reform Section 101 of the Patent Act (“Section 101”), which specifies what subject matter is patentable.  My remarks are solely attributable to me, and should not be taken to represent the views of the Federal Trade Commission or of any individual Federal Trade Commissioner. After briefly describing the interrelationship between patent law and antitrust law, I will highlight the role of the Federal Trade Commission’s policy interest in the structure of the law bearing on patentability.  That interest is substantial, reflecting the reality that legal rules governing patents – and the use of patents in the economy – have a profound effect on the competitive process and innovation.  In particular, I will focus on how Section 101 reform might enhance the vibrancy of competition. Let me caution that my remarks are meant to be a bit provocative and speculative, aimed at furthering a broader dialogue.  I obviously cannot speak for the Patent and Trademark Office, which administers our patent law system.  

This week in Other Barks & Bites: the Supreme Court asks for the U.S. Solicitor General’s view on whether patents that claim a method of medically treating a patient automatically satisfy Section 101; a jury gives Qualcomm a win in its ongoing patent battle with Apple; the World Intellectual Property Office announces record-breaking totals for international patent applications and cybersquatting actions; Cisco avoids a nearly $60 million damages award at the Federal Circuit; McDonald’s appeals its loss in the EU over its Big Mac trademark; Tesla files trade secret lawsuits against former employees; Peloton faces a copyright suit from music publishers who are seeking $150 million; and Google gets another billion-dollar-plus fine from antitrust regulators in the EU.

n an age with instantaneous commentary on social media, the wheels of justice in courts seem to move at a glacial pace, especially in patent infringement lawsuits in the fast-paced smartphone industry. Yet, courts have been methodically receiving and meticulously reviewing the evidence in Qualcomm’s lawsuits against Apple Computer for infringing its patents. And, like the tortoise who eventually wins over the speedy hare, the judgments are just now coming out against Apple. This past December, a Chinese court issued a preliminary injunction against Apple selling iPhones that infringed Qualcomm’s patents. A week later, A German court issued an injunction against Apple selling iPhones in that country that infringed Qualcomm’s patents. Last week, a jury in the United States found Apple liable for infringing Qualcomm’s patents and awarded Qualcomm $31 million in damages.

A number of organizations, including Ericsson, Nokia, Philips, Qualcomm, the Innovation Alliance and the Licensing Executives Society, have sent two separate letters to U.S. Attorney General William Barr, USPTO Director Andrei Iancu, and Secretary of Commerce Wilbur Ross stating their support for the United States’ decision to withdraw the Department of Justice, Antitrust Division’s assent to the 2013 joint DOJ-U.S. Patent and Trademark Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments” (the 2013 Joint Policy Statement). The letter sent by Ericsson, Nokia, Philips, and Qualcomm begins by explaining that those signing the letters collectively spend many billions of dollars annually to “the development of cutting-edge that substantially contribute to the social welfare and quality of life of U.S. consumers,” and “and employ tens of thousands of people in the U.S.” The letter goes on to explain that injunctions are necessary to address the widespread patent infringement that has occurred in recent years; infringement that risks innovators’ ability to continue to innovate and create next generation technologies. Without property protections it is economically irrational to invest the billions of dollars required to create cutting-edge technologies.

This week in Other Barks & Bites: the U.S. Patent and Trademark Office promotes Scott Boalick to Chief Judge of the Patent Trial and Appeal Board (PTAB); the agency also announces a new pilot program for motions to amend at the PTAB; India’s Cabinet votes to bring trademark and industrial design law into accord with international standards; a trial date is set in the copyright case brought by the heirs of Marvin Gaye against Ed Sheeran; a Southern California district judge rules that a Dr. Seuss/Star Trek mash-up is a transformative fair use; Apple alleges that someone has tampered with a key witness in the Qualcomm patent infringement case; and UK finance ministers issue a report calling for more antitrust activity against American tech giants, including Facebook and Google.

On the morning of Thursday, March 7, the House Ways & Means Committee’s Subcommittee on Health held a hearing titled Promoting Competition to Lower Medicare Drug Prices. The hearing focused a great deal on the effect of patents in the pharmaceutical industry as they relate to pricing. Although some of the Republican membership of the subcommittee pointed out issues with various proposals to limit patent protections for drugmakers, the panel acted largely as a firing squad for patents. In his closing statement, Rep. Doggett expressed his dissatisfaction with the tenor of the day’s debate. “I view it as encouraging that there is bipartisan recognition of the serious problems so many Americans are facing with, really, prescription price gouging,” he said. “The question is whether we’ll have any bipartisan agreement on doing anything about it.”

This week on Capitol Hill, both houses of Congress are abuzz with a full schedule of hearings related to science, technology and innovation topics. In the House of Representatives, various committees explore a proposed net neutrality bill, innovation in the aviation industry, and ways to improve competition in the pharmaceutical industry—a hot topic of debate in recent weeks. Both the House and the Senate will hold hearings on the future of America’s space program. The Senate will also consider consumer data privacy regulations, rural broadband investments, and military applications of artificial intelligence. On Tuesday, a pair of events at the Brookings Institution will look at the impact of technological advances on public policy, as well as the artificial intelligence race between the U.S. and China.

This week on Capitol Hill and in the Washington D.C. area, the Supreme Court grants cert in Iancu v. NantKwest; the U.S. House of Representatives will hold several hearings on important topics in technology, including electronic health records modernization for veterans, cybersecurity measures for voting systems and research on the nexus between energy and water. House committees will also explore ways to improve broadband access for small businesses and promote generic competition to reduce branded pharmaceutical prices. Drug pricing, which often involves a focus on patents, is the subject of a two-part hearing series in the U.S. Senate. Other Senate hearings this week will look at data breaches in the private sector and IP issues related to Chinese trade. The week is book-ended by a pair of events hosted by the Information Technology & Innovation Foundation, including a Thursday event that looks at the impact of the Bayh-Dole Act of 1980 and controversial calls to enforce certain provisions of the law to reduce drug prices.

This week on Capitol Hill, the newly revived Senate Subcommittee on Intellectual Property meets for the first time this term to discuss the 2019 “Annual Intellectual Property Report to Congress”; other Senate committee hearings will look at concerns related to drug pricing, the effects of the Made in China 2025 initiative on American industry and proposed legislation to support innovation in carbon capture technologies; U.S. House of Representatives committees hold hearings focusing on issues from cybersecurity in the nation’s surface transportation and defense agency to energy research funding programs and trade tensions between the U.S. and China; and elsewhere in the nation’s capital, the Heritage Foundation looks at issues related to the modernization of the United States’ nuclear submarine fleet and the Cato Institute holds a day-long event on Friday to examine the topic of regulating the activities of American tech giants like Facebook and Amazon.

This week in Other Barks & Bites: the Chinese and U.S. governments hash out intellectual property issues; a prominent New York City politician joins the effort to break the patent on Gilead’s Truvada; Qualcomm tells the ITC that Apple’s design around undermines the agency’s finding that an exclusion order shouldn’t be entered against infringing iPhones; the Fortnite copyright cases take a new turn; Babybel loses the trademark on its red wax cheese coating in the UK; Fisker & Paykel and ResMed settle their worldwide patent dispute; Facebook could face major FTC fines for payments from children playing video games on the platform; and reports indicate that Pinterest is pursuing an initial public offering.

This week in Other Barks & Bites: the USPTO appoints a new Chief Information Officer; Apple uses Qualcomm chips in Germany while American professors urge the ITC to deny exclusion of iPhones found to infringe Qualcomm patent claims; two important IP cases will be heard by the U.S. Supreme Court next week; the EU approves copyright reforms, including the hotly-debated Article 13; Fresh Prince of Bel-Air star Alfonso Ribeiro runs into issues at U.S. Copyright Office; Facebook could owe billions in fines for consumer data practices; a jury verdict dings Walmart for nearly $100 million in trademark infringement case; and Google announces multi-billion dollar plan to expand offices and data centers across the United States.