Lev­el­ing the an­titrust play­ing field

Why for­eign an­titrust bul­ly­ing of Amer­i­can in­no­va­tors must stop

The Washington Times Daily - - OPINION - By David Lund and Matthew Bar­blan Matthew Bar­blan is ex­ec­u­tive di­rec­tor and David Lund is the the John F. Wither­spoon le­gal fel­low at the Cen­ter for the Pro­tec­tion of In­tel­lec­tual Prop­erty at An­tonin Scalia Law School, Ge­orge Mason Univer­sity.

Amer­i­can busi­nesses are suf­fer­ing as for­eign gov­ern­ments mis­use their an­titrust laws to dis­crim­i­nate against U.S.based com­pa­nies. A re­cent re­port from Cham­ber of Com­merce’s In­ter­na­tional Com­pe­ti­tion Pol­icy Ex­pert Group ex­am­ined this prob­lem, and Congress is now hold­ing hear­ings on the topic. Un­for­tu­nately, com­pa­nies that rely on in­tel­lec­tual prop­erty (IP) are par­tic­u­larly vul­ner­a­ble to abuse. As the re­port notes, “le­git­i­mate IP rights are of­ten not re­spected for their role in in­cen­tiviz­ing in­vest­ment in in­no­va­tion that can have an enor­mously pos­i­tive long term im­pact on com­pe­ti­tion.”

By se­cur­ing to in­no­va­tors ex­clu­sive prop­erty rights to the fruits of their pro­duc­tive labors, in­tel­lec­tual prop­erty law in­cen­tivizes in­no­va­tion and forms the foun­da­tion of the myr­iad part­ner­ships and trans­ac­tions that en­able cre­ators and in­no­va­tors to com­mer­cial­ize their in­ven­tions. In the­ory, an­titrust law is sup­posed to sup­port the IP sys­tem by pro­vid­ing a fair mar­ket­place where in­no­va­tive com­pa­nies thrive ac­cord­ing to their own merit. The main the­sis of the Cham­ber’s re­port, how­ever, is that sev­eral coun­tries are mis­us­ing their an­titrust laws to pur­sue do­mes­tic in­dus­trial pol­icy goals that al­low the govern­ment to pick par­tic­u­lar win­ners and losers.

When an­titrust law is used for in­dus­trial pol­icy goals or po­lit­i­cal fa­voritism, it un­der­mines the ba­sic premise of the IP sys­tem. Of­ten the se­lected win­ners are cherry-picked na­tion­als of the coun­tries at is­sue. This harms in­no­va­tive Amer­i­can com­pa­nies who strive to com­pete in these mar­kets based on the ac­tual eco­nomic value of their prod­ucts and IP.

The Cham­ber’s re­port dis­cusses sev­eral im­proper uses of an­titrust law that un­der­mine IP own­ers’ abil­ity to freely de­ploy their prop­erty rights in the mar­ket­place.

One key prob­lem is the in­con­sis­tent ap­pli­ca­tion of vague “fair­ness” con­sid­er­a­tions. Even though it makes per­fect sense — both from an eco­nomic and a moral stand­point — for IP own­ers to com­mand ro­bust li­cense fees when their IP en­ables im­por­tant func­tion­al­ity in a prod­uct, com­pe­ti­tion law au­thor­i­ties are quick to crit­i­cize Amer­i­can com­pa­nies’ li­cense fees as “un­fair.” This is par­tic­u­larly true in in­dus­tries where Amer­i­can com­pa­nies are lead­ers in re­search­ing and de­vel­op­ing foun­da­tional innovations that for­eign com­pa­nies want to in­te­grate into their prod­ucts.

In an­other trou­bling trend for Amer­i­can IP own­ers, for­eign an­titrust reg­u­la­tors are in­creas­ingly pur­su­ing in­ves­ti­ga­tions that go be­yond the scope of any rea­son­able an­titrust con­cerns. De­spite be­ing base­less, these in­ves­ti­ga­tions have se­ri­ous neg­a­tive con­se­quences for the tar­geted firms, par­tic­u­larly for in­no­va­tive firms try­ing to li­cense their IP or get their prod­ucts to mar­ket while their patents are still in force and while their tech­nol­ogy is still cut­ting-edge.

In par­al­lel with overly ex­pan­sive in­ves­ti­ga­tions, many ju­ris­dic­tions do not of­fer the ba­sic pro­ce­dural due process safe­guards nec­es­sary for busi­nesses to de­fend them­selves against base­less ac­cu­sa­tions. The Cham­ber’s re­port notes that U.S. com­pa­nies suf­fer “en­force­ment ac­tions in which they are not given ad­e­quate no­tice or time for re­sponses to ques­tions; are not in­formed of the par­tic­u­lar acts or prac­tices which are a sub­ject of con­cern; [and] are not al­lowed to ob­tain from en­forcers in­for­ma­tion about the the­ory of an­ti­com­pet­i­tive harm . . . . ” Once again, this ef­fec­tively al­lows au­thor­i­ties to pick win­ners and losers based on po­lit­i­cal crony­ism or do­mes­tic in­dus­trial pol­icy goals rather than ac­tual an­titrust con­cerns.

Un­for­tu­nately, in­stead of work­ing to im­prove their poli­cies and level the an­titrust play­ing field, for­eign coun­tries are ex­pand­ing their ef­forts to dis­crim­i­nate against U.S. in­no­va­tors. The Cham­ber’s re­port notes that some coun­tries are even con­sid­er­ing cre­at­ing li­a­bil­ity sim­ply for fail­ing to li­cense patents, in­clud­ing for fail­ing to li­cense out­side of the coun­try in ques­tion. This would give for­eign an­titrust reg­u­la­tors lever­age to in­flu­ence how Amer­i­can IP own­ers con­duct busi­ness all over the world, in­clud­ing in the U.S.

In­tel­lec­tual prop­erty in­cen­tivizes in­no­va­tion and com­mer­cial­iza­tion based on the prop­erty rights it secures to cre­ators. These prop­erty rights are only valu­able — and thus only func­tion as an in­cen­tive — when IP own­ers can de­ploy them in the mar­ket­place with­out un­due in­ter­fer­ence. When coun­tries use an­titrust laws to de­value Amer­i­can IP in or­der to fa­vor their own lo­cal busi­nesses, it un­der­mines the pur­pose and func­tion of the IP sys­tem as a whole, and it un­der­mines Amer­i­can com­pa­nies’ abil­ity to com­pete on a level play­ing feel.

It’s time to put an end to for­eign an­titrust bul­ly­ing of Amer­i­can in­no­va­tors.

In­tel­lec­tual prop­erty in­cen­tivizes in­no­va­tion and com­mer­cial­iza­tion based on the prop­erty rights it secures to cre­ators.

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