Symposium Preview: Looking Both Ways at the Intersection of Antitrust and Intellectual Property

At what point does a copyright or patent owner’s exercise of her exclusive rights become anti-competitive behavior? Do the Federal intellectual property right laws sufficiently cover these issues? Is there a clear standard? On March 5, 2010, Professor Andrew Chin will be discussing these issues and more at the Wake Forest Intellectual Property Journal Spring 2010 Symposium: Copyleft v. Copyright.

To understand Professor Chin’s discussion, a little background is necessary. Generally, a copyright holder has exclusive rights to both license and distribute the copyrighted product. 17 U.S.C. § 106. The scope of § 106(3) allows a copyright holder extensive authority to prohibit licensing if it chooses. However, antitrust concerns arise when the company prevents licensing to an impermissible extent, thus creating a monopoly. These concerns arise notably in the computer technology field, where the development of corollary software may depend on the licensing of a certain piece of hard or software.

In 2001, the DC Circuit Court of Appeals considered a prime example of this type of case. United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). At issue was whether Microsoft had a plenary right to deny licenses to all other companies based on its exclusive copyrights. Microsoft argued that it was merely exercising its rights as the valid copyright holder; however, the court flatly rejected this claim, calling it both frivolous and overbroad. The Supreme Court defined the monopoly power as “the power to control prices or exclude competition.” United States v. E.I. Du Pont, 351 U.S. 377, 391 (1956). If Microsoft could deny licenses under all circumstances, it would have the ability to completely exclude all competition, thus exercising a monopoly power under the court’s definition.

The practical consequences of Microsoft’s argument justified the court’s opinion. If Microsoft were allowed to deny licenses at-will, no company would be able to create compatible software. This would not only allow Microsoft to rule the operating system or web browser market, but would allow them to dominate entirely the repair market and the corollary software market. Basically, if you were running Internet Explorer, no one could create anything compatible, such as flash media players or Active X controls. The only products that could be used with Microsoft products would be other Microsoft products. It is easy to see how extensive the consequences would be; Microsoft could take over the entire market. This would obviously be an unfair restriction of competition, and not a difficult one for Microsoft, because they have such a large market share. Hence, the court prohibited this conduct and held that the denial of licenses may constitute a violation of the Sherman Act. 15 U.S.C. § 2.

Now, Federal courts face the logical extension of this problem in the area of patent protection. If copyright cannot provide plenary power to license, how far will the law allow the patent holder to stretch its rights? Professor Chin will be examining this issue precisely, considering a patent holder’s right to deny licenses and effect, if not control, all competition. Professor Chin will discuss this issue in the context of mainframe computers and the T3 claim against IBM. IBM v. Platform Solutions & T3 Techs., 658 F. Supp. 2d 603 (S.D.N.Y. 2009). In addition, he will explain the treatment of this issue by the different circuits, which have split on the issue. Finally, he will analyze this issue in light of the change in Administration, and give a recommendation to the Second Circuit for their pending analysis of the T3 appeal.