Canadian COMPETITION LAW

Davies Ward has published a paper on competition and IP (patents) entitled “Mind the Gap: Economic Costs and Innovation Perils in the Space Between Patent and Competition Law”.

Outline:

“[T]he aims and objectives of patent and antitrust laws may seem, at first glance, wholly at odds. However, the two bodies of law are actually complementary, as both are aimed at encouraging innovation, industry and competition.”  (Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572 (Fed. Cir. 1990)

“As the U.S. Federal Circuit Court explains above, the legal regimes of competition law and patent law act as complementary instruments in the pursuit of innovation and consumer welfare. Antitrust law and policy strive to maintain competitive markets, prohibiting unreasonable restraints on trade that could act as barriers to new innovation. Robust and effective competition in turn drives competitors to improve existing products or introduce new products to maintain their market share. Meanwhile, patent law and policy aim to foster long-term dynamic efficiency through incentives to invest and innovate over time. Patent law grants enforceable property rights to inventors which, as a reward for disclosure of the invention, allow the owners of the patent to unilaterally exclude others from using the property.  The patent system promotes innovation by providing incentives for owners to invest in the creation and development of new inventions,4as well as by making the invention available to the public to promote build-on innovation.

Although competition and patent regimes share the same goals of innovation and related economic and consumer benefits, tensions at the interface between these areas of law have often been considered. The well-recognized challenge is to permit the legitimate exercise of patent rights while continuing to enforce competition laws where anti-competitive practices involve patent rights. But what happens where both regimes are implicated and yet neither effectively controls conduct that harms innovation and imposes economic costs? How do we compare the cost/benefit trade-off of addressing the problem via the competition system, patent system or both? When intellectual property laws are being used to impede innovation should competition law intervene?

This article considers a gap between patent law and competition law that is being profitably exploited by “patent trolls”, firms whose business is the acquisition and assertion of patents against parties who are already using the patented technology.5 First, we frame the discussion by considering the interaction of competition law and patent law and how the interaction can, in theory, impact innovation. Then we look at the example of patent trolls and how they are taking advantage of an absence of competition and patent law enforcement: what they are, the reasons for their recent emergence and the main arguments in defence of patent trolling. Next we examine the economic cost and harm to innovation caused by patent trolls in the context of wider issues in competition and patent law and policy, including asymmetry of litigation risk, the hold- up problem and the growing valuation of patents based on the right to exclude rather than the economic value of the underlying invention. Finally, we survey the efforts to stem patent abuse, including patent trolling, through market, judicial, legislative and regulatory means. Regardless of the source of the solution, be it patent or competition law or policy, patent trolling highlights a clear need for reform to achieve the innovation goals of both the competition and patent regimes. Law makers, enforcement agencies, regulators and the courts need to bridge the ever-widening gap.”

For a copy of the paper see:

Mind the Gap: Economic Costs and Innovation Perils in the Space Between Patent and Competition Law

____________________

For more information about our regulatory law services contact: contact

For more regulatory law updates follow us on Twitter: @CanadaAttorney

Comments are closed.