By: Caroline Gousse
Source: http://www.ipbrief.net
A day after an article analyzing the intricacies of patent litigation appeared on PCWorld’s website, Bloomberg relayed that Barnes & Noble was urging U.S. regulatory entities to investigate whether Microsoft was abusively suing competitors for patent infringements.
Barnes & Noble refused to agree to the terms of Microsoft’s license to use patents developed by the Washington-based company and to abide by the restrictions on upgrades allegedly demanded by those terms. As a consequence, in March 2011, Microsoft initiated proceedings against Barnes & Noble and asked the U.S. International Trade Commission to stop imports of Barnes & Noble’s NOOK products, arguing that the book retailer was infringing on five patents that Microsoft owns on electronics operating under the Android system.
On November 8, 2011, Barnes & Noble quite publicly recommended that the U.S. Department of Justice take a closer look at Microsoft’s unforgiving enforcement of its patent-related rights. According to Wired magazine, Barnes & Noble is claiming that the license offered by Microsoft for the use of Microsoft’s patented products was much too restrictive, as a result of which Microsoft is abusing its dominant position by limiting Microsoft’s competitors’ influence on the relevant market.
Barnes & Noble’s strategy seems an interesting one: Microsoft already has a reputation as a blob-esque company and Barnes & Noble’s theory that Microsoft is violating antitrust laws is not completely ludicrous. The news of Barnes & Noble’s questioning the legality of Microsoft’s market behavior, with its David-against-Goliath feel, nonetheless reveals important issues between the preservation of incentives and rewards for innovation, on one hand, and the possible abuses of dominant positions on the other. Microsoft’s patent infringement claims might be indeed unforgiving, but it seems unclear whether they should be dismissed on the mere count that these claims are establishing Microsoft’s dominant position in the market. After all, patents are granted for the very reason that they can be used against competitors, thus assuring patentees’ lead on relevant markets and rewarding patent-holders for the cost of research and development they have incurred in developing patented products. Barnes & Noble is arguing that “Microsoft is attempting to raise its rivals’ costs in order to drive out competition and to deter innovation in mobile devices.” That may very well be true. Yet, aggressive protection of patent-related rights against companies which have not incurred the expenses of research and development is another means of preserving competition.
U.S. courts have many times upheld such an approach. The creation and preservation of a monopoly through the commercialization of an innovative product does not violate antitrust laws. Licenses may be restrictive as long as they do not create restraints that exceed the exclusive exercise of patent-related rights. “[W]hether [licenses] have or threaten to have anticompetitive effects beyond what the patentee could achieve through exclusive retention of the patent rights or an exclusive license of the totality of those rights” has been suggested as a sum-up test used by courts to determine the line between rightful license terms and abuse of dominant positions. See Donald F. Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 Antitrust L.J. 485, 491 (1985). In Europe also, courts have held that strengthening a dominant position did not necessarily amount to an abusive use of patent rights in violation of antitrust law.
The state of mind of the claimant may, under Rule 11 of the Federal Rules of Evidence, be taken into an account to determine whether this claimant is frivolously raising patent infringement claims. The dichotomy between preserving incentives for competition via a tolerance for monopolies and the distortion of competition incurred by the same dominant positions has been resolved in Europe, at least in part, by the introduction of “block exemptions.” The block exemption system allows agreements to escape the scrutiny of Article 81 of the Treaty of Rome, relating to abuses of dominant positions, provided these agreements abide by the specific terms of the block exemption. Such a system might not serve as an applicable example to the United States, but it remains that U.S. courts may soon have to define a clearer limit between frivolous infringement suits and zealous defense of one’s patents in light of the highly competitive market for new technologies.
Source: http://www.ipbrief.net/2011/11/12/the-patent-abuse-of-patent-infringement-claims/
Source: http://www.ipbrief.net
A day after an article analyzing the intricacies of patent litigation appeared on PCWorld’s website, Bloomberg relayed that Barnes & Noble was urging U.S. regulatory entities to investigate whether Microsoft was abusively suing competitors for patent infringements.
Barnes & Noble refused to agree to the terms of Microsoft’s license to use patents developed by the Washington-based company and to abide by the restrictions on upgrades allegedly demanded by those terms. As a consequence, in March 2011, Microsoft initiated proceedings against Barnes & Noble and asked the U.S. International Trade Commission to stop imports of Barnes & Noble’s NOOK products, arguing that the book retailer was infringing on five patents that Microsoft owns on electronics operating under the Android system.
On November 8, 2011, Barnes & Noble quite publicly recommended that the U.S. Department of Justice take a closer look at Microsoft’s unforgiving enforcement of its patent-related rights. According to Wired magazine, Barnes & Noble is claiming that the license offered by Microsoft for the use of Microsoft’s patented products was much too restrictive, as a result of which Microsoft is abusing its dominant position by limiting Microsoft’s competitors’ influence on the relevant market.
Barnes & Noble’s strategy seems an interesting one: Microsoft already has a reputation as a blob-esque company and Barnes & Noble’s theory that Microsoft is violating antitrust laws is not completely ludicrous. The news of Barnes & Noble’s questioning the legality of Microsoft’s market behavior, with its David-against-Goliath feel, nonetheless reveals important issues between the preservation of incentives and rewards for innovation, on one hand, and the possible abuses of dominant positions on the other. Microsoft’s patent infringement claims might be indeed unforgiving, but it seems unclear whether they should be dismissed on the mere count that these claims are establishing Microsoft’s dominant position in the market. After all, patents are granted for the very reason that they can be used against competitors, thus assuring patentees’ lead on relevant markets and rewarding patent-holders for the cost of research and development they have incurred in developing patented products. Barnes & Noble is arguing that “Microsoft is attempting to raise its rivals’ costs in order to drive out competition and to deter innovation in mobile devices.” That may very well be true. Yet, aggressive protection of patent-related rights against companies which have not incurred the expenses of research and development is another means of preserving competition.
U.S. courts have many times upheld such an approach. The creation and preservation of a monopoly through the commercialization of an innovative product does not violate antitrust laws. Licenses may be restrictive as long as they do not create restraints that exceed the exclusive exercise of patent-related rights. “[W]hether [licenses] have or threaten to have anticompetitive effects beyond what the patentee could achieve through exclusive retention of the patent rights or an exclusive license of the totality of those rights” has been suggested as a sum-up test used by courts to determine the line between rightful license terms and abuse of dominant positions. See Donald F. Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 Antitrust L.J. 485, 491 (1985). In Europe also, courts have held that strengthening a dominant position did not necessarily amount to an abusive use of patent rights in violation of antitrust law.
The state of mind of the claimant may, under Rule 11 of the Federal Rules of Evidence, be taken into an account to determine whether this claimant is frivolously raising patent infringement claims. The dichotomy between preserving incentives for competition via a tolerance for monopolies and the distortion of competition incurred by the same dominant positions has been resolved in Europe, at least in part, by the introduction of “block exemptions.” The block exemption system allows agreements to escape the scrutiny of Article 81 of the Treaty of Rome, relating to abuses of dominant positions, provided these agreements abide by the specific terms of the block exemption. Such a system might not serve as an applicable example to the United States, but it remains that U.S. courts may soon have to define a clearer limit between frivolous infringement suits and zealous defense of one’s patents in light of the highly competitive market for new technologies.
Source: http://www.ipbrief.net/2011/11/12/the-patent-abuse-of-patent-infringement-claims/
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