Trolling for Standards: How Courts and the Administrative State Can Help Deter Patent Holdup and Promote Innovation

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Niels J. Melius · 15 Vand. J. Ent. & Tech. L. 161

Abstract

Antitrust law and patent law share the common goal of improving economic welfare by facilitating competition and innovation. But these legal fields conflict when baseless claims of patent infringement disrupt the competitive process. In its eBay decision, the Supreme Court muddied the precedential waters by promulgating a vague doctrine of injunctive relief in patent infringement cases. In the years since, a split has emerged in the district courts on the question of which entities generally qualify for injunctive relief as an additional remedy to damages. This uncertainty has failed to mitigate an antitrust phenomenon known as “patent holdup,” whereby an original patentee is able to “hold up” a downstream user of a particular patent by obtaining or threatening to seek an injunction in order to extract a supracompetitive royalty payment from the downstream licensee. The phenomenon implicates antitrust law when such litigation tactics, often pursued by patent assertion entities (PAEs or “patent trolls”), produce deadweight loss, chill follow-on innovation, and reduce competition. Courts have generally not taken holdup considerations into account in applying the vague eBay standard, and they lack the economic expertise to do so properly. Guidance is needed from a specialized administrative agency that is sensitive to the nuances of both patent and antitrust law. This Note proposes that Congress give the Federal Trade Commission authority to promulgate substantive rules to guide the district courts in their application of permanent injunctions in patent disputes.