Intellectual Property and Competition Law - IPRsonline.org

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ICTSD Programme on IPRs and Sustainable Development13Acquisition and Enforcement of Intellectual PropertyRightsIt is generally accepted in developed countriesthat holding IPRs does not automatically confermarket power per se 62 . The predominant concept isthat IP and competition laws are complementary:they both aim at promoting innovation andcompetition (Ghidini, 2006, p. 5). However, therespect of IPRs under competition law:“is premised on the assumption that theintellectual property is properly obtained.Problems arise when particular intellectualproperty rights have not been obtained in theproper manner or are not deserved. Patentprotection in the absence of novelty and nonobviousnesscan harm innovation by eliminatingthe incentives for the patent holder and othersto engage in further pursuit of something that isnovel and non-obvious” (Azcuenaga, 1995).The case of patentsThe anti-competitive effects of the granting ofIPRs, particularly patents, have raised growingconcerns. An OECD (Organisation for EconomicCo-operation and Development) report regardingbiotechnology patents, for instance, noted that“the rising tide of biotechnology patents hasbrought concerns that they are being grantedtoo freely and too broadly. Too many patentsthat cover too much ground will not only harmcompetition, but will also stifle innovation bymaking further research riskier, more difficult ormore expensive” (OECD, 2004, 15).The problem, however, is not limited tobiotechnology patents but extends to otherfields, such as pharmaceutical and softwarepatents. Jaffe and Lerner have documented howthe US current patent system:“provides incentives for applicants to file frivolouspatent applications, and for the patent office togrant them. It likewise encourages patent holdersto sue, and those accused of patent infringementto give in and pay under threat, even if the patentat issue is of dubious validity. It does not providegood incentives for the information necessaryto resolve questions about patent validity to bebrought forward and analysed appropriately”(Jaffe and Lerner, 2004, p. 6).The extent to which the application for patentsand their acquisition may be deemed anticompetitivecrucially depends on the room leftto obtain patents on minor developments. Suchroom has greatly expanded in the last twentyyears in some jurisdictions such as in the US 63where the FTC has found:“significant concerns that, in some ways, thepatent system is out of balance with competitionpolicy. Poor patent quality and legal standardsand procedures that inadvertently may haveanticompetitive effects can cause unwarrantedmarket power and can unjustifiably increasecosts. Such effects can hamper competition thatotherwise would stimulate innovation” (FTC,2003a, p. 5).The situation in the US patent office – one of thelargest in the world – exemplifies the weaknessesof patent prosecution and the possible abuses byskilled applicants willing to acquire patents asan anti-competitive tool rather than as a rewardfor genuine innovation. The FTC has noted thatpresumptions in Patent and Trademark Office(PTO) rules tend to favour the issuance of a patent:“[I]f the examiner does not produce a prima faciecase [of obviousness], the applicant is under noobligation to submit evidence of nonobviousness.”(footnote omitted) Similarly, “[O]ffice personnel.…must treat as true a statement of fact made byan applicant in relation to [the asserted usefulnessof the invention], unless countervailing evidencecan be provided that shows that one of ordinaryskill in the art would have a legitimate basisto doubt the credibility of such a statement.”Likewise, “[T]here is a strong presumption thatan adequate written description of the claimedinvention is present when the application isfiled.” (footnote omitted) The PTO’s resourcesalso appear inadequate to allow efficient andaccurate screening of questionable patentapplications (FTC, 2003a, p. 9).
14Carlos M. Correa — Intellectual Property and Competition LawAcquiring patent rights for frivolous developmentsor with overly broad claims can provide grounds foranti-competitive intervention even in jurisdictionswhere IP is essentially seen as compatible withcompetition law. This means that the grantingof a patent does not exclude the possibility ofconsidering that a misconduct has taken place. Apatent is granted on the basis of an examinationthat is often limited to prior patent documentsand which only confers a presumption of validitythat can be challenged by third parties beforethe same patent offices or courts. However, thepresumption of validity should be taken withcaution. 64 As noted by the FTC, the shortcomingsof the procedures to evaluate patent applications“suggest that an overly strong presumption of apatent’s validity is inappropriate. Rather, courts 65should require only a “preponderance of theevidence” to rebut the presumption of validity”(FTC, 2003a, p. 8). 66The increase in the number of patent applicationsand the relaxation of patentability standards, hasled to a proliferation of “poor quality” patentsin some countries. 67 This trend has been fuelledin the US by the pro-patent trend inaugurated in1982 with the creation of a Federal Circuit Courtspecialised in intellectual property cases (Jaffeand Lerner, 2004, p. 10). However, patents areoften held invalid by US courts. 68The lax standards of patentability applied bysome patent offices have encouraged applicationson trivial developments, generally known in thepharmaceutical industry as “ever-greening”. 69They are the result of various patentingstrategies 70 , such as “blanketing”, “flooding”,“fencing”, “surrounding” (Granstrand, 1999,p. 221-222), under which firms seek patentprotection to block or delay competition in eitherinnovation 71 , technology or product markets.The creation of “packages” of patents by acompany around a given technology or producthas become increasingly common. In thepharmaceutical field, for instance, ten or morepatents are often acquired around the sameactive ingredient, even after it has alreadyfallen into the public domain. The accumulationof patents may be the result of different patentstrategies. As examined by Rubinfeld and Maness(2005), package patents may be used:- to inappropriately extend market power fromlegitimate patents claims to illegitimatepatents; 72- to coerce a party into licensing patentsthat it might have chosen to avoid or designaround (especially when the licence fee isnot dependent on the number of patents);- to reduce a competitor’s incentive tochallenge individual patents since as “thecost of challenging patents increases with thenumber of patents included in the bundle, afirm may have an incentive to include weakpatents in the package”;- to misuse patents if the bundle is used “toextend a firm’s monopoly power from the“space” covered by a strong patent to thespace encompassed by strong and weakpatents together” (Rubinfeld and Maness,2005, p. 90).Mandatory package licensing have been generallydeemed anti-competitive by the US Departmentof Justice and the courts in the US, although insome cases they may arguably reduce transactioncosts as there is no need to negotiate individuallicences (Rubinfeld and Maness, 2005, p. 90).“Patent thickets” may also raise competitionlaw concerns. When an overlapping set ofpatent rights (belonging to various companies)exists, those seeking to commercialise newtechnology need to obtain licences from multiplepatentees. Co-operation among competitors indifferent forms (including cross-licensing) maybe necessary to navigate the patent thicket,ultimately limiting competition. 73Low standards of patentability and theexpectation of acquiring patent rights in orderto harass competitors, increase the likelihood of“sham petitioning”. This is:“the situation in which a person uses thegovernmental process, as opposed to theoutcome of that process, as an anti-competitiveweapon…such as the filing of a large number ofpatent applications that are not well founded,
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