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Intro 2 Econ. & Patent in Antitrust

Intro 2 Econ.

  1. Demand Curve

    1. Rel. W/Price

      1. If price high, then demand low except 4 luxury goods & staple diets

      2. Elasticity of demand is degree of demand change by price change b/c

        1. Availability & degree of substitutes

        2. Complement prices

        3. Percentage of income spent on partic. good

        4. Passage of X

        5. Gen. econ. state

    2. Demand Curve of Industry

      1. A partic. seller faces more elastic demand curve than ind. demand curve

      2. Monopolist would fact same demand curve as ind.

    3. Change in Demand Curve

      1. Movement along D curve /

      2. Shift in demand curve

  2. Supply Curve

    1. Det'ed By

      1. Price

      2. Cost

    2. Costs

      1. Fixed cost doesn't change w/# of units prod.'ed

      2. Variable cost changes w/# of units prod.'ed

      3. Opp. cost is cost that is foregone

        1. Wage entrepreneur could've had

        2. Return he could've had

    3. Change in Supply Curve

      1. Movement along supply curve /

      2. Shift in supply curve

  3. Marginal Analysis

    1. Avg Total Cost

      1. Total cost / total units

      2. Declines 4 each output then starts incr'ing

    2. Marginal Cost

      1. Cost of making add'al prod.

    3. Marginal Rev.

      1. Money made from next unit prod.'ed

  4. Assumptions

    1. Perfect Competition

      1. Can't affect mkt price by indiv. axn b/c lots of suppliers

      2. Free flow of info

      3. Uniform prod.'s

      4. No barrier of entry / imm. costless mobility of prod.

      5. Indiv. suppliers face hz'al D curve so prod. @ MC = D

    2. Monopoly

      1. One seller faces downward sloping D curve & dif. downward sloping MR

      2. Would want price discrim. but buyers would arbitrage so have 2 sell @ 1 price

      3. So quantity is where MC = MR & price is where D's level is 4 MC = MR

    3. Price Fixing by Monopolist

      1. Seller captures consumer surplus b/c of wealth transfer

      2. Dead wt. loss 2 soc. also created

      3. Ineff. allocation of res's

    4. Mkt Pwr

      1. Pwr 2 incr. price in mkt above competitive price 4 sig. X

  5. Antitrust View

    1. Max Consumer Welfare by Encouraging

      1. Lwr prices

      2. Innovation of new prod.

      3. Eff. methods of prod.

      4. Allocative eff.

  6. Post Chicago Econ.

    1. Prod. & Allocative Eff. Should Still Guide

    2. Different Assumptions From Chicago School of Econ.

      1. Mkt is imperfect b/c

        1. Info not fully avail.

        2. Not just driven by profit

        3. Not all res's R mobile

      2. Wealth transf. is relev.

        1. Want consumer 2 get wealth

        2. Judge value of $ on the margin

      3. Actors may act irrationally in short term 4 long term rational dec's

Patent

  1. Const.

    1. Promote Prog. in Science & Useful Art by Granting Excl. Rt.

    2. Monopoly Rt. 4 20 Yrs.

  2. Patent Applic.

    1. Discl.

      1. Describe how 2 make prod. so that person of ord. skill can pract.

    2. Claims of Patent

      1. Each parag. state invention compl'ly but each gets more detailed

      2. Metes & bounds of invention

    3. Process

      1. Adversarial & takes long X @ patent office of Wash.

      2. Must B honest 2 examiner otherwise void

    4. Rts of Patent

      1. Excl. rt. 2 make / sell

      2. Rt. 2 prevent contrib. infringer who creates part having no use except as part of patented invention

      3. Rt. 2 prevent inducement of patent infringement

    5. Void Patent

      1. If try 2 enforce it, then antitrust viol. of S Act § 2

  3. Reqts of Patentability

    1. Patentable Subj. Matter: Utility Patent of

      1. Process / method

      2. Composition of matter

      3. Machine

      4. Article of mfgr. /

      5. Any improvement on above

    2. Pract'ly Useful & Actually Works

    3. Novelty

      1. Not done before

      2. Factors

        1. Existing patents globally

        2. Present pract. of area of work

        3. Publications

      3. If prod. on sale more than 1 yr. before patent applic., not novel

    4. Nonobvious

      1. Advance prior art sig'ly

      2. Eval. as a person in ord. skill who knows all of prior art

      3. Secondary factors

        1. Fills long felt need

        2. Comm'l success

        3. Prior art pt'ed toward / away from soln.

  4. Types of Patent 4 Antitrust Purposes

    1. Blocking Patent

      1. Basic patent on prod. can B improved w/another prod. w/patent but blocked from using

      2. Beneficial 2 competition 2 combine these patents

    2. Complementary Patent

      1. All the inputs R complementary 4 prod.

      2. Beneficial 2 competition 2 combine these patents

    3. Competing Patent

      1. More than 1 patent prod. can B used 4 that obj.

      2. Anticompetitive 2 allow these 2 pool together

  5. Per's of Patent & Antitrust

    1. Early Yrs.: Until 1911

      1. Patent dom. over antitrust

      2. S Act not restrict patent license even if it's hz'al price fixing

    2. Middle Yrs: 1911-1981

      1. Patent & antitrust R @ polar opposites

      2. Could do whatever w/in patent monopoly

      3. Antitrust viol. if beyond boundary of patent

      4. Couldn't do w/patent licensing

        1. Tying of unpatented goods 2 patent license

        2. Mandatory package licensing

        3. Post resale restrictions

        4. Excl. dealing of patent

        5. Nonexcl. license w/veto pwr / licensee's pwr 2 veto licenses 2 its competitors

        6. Restrictions on sale of unpatented goods made by patented process

        7. Mandatory granbacks of patent tech. from licensee 2 licensor

        8. Royalty in amts not rsbly rel'ed 2 sales of patented prod.

        9. Fix price @ which licensee may sell patented prod.

    3. Modern Era & IP Licensing Guideline Princ's

      1. Patent & antitrust R similar b/c both serve 2 incr. consumer welfare

        1. Create prop. rts & incr. / preserve competition

        2. Treatment of free-riders

      2. IP is same as ord. prop. so no longer presume auto. mkt pwr

      3. Licensing IP is gen'ly good

      4. Antitrust should look @ actual mkt effects & use rule of rsn

      5. Judge's restrictions by effect on mkts of

        1. Trad'al mkt of goods & serv's

          1. Geog. of mkt

          2. Types of prod. & serv's in mkt

        2. Mkt 4 existing tech.

        3. Mkt 4 research & devt / innovation

          1. Access 2 present tech. +

          2. Capital +

          3. Incentive 2 research

      6. Possible anticompetitive effects

        1. Hz'al like fix price, output, div. terr., etc.

        2. Vertical like forecl. competitors & limit access 2 supplies

      7. Safety zone 2 avoid attack from FTC / DOJ

        1. If meet safety zone reqts, then not per se illegal

        2. Competitor / state atty gen. can still attack

      8. If patent misuse through license restriction, then patent unenforceable

      9. Guidelines persuasive but not law

      10. Common restraints in licenses

        1. Hz'al restraints

        2. Resale price maint.

        3. Tying

        4. Excl. dealing

        5. Cross licensing & pooling

        6. Granbacks

        7. Acquisition of IP rts


This material is copyrighted by the author. Use of the material for profit is expressly prohibited without the written permission from the author.

Ms. Haeji Hong

May 12, 1998

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