As TOTM readers are likely to know, the Supreme Court denied certiorari in Rambus, a course of action I had argued was the appropriate response to the arguments set forth in the Commission petition. I recently expanded the blog post into a short essay which I’ve posted on SSRN. It will also be available in a few weeks at Global Competition Policy. Here’s the abstract:
In November 2008, the Federal Trade Commission petitioned the Supreme Court to review the D.C. Circuit’s decision in FTC v. Rambus. That decision reversed the Commission’s finding that Rambus knowingly failed to disclose a patent to a standard setting organization and, in so doing, acquired monopoly power in violation of Section 2 of the Sherman Act. In February 2009, the Supreme Court denied the Commission’s petition. This article examines some deficiencies in the Commission’s arguments, concluding ultimately that the Supreme Court was correct to deny review. Moreover, the article suggests that the patent holdup problem, and ex post opportunism generally, is more effectively handled by contract and patent law. Because parties cannot contract around heavy mandatory antitrust remedies, contract and patent law offer superior substantive doctrine designed to distinguish good faith contractual modifications from bad faith holdup, thereby minimizing the social welfare reducing decision errors.
For a fuller elaboration on the arguments in the short essay, and in particular the case for contract and patent remedies as substitutes for antitrust, see Kobayashi and Wright.
One question I’ve been thinking about of late is where the Commission’s patent holdup agenda go from here? There are a lot of competing forces and tensions to think about. On the one hand, Rambus is an incredibly important decision in this area (especially now) militating toward perhaps a less aggressive patent holdup agenda at least with respect to Section 2. However, the President’s promise of more active antitrust enforcement and Commissioner Leibowitz’s pending promotion to Chairman (who has advocated more aggressive enforcement of standard setting abuses under Section 5 where the Sherman Act may not apply, e.g. N-Data). More on which way I think all of this (and other factors) cuts a bit later.