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Nonetheless, breakups are critical on at least two grounds. In testimony before the House of Representatives last year, Judge Diane Wood stated that “without competitors, there will be no competition.” Even if Congress and agencies prohibit certain forms of unfair competition, they cannot conjure up beneficial forms of competition in monopolistic markets, especially markets in which incumbents enjoy the protection of large network effects. Without a serious search rival, how much motivation does Google have to improve its search results and interface? In the absence of effective competitors, the quality of Google search appears to have steadily declined, including through the proliferation of often unwanted ads. So long as Amazon dominates e-commerce, will it feel much pressure to reduce commissions and improve other terms for its millions of sellers? Paired with rules on unfair competition, breakups of dominant tech corporations can ensure business rivalry that confers benefits on consumers, workers, and suppliers. Great size also means great power: Amazon exercises power up its supply chain to the detriment of manufacturers and their workers, while Facebook and Google wield outsized clout over advertisers. Further, a corporation that owns dozens of plants and facilities across the United States is well positioned to thwart labor organizing. Large corporations today, in the words of labor lawyer Brandon Magner, “disperse their production without dispersing their power.” Under current American labor law, unions can only be formed at the establishment level. For example, Amazon warehouse workers would have to organize the company one warehouse at a time. With its concentration of power but decentralization of operations, a firm like Amazon can reallocate work away from warehouses with unions or even nascent signs of union activity and toward warehouses with more quiescent workforces. This is not a new fear. In 1920 the Interchurch World Movement attributed the failure of workers to organize U.S. Steel to the corporation’s enormous size: The first cause of failure was the size of the Steel Corporation. . . . It had too large a cash surplus, too many allies among other businesses, too much support from government officers, local and national, too strong influence with social institutions such as the press and the pulpit, it spread over too much of the earth—still retaining absolutely centralized control—to be defeated by widely scattered workers of many minds, many fears, varying states of pocketbook and under a comparatively improvised leadership. Giant corporations—specifically their controlling shareholders and top executives—wield extraordinary power in society. They can use their command of economic resources to shape the course of political campaigns, fund favorable media coverage, sponsor sympathetic scholarship, and decide which cities and regions thrive. The utility holding companies did this in the 1920s and ’30s and Big Tech companies do this today. Lord John Browne, the former CEO of BP, candidly told the Wall Street Journal in 2003: “We do get the seat at the table because of our scope and scale. Whether we are the second or the third largest (oil) company is of very little import, but we’re certainly up there and we operate in places which are important to the United States government, and the United States government is important to us.” Jeff Bezos exercised the power that comes with scope and scale in a particularly brazen fashion in 2017 when he invited states and cities to compete to host Amazon’s second headquarters. Municipal and state governments offered Amazon lavish incentives with the aim of attracting “HQ2” and the associated jobs and tax revenues. This frenzy to entice one of the world’s richest men took a particularly embarrassing turn when New York Governor Andrew Cuomo jokingly offered to rename himself Amazon Cuomo if Bezos selected New York for the second headquarters. With elected officials supplicating before Bezos, democracy certainly seemed subordinate to great wealth.

In response to these arguments, opponents assert that antitrust enforcement impedes innovation in the pharmaceutical industry.147 The idea of chilling innovation and deterring the development of new, potentially life-saving drugs is certainly concerning. However, this argument is less concerning than it sounds. When submitting its Amicus Brief in support of Plaintiff-Appellee State of New York in the Second Circuit Actavis case, the AAI addressed this argument. First, the AAI asserted that no empirical evidence existed showing that antitrust scrutiny of product hopping deters innovation.148 Moreover, the AAI further asserted that antitrust scrutiny of product hopping actually increases innovation.149 Without antitrust scrutiny of product hopping, brand- name companies will invest in making minor alterations to products to extend the patent, rather than investing in research for new, innovative drugs.150 Indeed, one study found that “[b]rand-name firms have sought increasing recourse to ancillary patents on chemical variants, alternative formulations, methods of use, and relatively minor aspects of the drug.”151 Essentially, immunizing brand-name pharmaceutical companies from antitrust liability encourages them to spend time and resources in order to find ways to make insignificant changes to current drugs in order to preserve the patent, instead of using time and resources to develop the next innovative drug. In its Brief as Amicus Curiae filed with the district court in Mylan, the FTC bolstered this argument by asserting: “The threat posed to existing brand drugs by generic competition can incentivize the brand company facing dramatic loss of sales to develop new and innovative drugs that benefit consumers.”152 Notably, the FTC recently filed a Brief for Amicus Curiae in support of Mylan in its appeal to the Third Circuit.153 In sum, there is no evidence that antitrust regulation of product hopping slows down innovation by brand-name pharmaceutical companies. Rather, regulation actually encourages innovation, as the competition from generics causes brand-name manufactures to innovate new products and prevents them from spending resources on insignificant changes to extend patents.

Antitrust has always played a fundamental role in guiding the innovation process. The AT&T antitrust consent decree of 1956 led to the creation of Unix, the first and most important universal computer operating system and the underlying language of the Internet. The Internet is probably the main technological innovation that has affected markets in the last thirty years taking us in the Internet Era and massively generating digital online markets. Based on Pen Internet surveys, in mid-2011, seventy-eight percent of the American people interviewed were Internet users. Hi-tech companies built on the Internet platform, such as Google and Amazon, exponentially increased in size in a few years. In 1998, Google counted six million of Web pages; in two years Google ran a billion of pages. The blockchain has the potential to be the next cutting edge technology which will change markets paradigm again bringing us to a new era—the Blockchain era. Similar to Java technologies developed in the late 20th, blockchain represents a world of new opportunities for some companies. Alternatively there is a looming threat for others who hold market power in present centralized networks as such platforms may become unnecessary. At the end of the 1990s Microsoft, which held over ninety percent of the world’s personal computer (PC) market, had to confront the threat of Java. Microsoft v. Java is an interesting case and useful to the blockchain discussion, because Java technology was the first open technology to enable software developers to write programs that could run on any operating system or microprocessor, bypassing Microsoft. Present large players, including Google and Amazon, may be tempted to engage in anticompetitive conduct to slow down the success of the blockchain technology or to misuse this technology to increase their market power or to collude with others. Blockchain technology is in its infancy and far from being perfect. Private/closed blockchains can, for example, create the perfect conditions for companies to collude and smart contracts automatically punish deviations by participants from cartel agreements. In private/closed blockchains exclusionary conduct might also occur, as the participation to those networks is by invitation only. Antitrust enforcers have the responsibility to investigate similar risks and be proactive. On the other hand, a public and open blockchain devises an open democratic platform that preserves economic democracy and open markets. Since Standard Oil, the creation and preservation of open and free markets is the primary antitrust goal; the same goal should be encouraged for blockchain technology today. Standard Oil, AT&T and more recently U.S. and EU Microsoft cases have shown that the temptation for companies that have the most to lose in a totally open market to engage in illegal anticompetitive behavior is often too compelling. Antitrust enforcers are markets’ irreplaceable gatekeepers and need to be aware and prepared for such a risk without compromising companies’ incentives to innovate as it is explained in the following section—Microsoft v. Java. A. Microsoft v. Java (1995) In 1995, Sun Microsystem (Sun) released the Java platform, which included a set of computer software and specifications; the DOJ saw in Sun and its development of Java technologies a potential alternative to Microsoft’s quasi-monopoly in operating systems. At the time that Sun developed Java technologies, which included both Java programming language, Java class libraries, and Java Virtual Machine (JVM), Microsoft held about 95 percent of the “licensing of all Intel-compatible PC operating systems worldwide.” Java technologies enabled software developers to write computer programs that could run on any operating system through a JVM, a virtual translator that enabled software written in Java or other computer languages to be executed in different operating systems or directly on microprocessors like Intel. Before Java was released, all computer programs were written to and run only on a specific operating system or microprocessor. Microsoft Windows or Apple IOS needed specific compilers (called platforms-dependent) to execute computer programs because each operating system reads/understands a specific machine language. Conversely, the JVM is a virtual machine (not a compiler designed for a single operating system) that enables operating systems to run any computer programs, significantly lowering the barriers of the operating systems market. By doing so, the JVM could have become the common platform used to perform computer programs on any machines. Sun, in addition to collaborating with Netscape, started collaborating with Intel, the market leader of computer microprocessors (Intel x86 CPU). Sun and Intel aimed at optimizing the translation of the computer program codes directly to Intel microprocessors, bypassing the Microsoft operating system (Windows). In 1996, as Java was increasing in size and threatened to overshadow Windows’ quasimonopoly, Microsoft created a fork of Java technologies. In particular, the Microsoft fork included the Microsoft version of the JVM that was intentionally incompatible with any Sun products. Although the DOJ considered that Microsoft’s fork of Java aimed at weakening the JVM competitive position, the district court did not embrace the DOJ’s complaint. As the Microsoft JVM ran faster than “ones calling upon Windows APIs with Sun’s method,” the district court recognized Microsoft’s conduct as lawful. In other words, Microsoft invested in developing a JVM for Microsoft that ran faster and was incompatible with Sun products, to prevent the JVM, and more generally Java’s technologies from jeopardizing Microsoft’s dominance. Although de facto Microsoft’s conduct was directly focused on limiting Sun’s success through the standardization process of its technologies, Microsoft developed a higher quality product for its operating systems than Sun. Considering the fact that antitrust law encourages competition among companies and competitors, no antitrust intervention was taken with respect to the Microsoft/JVM fragmentation issue. Antitrust enforcers thought that no matter what the underlying intent of Microsoft conduct was or whether its conduct damaged competitors, in the end, Microsoft created a better version of this operating system which increased consumer welfare. Although I am still not convinced that the decision of the district court was the best antitrust solution—it makes legal sense. There is much to learn from Microsoft v. Java case that can be useful as it relates to the development of blockchain and the preservation of a truly open market. Antitrust enforcers will be faced with a similar situation when confronting the potential of blockchain as it relates to the players that have the most to lose in a totally open market. Antitrust law protects consumers and markets’ efficiency—not competitors. Antitrust analysis should evaluate the overall results in the behavior of companies in the light of innovation technology and consumer welfare. The innovation process inevitably increases consumer welfare providing a wider variety of technological products and services at increasingly lower prices. The main focus of antitrust law should be to achieve this competitive outcome. B. Antitrust and Innovation “Without change there is no innovation, creativity, or incentive for improvement.” (William Pollard) If we look back historically, antitrust law has made clear the importance of the innovation process in preserving market efficiency and consumer welfare, often leading the path to innovation and the development of new markets. The AT&T antitrust consent decree of 1956, for example, led to the creation of Unix, the first and most important universal computer operating system. Although AT&T developed the Unix operating system for private use in 1969, AT&T could not sell Unix because the terms of the consent decree of 1956 prevented AT&T from selling software, such as Unix. AT&T decided to freely license the Unix operating system to universities and Unix soon became the most important universal operating system due to its network effects 100 and the underlying language of the Internet. In 1980, Berkeley University, which had created complementary software for Unix, collaborated with the Defense Advanced Research Projects Agency to adapt Unix for the creation of the precursor to the Internet—the ARPANET project. Unix has been developed in many different versions, such as GNU/Linux, Sun Solaris and MacOS X. Linux is the open source operating system that powers Google, Facebook, Twitter and Amazon. In the discussion on antitrust and innovation, the IBM antitrust case and the creation of the market of operating systems represents another interesting story. In 1960s, IBM was the leading computer manufacturer, which produced from the hardware to the operating system and most of software installed in IBM computers. In 1968, the DOJ required IBM to implement a software unbundling policy, which prevented IBM from installing its own operating system. The IBM unbundling decision opened the market of operating systems to competition. In 1980s, Microsoft started developing the operating system for IBM’s personal computers (IBM PC) —the rest of the story is well known. The 1956 antitrust intervention at AT&T set the tone for the creation of the Internet. In 2018 blockchain potentially could be the next technology that would lead the innovation process. Blockchain may change market paradigm again and markets shift from digital to blockchain platforms. Innovation means “the discovery, development, and commercialization of new and improved products and processes,” according to Professor Michael Carrier, hence new markets. Professor William Baumol, Robert Litan and Carl J. Schmman provided a broader definition, defining innovation as “the marriage of new knowledge, embodied in an invention.” Blockchain technology falls perfectly into both of these definitions. Antitrust and innovation (such as the blockchain) are not separate issues. Antitrust and the innovation process pursue the same goals: increasing market efficiency and consumer welfare. Antitrust and innovation need each other to achieve such goals. Similar to the Internet, blockchain can change markets again bringing us to a new economic era—the blockchain era— where ‘blind alleys’ are the standard and where antitrust needs to serve as first market guidance enforcing antitrust rules and principles. Antitrust enforcers must endorse and oversee this new economic era maintaining the delicate balance between over controlling the actions of large high technology companies and keeping incentives for them to lead in the creation of new technologies.

The patent misuse doctrine alone is an inadequate response to anticompetitive tying arrangements. Patent misuse is only a defense, not a cause of action, and the targets and victims of such misuse do not have any affirmative claim for damages under patent law.161 Consequently, patent misuse can neither disgorge ill-gotten gains (and thus deter misuse by making it unprofitable), nor provide compensation to those who suffered from the anticompetitive effect created outside the scope of the patent. Furthermore, the patent misuse doctrine allows a patentee to retain and enforce its patent so long as the anticompetitive conduct is stopped. While courts have not spoken with a single voice on the matter, some have held that ―if the unlawful practice has been abandoned and the consequences of the improper exploitation have been dissipated, the misuse is considered ‗purged,‘ and the owner‘s right to enforce the patent revives.‖162 This imposes a temporary cost, because the patentee cannot recover against infringers during the period in which the misuse occurred. It remains possible that, depending on the amount of infringement damages sacrificed, the amount of money gained by tying may outweigh the expected losses. If so, patent misuse doctrine may insufficiently deter anticompetitive moves that may hurt innovation.

Antitrust takes a different approach in dealing with tying arrangements. Instead of providing a defense and simply removing the patentee‘s ability to collect damages, antitrust allows the targets and victims of tying arrangements to collect damages from the patentee. In this way, consumers and competitors who suffer antitrust injury as a result of the tie-in are compensated. Furthermore, because damages are trebled, the antitrust approach is more likely to disgorge any ill-gotten gains earned through the tie-in. Finally, the successful plaintiff in an antitrust suit will receive its attorneys‘ fees and reasonable costs.163 Even if the infringement defendant prevails on its patent misuse defense, it will ordinarily be responsible for its own litigation costs. Thus, even if the defendant wins on a patent claim, it is worse off than if the misuse had never occurred. On some level, the relationship between patent misuse and antitrust law remains unclear. Some courts describe the patent misuse doctrine as ―a method of limiting abuse of patent rights separate from the antitrust laws.‖164 Others describe them as coextensive.165

Indeed, my core belief is that the U.S. economy today is the most dynamic, creates the most jobs, and produces the highest level of innovation precisely because we as a nation committed long ago to a policy of vigorous but sound antitrust enforcement. My thesis before you today, then, is that antitrust enforcement is as essential to innovation and economic growth in the 21st Century as it has been in the 20th -- and that vigorous but reasonable antitrust enforcement is a crucial component of the fight to keep America competitive in international and high-tech markets.

Before I explain these views, however, it is imperative that you have a clear understanding of how modern antitrust law is applied. I need not go back to the legislative histories of the Sherman and Clayton Acts to ascertain whether those laws originally reflected an animus against large corporations. If they did, that is simply no longer the case. Congress drafted the antitrust laws in sufficiently general terms to delegate to the courts the task of developing an antitrust jurisprudence that is consistent with contemporary concepts of economic efficiency and consumer welfare. And the courts and federal antitrust enforcement agencies have accepted that responsibility.

Presently large digital companies, known as Big Tech, are in the crosshairs of regulators and Congress for alleged monopolistic conduct. Antitrust lawsuits, and government and legislative interventions worldwide against Big Tech, are hard to count. Keeping track of their developments has become challenging. A recent study published in this journal identified “100-plus antitrust cases” only considering Google in 23 jurisdictions.

The U.S. has often been criticized for being lax compared to EU antitrust enforcers in dealing with Big Tech’s power. But innovation does not seem to be a hallmark of EU companies. In the U.S., Alexander Bell invented and patented the telephone before founding what was later called AT&T. It was at AT&T that other game-changer technologies, such as the transistor and Unix operating system, were also invented. IBM, Microsoft, Google are only three other examples of U.S. tech companies which changed the computer industry forever by setting the tone for the present digital economy. This raises the question of whether U.S. antitrust enforcement action played a prominent role in the innovation process which led to breakthrough technologies flourishing especially in the computer industry. It also begs the question “why do we see less innovation on the other side of the Atlantic?”

Further, the presumption of market power is gone, and today patents are regarded in most cases as no more indicative of monopoly power than are land titles or other tangible property interests.

Both antitrust policy and patent policy are properly concerned with economic welfare, although the concerns are articulated more clearly in antitrust than in patent law. At the atmospheric level, antitrust focuses on the short run, including such things as immediate pricing and output, while patent law is concerned with long run issues relating to innovation. But upon inspection this dichotomy quickly breaks down. In fact, antitrust policy has always been concerned with performance over both the short and long runs and often considers effects on innovation.

Innovation competition plays an increasingly important role in the economy, displacing more traditional forms of price competition. Antitrust enforcement has recognized these developments and increased its focus on technological change. Antitrust policy makers are placing greater emphasis on innovation in evaluating competitive conduct, licensing of intellectual property (IP), and mergers. The issue is whether antitrust policy makers have the right tools for the job. Incorrect economic analysis of innovation competition risks impeding competition, mischaracterizing anticompetitive activities, and discouraging welfare-enhancing innovation. In this article, I point out that economic frameworks applied by antitrust policy makers have not kept up with the growth of innovation competition. I find that antitrust policy makers need to update their economic frameworks to evaluate competitive and anticompetitive conduct when there is innovation competition. I argue that antitrust policy makers should take advantage of significant developments in the Economics of Technology & Innovation that address the rise of innovation competition.

Innovation has become the dominant mode of competition, driving greater antitrust scrutiny of innovation. What I have termed the ‘Business Revolution’ is driving digital automation of retail, wholesale, finance, supply chains, manufacturing, services, technology transfers, and other transactions.1 Digital platforms are improving the efficiency of transactions and creating new markets yet are raising concerns about privacy and exclusion.2 Companies engaged in innovation competition continue to shift investment from plant and equipment toward invention and innovation. Intangible assets’ contribution to the market value of leading publicly traded companies overshadows that of tangible assets, expanding from only 15 per cent of their value in the 1970s to over 90 per cent of their value.3 A large part of the economy participates in the production and distribution of knowledge.4 The number of specialized scientific and technical personnel engaged in Research and Development (R&D) is expanding rapidly.5 Nearly every part of the economy benefits from advances in general purpose technologies (GPTs) such as Information and Communications Technology (ICT), mobile and broadband communications, artificial intelligence (AI), cloud computing, processing of big data, virtual and enhanced reality, robotics, Additive Manufacturing (AM), and the Internet of Things (IoT).6

We write in praise of market disrupters—firms that shake up the status quo, threaten incumbent firms, and sometimes transform entire industries. Through this process, which Joseph Schumpeter famously called “creative destruction,” disruptive firms promote economic growth and bring the benefits of new technologies and new business practices and business models to consumers.

We focus on the impact of antitrust policy—known globally as competition policy—on innovation.1 Competition policy seeks to protect and promote a vigorous competitive process by which new ideas are transformed into realized consumer benefits. In this fundamental way, competition spurs innovation. The productivity and growth literature teach us that innovation is the primary driver of rising standards of living over time, so promoting innovation through effective competition policy is likely to be very consequential for economic growth and welfare.

The previous two Parts examined the existing sources of regulatory authority in the patent context--the PTO, the ITC, and the Federal Circuit--to create a hierarchy of potentially anticompetitive patent activities, categorizing them based on the degree to which they are already under patent-specific supervision. Where that alternative supervision exists, as the Credit Suisse Court recognized, the benefits of overlapping antitrust intervention are marginal. Of equal--if not greater--concern, however, are the costs of overlapping antitrust intervention.

The bulk of the Court's analysis in Credit Suisse was dedicated to calculating those costs in the securities context. Due to the "fine, complex, detailed line" separating activity the SEC permits and activity the SEC forbids, the "contradictory inferences" that might arise from identical behavior, the "need for securities-related expertise" in adjudication, the "risk of inconsistent court results," and the danger of permitting plaintiffs to "dress what is essentially a securities complaint in antitrust clothing," the Credit Suisse Court determined that "antitrust courts are likely to make unusually serious mistakes" where they intervene with securities law. 193 As a result, the Court stated, permitting antitrust law and securities law to overlap would likely "produce conflicting guidance, requirements, duties, privileges, or standards of conduct." 194 This Part extends that analysis to the patent context where the costs are equally substantial. Each of the above concerns is just as pressing in the patent sphere--if not moreso.

The real aim of antitrust law, then, is to curb excessive economic and political power of business. Yet the original legislation made only the restraint of trade illegal. Finding this too vague, the courts compelled Congress - in 1914, 1936 and 1950 - to spell out unlawful market practices, but always without reference to the exercise of power. Thus, in practice, antitrust policy has been used to ensure the free entry of competitors into all markets.

While Milton Friedman opposed antitrust because it creates bureaucracy, most of the opposition to it has rested on the claim that it penalises the best for being the best. University of Chicago economists and legal scholars, such as Robert Bork, convinced the courts that the real intent of the Sherman Antitrust Act was to enhance consumer welfare. The only relevant problem is the short-term market price - not market power. Monopoly power and business practices do not matter if a firm is the best and offers products at prices and qualities that benefit consumers.

On October 31, 2022, a federal court stunned the legal and publishing worlds when it sided with the U.S. Department of Justice and blocked the planned acquisition of publishing house Simon & Schuster by the book behemoth Penguin Random House.1 Just a little under a month later, the deal officially collapsed, “paus[ing] consolidation in an industry that has been profoundly reshaped by mergers and acquisitions, with little regulatory intervention.”2 For the publishing world, the court’s order—and the decision by Simon & Schuster’s parent company to terminate the deal rather than seek an appeal of the court order—broke a pattern of rapid consolidation in a deeply concentrated landscape that had dwindled to just five publishers.3 For the legal world, the DOJ’s win marked a rare victory for the new antitrust movement: regulators actively seeking to reform antitrust law away from what they argued was a narrow focus on consumer pricing, toward an expansive, mostly untested interpretation of the law that protected labor markets and curbed corporate power.4

More broadly, the decision was that rare collision between antitrust law and the deeply consolidated copyright-content industries, which many have long acknowledged but about which little has been done.5 Yet, to date, scholars have generally viewed copyright and antitrust as working independently of each other, theorizing that copyright law itself might regulate competition amongst firms through specific mechanisms like safe harbors and compulsory licenses, and in cases of extreme anticompetitive conduct, that antitrust law can step in and regulate discrete antitrust harms like price-fixing.6 But, as this Article argues, neither copyright nor antitrust law alone has been sufficient for addressing the immense concentration of the copyright industries or the anticompetitive practices of new, large technology companies.

"The unprecedented is necessarily unrecognisable. When we encounter something unprecedented, we automatically interpret it through the lenses of familiar categories, thereby rendering invisible precisely that which is unprecedented."

Shoshana Zuboff, The Age of Surveillance Capitalism2

How does antitrust law enforcement against the anticompetitive effect of a firm’s consolidation of patents shape innovation? This inquiry is at the crossroads of the antitrust and patent policy domains; thus, the answer is deemed crucial to a comprehensive understanding of how interactions between the two institutions shape innovation. However, existing studies seem to have provided only clues and limitations. Whether a stronger market competition drives innovation (Aghion et al., 2005; Arrow, 1962; Schumpeter, 1942) remains unclear. Meanwhile, there has been a sharp scholarly disagreement with mixed empirical findings on whether stronger patent protection promotes innovation (Hall and Ziedonis, 2001; Kortum and Lerner, 1997; Sakakibara and Branstetter, 2001). In antitrust law scholarship, questions about antitrust law’s relation to innovation (Khan, 2016), and the conditions under which the enforcement of antitrust laws shape market competition and innovation have drawn scholarly attention but with limited empirical evidence (Katz and Shelanski, 2005; Sidak and Teece, 2009). The present study explores a part of the answers to the foregoing question by examining the effect of antitrust regulation of patent consolidations on the creation of follow-on innovations. Firms can consolidate patents in two ways: (1) preemptive patenting through internal research and development (R&D) and A (2) purchasing existing patents (i.e., patent transfers). Preemptive patenting helps dominant players maintain their monopolistic market power (Gilbert and Newbery, 1982); this does not violate antitrust law (see, Gilbert, 1987). Meanwhile, patent consolidation by patent transfer can restrict access to upstream technology (Figueroa and Serrano, 2019; Hahn, 1984) by downstream innovators and deter their market entry (Gotts and Sher, 2012; Ziedonis, 2004); such consolidations may violate antitrust law. The latter case is the scope of this study. By reconciling the literature on patent pools and the role of patents in cumulative innovation, we hypothesize the negative effect of a firm’s patent consolidation on its competitors’ follow-on innovations and market competition in a sector where innovation is created in a highly cumulative manner. This holds if the patent-consolidating firm amasses patents for upstream technologies that are substitutes for technologies it already owns. In that case, antitrust regulation of patent consolidation is anticipated to positively affect the creation of follow-on innovations by the patent-consolidating firm’s competitors. We empirically test this hypothesis by analyzing the intervention by the US Department of Justice (DOJ) in transfers of Linux-related patents by Novell—an open-source software (OSS) company—to a consortium of four large proprietary software companies in 2011. The consortium, which comprises Microsoft (MS), Oracle, EMC, and Apple, was known as CPTN Holdings (CPTN). Because Novell’s patents were crucial to Linux software development, while the patent-consolidating firms’ products were in fierce market competition with the Linux-based software, the patent transfers could discourage software market competition. The DOJ intervened in response to antitrust concerns about this patent transfer deal. The intervention was intended to regulate the transfer of patents to MS rather than banning the entire patent transfer. Some Novell patents could (or could not) be transferred to the other three software companies (i.e., Oracle, EMC, and Apple) because of this partial regulation. By exploiting the fact that DOJ intervention was triggered by details of the patent transfer deal that were disclosed by the German federal antitrust authority, we identify the causal impact of the regulation of patent transfers. Our analyses using patent citation, copyright, and trademark data show the positive effect of the antitrust regulation of Novell’s patent transfers on the development of follow-on innovations by the patent-consolidating firms’ competitors. By empirically examining how antitrust regulation of patent-enabled monopolies affects follow-on innovations, this study advances the broad policy discussion on interactions between antitrust and patent laws become relevant to innovation. As intensively discussed by scholars (Katz and Shelanski, 2005; Sidak and Teece, 2009), the necessity of incorporating “technological innovation” into modern antitrust law by accounting for the Schumpeterian perspective has received increasing recognition from the antitrust law community. The Schumpeterian view posits that market competition and technological innovation are mutually and dynamically influenced in the so-called “innovation cycle.” Firms that are not dominant market players may enjoy monopolistic market profits through future innovation. In contrast, a dominant market player may lose its monopolistic market position due to a competitor’s innovation. The dynamics create therein incentives for firms to innovate. This scholarship leads to the important question of how antitrust law jointly shapes market competition and innovation. Our study contributes to this discussion by empirically showing that “patent consolidation” by firms is a venue where enforcement of antitrust law promotes market competition and technological innovation. The remainder of this paper is structured as follows. Section 2 reviews the literature on patent pools and cumulative innovation to derive our main hypothesis. Section 3 describes the data and methods for empirical analysis. Section 4 presents the findings, and Section 5 discusses the implications.

Another risk is that a specialised court may be more easily subject to political or economic influences.64 This is due to the fact that generalist courts are often considered to be more independent than specialised courts.65 This risk can materialize ex ante, that is, in the process of appointing judges to the specialised courts.66 The risk can also materialise subsequently because of the closer interaction between counsel and judges before a specialised court.67 Such interaction may be problematic and detrimental to the court’s legitimacy,68 as it generates a risk that the courts will become ‘captured’ by special interest groups to the detriment of broader societal interests.69 The capture may materialise itself in a (perceived) loss of independence and bias towards certain frequent players and stakeholders. From this perspective, it is suggested that generalist courts can provide the ‘antidote’ to this risk.70

I share that story to illustrate that when it comes to picking a jury, one side is going to want somebody that they can bamboozle; they want to knock the people off who can actually understand the patent and understand the science and where the motor uses whatever it is that the motor uses.

Another major difference is that competitor-competitor suits are less common today. These companies have now built up their own arsenal of patents—so a company asserting patents against a competitor could lead to mutual destruction. But that dynamic is not present with non-practicing entities—they do not have any products of their own, so they have nothing to lose.

Specialized IP courts are generally believed to improve the quality of justice available to IP right holders. The court’s expertise means that disputes can be handled coherently on the basis of past experience. This is particularly important for IP disputes because courts are often requested to render decisions very quickly on applications for provisional measures in order to prevent or stop an infringement of IP rights. Specialized IP courts are better equipped to keep pace with and adapt to dynamic developments in IP law. They allow for timely and cost-effective handling of proceedings and can improve the consistency of case law. They can also help to eliminate or reduce any risk of forum shopping – whereby IP owners, given the choice of court, choose the one that will favor their interests – by centralizing IP disputes before the specialized IP courts, and can further foster the development of special procedural rules that are tailored to IP disputes.

Specialized IP courts are generally believed to improve the quality of justice available to IP right holders. The court’s expertise means that disputes can be handled coherently on the basis of past experience. This is particularly important for IP disputes because courts are often requested to render decisions very quickly on applications for provisional measures in order to prevent or stop an infringement of IP rights.

Specialized IP courts are better equipped to keep pace with and adapt to dynamic developments in IP law. They allow for timely and cost-effective handling of proceedings and can improve the consistency of case law. They can also help to eliminate or reduce any risk of forum shopping – whereby IP owners, given the choice of court, choose the one that will favor their interests – by centralizing IP disputes before the specialized IP courts, and can further foster the development of special procedural rules that are tailored to IP disputes.

Civil law is a comprehensive, codified set of legal statutes created by legislators. A civil system clearly defines the cases that can be brought to court, the procedures for handling claims, and the punishment for an offense. Judicial authorities use the conditions in the applicable civil code to evaluate the facts of each case and make legislative decisions. While civil law is regularly updated, the goal of standardized codes is to create order and reduce biased systems in which laws are applied differently from case to case.

Common law draws from institutionalized opinions and interpretations from judicial authorities and public juries. Similar to civil law, the goal of common law is to establish consistent outcomes by applying the same standards of interpretation. In some instances, precedent depends on the case-by-case traditions of individual jurisdictions. As a result, elements of common law may differ between districts.

Common law refers to the law made by judges and not the parliament. It’s basically that law that develops organically in due course and is based on the accepted shared values and customs of society.

As judges consider both criminal and civil matters, they make informed decisions, develop precedents, and deliver rulings. When all these things are taken together, they constitute common law. Some civil laws like negligence and torts began as common law. Common law systems come with many advantages, five of which are listed below.