- - Sunday, June 11, 2017

ANALYSIS/OPINION:

American businesses are suffering as foreign governments misuse their antitrust laws to discriminate against U.S.-based companies. A recent report from Chamber of Commerce’s International Competition Policy Expert Group examined this problem, and Congress is now holding hearings on the topic.

Unfortunately, companies that rely on intellectual property (IP) are particularly vulnerable to abuse. As the report notes, “legitimate IP rights are often not respected for their role in incentivizing investment in innovation that can have an enormously positive long term impact on competition.”

By securing to innovators exclusive property rights to the fruits of their productive labors, intellectual property law incentivizes innovation and forms the foundation of the myriad partnerships and transactions that enable creators and innovators to commercialize their inventions. In theory, antitrust law is supposed to support the IP system by providing a fair marketplace where innovative companies thrive according to their own merit. The main thesis of the Chamber’s report, however, is that several countries are misusing their antitrust laws to pursue domestic industrial policy goals that allow the government to pick particular winners and losers.

When antitrust law is used for industrial policy goals or political favoritism, it undermines the basic premise of the IP system. Often the selected winners are cherry-picked nationals of the countries at issue. This harms innovative American companies who strive to compete in these markets based on the actual economic value of their products and IP.

The Chamber’s report discusses several improper uses of antitrust law that undermine IP owners’ ability to freely deploy their property rights in the marketplace.

One key problem is the inconsistent application of vague “fairness” considerations. Even though it makes perfect sense — both from an economic and a moral standpoint — for IP owners to command robust license fees when their IP enables important functionality in a product, competition law authorities are quick to criticize American companies’ license fees as “unfair.” This is particularly true in industries where American companies are leaders in researching and developing foundational innovations that foreign companies want to integrate into their products.

In another troubling trend for American IP owners, foreign antitrust regulators are increasingly pursuing investigations that go beyond the scope of any reasonable antitrust concerns. Despite being baseless, these investigations have serious negative consequences for the targeted firms, particularly for innovative firms trying to license their IP or get their products to market while their patents are still in force and while their technology is still cutting-edge.

In parallel with overly expansive investigations, many jurisdictions do not offer the basic procedural due process safeguards necessary for businesses to defend themselves against baseless accusations. The Chamber’s report notes that U.S. companies suffer “enforcement actions in which they are not given adequate notice or time for responses to questions; are not informed of the particular acts or practices which are a subject of concern; [and] are not allowed to obtain from enforcers information about the theory of anticompetitive harm …” Once again, this effectively allows authorities to pick winners and losers based on political cronyism or domestic industrial policy goals rather than actual antitrust concerns.

Unfortunately, instead of working to improve their policies and level the antitrust playing field, foreign countries are expanding their efforts to discriminate against U.S. innovators. The Chamber’s report notes that some countries are even considering creating liability simply for failing to license patents, including for failing to license outside of the country in question. This would give foreign antitrust regulators leverage to influence how American IP owners conduct business all over the world, including in the U.S.

Intellectual property incentivizes innovation and commercialization based on the property rights it secures to creators. These property rights are only valuable — and thus only function as an incentive — when IP owners can deploy them in the marketplace without undue interference. When countries use antitrust laws to devalue American IP in order to favor their own local businesses, it undermines the purpose and function of the IP system as a whole, and it undermines American companies’ ability to compete on a level playing feel.

It’s time to put an end to foreign antitrust bullying of American innovators.

• Matthew Barblan is executive director and David Lund is the John F. Witherspoon legal fellow at the Center for the Protection of Intellectual Property at Antonin Scalia Law School, George Mason University.

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