Every day, in many areas of life, there are important races occurring. There is a race to develop a vaccine for COVID-19. There is a race to perfect cars that can drive themselves. There is a race to expand the availability of 5G … and to develop the next wireless communications technology — 6G?
Innovative companies are expending great amounts of research dollars and human capital to participate in these races with the hopes of being part of the “winning team,” but the real winner when these technologies come to fruition is the public. Although the public may be desperately interested in obtaining the technology from these races — new inventions that make life better — a number of obstacles are regularly being introduced that hinder innovative companies ability and desire to participate. It’s time to stop hamstringing the competitors.
The competitors in these races are willing to spend millions of dollars developing new technologies and millions more innovating and commercializing the products and systems that incorporate these technologies. In exchange, these companies often seek patents on their inventions. By getting a patent on a new technology, the innovative company can then ensure it has a limited monopoly to make and sell the product itself or, as is more often the case, the company can license the technology to other companies to use.
In either case, the innovative company can then recoup some of those costs associated with participating in the race and, ideally, have money to invest in future races, or inventive and innovative efforts. If these companies cannot rely on patent law as a way to protect their investments in these areas, they may stop competing in these races altogether.
Although the obstacles facing innovative companies can come from anywhere, it is particularly concerning when it is the U.S. government that is trying to impede a competitor’s success. One example of this is the case of the Federal Trade Commission v. Qualcomm.
The FTC had filed a lawsuit against Qualcomm in January 2017, alleging that the company’s behavior in licensing its patents was anticompetitive. Essentially, this case was about using competition law, or antitrust, to impede a competition or the race for new technology.
In May 2019, the district court judge in the case issued an opinion finding Qualcomm’s behaviors caused anticompetitive harm, in part because the company had breached a duty to deal with its competitors. After winning the technology race, apparently the winner was supposed to go back and help its competitors to get ahead of itself. What is the point of racing if you are not allowed to get ahead of your competitors?
The judge also issued a sweeping injunction that significantly hindered Qualcomm’s ability to license its patents. The FTC in bringing the case and the district court judge in deciding the case essentially took away Qualcomm’s prize for winning a race. It is important to stress that last part here: Qualcomm had won a race. The patents that Qualcomm had obtained were good patents, covering inventive technology, and found to be valid.
Not only that, but the reason that there was a dispute about licensing the patents is that other companies are clamoring to be able to use the technology that Qualcomm invented. A race that results in innovation that other companies, and the public, dearly desires is exactly the point of competition. And yet, the FTC and the district court were willing to place obstacles that would hinder this innovative company’s ability and desire to compete in other races.
Thankfully, the U.S. Court of Appeals for the Ninth Circuit recognized this and, in an opinion issued this past week, has rectified the situation. Qualcomm’s behavior was found to not be anticompetitive or against antitrust law — and, importantly, disputes of this type should not be addressed by antitrust law at all.
If there is a dispute between the winner of a race and another competitor regarding the prize, that is licensing of a legitimate, valid patent, the issue is a matter of contract law or patent law – not a question of competition. While these technology races may result in harm to a losing competitor, that is the nature of races. Races create winners — and losers. While winners often continue racing, or investing in invention and innovation that is desired, sore losers complain about the race or about the winner.
But antitrust law is meant to encourage the winners. As the Ninth Circuit noted in its opinion, there is a difference between “anticompetitive behavior, which is illegal under federal antitrust law, and hypercompetitive behavior, which is not.”
Hypercompetitive behavior is exactly what we need and want. It is time to allow antitrust behavior to encourage competition and allow patent law to reward winners of the technology race. Otherwise, it is the public who ends up losing.
• Kristen Osenga is the Austin E. Owen Research Scholar & Professor of Law at the University of Richmond School of Law.