Jeffrey K. MacKie-Mason

What to do About Unilateral Refusals to License? (Download full paper)

Jeffrey K. MacKie-Mason

Published on: January, 2002

Abstract: There are well-known circumstances under which unilateral refusals to license will cause harm to competition, that is, will lower consumer welfare. However, when the strategy is profitable, refusals to license also increase the returns to intellectual property, and thus limitations on them will reduce the incentives for firms to invest in innovation. The optimal balance between innovation incentives and protection against static monopoly harm is not knowable to any reasonable degree of precision. Economists may be able to identify some special cases in which the desired rule is unambiguously knowable, but these cases will be few. Given a policy or legal rule, economists can help interpret and apply the rule. Analysis of recent legal statements on the treatment of refusals to license shows that some of the current confusion and frustration in this area can be attributed to failure to formulate the rules in terms of the economic purposes of the underlying statutes. Some attempts to delineate a boundary between cases in which intellectual property protection is absolute and those in which antitrust restrictions may be imposed are based on logical or semantic distinctions that are not related to the economic issues. These attempts will fail to resolve the confusion.

Antitrust Immunity for Refusals to Deal in (Intellectual) Property Is a Slippery Slope (Download full paper)

MacKie-Mason, Jeffrey K.

Abstract: The Federal Circuit's decision in CSU v. Xerox1 has generated enormous controversy. However, there seems to be emerging agreement among both critics and supporters of the decision on a correct, narrow reading of the decision. Whatever else the decision stands for, it appears to declare antitrust immunity for unilateral refusals to sell or license patented or copyrighted intellectual property (IP). What was at stake in Xerox is whether a firm with a legitimate property right in the design of certain parts has the right to condition sale of those parts with terms that enable Xerox to obtain a monopoly in a different market, for service labor. More broadly, what is at stake is a safe harbor for conduct that previously has been found illegal. For, although much emphasis is placed on whether this was a unilateral refusal to deal (as opposed to a concerted agreement, which would not be exempt from Section 1 scrutiny), it is at least as important that this was a conditional refusal. As I show below, the meaningful distinction between this conditional refusal to deal and a conventional illegal tie is nil. Further, if an antitrust exemption is given to all conditional unilateral refusals to deal, this formalistic shield will be easily available in the future to firms that would otherwise be subject to antitrust liability for tying or other concerted agreements.

Links Between Vertically Related Markets: ITS v. Kodak (Download full paper)

MacKie-Mason, Jeffrey K. and John Metzler

Abstract: In 1987 seventeen small companies filed an antitrust lawsuit against the Eastman Kodak Corporation, alleging that Kodak used its monopoly power over repair parts for its high-volume copiers and micrographics equipment in order to monopolize the service markets for those machines. Eleven years later, there have been two District Court opinions, two from the Ninth Circuit Court of Appeals, and one from the Supreme Court, and further post-trial, post-appeal disputes continue. Since the initial Supreme Court opinion in Kodak, there have been at least seven closely related Appeals Court opinions, and they stand in sharply divided conflict. Kodak is one of the most significant antitrust cases of the last decade or two. It is also one of the most controversial, and the controversy is far from resolved. We review the facts and the procedural history. We then present the main economic issues in dispute, and summarize the evidence presented at trial. We close with brief observations on some unresolved question that affect future antitrust economic analysis, and describe the post-Kodak conflict among other Circuit Courts of Appeal.