Document Type

Article

Publication Date

2009

Abstract

Judges will tell you that they are comparatively poor rate regulators. The specialized, technical competence and supervisory capacity that public utilities commissions enjoy are usually absent from judicial chambers. Nonetheless, when granting antitrust remedies-particularly remedies for monopolistic abuse of intellectual property-courts sometimes purport to act as rate regulators for the licensing or sale of the defendant's assets. At the outset, we should distinguish between two forms ofjudicial rate setting. In one form, a court (or the FTC in its adjudicative capacity) grants a compulsory license and sets a specific rate as part of a final judgment or an order. The established rate merges with the final judgment, just like a damages award, requiring no further action from the court. Examples here include the FFC's recent decisions in Rambus and N-Data, where the Commission's order either set an actual rate or a maximum rate for patent licenses. The Supreme Court has suggested that such compulsory licensing and judicial rate setting may be a preferred remedy in cases of monopolistic abuse of patents. Another form of antitrust remedy involves merely potential judicial rate setting. Here, the relevant judgment requires the defendant to license on reasonable (or reasonable and nondiscriminatory-RAND) terms and reserves jurisdiction for any potential licensee who is unhappy with the rate offered by the defendant to petition the court to set a rate. Significantly, however, such 'jurisdiction retention" judgments do not necessarily involve a court in ever setting a rate. Instead, the mere threat of rate setting frames future licensing negotiations. The licensor comes to the bargaining table bereft of the power to impose monopolistic royalty rates, given that the licensee can always appeal to a court to set a monopoly-free rate. This essay is largely concerned with the latter form of judicial rate setting-the jurisdiction retention mode-about which it makes three general points. First, judges' lack of expertise to set rates should not be thought a major detraction from this sort of remedy. Courts rarely exercise their rate-setting powers even when they retain them. The interesting question is not whether courts are any good at setting rates-they are not, but that may not matter-but what happens to the bargain of the licensor and the licensee when the shadow of a rate-setting court lies upon them. The short answer is that the shadow of a rate-setting court, as distinguished from the more amorphous shadow of a damages-assessing antitrust court, makes equality the dominant norm in the licensing of intellectual property. However egalitarian the general impulse of liberal society, it is not clear that equality is such a desirable norm when it comes to the licensing of intellectual property. Even so, in cases where the defendant has acquired monopoly power unlawfully, it is useful to have it bargaining with licensees under the shadow of an undefined cap on what it can demand as royalties.

Comments

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