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22 Minn. J.L. Sci. & Tech. 83 (2020-2021)
Antitrust Policy toward Patent Licensing: Why Negotiation Matters

handle is hein.journals/mipr22 and id is 87 raw text is: Antitrust Policy Toward Patent Licensing: Why Negotiation Matters Daniel F. Spulber* ABSTRACT Major technological changes driving the Fourth Industrial Revolution combine complementary inventions to form complex innovations. These include the Internet of Things (IoT), 5G mo- bile communications, artificial intelligence (AI), cloud compu- ting, data analytics, autonomous vehicles, additive manufactur- ing, and augmented/virtual reality. This article shows that negotiation of patent license contracts fully eliminates many in- fluential antitrust concerns about complementary inventions, in- cluding royalty stacking, SEP hold-up, patent thickets, blocking patents, the 'Tragedy of the Anti-Commons, and reg- ulatory patent pools. Negotiation of patent license contracts im- plies that total royalties will be less than those charged by a bun- dling monopoly. Negotiation of patent license contracts in a competitive market avoids distortions from royalties per unit of output and eliminates the multiple-marginalization problem. Ne- gotiation generates contract provisions consistent with contingent royalty arrangements. Negotiation also has important implica- tions for antitrust policy toward patent pools. The analysis shows that patent pools serve to mitigate transaction costs rather than to regulate total royalties. This article suggests that antitrust pol- icy makers should continue to be neutral between negotiation of patent license contracts and patent pools. This article supports the view that negotiation is pro-competitive as expressed by the © 2020 Daniel F. Spulber * Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy, Kellogg School of Management, Northwestern University. jems@kellogg.northwestern.edu. I am grateful for research support from Qual- comm and the Kellogg School of Management. All opinions expressed are my own. I thank Alexei Alexandrov, Ashish Arora, John Golden, Suzanne Munck, Jonathan Nash, and Danny Sokol for helpful comments. I also thank partici- pants at the National Science Foundation 2020 Future of IP Conference, Or- lando, Florida, February 28, 2020 for their helpful comments. 83

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