105 Nw. L. Rev. Colloquy 1 (2010-2011)

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Copyright 2010 by Northwestern University School of Law                Vol. 105
Northwestern University Law Review Colloquy


THE RIDDLE UNDERLYING REFUSAL-TO-DEAL

      THEORY


                                          Michael Jacobs* and Alan Devlin**


     May a dominant firm refuse to share its intellectual property (IP) with
its rivals? This question lies at the heart of a highly divisive, international
debate concerning the proper application of the antitrust laws. In this short
Essay, we consider a profound, yet previously unaddressed, incongruity un-
derlying the controversy. Specifically, why is it that monopolists refuse to
share their IP, even at monopoly prices? To resolve this issue, some have
recommended compulsory licensing, which would require monopolists to
license their IP in certain circumstances. This proposal, however, entails an
inescapable contradiction, one rooted in the issue of monopolists' seeming-
ly inexplicable refusal to share their IP.
     The policy tensions implicated by the compulsory licensing debate are
straightforward, involving a tradeoff between short- and long-term consid-
erations. Assuming that the monopolist being targeted has not committed a
separate violation of the antitrust laws,1 the near-term virtues of compulsory
licensing are two-fold. First, forced sharing will render the market more
competitive in the short run. Second, by increasing access to the relevant
IP, the law may accelerate cumulative innovation and invent-around. Both
of these benefits seem reasonable, yet they portend a serious long-term cost:
antitrust incursions into IP threaten to diminish incentives to invent.
     The tension between the long and short run moves the debate in a pre-
dictable but inconclusive direction. Consider, for example, the differences
between the U.S. and European approaches to compulsory licensing.
Courts in the United States have ruled that monopolists may refuse for al-
most any reason to license their IP to a rival, reasoning that the long-term
harm to incentives counsels against compulsory licensing.2 Conversely, the


    Distinguished Research Professor, DePaul University College of Law; Dartmouth College, B.A.,
1968; Yale Law School, J.D., 1971.
     Law Clerk to the Honorable Richard D. Cudahy, United States Court of Appeals for the Seventh
Circuit; University College Dublin, B.B.L. (Int'l), 2004; University of Chicago, LL.M., 2005; Universi-
ty of Chicago, J.S.D., 2006; Stanford Law School, J.D., 2007.
   1 If the monopolist has infringed the competition laws through unrelated conduct, see, e.g., United
States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (link), compulsory licensing might be an appro-
priate remedy.
   2 See, e.g., Verizon Commc'ns. Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-16
(2004) (link); In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325-28 (Fed. Cir. 2000) (link);
Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1215 (9th Cir. 1997) (link).

http://www.law.northwestern.edu/lawreview/colloquy/2010/17/                 1

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