Federalism, Substantive Preemption, and Limits on Antitrust: An Application to Patent Holdup

Competition Policy and Antitrust

Article Snapshot


Bruce Kobayashi and Joshua Wright


Journal of Competition Law and Economics, Vol. 5, No. 3, pp. 469-516, 2009


This article asks whether antitrust law can help resolve some patent-related disputes among firms.

Policy Relevance

It makes sense to resolve patent holdup disputes under contract law or patent law. Relying on antitrust law could harm consumers.

Main Points

  • The Supreme Court ruled that some disputes involving securities are best resolved under securities law, not antitrust law, when alternatives to antitrust are available and antitrust regulation could result in “unusually serious mistakes.”

  • Technology firms working to develop a standard can be frustrated to find that a firm has allowed them to use its patented technology, but later demands a high price to license the necessary patents. This is “patent holdup.”
    • Patent holdup cases can arise from deception, or simply when a patent owner in good faith seeks to raise the price of the licenses he offers.

  • Using antitrust law to analyze patent hold-up will not work,  especially when the patent owner simply raises his prices. It is hard to show this will harm consumers by unlawfully hurting competition, because the patent owner’s power came from lawfully joining in the standards process.  

  • In one case, Rambus failed to tell the standard-setting organization about a patent application it had filed. But there is no duty under antitrust law for a firm to disclose its patent applications, and creating such a duty would cause problems.

  • Patent law cases bar patent owners from enforcing a patent when they have used the patent in a deceptive way. These rules would address patent holdup.

  • State contract law can also help courts decide patent holdup cases. Contract law gives firms some leeway to change their contracts, which often makes sense for everyone. Antitrust cases involve more severe penalties, and might make firms hesitate to renegotiate deals even when this would help consumers.

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