Joff Wild

There’s a scene in the third film of Peter Jackson's Lord of the Rings trilogy when after having managed to travel incognito through the wastelands of Mordor to the foot of Mount Doom, suddenly the piercing, laser-like gaze of Sauron falls directly on the two heroes, Frodo and Sam; immediately the forces of hell are unleashed upon them. It's a memorable moment and for some reason, whenever I think of the IP transactions marketplace and the globe’s anti-trust/competition authorities it comes into my head.

Earlier this year, we reported on comments made by the former head of the US Department of Justice’s anti-trust division that “We’re only in the early stages of understanding how the acquisition of patents might deter innovation”; while just last week, we looked at the remarks of Jeffrey Wilder, of the division’s Economics Analysis Group, on looking more closely at situations when competitors club together to buy patents before setting up an NPE to monetise them. Over in Europe, meanwhile, the head of the Competition DG has made it absolutely clear that he is “determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market”.

Against this backdrop, a report published in the Huffington Post earlier this week is absolutely essential reading. Authored by anti-trust attorney David Balto and entitled Antitrust Agencies Right to Expand Scrutiny of Patent Transfers and Acquisitions, the piece focuses on two recent events – the Georgetown Global Antitrust Enforcement Symposium and the Fordham Conference on International Antitrust Law and Policy – and the IP-related topics that they dealt with. Balto identifies five:

1) Unilateral aggregation of patents by a competitor;

2) Collaborative acquisition and aggregation of patents by competitors;

3) Business practices of non-practicing entities ("NPE"), whom the industry has described as "trolls" and which are sometimes referred to as "patent assertion entities";

4) Transfer of patent rights to trolls by legitimate competitors and the subsequent economic relationship between the competitor and the troll; and

5) Business practices of unwilling licensees within the standard-essential patents (SEP) context, and whether an unwilling licensee may be subject to equitable relief for failure to negotiate in good faith.

Balto explains the issues that are concerning the regulators in these areas in a way that makes clear they are now looking very closely at them, and that they are concerned by what they are seeing. Certainly, the fact that points four and five are now on the radar does indicate a pretty sophisticated understanding of the market; and one that may have an impact on the value creation strategies of many types of patent owner, as well as on the value of patents themselves. 

We are still at the very early stages of the authorities’ interest in the patent transactions market and how it is being used, but I don’t think it is unreasonable to say that pretty soon we may start to see the practical effects of what they are currently exploring. At a guess, I reckon that at least some NPEs may find their activities very closely scrutinised, while operating companies that start NPEs or do deals with them may also find their actions coming under the microscope. A highly nuanced way of dealing with FRAND and standards essential patents may also emerge, based squarely on giving consumers the maximum choice at the most competitive prices (this may, in the end, be very good news for Android, despite current difficulties).

In the Lord of the Rings, Frodo and Sam eventually see of Sauron’s terrible threat and return home. But in a bitter-sweet ending, both realise they have been irrevocably changed by their experiences. You can always take parallels too far, of course, but I wonder if the same thing may happen to those participating in a patent marketplace that, so far, has seen very little in the way of attention from what soon may come to be regarded as the evil eye!