UC Berkeley

When government recognizes intellectual property (IP) rights, it is often viewed as sanctioning the existence of private “monopolies,” in contrast to the general antimonopoly policy manifested in the antitrust laws. And yet, on occasion IP law itself condemns conduct on the part of IP owners--or excuses otherwise infringing activity on the part of IP defendants--expressly for the purpose of promoting competition, even though antitrust law (if one were to apply it at all under analogous circumstances) would not find anticompetitive harm absent a more thorough analysis of whether the antitrust defendant possesses power over a well-defined market. Salient examples include the misuse doctrines in patent and copyright law; some applications of merger and fair use in copyright; and trademark law’s functionality doctrine. In this paper, I develop a theoretical explanation for this divergence between antitrust and IP. Specifically, I argue that in some limited contexts the expected social costs (including error costs) of ruling for IP defendants may be low in comparison with the expected anticompetitive harm from ruling for IP plaintiffs. As a result, it sometimes may be welfare-enhancing for IP courts to be less concerned than antitrust courts about the expected costs of “false positives,” that is, cases wrongly decided against the party defending the allegedly anticompetitive conduct. I further contend, however, that such cases probably are more common in the copyright than in the patent law context, and that even in copyright contexts courts should be cautious about casually inferring anticompetitive harm; but that the analysis provides a rationale for a relatively expansive definition of trademark functionality.