Silicon Valley Antitrust v.3

Hanno Kaiser. University of California, Berkeley, School of Law, Fall 2013 Friday 8 - 9:50 am, Room 170

Class 1: Introduction; antitrust and technology

August 23, 2013

Topics for discussion

• A short history of antitrust and technological change (railroads, phones, computers, internet)
• The anticompetitive toolkit: collusion, exclusion, leveraging
• The ingredients of an antitrust case: facts, law, economic theory, and telling a good story
• A roadmap for this course

Required reading

• Hanno Kaiser, Excerpt from Antitrust Law And Policy: An Introduction (2012)
• Hanno Kaiser, Antitrust 101 Cheat Sheet (2011)

Optional reading

• Christopher Sagers, Antitrust (2011), Ch. 1 (Introduction)
• Christopher Sagers, Antitrust (2011), Ch. 5 (§1 of the Sherman Act)
• Dan Wall, The qualities of the successful antitrust practitioner (2011) (bspace)

Slides

• Class 01 Slides

Class 2: Horizontal agreements: Hardcore cartels and efficient collaborations

August 30, 2013

Topics for discussion

• Per se illegal conduct: price fixing and market division
• How cartels work: bigger pieces of a smaller pie, audits, scorecards, and compensation schemes
• Establishing a baseline: What conduct is clearly per se illegal and why
• Rule of reason and ancillary restraints
• The problem of classification: When is the per se rule appropriate?

Required reading

• U.S. v. Andreas, 216 F.3d 645 (7th Cir. 2000) (excerpts on bspace).
• Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1 (1979)

Optional reading

• Griffin, Caught in the Act: Inside an International Cartel (2005)
• James Lieber, Rats in the Grain (2000)
• John Connor, Global Cartels Redux: The Amino Acid Lysine Antitrust Litigation (1996)
• DOJ, Antitrust Division Update Criminal Program (2012)

Slides

• Class 02 Slides

Class 3: Horizontal agreements: New business models

September 6, 2013

Topics for discussion

• Rapid technological change and per se illegality
• Ecosystems and the limits of the "category approach"
• Platform competition and price effects

Required reading

• United States v. Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar (2013)
• United States v. Apple Inc., et al., Nos. 12 Civ. 2826 (DLC), 12 Civ. 3394 (DLC) (July 10, 2013) (This is a long opinion. Give yourself a few days.)

Optional reading

• eBooks, DOJ Trial Materials (2013)

Class 4: The Microsoft Universe, Part 1/2

September 13, 2013

Topics for discussion

• Can antitrust keep up with fast moving technology markets?
• Will a remedy be timely?
• Trial strategy: theory or facts?
• Market definition and market power

• Key market power issues in U.S. v MSFT

  • Indirect network effects as entry barriers
  • Interoperability layers are threats to two-sided platform market power
  • Time horizons: market definition (Java “not yet” a substitute) v. exclusionary conduct (nascent competitor)

Required reading

• U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read pages 45–80: I. INTRODUCTION; A. Background; B. Overview; II. MONOPOLIZATION; A. Monopoly Power

Optional reading/viewing

• Jonathan Baker, Market Definition: An Analytical Overview (2007)
• Martyn Burke, Pirates of Silicon Valley (2005)
• Richard McKenzie, Trust on Trial (2002)

Slides

• Class 04-01 Slides: Market definition
• Class 00 Slides: Case Excerpts

Class 5: The Microsoft Universe, Part 2/2

September 20, 2013

Topics for discussion

• Exclusionary conduct (OEM agreements, commingled code, “embrace, extend, extinguish”)
• Causation
• The “biodiversity” approach to ecosystem industries
• Why did the attempted monopolization claim fail?
• Rule of reason for platform markets

Required reading

• U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read: II. MONOPOLIZATION […] B. Anticompetitive Conduct C. Causation III. ATTEMPTED MONOPOLIZATION (do not read the tying part; we'll return to that later)

Optional reading

• Doug Melamed, Dan Rubinfeld, U.S. v. Microsoft: Lessons Learned and Issues Raised, in: Antitrust Stories (2007)

Slides

• Class 04-02, U.S. v. Microsoft Overview
• Hanno Kaiser, Microsoft Monopolization Offenses Chart (2008)
• Hanno Kaiser, Note on MSFT remedies in the EU (2013)

Class 6: Predatory innovation

September 27, 2013

Topics for discussion

• What is innovation? Narrow and broad conceptions.

  • Phases: discovery, development, diffusion
  • Types: Discrete, complex, radical, incremental, disruptive, sustaining
  • Actors: Universities, small firms, large firms, first movers, fast followers, incumbents, challengers, individuals, collectives, users
• Should courts police product design decisions?
• Transferring monopoly power from one product generation to the next
• What about code? Does “cheap exclusion” change everything?

Required reading

• Allied Orthopedic v. Tyco Healthcare, 592 F.3d 991 (9th Cir. 2010); alternatively, read the excerpt and discussion in Herbert Hovenkamp, Innovation and Competition Policy: Cases and Materials (2011), Chapter 8, pp. 36–47.
• FTC v. Intel, Complaint (2009)

Optional Reading

• FTC, In re Intel, Analysis of Proposed Consent Order To Aid Public Comment (2010)
• FTC, In re Intel, decision and order (2010)
• EC, The Intel Antitrust Case in the EU (2009). The Commission fined Intel Euro 1.06 billion.
• EC, Commission Decision (2009) (518 pages. Not for the faint of heart.)
• EC, Summary of the Decision (2009)

Class 7: Open and Closed Systems: Foundations: Tying and Aftermarkets, Part 1/2

October 4, 2013

Topics for discussion

• Platform competition law ingredients: "applications barrier to entry," predatory innovation, tying, aftermarkets

• Single-brand aftermarkets and limiting principles

  • What is the antitrust significance of two-step purchasing patterns ("First you choose a phone, then you choose among the apps available for the phone.")?
  • Who gets what? Fairly and unfairly appropriating the gains from collaboration.
• The law and economics of tying

Required reading

• Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992) (Here are some case notes).
• Newcal Industries v. Ikon Office Solution, 513 F. 3d 1038 (9th. Cir. 2008)
• Dan Wall, Aftermarket Monopoly Five Years After Kodak, Antitrust 32, 33 (1997)

Class 8: Open and Closed Systems: Platform Strategy, Part 2/2

October 11, 2013

Topics for discussion

• The political philosophy of "open v. closed"
• Is resiliency part of economic efficiency (e.g., no single point of failure, deconcentration as a safeguard against government intrusion)

• Beyond the "open v. closed" soundbites

  • “Open systems win”, Jonathan Rosenberg, Google (2009)
  • “Open systems [are] good for making others lose.”, John Prentice, Gartner (2009)

• The economics of platforms

  • The players: system sponsors, users, contributors
  • Platforms as “managed economies”
  • “More is not always better” How platform rules emerge.

• Examples: Gaming platforms (XBOX, PS3, Wii), mobile (Andorid, iOS, FirefoxOS, Windows), online stores (eBay, Amazon)

  • "Closing an open system" v. "maintaining a closed system"

Required reading

• Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D.Cal. 2008)
• Datel Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974 (N.D. Cal. 2010)
• Hanno Kaiser, Are Closed Systems an Antitrust Problem?, Competition Policy International 91, Vol.7, No.1 (2011)
• U.S. DOD, Dates when PRISM Collection Began for Each Provider (2013)
• Landar Levison, Lavabit Shutdown Statement (2013)

Optional reading

• Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne, Opening Platforms: How, When and Why? (2008)
• John Gruber, Open and Shut (2013)
• Cory Doctorow, Lockdown, The coming war on general-purpose computing (2012)
• Jacob Appelbaum, LCA 2012 Keynote (2012)
• Eben Moglen, Innovation under Austerity (2012). Video. Transcript

Class 9: Interconnect obligations and refusals to deal

October 18, 2013

Topics for discussion

• Taxonomy: Platform sponsors with (MSFT) and without monopoly power in the platform market (Kodak)
• Do monopolists have affirmative duties to interconnect with competitors or duties to maintain interoperability
• Denial of (a) de novo access versus (b) continued access
• What if a monopolist's platform is an "essential facility" (US and EU perspectives)
• What happens when antitrust and other regulatory regimes collide - e.g., regulation that mandates interconnection (net neutrality)

Required reading

• Novell, Inc. v. Microsoft Corp., 2013 WL 5303259 (10th. Cir. September 10, 2013)
• Aspen Skiing Co., v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (read the excerpts on bSpace)
• Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004) (read the excerpts on bSpace)

Optional reading

• Florian Mueller, FOSS Patents Blog
• LiveUniverse, Inc. v. MySpace, Inc., 304 F. App'x 554, 555 (9th Cir. 2008)
• Facebook, Inc. v. Power Ventures, Inc., C 08-05780 JW, 2010 WL 3291750 (N.D. Cal. July 20, 2010) (Dismissal of Power Ventures' §2 counterclaim, p.12-13)

Class 10: The Smartphone Wars: Standard Essential Patent Holdup, Part 1/2

October 25, 2013

Topics for discussion

• The origins of the Smartphone wars: telcos v. computer companies

  • Who should get how much of a new category of devices that amalgamate telecommunications and computer technologies?
  • Who contributes what? Features v. standards.

• Identifying the key questions

  • Injunctions: Should holders of patents that they (a) declared essential to a standard and (b) promised to license on fair and reasonable terms be permitted to seek injunctions against implementers?
  • Royalties: Who should determine a reasonable royalty for standard essential patents and how should this royalty be determined?

• The benefits of interoperability standards, the problems that patents cause for standard setting, and the solutions developed to deal with patent-related problems

  • Procedural safeguards
  • Disclosure obligations
  • Licensing obligations

• The effects of holdup and hold-out

  • With feature patents
  • With standard essential patents

Required reading

• FTC, Standard Essential Patent Disputes and Antitrust Law, Prepared Statement before the U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, July 30, 2013
• Broadcom v. Qualcomm, 501 F.3d 297 (3rd Cir. 2007)
• U.S. Trade Representative, Disapproval of ITC determination, Investigation No. 377-TA-794 (August 3, 2013) (Samsung seeking exclusion order against Apple)

Optional reading

• FTC, Google/Motorola Mobility Consent Order ("SEPs") (2013)
• Apple, Remarks for ITU Patent Roundtable (October 10, 2012)
• Google, Letter to IEEE (February 8, 2012)

Class 11: Smartphone Wars: The Path Forward, Part 2/2 and Guest Lecture: The Mozilla Story (Harvey Anderson)

November 1, 2013

Topics for discussion

• What is the nature of a FRAND commitment?
• How real is the threat of injunctions?
• Willing licensees and willing licensors

Required reading

• Welford Hill, Reasons to Reject a ‘No Injunctions’ Rule for SEPs and FRAND-Obligated Patents, Competition Policy International (April 30, 2012)
• Wikipedia, Mozilla Foundation
• Wikipedia, Mozilla Corporation

Optional reading

• Dennis Carlton, Allan Shampine, An Economic Interpretation of FRAND (2013)

Class 12: The Google Search Investigations

November 8, 2013

Topics for discussion

• The economics of web search
• The antitrust case against Google

Required reading

• FTC, Statement of the Commission, In re Google Inc. File No. 111 0163 (2013)
• Commitment Letter from David Drummond, SVP, Google, to Chairman Leibowitz (December 27, 2012)

Optional reading

• Google, Competition Website (2013)
• FairSearch, Google’s Transformation from Gateway to Gatekeeper (2011)
• Geoff Manne, Josh Wright, Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google (2010)

Class 13: High Technology Mergers, Part 1-2

November 22, 2013 (8 am)

Topics for discussion

• Agency practice v. court decisions; the impact of the HSR Act on merger jurisprudence
• Structural presumptions in horizontal merger cases
• Coordinated theories of harm
• Unilateral theories of harm

Required reading

• FTC/DOJ, 2010 Horizontal Merger Guidelines
• U.S. v. Oracle Corp., 331 F.Supp.2d 1098 (N.D.Cal. 2004) (I posted excerpts on bSpace.)

Class 14: High Technology Mergers, Part 2-2

November 22, 2013 (1 pm, Room 170)

Topics for discussion

• Vertical mergers
• Changing incentives and ability to foreclose competition
• Acquisition of large patent estates

Required reading

• Case No COMP/M.6381 - Google/Motorola Mobility (2012)
• DOJ, Google/Motorola Mobility, Closing Statement (2012)

Optional reading

• FTC, Google/Motorola Mobility Consent Order ("SEPs") (2013)

Class 15: Review Session

December 3, 2013 (Tuesday, Room 170)

Materials

Textbook

• Christopher L. Sagers, Examples & Explanations: Antitrust (2011)

Recommended resources (not mandatory)

• Luis Cabral, Introduction to Industrial Organization (2000)
• Herbert Hovenkamp, Innovation and Competition Policy: Cases and Materials - An Open Source Casebook (2011)
• Wayne Dale Collins, Applied Antitrust: Case Development and Litigation Strategy (2013)

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