Silicon Valley Antitrust v.2

Hanno Kaiser University of California, Berkeley, School of Law, Spring 2013 Friday 8 - 9:50 am, Room 12

Last updated: February 25 2013

Textbook:

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

Class 1: Introduction; antitrust and high-technology (January 11, 2013)

a. Topics for discussion

• A brief history of antitrust and the regulation of high tech
• Static and dynamic antitrust analysis
• Technological change and the limits of legal regulation

b. Required reading

• Thomas Rosch, Intel, Apple, Google, Microsoft, and Facebook: Observations on Antitrust and the High-Tech Sector (November 18, 2010)
• Hanno Kaiser, Excerpt from Antitrust Law And Policy: An Introduction (2012)

c. Optional reading

• Sagers, Antitrust, Chapter 1
• Hanno Kaiser, Antitrust 101 Cheat Sheet (2011)

Class 2: The Smartphone Wars, Part 1: Overview (January 18, 2013)

a. Topics for discussion

• The origins of the smartphone wars: collision between the computer and the telecommunications industries
• Different regulatory histories: computers v. telecommunications
• Standard setting: the special powers of standard-essential patents
• Antitrust liability for deceptive licensing (FRAND) commitments

b. Required reading

• Broadcom v. Qualcomm, 501 F.3d 297 (3rd Cir. 2007)
• Michael A. Carrier, A Roadmap to the Smartphone Patent Wars and FRAND Licensing, CPI Antitrust Chronicle, Vol. 2 (April 2012)

c. Optional reading

• Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988)
• Florian Muller, FOSS Patents
• Renata Hesse, Six Small Proposals for SSOs Before Lunch (October 10, 2012)
• EC press release, Commission sends Statement of Objections to Samsung on potential misuse of mobile phone standard-essential patents (December 21, 2012)

Class 3: The Smartphone Wars, Part 2: Google’s acquisition of Motorola and the FTC’s complaint (January 25, 2013)

a. Topics for discussion

• From Google’s acquisition of Motorola (DOJ, 2012) to the FTC’s complaint and proposed order (2013)
• FTC authority under Section 5
• Analyzing the FTC’s complaint
• Harm to competition: Distortion of royalty negotiations
• Exclusionary conduct: making and breaking FRAND commitments without reference to states of mind
• Injunctions based on FRAND-encumbered SEPs: pros and cons

b. Required reading

• DOJ, Statement of the Department of Justice’s Antitrust Division on Its Decision to Close Its Investigations of Google Inc.’s Acquisition of Motorola Mobility Holdings Inc. and the Acquisitions of Certain Patents by Apple Inc., Microsoft Corp. and Research in Motion Ltd. (February 13, 2012)
• FTC, In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121 0120, Complaint (January 3, 2013).
• Welford Hill, Reasons to Reject a ‘No Injunctions’ Rule for SEPs and FRAND-Obligated Patents, Competition Policy International (April 30, 2012)

c. Optional reading

• Apple, Remarks for ITU Patent Roundtable (October 10, 2012)
• Google, Letter to IEEE (February 8, 2012)
• FTC, In the Matter of Certain Wireless Communication Devices, Inv.No.377-TA–745 FTC Statement on the Public Interest (June 6, 2012)
• FTC, In the Matter of Robert Bosch GmbH, Docket No. C–4377; File No. 121 0081 Analysis of Agreement Containing Consent Orders To Aid Public Comment (November 26, 2012)
• Various Industry Participants Contributions to ITU Patent Roundtable (October 10, 2012)
• FTC, In the matter of N-Data (2008)
• Sean Royall, Adam Di Vincenzo, The FTC’s N-Data Consent Order: A Missed Opportunity, Antitrust, Vol.22 No.3 (Summer 2008)

Class 4: The Smartphone Wars, Part 3: Consent orders and negotiated settlements

a. Topics for discussion

• The consent order process
• Outsourcing of antitrust compliance (e.g., Google/ITA; Ticketmaster/LiveNation; Google SEPs)
• Analysis of the FTC’s proposed consent order in the Google SEP matter
• Procedural remedies for substantive concerns
• FTC v. ITC?
• Impact of non-U.S. FRAND breaches on domestic commerce

b. Required reading

• FTC, In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121 0120, Decision and Order (January 3, 2013).
• FTC, In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121 0120, Analysis of Proposed Consent Order To Aid Public Comment (January 3, 2013).

c. Optional reading

• FTC, In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121 0120, Public comments.

Class 5: The Microsoft Universe, Part 1/3 (February 15, 2013)

a. Topics for discussion

• Can antitrust keep up with fast moving technology markets?
• Will a remedy be timely?
• Trial strategy: emphasize 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)

b. 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

c. Optional reading/viewing

• Sagers, Antitrust, Chapter 4 (The All-Important Concept of Market Power)
• Pirates of Silicon Valley (2005)

Class 6: The Microsoft Universe, Part 2/3 (February 22, 2013)

a. Topics for discussion

• The anticompetitive playbook
  • Collusion
  • Exclusion
  • Leveraging
• Causation
• The “biodiversity” approach to ecosystem industries
• Attempted monopolization
• Tying
  • Code and “separate products”
  • Rule of reason for platform markets
• Who won?

b. 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 IV. TYING
• Kaiser, Microsoft Monopolization Offenses Chart (2008)
• Kaiser, U.S. v. Microsoft Overview (2013)

c. Optional reading

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

Class 7: The Microsoft Universe, Part 3/3 (March 1, 2013)

a. Topics for discussion

• Legal elements of a tying claim
  • Two products
  • Tie
  • Market power (tying)
  • Effect (tied)
• Economics of tying
• Issues posed by U.S. v. MSFT and “EC v. MSFT”
  • Evolution of code and the “separate products” test
  • The “rapid success problem”
  • Rule of reason for platform markets
  • Are “nudges” ties?
• Remedies
  • U.S. remedies
  • EU remedies (WMP, IE)
  • Behavioral economics and remedies design

b. Required reading

• U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read: IV. TYING

• Case T–201/04, Microsoft Corp. v. Commission, CFI 2007. Read the excerpts bSpace (tying claim).

• Kaiser, Note on Tying (2013)

• Kaiser, Note on MSFT remedies in the EU (2013)

c. Optional reading

• EC, Choice Screen Screenshots (2007)

Class 8: Patent assertion entities (March 8, 2013)

• Guest lecturer: Alan Devlin

a. Topics for discussion

• What are patent assertion entities?
• The economics of aggregation
• Shifting existing monopolies or creating new ones?
• Patent aggregation and assertion as an antitrust problem

b. Required reading

• See documents on bSpace
• Colleen Chien, Patent Assertion Entities (2012)

c. Optional reading

• Fiona Scott-Morton, Patent portfolio acquisitions: An Economic Analysis (2012)
• Carl Shapiro, Patent Assertion Entities: Effective Monetizers, Tax on Innovation, or Both? (2012)

Class 9: Open v. closed systems, Part 1/2 (March 15, 2012)

a. Topics for discussion

• “Open systems win”, Jonathan Rosenberg, Google (2009)
• “Open systems [are] good for making others lose.”, John Prentice, Gartner (2009)
• The “political philosophy” of open systems
• The economics of platforms
  • The players: system sponsors, users, contributors
  • Platforms as “managed economies”
  • “More is not always better” How platform rules emerge.
• Single platform aftermarkets
• Examples: Gaming platforms (XBOX, PS3, Wii), mobile (Andorid, iOS, Blackberry, Windows), online stores (eBay, Amazon)

b. Required reading

• Tim Wu, Does A Company Like Apple Need A Genius Like Steve Jobs? (2013)
• John Gruber, Open and Shut (2013)
• Kaiser, Are Closed Systems an Antitrust Problem?, Competition Policy International 91, Vol.7, No.1 (2011)
• Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992)

c. Optional reading

• Mozilla, Firefox OS (2013)
• Canonical, Ubuntu for Phones (2013)
• New Yorker, Degree of Openness, Infographic (2013)
• Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne, Opening Platforms: How, When and Why? (2008)
• David S. Evans, Andrei Hagiu and Richard Schmalensee, Invisible Engines (2006)
• Cory Doctorow, Curated Computing is No Substitute for the Personal and Handmade (2010)
• Cory Doctorow, Lockdown, The coming war on general-purpose computing (2012)
• eBay International AG - Notification - N93365 (Australian Competition & Consumer Commission) (2008)

d. Seriously optional reading/viewing

• Jacob Appelbaum, LCA 2012 Keynote (2012)
• Cory Doctorow, Homeland (2012)

Class 10: Open v. closed systems, Part 2/2 (March 22, 2012)

• TBA. Whatever we won’t manage to discuss in Class 9
• Newcal Industries v. Ikon Office Solution, 513 F. 3d 1038 (9th. Cir. 2008)]
• 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)

Class 11: Predatory innovation and cheap exclusion (April 5, 2013)

a. Topics for discussion

• To what extent should governments police product design decisions?
• What about code? Does “cheap exclusion” change everything?

b. Required reading

• FTC v. Intel, Complaint (2009)
• Allied Orthopedic v. Tyco Healthcare, 592 F.3d 991 (9th Cir. 2010); Read the excerpt and discussion in Herbert Hovenkamp, Innovation and Competition Policy: Cases and Materials (2011), Chapter 8, pp. 36–47.
• John Newman, Anticompetitive Product Design in the New Economy (2012)

c. 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 Decision, COMP/37.990 Intel (Warning! 518 pages.)
• Apple iPod iTunes Antitrust Litigation, [No. C 05–00037 JW, 2011 WL 2690511 (N.D. Cal. May 19, 2011)]

Class 12: Free and Open Software (“FOSS”) meets antitrust (April 16, 2013)

a. Topics for discussion

• What is FOSS? How is it different from Open Source?
• FOSS business models; how to make money with a ‘free’ product
• Is giving stuff away for free predatory?

b. Required reading

• Tim Lee, Antitrust complaint against Android is an attack on open source (2013)
• Wallace v. IBM, 467 F.3d. 1104 (7th. Cir. 2006)
• Brooke Group (Liggett) v. Brown & Williamson, 509 U.S. 209 (1993). Read the excerpts from Gavil, Kovacic, Baker, Antitrust Law in Perspective, 2d. Ed. (2008) on bSpace, which also include an excellent discussion of the basic economics of predatory pricing.
• U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) (focus on the “giving IE away for free” discussion on p.68)

c. Optional reading

• Richard Stallman, The Free Software Definition
• faberNovel, Business Models of Open Source and Free Software (2007)
• Eben Moglen, Innovation under Austerity (2012). Video. Transcript
• Eric Raymond, The Cathedral and the Bazaar (1997)

Class 13: The Google Search Investigations (April 19, 2013)

a. Topics for discussion

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

b. 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)
• Claire Cain Miller, Europeans Reach Deal With Google on Searches, New York Times (April 14, 2013)

c. 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 14: Review Session (April 26, 2013)