Reverse Settlement and Holdup at the Patent Office. (With Jorge Lemus). Under review, Journal of Legal Studies.
Abstract: The Patent Trial and Appeal Board (PTAB) is an adjudicative division of the Patent Office that permits parties to challenge patents as invalid. We investigate whether PTAB's distinctive institutional characteristics—such as its lack of antitrust jurisdiction or traditional justiciability requirements—may be exploited to facilitate potentially anticompetitive "reverse settlements" between drug monopolists and prospective generic competitors. We offer empirical evidence that most pharmaceutical settlements reached in PTAB appear to forestall market entry by the generic-petitioner, even if the disputed patent claims had been deemed “reasonably likely” to be invalidated.
Competition, Inalienability, and the Economic Analysis of Patent Law. (Job market paper).
Abstract: Most influential economic theories about private disputes, including the Coase theorem, assume that there are no legal restraints on alienability. However, the parties to a patent dispute are often competing firms, and their private dealings may thus be constrained by the antitrust laws. Antitrust prohibits private transactions that allocate commercial rights in ways that unreasonably subvert competition between the parties. This creates an asymmetry between (1) the allocations of rights that the parties can effect through contract; and (2) those a court can effect through its judgment. For example, antitrust may condemn a “reverse payment” settlement in which a monopolist-patentee pays an accused infringer to stay off the market for several years. But if the dispute were litigated to judgment, a court could produce the same exclusionary outcome by issuing an injunction. The result is ultimately that, in contrast to familiar Coasean logic, a court’s delimitation of patent rights can influence the final allocation of such rights, even if the parties can bargain. Further, the parties may (rationally) litigate to judgment even if they have common expectations about litigation, and even if they are perfectly capable of entering into a lawful settlement ex ante.
How Patent Damages Skew Licensing Markets. (With Jonathan Masur). Forthcoming, Review of Litigation.
Abstract: If a litigated patent has previously been licensed to a third party, the courts generally adopt the terms of the prior agreement as the best measure of damages. However, while administratively convenient, this “licensing-based damages” standard creates problematic incentives and undermines the efficient commercialization of patented inventions. It rests on the trivialized (and generally false) presumption that a patent license is like a commodity, with the patentee charging a common price to all comers. As a consequence, patentees distort their future recovery prospects – and by extension the outcomes of future licensing negotiations – whenever they license their patents, whether or not today’s agreement will be a good proxy for tomorrow’s dealings or disputes. Knowing this, patentees are discouraged from licensing at anything less than a high royalty rate, even if they could reach many additional mutually-beneficial agreements on more modest terms. The result is that patent holders rationally cut off the bottom segment of the licensing market, creating substantial deadweight loss. This injures not only patentees, but also prospective licensees and their consumers. The standard creates additional problems by encouraging secrecy and “gamesmanship” in patent licensing. We propose that the licensing-based damages standard be abandoned, and that damages should instead be awarded ad hoc. That this necessitates some speculation does not suggest it is the less desirable approach, for it is better that damages be speculative but unbiased than systematically problematic.
Challenge Restraints and the Scope of the Patent. Forthcoming, Antitrust Chronicle.
Abstract: Patent rights are not the only important legal entitlements conferred by the Patent Act. It also vests challenge rights in third parties, permitting them to challenge granted patents as invalid or uninfringed, and potentially clearing a path for privileged competition. These classes of rights perform opposite policy functions, with patent rights providing an inducement for invention and challenge rights providing a check against unwarranted or overbroad patent enforcement. And, unlike patent rights, the Patent Act never provides that challenge rights are alienable – i.e. that they may be transacted or restrained through contract. As such, challenge restraints – contractual restrictions on a party’s challenge rights – are not within “the scope of the patent.” This suggests not that they are categorically unlawful, but simply that they do not enjoy safe harbor from antitrust attack.
Buying Monopoly: Antitrust Limits on Damages for Externally Acquired Patents. (With Herbert Hovenkamp). Forthcoming, Texas Intellectual Property Law Journal.
Abstract: Most patent assignments are procompetitive and serve to promote the efficient commercialization of patented inventions. However, patent acquisitions may also be used to combine substitute patents from external patentees, giving the acquirer an unearned monopoly position in the relevant technology market. A producer requires only one of the substitutes, but by acquiring the combination it can impede product market rivals by limiting their access to important technological inputs. Similarly, a patent assertion entity may acquire substitute patents to eliminate inter-licensor competition, enabling it to charge supra-competitive license fees, much like a merger or cartel. For example, by acquiring two or more substitute patents that collectively dominate a market a PAE can effectively monopolize the technology for that market. Such anticompetitive practices are regularly condemned in conventional product contexts, but the courts have not yet applied the same antitrust logic to patent markets. And they passively encourage anticompetitive patent acquisitions by awarding large damages when such patents are infringed.
Anticompetitive Patent Injunctions. (With Tom Cotter). 100 Minnesota Law Review 871 (2016).
Abstract: The current approach for determining when courts should award injunctions in patent disputes involves a myopic focus on the hardships an injunction might impose on the litigants and the public. This article demonstrates, however, that courts sometimes could rely instead on a consideration far more relevant to the patent system's goal of promoting innovation: the extent to which the right to exclude was actually a necessary quid pro quo for the plaintiff's decision to bring its products to market. We illustrate the value of this approach with a critique of a recent Federal Circuit decision, Trebro Mfg. Inc. v. FireFly Equipment, LLC, which held that injunctive relief may be appropriate when a defendant infringes a patent that the plaintiff-competitor does not practice, and against which it lacked any legal protection when it entered the relevant downstream market. These circumstances — which are increasingly common in industries with rich markets for secondhand patents, result in the formation of what we refer to as a “diagonally integrated” nonpracticing entity (NPE) — a producer who owns a patent it does not practice, and who competes with downstream rivals who use (or would like to use) the patented technology.
Predatory Patent Litigation: How Patent Assertion Entities Use Reputation to Monetize Bad Patents. Submitting fall 2016.
Abstract: Despite their expertise in patent law, the most litigious patent assertion entities (PAEs) frequently file dubious infringement claims on which they are ostensibly very unlikely to turn a profit. Thus one might conjecture that these PAEs are mistaken to follow through on their litigation threats when their chances of coming out ahead are so scant. To the contrary, this paper demonstrates that this is in fact a calculated strategy of predatory patent litigation: by following through on its threats of seemingly irrational litigation, the PAE develops a litigious reputation that convinces other producers that these threats are credible, leading them to accept licensing offers they would ordinarily rebuff. This allows the PAE to garner substantial licensing revenues using low quality patents that would otherwise be difficult or impossible to monetize.
Profitable Double Marginalization. (With Kevin Bryan). Submitting winter 2016.
Abstract: When successive monopolies transact through noncooperative linear pricing, the resulting double markup decreases their joint profits relative to vertical integration. However, if there are downstream rivals (which are not double marginalized), the same noncooperative interaction often inadvertently raises their joint profits. Profit effects depend on how the well-understood harm from misaligned interests compares to the value of the resulting strategic effect. When profitable, vertical noncooperation incidentally approximates strategic delegation a la Bonanno & Vickers (1988), but avoids its credibility problem, suggesting an inability to bargain may be indirectly beneficial. The "conjectural consistency" concept helps to explain the disparate profit effects, and to synthesize the literature on strategic delegation and vertical control. The optimal way to "distort" a downstream firm's behavior is always to make it behave as if it has a consistent conjecture, no matter the distortion mechanism. If upstream competitors do this in parallel, they induce a "consistent conjectures equilibrium" (CCE) -- or else a close analogue -- evincing a strong link between ordinary Nash games and the CCE.
Patent Pools and Related Technology Sharing. (with Herbert Hovenkamp). Forthcoming, Cambridge Handbook on Antitrust Intellectual Property.
Abstract: A patent "pool" is an arrangement under which patent holders in a common technology commit their patents to a single holder, who then licenses them out to the original patentees and perhaps also to outsiders. The payoffs include both revenue earned as a licensor, and technology acquired by pool members as licensees. Public effects can also be significant. For example, technology sharing of complementary patents can improve product quality and variety. In some information technology markets pools can prevent patents from becoming a costly obstacle to innovation by clearing channels of technology transfer. By contrast, a pool's aggregate output reduction or price fixing in a product market can produce cartel profits.
A Broader Look at Patent Royalties and Antitrust. (Work in progress).
Abstract: It is well known in antitrust economics that competitors can rely on patent licensing with supracompetitive royalties as a surrogate for price fixing. This paper addresses a number of alternative situations in which patent royalty agreements may raise antitrust concerns, even if the royalty rate is ostensibly reasonable (implying the agreement is not transparently anticompetitive). First, a royalty may serve effectively as a vertical restraint, preventing the downstream firm from passing too much of the licensing value through to consumers, which may enhance joint profits. Second, licensing to a rival creates an "alignment effect" by giving the licensor a stake in its rival's success, thereby diminishing inter-party competition. This is the same problem that arises when a firm buys stock in a competitor. Consequently, even if the royalty rate is reasonable, the arrangement may reduce consumer welfare overall. Indeed, it creates essentially the same welfare tradeoff as horizontal merger: it engenders some procompetitive efficiencies, but it makes the market less competitive.
Patent Prospect Theory and Competitive Innovation. (Work in progress).
I was born in Iowa City, Iowa, in 1988. After graduating from Iowa City High School in 2006, I enrolled at the University of Iowa, majoring in mathematics and economics. While at Iowa, I received the Frank Knight Award, given to the top undergraduate in economics. I also wrote editorials for the Daily Iowan newspaper. I graduated in three years, with highest distinction. In fall of 2009, I entered the economics PhD Program at Northwestern. Four years later, I decided to attend law school, and was ultimately admitted into Northwestern's JD-PhD program. I completed law school in spring 2016, cum laude. However, per the rules of Northwestern's JD-PhD program, my JD will not be officially conferred until I complete my PhD, which will occur in May of 2017.
I am an avid piano player, and a big sports fan. I am 100% Dutch, despite having been to the Netherlands only once. I have a cat named Carl, who is remarkably indifferent to most things that are not food.