Collusive and Exclusive Settlements of Intellectual Property Litigation

Abstract

During the past year, two important developments have emerged at the intersection of antitrust and intellectual property.  The first is the proposed settlement in copyright litigation over the Google Books Search program, currently pending in the Southern District of New York, where the judge is considering, among other things, antitrust objections to the proposed settlement.  The second is an antitrust challenge to the consummated settlement of patent litigation between two drug makers.  The appeal of that case was recently decided by the Second Circuit.

These cases renew some interesting questions about the relationship between intellectual property and antitrust.  It is a major principle of intellectual property law that innovators should retain the fruits of their labor, i.e., the profits from innovation.  However, antitrust defendants have tried to turn this principle into a complete defense from liability.  The argument is that creation of a new product, especially one covered by a patent, may offer protection against antitrust liability.

The Article argues that claims of a complete antitrust defense go too far.  The key question in antitrust cases is whether the innovator has acted in a way that is likely to limit competition and harm consumers, relative to feasible alternatives.  The Article explores the answers to this question in the context of the two cases above, reaching different conclusions for each case.