Patents and Antitrust: Application to Adjacent Markets

We examine the intersection of patents and antitrust where a patentholder uses the monopoly power it possesses in the market for a patentedproduct to exclude competitors in an adjacent market and attempt tomonopolize or monopolize the adjacent market. The present scheme forawarding patents cannot judge when the issuance of a patent will lead tothe appropriate balance between innovation and economic efficiency.Where a patent holder's invention uses an interface with adjacentproducts, the patent holder may be tempted to extend its patent monopolyinto adjacent markets that depend upon the interface with the patentedinvention. Economic theory suggests that it is inappropriate to immunizea patent holder from antitrust liability when it attempts to extend itspatent monopoly into adjacent markets because it could decrease consumersurplus. Courts have expressed their reluctance to scrutinize a patentholder's innovations and design changes because of the potentialbenefits of the innovations and their reluctance to second-guess themarketplace. However, applying traditional antitrust principles, courtshave found that monopolists could be liable for unlawfully extendingtheir monopoly positions into adjacent markets in the areas of computerperipherals and software applications; aftermarkets for replacementparts, service and maintenance of durable goods; design changes tomedical devices; and changes in drug formulas. While the patent lawsprovide a spur to innovation by granting limited monopoly rights, theantitrust laws curb the excessive reach of these monopoly rights byacting as a check on excessive expansion of the scope of the patentgrant. Courts are the only participants in the legal process that havethe competence to ensure that patents do not cause economic stagnationand harm by permitting a patent holder to extend its monopoly into anadjacent market. Consequently, courts should be willing to applyantitrust principles to cases involving the monopolization of interfacesthrough design changes.