Maurice- the practice you are describing is in US antitrust nomenclature known as tying. Simply stated a person would use his monopoly power in the market for the desired product to extend his influence into another market by only selling the desired product if one agrees to buy another product the consumer would otherwise prefer not to purchase (the disfavored product), or would prefer to purchase from someone else with a superior version of the disfavored product.
What I understand QCOM to be doing is that they are allowing anyone to license any patent they want. No one has to license them all. Its just that they charge the same price regardless of how many or few patents you license. This wouldn't be tying, inasmuch as QCOM is essentially giving away the tied, or unwanted product.
In the Microsoft case, the problem wasn't only that the browser was essentially thrown in for free, it was that MSFT wouldn't sell you an OS unless the browser was bundled in. Thus to get Windows (which everybody wanted) they also got the browser for free and thus did serious harm to competitors with superior browsers, but who had to charge some price for it, and who could have sold their browsers if MSFT had offered the option of buying the OS without the browser.
Now, on the surface, the "get the browser for free deal" might look alot like the "get the rest of the patents for free" deal from QCOM. But the distinctions are that QCOM will sell one without forcing you to buy them all, and even more importantly, the remaining patents they are willing to throw in for free if you want them are not like browsers in the sense that other people don't "make" those patents and compete with QCOM in the sale of them. QCOM is the only source for the disfavored (as opposed to the favored) product (or license). Thus there is no harm to the competitive process in the market for the disfavored product (or here, license) because there is no competitive process to begin with.
Thats why even if MSFT unbundled the browser, but still gave it away for free, you could have a form of predatory pricing in the browser market, but such claims at the federal level at least were put to rest in the Supreme Court's decision in Brooke Group vs. Brown and Williamson, where the court reasserted the maxim that harm to competitors is not the proper test; rather harm to competition must occur in a way that ultimately harms the consumer. The court noted that a "below-cost", or predatory price initially benefitted the consumer, and that competitive harm would only result if the barriers to entry in the affected market were such that the predatory pricer would have sufficient time to recoup his "investment" (the court's word) in below-cost pricing. By this the court meant that, having chased all the competition away, barriers to entry in the affected market were so high that the predator would have a sufficient period of time to charge supra-competitive prices in that market before other competitors were lured back in by the predator's supra competitive price, at which point the predator loses his pricing power and is back where he started.In mathematical terms, if the consumer saves 50 million during the predation phase, but only pays back 25 million in the recoupment phase before new competiton returns the prices back to a normal competitive level, the consumer has benefited, the competitive process has been preserved, and all is well. The Court left open the hypothetical possibility that a set of facts could arise in which this "recoupment period" test could be satisfied, but openly expressed skepticism that in reality it could happen. Sherman Section 2 predatory pricing claims have for all intents and purposes been DOA ever since. Amazingly enough, most of our states have their own antitrust laws (if ever there was an area where plain common sense cries out for pre-emption this is it), and while most of them follow the federal cases as persuasive authority, several states still allow predatory pricing claims. That's Mr. Softy's problem, though, and not ours.I apologize for the digression.
As for the same price no matter how many or few you use, that seems competitively defensible on two grounds. First, it would be nightmarishly complex to individually price each patent. Second, under the present arrangement there is a willing buyer and seller who agree on a fair price for the desired patent(s). QCOM receives the 5% because the buyer deems the patent he wants to be worth the royalty.If the patent isn't worth it then QCOM has priced itself out of the market and will lose the sale of the license. if the buyer has IP QCOM needs then they can negotiate the terms of a cross-license.
There is thus no effect of forcing the purchase of unwanted items, and thus harming the (as previously noted non-existent) competitors in the market for the sale of those items. And thus QCOM is not misusing the monopoly power lawfully granted to it by its patents to obtain concessions in other unrelated markets it would otherwise not be able to obtain.
I can't speak for the EU, but I feel confident this does not offend any North American Antitrust laws, or those of most or all of Pac Rim Countries either. |
