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Should We Kill the Dinosaurs Or Will They Die of Natural Causes Peter Brown

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Should We Kill the Dinosaurs Or Will They Die of Natural Causes Peter Brown Cornell Journal of Law and Public Policy Volume 9 Article 8 Issue 1 Fall 1999 Should We Kill the Dinosaurs or Will They Die of Natural Causes Peter Brown Lauren McCollester Follow this and additional works at: http://scholarship.law.cornell.edu/cjlpp Part of the Law Commons Recommended Citation Brown, Peter and McCollester, Lauren (1999) "Should We Kill the Dinosaurs or Will They Die of aN tural Causes," Cornell Journal of Law and Public Policy: Vol. 9: Iss. 1, Article 8. Available at: http://scholarship.law.cornell.edu/cjlpp/vol9/iss1/8 This Article is brought to you for free and open access by the Journals at Scholarship@Cornell Law: A Digital Repository. It has been accepted for inclusion in Cornell Journal of Law and Public Policy by an authorized administrator of Scholarship@Cornell Law: A Digital Repository. For more information, please contact [email protected]. SHOULD WE KILL THE DINOSAURS OR WILL THEY DIE OF NATURAL CAUSES? Peter Brown and Lauren McCollestert Since the industrial revolution, certain companies were able to attain monopolistic dominance in particular markets or industries because of the ownership of physical property such as steel mills, railroads and tele- phone lines. Such monopolies have prompted regulatory and judicial scrutiny as well as a desire to oust them from their dominant perches. With the dawn of the information age, an analogous situation has arisen in the technology industry. For example, as of this writing, Microsoft, through the copyright it holds on the Windows platform, is the leading provider of PC operating system software;1 Intuit, with its Quicken Tm software, dominates the market for personal financial management 3 software;2 and Macafee leads the market in virus detection software. The ownership of intellectual, as opposed to physical, property, has as- sisted these entities in achieving their market positions. As the publicity surrounding the Microsoft and Intel cases4 indi- cates, the instinct to eliminate monopoly power in the technology indus- try through traditional statutory or judicial means - i.e., enforcing antitrust laws more stringently and/or reducing the protections afforded by the intellectual property laws - remains strong.5 However, due to the t Peter Brown is a managing partner in the New York office of Brown, Raysman, Mill- stein, Felder & Steiner LLP. His practice concentrates on matters relating to intellectual prop- erty, Internet, Year 2000, new media and computer law. Lauren McCollester is a senior associate in the Information Technology department at Brown, Raysman, Millstein, Felder & Steiner LLP. Her practice focuses on e-commerce agreements, strategic alliances and content licensing, software licensing and hardware development. 1 See Linda Grant & Ron Chemow, Playing Monopoly; Rockefeller and Gates, FOR- ruiri, June 22, 1998, at 164 fig.2. 2 See Jeffrey Kutler, Banking Warming to Intuit After an Estrangement,THE AMRICAN BANKER, Feb 26, 1998, at 1. See also News Briefs, REPORT ON HovE BANMING & FINANLcAL SERVICES, Jan. 16 1998, at 1, available in LEXIS, News Library, News Group File. 3 The World as a Global Village: McAffee now Leads Anit-Virus Market, Busn,_ss- WORLD, Mar. 17, 1999, at 28. 4 See United States v. Microsoft, No. 98-1232, 2000 U.S Dist. LEXIS 4014, at *1 (Apr. 3, 2000), In re Intel Corp., FTC Complaint (No. 9288) (visited December 21, 1999) <http:www.ftc.gov/os/1998/9806/intelfin.cmp.htm>. See also Stephen Labaton, U.S. Approves Accord in Case Against Intel, N.Y. Tnmis, March 18, 1999 at CI; Stephen Labaton, Antitrust Case Illuminates Tangled Ties Atop PC Industry; U.S. and Intel at Odds Over that Issue Raises Question of Law's Limit, N.Y. TIMEs, February 22, 1999 at Cl. 5 See e.g., Arnold B. Calmann, Commentary on Antitrust: 1998-1999, THE METmoPoLi- TAN COPORATE CouNsEL, May 1999, at 18 (Greater N.Y. Metro. Ed.); Andrew J. Glass, Microsoft: Gates Still Standing Up to Justice, ATLANTA JouRtNAL AND CONsTrrrtON, Feb. 15, 224 CORNELL JOURNAL OF LAW AND PuBLIc POLICY [Vol. 9:223 unique characteristics of the technology industry, the same methods and principles that have been applied in the last century to address monopo- listic dominance in industries such as railroad, steel and telecommunica- tions, may not be as relevant, necessary or applicable to the technology industry. Part I of this paper provides a brief historical overview of the patent, copyright and antitrust laws. Part II proposes three arguments as to why the antitrust laws should not be vigorously applied to the technology in- dustry as compared to historical counterparts. The paper concludes that the unique characteristics of the technology industry, including the speed with which it evolves, and the extent to which it is guided by consumer needs, whims and desires, indicate that no strengthening of antitrust en- forcement or diminishing of intellectual property rights is desirable or necessary to eliminate market dominance in the industry. Rather, these unique characteristics have caused and will continue to cause a self-cor- rection or self-regulation that renders such change unnecessary. I. HISTORICAL OVERVIEW Many years ago, the Founding Fathers recognized the importance of fostering creativity and invention, and in the Constitution empowered Congress to grant patents and copyrights. 6 In 1890, as the industrial revolution was nearing completion, Congress, partially prompted by con- cerns regarding the potential economic consequences of industry domi- nation by a few private entities, enacted the Sherman Antitrust Act7. Shortly thereafter, in 1914, Congress enacted both the Clayton Act,8 which enumerated certain illegal anti-competitive activities, and the FTC Act,9 which empowered the Federal Trade Commission to "prevent... persons, partnerships or corporations ... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce." 10 Like patent and copyright laws, Congress intended the Sherman, Clayton and FTC Acts to foster compe- tition and economic growth and to prohibit the abuse of monopoly power 1998, at 18A; Joe Sims and Jeffrey Levee, An Antitrust Harmonic Convergence, INTLL C. TUAL PROP. MAG., Jan. 1998. 6 U.S. CONST. Art.I, § 8, cl. 8. As the Ninth Circuit stated, "[P]atent law seeks to pro- tect inventions, while inducing their introduction into the market for public benefit." Image Technical Services, Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1214 (9th Cir. 1997) (citing SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1203 (2d Cir. 1981)). 7 15 U.S.C. §§ 1-7 (1890). 8 15 U.S.C. §§ 12-27 (1914). 9 15 U.S.C. §§ 41-58 (1914). 10 15 U.S.C. § 45(a)(2) (1999). 1999] SHOULD WE KILL THE DiNOSAURS? 225 in particular industries and markets." Although they all have the same goal, the focus of the Acts differ from the focus of copyright and patent laws. The Sherman, Clayton and FTC Acts encourage competition, 12 while the copyright and patent laws reward innovation. Throughout the 2 0 th century, law enforcement officials have used the antitrust laws to regulate monopoly power and market dominance in varying degrees depending upon, among other factors, the then-current political and economic climate. 13 Similarly, in certain instances the pro- tections afforded by the copyright and patent statutes have been ex- 11 See Image Technical Services, Inc., 125 F.3d at 1214 ("[a]ntitrust law seeks to pro- mote and protect a competitive marketplace for the benefit of the public" (citing Standard Oil Co. v. United States, 221 U.S. 1, 58 (1911) and SCM Corp., 645 F.2d at 1203.)). 12 See, e.g., Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990) (antitrust and patent laws are "complementary, as both are aimed at encouraging innovation, industry and competition" (citing Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 876-77 (Fed. Cir. 1985))); and Ronald S. Katz et. al., Intellectual Property v. Antitrust: A False Dilemma, A.L.I.-A.B.A. COURSE OF STUDY: ANTrrRUST/INTELLECTUAL PROPERTY CLAIMS IN HIGH TECHNOLOGY MARiKTs: LITIGATING AND ADVISING 1, 3 (April 1999). But see hnage Technical Services, Inc., 125 F.3d at 1215 (acknowledging the "obvious tension" between antitrust and intellectual property laws); Mark Lemley, The Economic Irrationalityof the Patent Misuse Doctrine 78 CAL. L. REv. 1599, 1600 (1990) (recognizing "an inherent conflict between the goals of the patent laws and the antitrust laws," but noting, id. at 1600 n.7, that many commentators "oversinplif[y] the relationship" between patent law and antitrust law). 13 Although the antitrust provisions were enacted during a Republican administration, they have, for the most part, been vigorously enforced by both parties. See Milton Handler, AnticipatingAntitrust's Centennial,75 CAL.L. REv. 787, 787 (1987). For example, the eco- nomic crisis dubbed the "Panic of 1907" was partially blamed on Theodore Roosevelt's ad- ministration's increased enforcement of the antitrust laws. See James R. Devine, The Legacy of Albert Spalding, the Holdouts of Ty Cobb, Joe DiMaggio, and Sandy Koufax/Don Drysdale, and the 1994-95 Strike: Baseball'sLabor Disputes Are as Linear as the Game, 31 AKRON L. Rav. 1, 7 n.24 (1997). In the early 1980s, however, a number of large antitrust cases, includ- ing ones against IBM and the petroleum industry, were dismissed. See William E. Kovacic, The Big, The Bad and The Merged, Tim WASHNGTON POST, Dec. 6, 1998, at Cl; Andrew F. Popper, The Antitrust System: An Impediment to the Development of Negotiation Models, 32 Am.U.L. REv. 283, 309, 311 (1983). This lax, hands-off approach of the Reagan Administra- tion, see Popper, supra, at 310-11; Ian Ayres and John Braithwaite, Partial-IndustryRegula- tion: A Monopsony Standardfor Consumer Protection,80 CAL.L.
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