Slide 0 Refusals To License IP Jonathan I. Gleklen Partner Arnold & Porter The opinions expressed are those of the author and do not necessarily represent those of the law firm of Arnold and Porter or its clients, including Xerox Corporation. Antitrust Counterclaims in Patent Infringement Lawsuits Computer Industry and Internet Committee Program ABA Section of Antitrust Law 2003 Spring Meeting April 3, 2003 ARNOLD & PORTER

Slide 1 Key Precedents n Xerox in the Federal Circuit n Kodak in the 9th Circuit But.... Do either of them really matter here?

Slide 2 The Xerox Holding n District Court: n Unilateral refusals to license IP are neither anticompetitive under § 2 nor misuse n “High” prices for IP are neither anticompetitive under § 2 nor misuse n The number of markets affected by a refusal to license is irrelevant n The IP holder’s intent is irrelevant n The CAFC: n Affirmed. n The rest is confusing

Slide 3 The CAFC’s Decision n “Exceptions” to the right to unilaterally refuse to license make no sense n “Tying” -- this isn’t unilateral conduct n “Fraud on the PTO” -- then there’s no IP n “Sham litigation” -- no explanation of why the refusal to license should be unlawful, rather than just the sham litigation n But none of these help Pomegranate in the hypo anyway n What about unlawful acquisition of IP (from Data General)?

Slide 4 Kodak in the Ninth Circuit n No absolute right to refuse to license IP n Where the IP is used to “leverage” market power from one market to another n Where the “IP Defense” is “pretextual” n Not clear it would even help Pomegranate here: n Is there leveraging, or only one market? n Is there pretext? n Regardless... Kodak doesn’t help because the CAFC has appellate jurisdiction.

Slide 5 The CAFC Got It Right n Compelled by Supreme Court precedent n Dawson (1980): The “essence” of the patent grant is the “right to exclude others from profiting by the patented invention.” n Simpson (1964): “The patent laws... are in pari materia with the antitrust laws and modify them pro tanto.” n United Shoe (1918): A patentee’s exercise of its right “to exclude others from the use of the invention.... is not an offense against the Antitrust Act.” n Compelled by 35 U.S.C. § 271(d)(4) n Consistent with every decision except the Ninth Circuit’s

Slide 6 But Xerox and Kodak Don’t Matter Here n The anticompetitive conduct is not the refusal to license. n The harm from the unilateral refusal to license was made possible by the misrepresentation of licensing policy n Cases finding misrepresentation anticompetitive n But for that misrepresentation, the Apple patent would be (might be) irrelevant n Other examples: n Refusal to license IP that is not lawfully acquired n Termination of license as sanction for exiting a conspiracy