Three reasons Intel’s antitrust patent-suit against Fortress is bad policy.
Zachary Silbersher
Intel recently sued Fortress for antitrust violations based upon its alleged monopolistic aggregation of patents. Intel’s allegations mirror those by Capital One against Intellectual Ventures, which were recently rejected by the Federal Circuit. Over the past several years, any patent assertion has had to contend with certain expected defenses: Alice, IPRs, threats of Octane Fitness. Are antitrust counterclaims the next trend?
Intel’s complaint raises the question whether targeting patent-aggregation as an anti-trust violation demonstrates a trending defense to patent assertion. Intel’s complaint does make an effort to distinguish Fortress from the garden-variety patent plaintiff. Intel concedes that, “[t]here is nothing inherently illegal with owning many patents or obtaining those patents through acquisition.” (Complaint ¶ 40). Nevertheless, Intel takes swipes at the practice of aggregating patents and asserting them in litigation. Putting aside whether Intel has adequately stated a claim for antitrust relief, what are some of the implications of tagging patent-aggregators with antitrust liability?
1. Using antitrust against patent aggregation rewards efficient infringement.
In its complaint, Intel comes close to admitting that Fortress’ patent aggregation has frustrated its attempts to practice efficient infringement. Intel’s complaint laments that, “even with the most diligent approach to assessing the patent landscape for a product, it can be challenging to determine whether the technologies included in the device are patented, including because the scope of patent claims may be uncertain prior to litigation, as well as the validity and enforceability of such claims.” (Complaint ¶ 25).
Intel argues that when patents covering electronic components are distributed among many different companies, the cost of a design-around should theoretically cap any likely damages. Yet, when all available substitutes are purportedly aggregated by a single entity, that makes it harder for companies like Intel to cap their exposure with recourse to design-arounds. (Complaint ¶¶ 26-29).
But this begs a deeper question—did Intel do any research to avoid infringement in the first place? Patents are public, and they existed before they were aggregated by Fortress and asserted against Intel. Intel’s complaint sounds to be more of inconvenience than a restraint on trade. Intel admits that when patents covering substitute technologies are distributed among several different actors, it is much more convenient for Intel to avoid one patent-infringement suit by adopting another party’s patented technology, even if Intel can learn that doing so would infringe another party’s patents. If patents are going to mean anything, should this sort of inconvenience drive antitrust policy?
Some have argued that efficient infringement is arguably more of a detriment to the economy than the purported scourge of the alleged “patent troll.” (Admittedly, that debate is beyond the scope of this short blog post.) If there are too many patents, the solution is not to penalize those who have paid millions in maintenance fees to the Patent Office for prosecuting or aggregating those patents. Rather, the solution is to improve the examination process.
2. Numerous practicing entities are interested in PAE services.
Intel’s complaint takes pains to paint Fortress as a pernicious actor engaged in “abusive” practices using “weak” patents that are “holding up” innocent companies. But the complaint is forced to admit that, for better or worse, Fortress and the NPEs that it finances have many customers. And those customers are themselves large, practicing entities that are interested in Fortress’ patent-monetization services.
Contrary to Intel’s suggestions, Fortress’ alleged stable of patents did not emerge from a vault of purported meritless patents that only patent trolls have access to. Rather, as detailed in the complaint, Fortress, and the companies that it has financed, sourced their patents from large, practicing companies. As detailed in the complaint, these companies include NXP, Koninklijke Philips, Huawei, Panasonic, Nokia, IXI Mobile and Crossroads.
Intel’s complaint repeatedly claims the patents asserted by Fortress and its PAEs to be “meritless.” (See e.g., Complaint ¶ 4). But Intel makes no allegations to substantiate this. Intel claims that the patents would never have been asserted by their original owners. But the original owners are clearly attempting to monetize the patents, and there is no suggestion the original owners view the patents to be “meritless.” Importantly, Intel does not even allege that any of the patents were procured by fraud, which is a recognized basis for arguing that their assertion was an antitrust violation.
Intel’s complaint therefore shows that NPEs and funders such as Fortress are not entities practicing in a vacuum. Rather, behind them are numerous large practicing companies that are themselves interested in extracting monetary value from their own patents. Rather than doing so themselves, these companies have taken recourse to companies that provide that service. If doing so leads to antitrust liability for aggregators, that would harm more than the NPEs and the funders—it would impact numerous large technology companies that also wish to extract value from patents they have paid substantial fees to the Patent Office to maintain.
3. Intel’s suit increases the monopoly power of Big-Tech.
One of the few bipartisan initiatives in today’s partisan political climate appears to be calls for antitrust enforcement against Big-Tech. The irony with Intel’s antitrust complaint against Fortress is that it would only serve to embolden the monopoly power wielded by the Big-Tech companies currently facing increased antitrust scrutiny. In that sense, Intel’s complaint is arguably a step in the wrong direction.
Regardless of whether Fortress-backed patent assertion has proven to be a nuisance to Intel, when patents are devalued, then Big-Tech’s monopoly power increases. If antitrust complaints become the new norm in defense to patent-aggregation, that in turn reduces the alienability of patents, which in turn lowers their value, which in turn increases the hurdles to their assertion, which eventually makes them less valuable.
That inures to the benefit of Big-Tech. It means that start-ups and potential competitors to Big-Tech cannot rely upon their intellectual-property to guard against larger companies simply coopting their technology in the face of competition. Indeed, the esteem for patents in the digital space is so low that, when Facebook and Google march into a space and knock-out startups, no one even questions why patents did not stop them.
Weakening patents, and making their assertion more and more difficult, has wider ramifications beyond the inconvenience of facing suits from NPEs. Companies such as defensive-aggregators market themselves on the narrative that NPEs are a pest that must be exterminated. Yet, that one-sided narrative does not tell the whole story, as discussed in the preceding section. And by perpetuating that narrative, they routinely ignore deeper consequences to the economy by fortifying monopolies in Big-Tech.
In short, part of Intel’s grievance appears to be that it is tired of being sued by companies backed by Fortress. In some cases, the same company has brought serial suits against Intel. (See Complaint ¶ 85). Whether or not these tactics are improper, both the courts and the patent system should consider exploring less draconian ways to address this grievance before hobbling patents even more.