Yesterday, the Supreme Court “invited” (which means “told”) the Solicitor General to file a brief expressing the views of the government on CSU v. Xerox Corp., a case decided last February by the Federal Circuit.

If the Court accepts the case, and the odds are good, CSU could be the most important Supreme Court antitrust decision in decades. It could simplify and clarify the interaction between antitrust doctrine and that rocket fuel of the New Economy–intellectual property rights. (It could also make this interaction even more muddled and incomprehensible than it is at the moment, of course, but that would still make it an important case.) The decision–whichever way it goes–will be significant for many other situations, including the pending appeal in Microsoft.

Xerox refused to sell patented parts for its copying machines to an independent service organization, which cried foul and alleged an attempt to monopolize in violation of Section 2 of the Sherman Act.

One might think, “so what?” Creating a monopoly is the very purpose of a patent. But the Courts of Appeal have been waffling, reflecting the confusion that surrounds the application of antitrust law to dominant firms.

In CSU v. Xerox, the Federal Circuit bit the bullet. It declared that patent rights can be enforced, period, and that the motivation of the patent holder is not relevant. The only limitation is that a patent may not be used to extend power over one market into a separate one.

The court also reasserted a point it decreed in 1999: because it is the only Court of Appeals that can decide patent issues, it also has the final say (except for Supreme Court review) on the relationship between patent law and antitrust law. The other circuits can lump it. The Supreme Court denied certiorari in the case deciding this, so there the law stands, unless some other circuit decides to challenge this rule.

Chairman Robert Pitofsky of the FTC has already expressed his disagreement with the circuit opinion in CSU, and it seems probable that DOJ, given its current high-testosterone state, will agree with Pitofsky. If so, it will ask the Court to take the case and reverse.

Hopefully, the Court will indeed take the case, but will take it to endorse the Federal Circuit decision, because it is a good one.

People are given temporary monopolies over intellectual property so that they will be encouraged to invest money and sweat and increase our national wealth. Most people think this works.

Antitrust doctrine, in contrast, is a thoroughgoing mess. In particular, rules governing behavior by dominant firms have become downright weird. Antitrust has become a kind of hate crime–it is not what you do that matters, but whether you intended to be mean to your competitors. The world will be better off if such nonsense is banished from the realm of intellectual property, at least, so that IP creators and holders can get on with their business of creating wealth. 

For a longer treatment of these issues, see The Microsoft Case and the Intellectual Property Defense, by James V. DeLong, which will appear soon in the Fall 2000 issue of the Federalist Society’s Intellectual Property News. A version of the piece will be posted on the CEI website.