Feb. 3, 2010
Law professor urges federal use of antitrust law to protect innovation
University of Iowa antitrust law expert Herbert Hovenkamp believes the Obama Administration is correct in taking a more assertive role in antitrust law, a marked change from the largely hands-off philosophy of the Bush Administration.
However, he urges the Obama Administration not to make the expansion too great, except when it comes to protecting technology and innovation.
Hovenkamp, a professor in the UI College of Law and one of the country's top antitrust law experts, worries that too much aggressiveness by government will cause private plaintiffs to file suit in the government's wake and cause economic damage to businesses.
"Nuanced expansion at the behest of a government agency can easily turn into unrestrained aggressiveness at the hands of subsequent private plaintiffs," Hovenkamp writes in his new paper, "The Obama Administration and Section Two of the Sherman Act," published this month in the Boston University Law Review.
To correct this, Hovenkamp suggests changes to antitrust laws that would segregate those parts of the law the government uses in its antitrust enforcement from those parts of the law that that private plaintiffs can use in civil suits. Disconnecting the two, he hopes, would encourage the government to prosecute firms that violate antitrust law but prevent other companies from following with often-times frivolous and costly follow-up suits.
"The government could function with more confidence in the social efficacy of its actions if it knew that the standards created by a court decision could not automatically be used by private plaintiffs," he wrote.
One area where he believes the government should enforce more vigorously is to protect innovation, which is so important to the economy's future growth because companies need to be able to innovate and develop new products. To make sure it's encouraged, he believes that antitrust law is one tool the federal government can use to protect risk-taking innovations.
On top of that, he said that because the results of innovation are difficult to predict -- for instance, would a new product that was killed by an antitrust law violation have been a success or not? -- courts have a hard time dealing with cases brought in a private lawsuit, making the government the only practical enforcer.
"The economic harm caused by restraints on innovation can be enormous, perhaps far larger than those caused by traditional restraints on pricing or output," Hovenkamp wrote. "The government acting as public antitrust enforcer should pay especially close attention to practices that restrain innovation unreasonably and make private action unpromising."
The paper was written under a $350,000 grant Hovenkamp and law professor Christina Bohannan received from the Ewing and Marion Kaufmann Foundation to suggest ways to reform and streamline U.S. intellectual property laws.
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