A patent is an exclusive right given to an inventor for the invention created. A patent is a legal document that protects the idea of a patent holder.. An individual or a firm can be patent holders. The legal issue provided in the fact pattern relates to intellectual property settlements and the rights of patent holders. This research paper examines patents and their resulting intellectual property rights to address the legal issue presented. This part has several sub-parts. The first is the introduction. The antitrust cases, the practices in the fact pattern raise, and the laws that it may violate have been discussed in the second part. The third part deals with the legality of patent protection. Anti-competitive or pro-competitive arising from patent protection are analyzed in the fourth part. The fifth part discusses the possible effects of a court ruling on the issues raised in the fact pattern. The conclusion forms the last part of this question.
The rationale for the protection of patents
The protection of inventions encourages innovation and excludes other inventors from inventing similar inventions.Patent protection differs from one country or jurisdiction to another. Most jurisdictions such as the United States, the United Kingdom, and Japan prescribe not less than 20 years for patent protection. Further, during the 20 years, an inventor of a patent should disclose important information relating to his patent. This allows other users and innovators t build more knowledge on the invention. The Trade-Related Aspects of Intellectual Property, the World Intellectual Property Organization, and the Paris Convention for the Protection of Industrial Property are examples of agreements that offer the protection of patents to individuals to patent inventors.
Antitrust issues and patent mergers
Robin argues in his legal paper that antitrust issues and patent protection are critical issues that are hard to debunk. Patent protection arises because one hand promotes monopoly, and on the other hand, the other promotes individualism, restricting monopoly. Pele’s Performance Products and Elena’s Exercise Equipment agreed to form a patent pool for their patents in the fact pattern. Walter Workouts joined the pool forming a monopoly on the patents. Antitrust and patent differ in the following aspects. The first is the concept of exclusivity. Under Antitrust law, exclusivity is defined within the confines of competition in that an owner of an invention is protected from other competitors in the line of business. Thus, patent protection by itself creates a negative right.It does not necessarily offer the patent holder exclusive protection. Instead, it focuses on excluding other dealers from working with or inventing similar innovations within the prescribed time. Antitrust laws frown upon patent merging since it creates a monopoly. The Sherman Anti-trust Act, the Federal Trade Commission Act, and the Clayton Act are the relevant regulations that regulate competition in business.
The legality of patents merging (monopoly)
In United States v WinslowJustice Holmes stated that the merger of the three leading shoe-making corporations constituted a monopoly and held that the union did not violate the provisions of the Sherman Act. The court held that the monopoly was legal. In Brulotte v Tys Co, the court held that a patent merger that exacts royalties past the patent expiry is unlawful. A patent can only be lawful and legal if the patent owners formulate reasonable royalties and terms regulating the merged patents in business. The Clayton Act under section 7 Prohibits mergers that are likely t create unfair competition in business. There are two forms of mergers horizontal and vertical mergers. On the one hand, horizontal mergers arise where two or more competing firms on the same level merge to reduce the competition in the business. On the other hand, vertical mergers occur when two or more companies that do not compete on the same level agree to merge to increase their profits.
Intellectual property settlement
Intellectual property settlement relates to the payment offered by a patent owner to a patent infringer motivating him to stop the infringement. Intellectual property settlement may be entered into by a company or its subsidiaries or by an individual as the case may be. The settlement entered into by the parties must be enforceable and recorded as a binding contract between the parties. The Reverse payment patent settlement is compensation where an alleged infringer agrees to pay the patent holder for the infringement occasioned. Additionally, this form of payment also relates to the compensation offered to the infringer by the patent holder to stop the infringement for an agreed period. Pay for the delay is another form of Intellectual property settlement where a generic manufacturer agrees to refrain or stop marketing his generic products for a given period to allow the originator of the products to market and sell their goods. Intellectual property settlement of disputes differs from case to case. Moreover, courts must assess the type of merger provided in each case and settle each case on its merit.
As discussed above, different factors should be considered before a settlement approach and award are given. When awarding intellectual property settlements, these factors are courts must analyze whether the patent infringement settlement violates antitrust laws and whether there was indeed an infringement occasioned. The merged companies’ v Antonio’s Athletics Apparatus may apply for the reverse payment patent or pay for delay methods.
The fact pattern provides the legal issues for determination in this case between Clark’s Consulting and Walter Workouts as to whether there was a violation on the weight loss estimator deal. To analyze whether there was a violation, this research paper addresses the following issues. The first is whether there was an agreement between the two parties. Secondly, the provisions of the antitrust laws relating to the form of the contract entered into by the parties. Thirdly, whether there was a violation of the antitrust laws and possibly the available remedies available to Clark’s consultants regarding the violation occasioned. Clark’s consulting had an agreement with Walter Workouts for the development of the weight lost estimator. However, this agreement was revoked by Walter Workouts after the trade conference, which addressed the issues relating to their workout and weight loss products.
Antitrust laws in business
Antitrust laws are laws and regulations that have been enacted to protect consumers from predatory business entities. Antitrust laws through the court prevent and prohibit unlawful, illegal mergers but defining which unions are lawful and which ones are not on case to case basis. Antitrust laws encourage healthy competition in the business world by eliminating abuses at times occasioned in business. Healthy competition in the industry ensures that the consumers access quality bargains, goods, and services. Courts have had a challenging experience differentiating beneficial competition factors from the unhealthy competitive factors commerce—for instance, the pro-sacrifice test troubled courts in determining whether it was lawful or illegal. Pro sacrifice is a method where organizations lower their prices and agree to reduce profits with the sole intention of eliminating competitors and jumping back to profit yielding prices after the elimination.
Antitrust violation laws prohibit abuse occasioned in commerce, such as monopolization, price-fixing, restraints, customer allocation, and discrimination. Monopolization in commerce means that one business entity unreasonably creates and manages monopoly power in a manner that prohibits competition in business. The Sherman Act expressly prohibits any monopolization of power in industry or any strategy of monopolizing the power. The rationale for banning monopolization in business is that it allows the business entities to compete equally. Price fixing involves an agreement entered into by business entities agreeing to either lower or increase commodities prices. Essentially, antitrust laws require each business entity to formulate and develop their own merits without external coercion or pressure from competitors. The various ways in which consumers or other clients working with business entities may become aware of possible price-fixing is where prices of similar products from different brands change simultaneously or around the same time. The second way is through evidence of either increase or lowering of the prices of commodities. Finally, customer allocation, when proven, is a form of an antitrust violation where the business firms agree on splitting the customers based on the geographical setup. In this arrangement, the traders agree to work in specific geographical locations at a time. The rationale behind the antitrust law is to offer protection to consumers and encourage healthy competition, and clearly, these practices discussed in this part prove the contrary. They are limiting competition, which violates the provisions of the Sherman Act, the Clayton Act, and the Federal Trade Commission Act.
Antitrust law enforcement
Claims against antitrust violations can be instituted in different methods. The first method is by the institution of lawsuits against violators brought by private parties seeking damages for the violations. Secondly, the Federal Trade Commission may, on its motion or through a petition from a private individual can institute civil enforcement against a violator. Thirdly, the Anti-trust Division of the Department of Justice may institute either criminal or civil enforcement against antitrust violators.
Analysis of the issues raised in the fact pattern
First, this research paper has established an agreement between Clark’s consulting and Walter’s Workouts. Secondly, the machine manufacturers’ companies agreed to standardize the formula to calculate calories burned. The standardization led to imposing a limit on the required work intensity, and the need to have new features such as the weight lost estimator was no longer essential. The agreement entered into by the companies violates the provisions of the statutes that frown upon monopoly. The antitrust issues presented in the fact pattern relate to creating trust. Secondly, the companies agreed to hide the number o calories lost during workouts. Antitrust law mandates and requires business entities to develop their terms regarding their products, provided that the terms are legal.
Further, Clark’s Consultation may institute proceedings against Walter’s Workouts through the Federal Trade Commission to violate antitrust law on individualism, leading to the breach of the agreement between the two parties. Antitrust laws protect consumers and clients such as Clark’s Consultants, who may suffer losses due to unhealthy competition practices occasioned in commerce. Breach of contract in contractual agreements compels the party in violation to make right the wrong through damages or specific performance as required by the courts.
The fact pattern deals with Pele’s Performance Products and its actions in business. This research paper evaluates the antitrust law regarding competition and the conduct of parties in the industry. Further, this paper examines the power an individual or a company has concerning its patent and how far the patent right can be stretched. Pele’s Performance Platoon is an example of a patent granting Pele the patent right. A patent is a legal right granted to an inventor for the invention created. Pele’s Performance Products as a company exercises market power. The fact pattern demonstrates that the Platoon developed is exceptionally successful and dominates its sector. Market power is the ability of a company or an inventor to raise the commodity price so high that other competitors cannot compete fairly in business. Market power harms both the consumers of the products and society as a whole. Market power arises because consumers must pay more for the commodities than they would have paid in a reasonably competitive market. Additionally, market power encourages monopoly, which discourages perfection in the business. This is a disadvantage to consumers who rely on the products.
Antitrust laws on excessive pricing and overpricing
Outrageous pricing in business occurs when a company charges prices that are way higher than the competitive limit. In analyzing whether the prices imposed on products are excessively high or not, two approaches are used. The first is the two-staged test, which compares the price the commodity is sold to the actual cost of producing the item. This test also includes comparing the price of the commodity with the costs of other sellers dealing with the same item. The second test is the economic value test which focuses on the fee charged by the company to the value of the commodity. Finally, the third test applied is the competitive Benchmark which focuses on the item’s price in a reasonably competitive market.
The rationale behind adopting antitrust laws in business is to protect consumers from unscrupulous business entities and encourage healthy competition in the industry. Antitrust laws have facilitated better competitive grounds and fair opportunities. Antitrust laws evolve as the commercial activities evolve and are geared to cover all new trade-related aspects that develop in the market. Antitrust laws relating to pricing include the following. The Clayton Act in section 2 prohibits price discrimination. Price discrimination occurs where a seller offers different prices for similar products to other consumers. For some consumers, the price may be higher or lower, which violates the standard price requirement. Price discrimination can have two impacts. First is the immediate effect, which has a significant impact on competitors. For instance, a supplier may reduce the prices to increase sales at the expense of the competitors. Second, secondary pricing impact refers to adverse effects of price discrimination that might befall a consumer due to a firm’s price discrimination.
The fact pattern provides an example of excessive pricing. Moreover, this research paper has provided various tests applicable in evaluating the existence of outrageous e pricing. In determining the legal issues raised in the fact pattern, the two-staged test, which considers the commodity price to the cost of production, is the best applicable test to be adopted by the court. When sold, Pele’s Platoon must be accompanied by an adaptor that costs very little to make, but Pele sells it at a substantial premium. In United Brands v Commission The court held that charging an unreasonable and excessive price that lacks an economic value was illegal. The court argued that the price of a commodity must have a direct relationship with the item’s monetary value. Therefore, courts must carefully consider both legal and non-legal allegations of the alleged unfair and excessive pricing when determining excessive pricing. The European Court of Justice provided this position in the United Brands v Commission. case. In British Leyland v Commission, the court held that it was an abuse of administrative monopoly for a firm to charge excessive prices to the economic value of the product. A fragile line exists between allowing parties to independently conduct their commercial activities and preventing harm caused by over-pricing in business.
The antitrust issue that results from the fact pattern is overpricing. Trudi’s Track Tutorage as a consumer has a right to be protected by antitrust laws. In all material times, the rights of consumers in a market must be protected and respected. Pele has intellectual property portfolio prevents other competitors from developing such an adapter which causes significant losses to Trudi’s Track Tutorage who relies on the adapter for their business. Antitrust laws protect a patent holder from other competitors in the line of business. However, unlike patent protection, antitrust laws encourage fair competition.
The fact pattern provides an invention created by Regina Rowing for the development of home rowing machines. The rights of inventors are protected by the patent rights that arise from the registration of the invention. A patent is a legal right bestowed upon the patent holder allowing him/her to enjoy exclusive rights regarding the patent. In most countries, a patent is protected for a period not less than 20 years. The rationale behind patent protection is to allow the inventor to enjoy exclusive rights within a specified period. In most jurisdictions, after the expiry of the specified periods, other innovators can make improvements and further adjustments to the product.
Antitrust issues raised in the fact pattern
The first issue is the unfair competition occasioned after Pele’s Performance Products Platoon hired Sam’s systems to manage their work. Sam initially partnered with Regina home rowing in network management. Regina’s Rowing and Pele’s performance products are competitors. Competitors are defined in the Department of Justice guidance as firms or business entities that preferably compete to sell similar products in an economy. Competitors may be divided into two broad classifications. These are horizontal and vertical competitors. Horizontal competitors are companies competing for the distribution and sale of similar products on the same market level.
On the other hand, vertical competitors involve the distribution of products by different companies who belong to different market levels. The Antitrust Division of the Department of Justice provided guidelines and regulations concerning human resources and the employment of employees. The Commission issued proposals to prosecute companies who poach for employees and who apply wage-fixing agreements.
The no-poach provision in the antitrust regulation provides that a company is prohibited from soliciting and competing from each other’s employees. In different cases, competing companies enter into agreements prohibiting the other from employing employees who previously worked for the competitor. The Department of Justice Regulations enforcement has been challenged on various grounds. First, courts are advised to adopt interpretations that do not lead to unreasonable trade restraints in enforcement. Therefore, courts apply the following tests in addressing the reasonableness of a guideline. A slight limitation is that which potentially discourages competition, thus suppressing market competition. For example, the case provided in the fact pattern relates to the employment of a former employee/partner of Regina Rowing House Machines by Pele’s Performance Products company. This discourages competition since Sam Systems did not renew the contract with Regina Rowing. Additionally, the Department of Justice regulations prohibits the poaching of employees.
Additionally, competing companies are prohibited from intentionally agreeing or formulating agreements that deny potential employees opportunities to access employment opportunities in the companies.
The second issue that arises in the fact pattern relates to pricing. The antitrust laws on pricing dictate that companies should not overcharge or undercharge their products, creating unhealthy competition in business. The fact pattern indicates that Pele will not increase its prices despite introducing the future versions of the Platoon, which will include the rowing attachment. This is an unhealthy business strategy that has the potential to cause detrimental impacts on competing companies. The Sherman Anti-trust Act, the Federal Trade Commission Act, and the Clayton Act prohibit underpricing and excessively overpricing commodities. The tests applied in determining whether the prices set for different items are reasonable or not include the following. First is the two-staged test, which compares the price the commodity is sold to the actual cost of producing the item. The second test is the economic value test which focuses on the fee charged by the company to the value of the commodity. The third test applied is the competitive Benchmark which focuses on the item’s price in a reasonably competitive market.
When addressing the issues, the courts must be guided by the rationale behind the implementation and adoption of antitrust laws. The explanation is to offer protection to both society and consumers in the market. Additionally, healthy competition in business encourages more companies and individuals to participate in business activities, thus increasing a country’s income. The rights of patent holders regarding their inventions should also be promoted.
Antitrust law is divided into two categories. The first deals with prevention, and the second deals with correction on market and business strategies to facilitate better commercial environments. Preventive antitrust laws are mainly concerned with prohibiting behavior that would reduce competition in the industry if otherwise allowed in the business. Corrective antitrust laws seek to correct the existing monopolistic power in business and allow business entities to compete fairly in trade. The most appropriate form of antitrust law applicable in the United States is the corrective antitrust law. Section 7 of the Clayton Act is an example of preventive antitrust law. The legal issue presented in the fact pattern relates to the merger of companies and the various consequences that arise from such unions. There are two distinct groups of competitors. These are horizontal and vertical competitors. Horizontal competitors in a market related to companies that have equal status and similar competing grounds and levels. Vertical competitors relate to companies not on the same level but compete in the same market. Therefore, the merging of companies may either occur horizontally or vertically.
Horizontal merging of companies leads to disadvantages such as creating coordinated competition and unilateral effect, which gives the merged entity the autonomy to increase prices profitably on its motion. Coordinated competitors arise when the merged companies influence the competing firms to perform some acts regarding different competitive dimensions such as prices, capacity, and output. This effect is contrary to the antitrust laws, which require companies to make decisions freely without coercion from any competitor.
This form of a merger is commonly applied by companies in a buyer and seller relationship. Essentially, in this merger, one company is a manufacturer and the other a supplier. A vertical merger can significantly limit the input or output of other competing firms in the business. Vertical mergers are lucrative in the following ways; Mergers increase market share. When two companies join to form one business entity, they pool together their market shares into one pool, increasing the shares. Second, mergers also contribute to the reduction of operation costs. This arises because the two or more merged companies trade as one entity against competitors. Thirdly, merging reduces the replication of products. Essentially, the companies that enter into merging arrangements are mainly companies that deal with similar Therefore, mergers will facilitate more creativity, thus reducing the replication of goods. Unions facilitate the expansion of trading activities to different geographical locations. Business entities on the verge of collapsing are saved by merging and are brought back to compete in the market as one legal entity with the profit-making company. Additionally, mergers offer security to the traders and facilitate the increase of profits.
Disadvantages of merging different companies
Merging of companies leads to raising of prices on products. This arises where competing companies merge therefore creating a monopoly and eliminating competitors in the market—secondly, joining leads to unemployment. Finally, this occurs where merging companies in a bid to consolidate their resources stop underperforming employees. Merging of companies prevents economies of scale. A company acquires a new status after merging with another. It becomes more prominent than it was previously, and the interaction between the employees may decline, thus affecting the economies of scale.
Factors to consider when evaluating the legality of a merger
In the first instance, the court must establish the companies involved in the union and the products with which they deal. Secondly, the companies’ market shares must be evaluated and classified accordingly in terms of large, medium, or small scale. Thirdly, courts must analyze the product traded and the significance of the product in the market. Lastly, courts must evaluate the possible effects of the merger on the market and the competitors.
The fact pattern indicates that Elena’s Exercise Equipment Walter Works have plans to enter into a merger agreement to produce rowing machines. First, this research paper has stated the two types of mergers available for companies. The horizontal merger system is presumably the best merger system applicable in the given case because the two companies have relatively equal opportunities and grounds to compete in the market. The court in United States v Winslow and Brulotte v Tys provided that the merger of competing companies is not illegal. However, the union is only unlawful if it is solely created to prevent fair competition in the market, contrary to section 7 of the Clayton Act.
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