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According to the dictionary, an “epoch” is “a particular period of time marked by distinctive features or events.” Antitrust scholars consider the discipline’s big epoch to have been the first decade or so of the 20th century. The period between 1897 and 1911, antitrust’s “golden age,” began with the U.S. Supreme Court issuing its first tentative antitrust decisions under the newly enacted Sherman Act, and ended with a muscular and confident Supreme Court breaking up the largest concentration of industrial power on the planet. A golden age indeed-and not the golden age associated with geezerhood and twilight years, but rather with a youthful experiment in constructing new rules to re-order the commercial landscape by raising competition above all other objectives. It’s hard to see that era today as an experiment, which it was-a successful one, but an experiment nonetheless. While the antitrust rules established during that decade have withstood the test of time, in their day they were controversial, bold and different. It was an exciting era, which the conventional wisdom says will never come again. But wait. In many ways, today’s state of affairs mirrors antitrust’s first golden age. Right now, new rules are being written that will fundamentally reshape competitive dynamics in ways no less significant than the breakup of Standard Oil, which was, in many ways, a smaller conceptual step than some now being considered by the courts. Three areas currently experiencing rapid change echo those of the golden age, and they form the steering currents that will push new antitrust developments. First, during the golden age, courts struggled to deal with large concentrations of power that arose in then-new markets of national scope. Now globalization is beginning to force the courts to apply American antitrust laws to firms possessing or seeking market power in the international arena. Second, in the same way that the early-20th century American economy shifted rapidly from an atomistic, agrarian economy into a much more concentrated, manufacturing economy, the economy is now experiencing a rapid shift away from a manufacturing-based economy and toward an intellectual property-based economy. And third, while the golden age saw legal reasoning evolve from abstract moral and philosophical principles into a more studied application of macroeconomic principles, antitrust courts now are vigorously extending this trend to its logical conclusion; they are jettisoning macroeconomic generalizations in favor of microeconomic analysis in virtually all cases. Thus, today we may be experiencing antitrust’s second golden age. Looking back a century A little history is helpful in putting today’s developments in context. The first golden age of antitrust developed in a dynamic socioeconomic context. In the late 1800s and early 1900s, the U.S. economy was rapidly transformed from a decentralized, agricultural and small-business economy to a dynamic, fast-paced industrial economy dominated by large corporations which, for the first time in history, could produce affordable tangible goods en masse and transport them from coast to coast via rail at unprecedented speeds. Technological innovations drove this transformation, both by fueling industrial development and by driving consolidation, as businesses sought to minimize risks associated with capital-intensive efforts and maximize benefits from economies of scale. These economic changes challenged the country’s most cherished social beliefs, which were rooted in Jeffersonian notions of individual freedom over one’s person, trade and property. The right of small business owners to compete freely, to contract and to control the fruits of their labor was viewed as a fundamental liberty. State courts struggled futilely to protect these core social beliefs at the local level in a world where decentralized, small businessmen were increasingly pressured by national industrial giants over which state courts and legislatures exercised little to no control. The bedrock cases: 1897-1911 The struggle at the federal level to weave these social values into the fabric of the emerging national economy is reflected in the Supreme Court’s earliest interpretations of the Sherman Act. From U.S. v. Trans-Missouri Freight Ass’n, 166 U.S. 290 (1897), through the landmark ruling in Standard Oil Co. v. U.S., 221 U.S. 1 (1911), the Supreme Court attempted to strike a balance that maximized individuals’ freedom to choose a trade and minimized government interference with the freedom to contract. The Trans-Missouri court held that an association of railroads engaged in interstate commerce for the purpose of controlling prices violated the Sherman Act. The Trans-Missouri court interpreted the Sherman Act to prohibit all contracts in restraint of trade, without regard to reasonableness. The very next year, the Supreme Court curbed the reach of Trans-Missouri in U.S. v. Joint-Traffic Ass’n, 171 U.S. 505 (1898), another case involving an association of railroad companies formed for the purpose of controlling rates. While the Joint-Traffic court also held that the association violated the Sherman Act, its reasoning was more refined. Facing arguments that Trans-Missouri unduly curbed individuals’ liberty to contract, the court qualified that ruling by interpreting the Sherman Act to prohibit all contracts whose “natural, direct, and immediate effect” was to restrain competition in interstate trade. It was not until Standard Oil that the Supreme Court struck a considered balance between fostering economic risk-taking and innovation through the protection of reasonable contracts, and curbing predatory conduct that stifled competition and small businesses’ freedom to trade. By holding that the Sherman Act prohibited only unreasonable restraints of trade and monopolies, the Standard Oil court prohibited anti-competitive use of market power while encouraging contracts and mergers that fostered healthy economic growth and development. The second golden age? Like the decade leading up to the Standard Oil decision, today’s economy is in transition. Now the economy is shifting from a national, industrial economy to a global, intellectual property economy. As with Standard Oil’s refineries and distribution system, today’s innovative IP products often involve significant capital, risks and uncertainties, and modern companies, like their predecessors in the early industrial era, attempt to minimize these risks through mergers, licensing agreements and other collaborative ventures. The current need for decentralized opportunities for individuals to compete is arguably even more essential in an economy driven by intellectual property than by industrial might. This is so because many decentralized, entrepreneurial ventures act as incubators of innovation, best exemplified, perhaps, by the fact that most of the top 10 companies on the Nasdaq 500 were either very small or did not exist at all 25 years ago. One need only look around Silicon Valley, for instance, to find numerous examples of up-and-coming incubators that, like their predecessors Microsoft, Google and Yahoo, may in 10 to 25 years top the Nasdaq charts. The need to foster the growth of these worldwide incubators, however, must be balanced against the reality that in many markets, such as pharmaceutical and biotechnology, innovation often involves significant investments of time and capital. Some consolidation, collaborative ventures, licensing agreements and, of course, temporary patent monopolies are essential to fostering innovations that, while having enormous potential benefits for society, would be unachievable without risky investments of enormous capital and time. Modern courts struggle to evaluate these countervailing concerns, and it is clear that this effort remains in its infancy. In the near term, the Supreme Court will be presented with fascinating but difficult cases involving some of these issues, some of which have already percolated up through the circuit courts. In U.S. Philips Corp. v. International Trade Commission, 424 F.3d 1179 (Fed. Cir. 2005), the International Trade Commission alleged patent misuse by a holder of patents for the manufacture of compact discs, which required licensees to license a bundle of patents covering CD-R and CD-RW technology. The U.S. Court of Appeals for the Federal Circuit found no patent misuse because the tying arrangement did not increase royalty fees and efficiently enabled licensees to choose which patents to use. The distinction between pro-competitive patent use and impermissible, anticompetitive patent misuse turned on whether the patentee “obtain[ed] market benefit beyond that which inheres in the statutory patent right.” See also Schering-Plough Corp. v. Federal Trade Commission, 402 F.3d 1056 (11th Cir. 2005) (payments in settlement of lawsuits between patent holder and generic pharmaceutical manufacturer did not violate the Sherman Act when patent was valid and settlement agreements did not restrict competition beyond the exclusionary effects of the patent). As with the first golden age cases, there are no obviously right answers in these disputes. Potential landmark cases Deeper in the pipeline are cases that may be tomorrow’s bedrock precedents. In Advanced Micro Devices Inc. v. Intel Corp., No. 1:05-cv-00441-JJF (D. Del. filed June 27, 2005) Advanced Micro Devices Inc. (AMD) alleges that Intel Corp. abused its dominant position in the global market for microprocessor chips to “coerce customers to refrain from dealing with AMD” by, inter alia, “forcing on the industry technical standards” that favor Intel products and making its programming language compiler perform optimally with Intel chips. This case is scheduled for trial in 2008. Another case to watch is In re Rambus, No. 9302, filed on June 19, 2002, and pending before the Federal Trade Commission (FTC). The complaint alleges that Rambus violated the Sherman Act by attempting to monopolize or otherwise engage in unfair competition in the market for dynamic random access memory. Rambus participated in the work of an industry standard-setting organization without disclosing that it possessed and was prosecuting patents involving technologies that were proposed, and ultimately adopted, as industry standards. While the Federal Circuit rejected a challenge to Rambus’ conduct based on principles of fraud in Rambus Inc. v. Infineon Technologies AG, 318 F.3d 1081 (Fed. Cir. 2003), the antitrust case pending before the FTC could significantly curtail the scope of patent owners’ legitimate participation in standard-setting organizations. Finally, the “monopoly broth” cases, such as LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) and Masimo Corp. v. Tyco Health Care Group LP, No. CV-02-4770 MRP (C.D. Calif. 2006), likely will become the last word in applied microeconomics, completing the trend begun by the turn-of-the century courts in the first golden age. Looking ahead Some commentators have suggested that all of the watershed antitrust cases are behind us, and that antitrust now plods along on a kind of comfortable autopilot, merely filling in smaller and smaller gaps in long-established rules. Others have voiced the (perhaps tongue in cheek, or perhaps hopeful) view that antitrust is dead, reasoning that the field has been reduced to little more than a microeconomic game. But in truth, antitrust is not the omniscient overseer of stable markets, and it would be a failure if it were. Antitrust both drives and follows technological and social change. Mostly, antitrust takes what is fed into it by a dynamically changing, unpredictable society, and then develops new modes of analysis to craft missing links (in small cases) or invent entirely new doctrines (in cases worthy of golden age designation). Conditions are ripe for the emergence of these new doctrines, pushing us toward antitrust’s second golden age. Thane D. Scott is a partner and co-chairman of the antitrust practice group at Boston’s Edwards Angell Palmer & Dodge. He may be reached at: [email protected]. Veronica C. Abreu is an associate in the firm’s intellectual property practice group. She may be reached at [email protected].

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