Friday, January 17, 2014

In the Matter of Dell Computer Corporation case brief summary

In the Matter of Dell Computer Corporation case brief summary
Case Brief: In the Matter of Dell Computer Corporation

FACTS
VESA adopts a VL-bus standard after interviewing its members to see if there were any patents that would prevent free use of VL-bus standard. Although Dell certified that they knew of no patent, it then attempted to enforce its patent against firms attempting to implement the standard. The FTC enjoined Dell from enforcing its patent against any firm using it to implement the standard.

DISCUSSION

  • Since the action was brought under FTC § 5, there is considerable more flexibility to prohibit prospective violations of the restriction on “unfair methods of competition” i.e. actions that violation Sherman §§ 1-2.
  • The only economic harm is simply that the price of implementing the standard is increased by the amount of royalties—Dell is unlikely to prevent implementation; it just wants to skim a bit of cash off the top.
  • If Dell sets the price low enough that other companies simply pay it (rather than even contesting it in court), the price is likely to simply be passed onto consumers. Even if the FTC isn’t perfectly situated to protect standards, there does not seem to be any alternative to protect consumers from minor anticompetitive increases in price.
  • Had VESA discovered that Dell held the patent prior to implementing the standard, it would have presumably used an alternative process or negotiated a fair amount of royalties.
  • Although the FTC phrases the injunction narrowly, it actually has precedential effects which ripple far beyond Dell.

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