ASCOLA Competition Law series
Edited by Josef Drexl, Warren S. Grimes, Clifford A. Jones, Rudolph J.R. Peritz and Edward T. Swaine
Chapter 13: Intellectual Property in Competition: How to Promote Dynamic Competition as a Goal
Josef Drexl 1 INTRODUCTION: THE ‘IDEAL WORLD’ OF SCHUMPETEREAN COMPETITION Ever since Joseph Schumpeter published his theory of ‘creative destruction’,1 it should have been clear that the protection of innovation by intellectual property rights (IPRs) does not as such contradict the competition principle. Schumpeter rejected the focus of traditional competition policy on price competition and highlighted the role of dynamic competition for better products as the driving force of economic growth. According to his ideas, even if superior technology leads to market dominance, continuous pressure by other innovators, who may ‘destroy’ the existing market position of the incumbent at any time, will keep the market competitive. In the Schumpeterean worldview, patents – as IP rights that are expected to create incentives for innovation – are hence pro-competitive. Indeed, they exclude only a specific form of competition, namely competition by imitation based on price as the parameter of competition. Simultaneously, by pushing competitors to bring products to the market that are technologically superior and serve consumer interests better than the pre-existing ones, patents ideally promote competition by substitution. Hence, Schumpeterian ‘dynamic’ competition is based on a trade-off. Patents have the potential of restricting price competition and thereby enhance competition based on innovation. In line with these theories, modern competition policy accepts a theory of ‘complementarity’, according to which intellectual property and competition serve the same objectives, or as phrased in the EU Technology Transfer Guidelines: 1 See J Schumpeter, Capitalism, Socialism, and Democracy (1942, new edn 1976) at 81–6. 210 M2697...
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