The Conflict over Vertical Foreclosure in Competition Policy and Intellectual Property Law

Although competition law and intellectual property have overlapping economic rationales, they frequently conflict. One area of conflict is vertical leveraging. This paper analyzes recent legislation and court decisions dealing with vertical leveraging. The main conclusion is that two policy changes – granting patent rights to fundamental knowledge and extending the life of copyrights – increased the cost of permitting refusals to deal by rights holders, so that vertical leveraging of IP ought to be subject to a rule of reason test that weighs the benefits of innovation inducement against the costs of extended monopoly.