Collusive Bidding, Competition Law, and Welfare

We explain why competing firms form collective entities to buy patents from other entities, particularly from non-producing entities (NPEs), and follow a catch and release patent strategy. We show why competitors bidding as a single unit is better than competitors bidding against each other and claim that collusive bidding on patents held by NPEs, even when the patents are not essential for a standard (SEPs), may be socially beneficial. This provides a theoretical foundation that explains why competition authorities often allow collusive bidding for patents and why courts employ the “rule of reason” to analyze agreements under competition law