PhillyDeals: Competition proposals could hit hard

Michael A. Carrier doesn't look radical. The intense Rutgers Law School professor seems every bit an ex-Washington corporate lawyer, federal appeals court clerk, and Yale and Michigan Law honors graduate.

But his proposals for business-competition law and policy have the potential to shake Big Pharma and telecom companies, including some of Philadelphia's major employers, right down to their patented, copyrighted, and Washington-regulated foundations.

"Innovation" - technology that might save lives, send data on alternate paths, break old businesses, and encourage new ones - "has been threatened in recent years," Carrier says. He blames corporate deal-making, timid judges, and lobby-born laws that protect the profits of old companies while "stifling" challengers.

That's how Carrier tells it at the start of his book, Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law, just out from Oxford University Press.

Since Congress passed the Sherman Antitrust Act to protect farmers from monopoly railroads in 1890, federal competition enforcement has swung:

From rigid defense of patents and copyrights in the early 1900s ... to aggressive enforcement of competition and the imprisonment of price-fixing executives from the late New Deal into the 1970s ... and back toward the Reagan-Clinton-George W. Bush era of favoritism for copyright-holders, and against file-sharers and other cut-rate competitors.

Going from George W.'s cautious antitrust chief Thomas Barnett to Obama's pick, activist former Federal Trade Commission lawyer Christine Varney, "will be a very interesting time," Carrier told me.

"They may have their hands tied a bit with the economy," Carrier explained. "But I still think they're going to increase enforcement" of competition.

And Carrier thinks that could be a good thing - if done as part of a larger plan to push competition, innovation, and the technologies that might help the economy.

Like what? I asked. Carrier was ready:

Drug deals. Under federal law dating from the early 1980s, pharmaceutical developers such as GlaxoSmithKline, AstraZeneca, and Cephalon, he says, have cut deals with generic-drug-makers like Teva Pharmaceuticals, in which the developers, rather than dragging on in court, agree to pay the generic-makers not to roll out new versions of old drugs too soon.

The Justice Department has usually left drug markets to the Federal Trade Commission. "Paying you not to compete is really anticompetitive," he said.

Merger mania. Antitrust lawyers typically review merging companies' products and force firms to sell product lines if a combination would dominate the market.

Carrier said Varney, when she was at the FTC in the 1990s, also considered future competition between drugs that were still in development when their makers merged - since products that aren't on the market yet are what often attract those billion-dollar merger premiums.

But most of the resulting competitive agreements have been private deals that weren't ratified by courts or reviewed by legal scholars.

Carrier suggests the government issue guidance soon: Giant combinations like Merck-Schering Plough and Pfizer-Wyeth are raising the stakes.

Licensing hell. "Bottlenecks" to product development are jamming attempts to exploit technologies at medical research universities such as Penn, Jefferson, and Temple, Carrier said. Reviews of licensing agreements show researchers are often "stymied" in working with private companies because their lawyers have a tough time reaching agreement on how to share information while protecting it from outsiders.

Government guidelines, like a fixed quiet period before scientists could publish their findings about patented processes, could help get products to development a little more quickly.

Copyrights and copy-wrongs. "The VCR, computer, CD burner, iPod, TiVo, and peer-to-peer file-sharing software" can either "create revolutionary new forms of interaction and entertainment" or "facilitate widespread copyright infringement," Carrier notes in his book.

Carrier sees innovation as more important, even if some copyright owners get infringed for a while.

Comcast has been criticized for limiting file-sharing, but it also has invested in new file-sharing technologies, Carrier noted.

In fact, a lot of battles over the future of competition are going on right now within big companies, the professor concludes. It's time the government caught up.